Cities of Oil: Municipalities and Petroleum Manufacturing in Southern Ontario, 1860-1960 9781442663138

Table of contents :
Contents
Illustrations
Tables
Acknowledgments
1. Introduction
2. London East: 1860–1883
3. Petrolia: 1883–1899
4. Sarnia: 1899–1960
5. Conclusion
Notes
Bibliography

Citation preview

CITIES OF OIL Municipalities and Petroleum Manufacturing in Southern Ontario, 1860–1960

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Cities of Oil Municipalities and Petroleum Manufacturing in Southern Ontario, 1860–1960

TIMOTHY W. COBBAN

UNIVERSITY OF TORONTO PRESS Toronto Buffalo London

© University of Toronto Press 2013 Toronto Buffalo London www.utppublishing.com Printed in Canada ISBN 978-1-4426-4558-5

Printed on acid-free, 100% post-consumer recycled paper with vegetable-based inks.

Publication cataloguing information is available from Library and Archives Canada.

University of Toronto Press acknowledges the financial assistance to its publishing program of the Canada Council for the Arts and the Ontario Arts Council.

University of Toronto Press acknowledges the financial support of the Government of Canada through the Canada Book Fund for its publishing activities.

Contents

Illustrations Tables

vi

vii

Acknowledgments 1 Introduction

ix 3

2 London East: 1860–1883 13 3 Petrolia:1883–1899 4 Sarnia: 1899–1960 5 Conclusion Notes

115

123

Bibliography

159

43 64

Illustrations

Map 2a City of London and the Village of London East, 1875 Map 2b Village of London East, 1875 Map 3a Railways of Southern Ontario, 1880 Chart 3a Imperial Oil Sales by Refinery Location, 1882–4 Chart 4a Annual Value of Municipal Bonuses Given to Industry in Ontario, 1870–99 Chart 4b Annual Value of Municipal Tax Concessions Given to Industry in Ontario, 1870–99

16 36 51 60 76 78

Tables

2a Imports of Illuminating Oil to Canada, 1877–84 2b Inspected Barrels of Refined Oil, 1880–4 2c Average Value of Illuminating Oil Imports, 1877–84 4a Private Municipal Bonusing Legislation Passed by the Ontario Legislature, 1869–1945

30 31 31 85

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Acknowledgments

This book has benefitted from the advice and suggestions of my colleagues at Western University. Andrew Sancton guided the project from the very beginning and provided much encouragement, advice, and gentle prodding along the way. But mine is a special debt. It was many years ago that I first wandered into Andrew Sancton’s undergraduate survey course on local government. His enthusiasm for the subject and his command over the material caught my attention then and inspired my sustained interest in the field. Since then, he has taught me almost everything I know about local government and has shown me what it means to be a dedicated scholar and teacher. For his help and kindness over the years, and especially with this project, I am deeply grateful. Others have also provided much help. I am thankful to Bob Young for his extensive comments on an earlier draft of one of the chapters and for his insights on other questions and problems that I shared with him during our many strolls. Steve Lecce also read portions of draft chapters, asked tough questions, and provided great friendship – I am grateful for all. Especially large debts are owed to the archivists who helped me locate the various documents and records upon which this study is based. In particular, I thank the professional and courteous staff at the Archives and Research Collections Centre (D. B. Weldon Library, University of Western Ontario), the Archives of Ontario, the Lambton Room Archives (Wyoming, Ontario), the Library and Archives of Canada, the Post Street Archives (Midland, Michigan), and the corporate archives division of Imperial Oil (Toronto). I also gratefully acknowledge financial support from the Social Science and Humanities Research Council of Canada (SSHRC), the Government of Ontario Graduate Scholarship Program, the RBC Financial

x Acknowledgments

Group Economic Policy Research Institute, and the University of Western Ontario. I also acknowledge the assistance of the J. B. Smallman Publication Fund and the faculty of social science, the University of Western Ontario. Finally, I thank my family for their patience and understanding. Above all, I thank my wife, Janelle, who endured my many absences as I undertook the fieldwork for this project and took on the additional burdens at home without (much) complaint. Throughout, she was encouraging and supportive, and this book owes as much to her as anyone else.

CITIES OF OIL Municipalities and Petroleum Manufacturing in Southern Ontario, 1860–1960

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1 Introduction

This book is a study of the influence of municipalities on the location and development of the petroleum manufacturing industry in southern Ontario during the period 1860–1960. It is, therefore, very much a study of the deep past, an account of an important industry in early Canadian history that has not yet received the sustained analysis that its significance warrants, and of the places in which it came to be centred, their people, and their local governments, the last of these also constituting a significant gap in historical research. But the objectives of this study are squarely rooted in the present. It is about the role of municipalities in stimulating economic growth. The petroleum manufacturing industry in Canada developed in the mid-eighteenth century, following the discovery of crude oil deposits in the extreme southwestern tip of the Ontario peninsula. It soon developed into one of early Canada’s largest manufacturing industries, and crude oil became, for a time, its most valuable mineral product. Initially, petroleum manufacturing consisted of simple distillation in a small cast-iron still, which was mostly done over an open fire at the well head. As petroleum came to supplant coal-oil as the main feedstock for producing lamp oil, the industry greatly expanded, and petroleum refiners were drawn to the urban centres of southern Ontario, where manufacturing inputs were more readily available and where transportation networks could be more easily accessed. By the early 1860s, petroleum refining had begun to centre on the eastern outskirts of London, in a place that came to be named London East, which afforded all of the advantages of locating in one of southern Ontario’s larger urban centres and was the point closest to the crude oil producing region along the industry’s main transportation route that

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Cities of Oil

possessed competitive railway shipping. There, in London East, petroleum manufacturers made significant breakthroughs in improving the technology of petroleum refining – through the discovery of a new process that helped mask the offensive characteristics of sulphur-rich southern Ontario crude oil – and in organizing the industry’s production, through the formation of Imperial Oil Limited, an early form of the modern industrial enterprise in Canada. The industry remained concentrated in London East until the early 1880s, when, following the formation of Imperial Oil, it shifted to Petrolia, a village in the centre of the crude oil producing region, after the village had acquired competitive railway shipping of its own. When Imperial Oil was acquired by Standard Oil at the end of the nineteenth century, the industry shifted again, this time to Sarnia, where the St. Clair River allowed for the bulk imports of US crude oil by tanker vessel. The Canadian petroleum manufacturing industry remained in Sarnia through the first half of the twentieth century, expanding greatly in the interwar years as production shifted to gasoline and again during and shortly after the Second World War through the development there of a world-class petrochemical manufacturing sector. The story of the Canadian petroleum manufacturing industry can be told from a variety of perspectives. And, at least in part, it already has been. Others have examined key periods in the industry’s development from traditional perspectives in Canadian historiography, explaining, for example, how protectionist federal policies stimulated the industry’s early growth by sheltering it from international competition, how entrepreneurs both shaped the industry’s organization and drove technological change behind those protectionist walls, and how foreign capital and ownership came to greatly influence the industry’s structure and scale. Their work greatly informs this study, as the attributions in the following chapters make clear. And indeed, one of the main objectives here is to combine these studies with fresh evidence to produce a more complete – and more accurate – account of the industry’s development and the factors which ultimately shaped it. But this study departs from previous efforts, and from traditional approaches to studying the political economy of industrial development in Canada more generally, by examining the petroleum industry’s growth from a decidedly local perspective. The emphasis here is on the role of municipal government in the industry’s development. From this view, three themes are important.

Introduction 5

The first concerns the factors influencing the development, growth, and location of industry. In modern terminology, the concentrations of petroleum manufacturing in London East, Petrolia, and Sarnia would be referred to as industrial clusters. Although exact usage varies, the term industrial clusters is usually held to mean a disproportionately large and particularly dense local or regional concentration of firms within one industry or a set of closely related industries.1 Industrial clusters have received much recent attention from analysts and policy-makers seeking to understand the locational decisions of firms and the dynamics of urban economic growth.2 Theories of industrial clustering abound, but most emphasize the importance of the external benefits firms generate for other local firms within their industry. These benefits are usually termed “localization economies,” of which three are held to be particularly important: local labour markets, demand and supply linkages, and information and knowledge sharing. As a local industry sector grows, a market of suitably skilled labour begins to pool, which attracts not only new investment but also more skilled workers who seek the robust benefits and diverse opportunities such markets afford them. Industry growth also works to draw in specialized supply and service industries, as well as those that purchase the sector’s outputs, and this vertical industry expansion can induce more new investment within the sector. Across local industry sectors, ideas and information can be shared rapidly, sometimes uncontrollably, and this dissemination of knowledge enhances labour productivity and so attracts both new investment and more workers. Once a local industry sector reaches some point of critical mass, these external benefits of agglomeration, these localization economies, begin to materialize, and the growth of the sector can become endogenously reproduced.3 The importance of localization economies in explaining industrial cluster formation and growth suggests a role for public policy in stimulating cluster development. Timely, responsive, and strategic government policies and interventions are emphasized, particularly during the early stages of cluster growth.4 Because such policies should take into account the dynamics and particular needs of industry sectors and because those are likely to vary by location, cluster policy is ideally devised and executed on a correspondingly local scale. Municipal governments, then, constitute a level of government uniquely positioned to develop and implement clustering policies, if only because the main

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Cities of Oil

institutional alternative – decentralized regional agencies of the provincial or federal government – would require territories highly similar to those of municipalities. Here, the role of municipal governments in stimulating the rise of the petroleum manufacturing clusters in London East, Petrolia, and Sarnia is explored. It might be tempting to assume that a cluster-based approach might not yield much insight into the development of the early Canadian petroleum manufacturing industry. After all, the industrial geography of such secondary processing industries is ultimately anchored by the sites of resource extraction. The location of manufacturing facilities, then, becomes largely a function of minimizing the relevant costs of shipping raw materials, supplies, and other manufacturing inputs to the plant and distributing intermediate and finished goods to purchasers and markets. The size and structure of the local industry are largely determined by economies of scale and scope that are internal to firms. Externalities explain little. Such a view would be mistaken. It does not accord, in the first instance, with the much more extensively documented history of the early US petroleum manufacturing industry, which emerged and developed alongside its Canadian counterpart – in stride, for a short time, but then with increasing dominance. There, in the industry’s initial decades, refineries were widely dispersed, with some clustering near the sites of oil production in Pennsylvania but with others scattered among several cities – namely, Pittsburgh, New York, New Jersey, and Cleveland – where skilled labour, supplies, and services were more abundant and where markets were more easily accessed. As the definitive account of the industry during this period states, “There was no dominant combination of forces dictating refinery location at any particular area.”5 Relevant transportation costs fluctuated greatly – as new oil wells were drilled and old ones rain dry, as new markets emerged and old ones faded, as refining efficiency improved and new shipping methods were deployed – and were themselves subject to change, through investments to new railways and pipelines and through strategic manipulation by leading firms. Timely access to information was always crucial, but the type of information varied depending on prevailing market conditions and the degree of organization among crude oil producers and petroleum refining. Gradually, Cleveland emerged as the dominant centre of refining, led by Standard Oil, even though it held no natural locational advantages over the other cities. Understanding the locational

Introduction 7

geography of the early US petroleum industry, then, it not a straightforward exercise. Different locations conferred different discrete, industry-specific advantages. Refining clusters did not spring up organically at the well-side. They were built by entrepreneurs and investors who made strategic investment decisions amidst highly uncertain economic conditions and whose investment decisions, in turn, influenced both the growth and the location of the US petroleum refining industry. As the reader will see, the same was true for petroleum manufacturing in Canada. Here, the development of the industry shaped its geography, but its geography also shaped its development. The second main theme in this study concerns the changing nature of the municipal corporation in Ontario during the period studied: the structure, scope, authority, and resources of municipal government, particularly as they related to business. For businesses, locating within a municipality implies a set of benefits and costs. Both vary across municipalities and also through time, but in modern terms the benefits normally comprise the services provided by the municipality (such as infrastructure, utilities, protection, and cultural and recreation amenities), as well as the social, economic, and cultural characteristics of the community. These benefits also come with costs, which, for business, include property taxes, fees for services, regulations on their operations, and the cost of land and labour. Not all of these costs and benefits are under the control of municipalities, at least not directly. But to the extent that they are, it is useful to conceive of their net impact on a business as the “municipal condition”;6 that is, the conditions under which the business can operate in the municipality. This study examines how the municipal condition changed over time, in relation to petroleum manufacturing but also to industry more generally. When petroleum manufacturing first began, Ontario was mostly a rural society, and so the scale and scope of municipal government was limited. Rural life made few demands on municipal governments, and although many incorporated urban municipalities existed, only a handful had populations exceeding twenty-five hundred persons, and the largest, Toronto, had only thirty thousand persons.7 Even in the larger urban centres, municipal responsibilities mostly centred on servicing and protecting real property. Policing and fire protection were important local responsibilities, as was the provision of local physical infrastructure, and, in the largest centres, water and gas utilities.8 Some

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Cities of Oil

economic policy responsibilities did exist, but these were minor and consisted primarily of regulating local public markets and licensing certain local businesses.9 As the century progressed, however, municipalities began to assume a much broader and more direct role in industrial development as they became actively involved in promoting railways and local industrial expansion through a variety of instruments afforded to them by the provincial government, including land grants, tax concessions, bond guarantees, and cash subsidies. The emergence of the positive local state in the era of new industrialism placed greater demands on local resources – mainly the property tax – and was accompanied by a gradual expansion of regulatory authorities. Though industrial growth was widely accepted as a legitimate and worthwhile objective for municipalities, the strategies that municipalities adopted and the policies that they enacted varied considerably. Towards the end of the nineteenth century, this pattern was reversed. The railway boom had slowed, especially in the south, and the province had begun to strip away the direct industrial policy instruments available to municipalities, a process that was essentially completed by the 1920s and a position that has been maintained by successive Ontario governments ever since. Following the 1930s, provincial intervention into local affairs increased, particularly over matters of local public finance. Obligatory municipal expenditures on provincially determined services ate away at the property tax base.10 By the midpoint of the twentieth century, the existing municipal condition, though it retained some of its old boosterish impulses and rhetoric, had become far more uniform across the province and less relevant to the location and investment decisions made by industry. Many would argue that this description still applies to modern municipalities in Ontario and elsewhere in Canada. Municipalities remain wedded to the property tax, and large proportions of their revenue go to fund services and programs whose contents are heavily determined by provincial officials. In other areas of municipal jurisdiction, provincial regulations and standards constrain the scope for local initiative and experimentation.11 In the area of industrial policy, all provinces effectively prohibit their municipalities from delivering selective inducements to industry, such as tax concessions, loans, grants, subsidized land, and discounted utilities.12 Of the few direct industrial policy instruments that municipalities can deploy, most pertain to land. Municipalities can purchase or expropriate land suitable

Introduction 9

for industrial uses so as to assist business with site assembly needs. They can enhance the attractiveness of industrial land through the provision of physical infrastructure and services, such as sewer and water mains, and roads or railways that provide access to transportation networks. They can encourage investment by providing regulatory accommodations, such as the easing of zoning regulations on building height or density. And marketing and advertising campaigns can be used to disseminate information about the municipality’s advantages as a site for new investment and as a destination for skilled labour. Indeed, as one recent study on local economic development initiatives in Ontario concluded, “Marketing activities have been, and continue to be, the centrepiece of Canadian local economic development initiatives.”13 But because land and location search costs comprise such a small percentage of business expenses, it is argued that municipal policies in those areas exert little influence over business investment decisions.14 The contemporary municipal condition, then, is one that is highly promotional but now perhaps hollowly so, with only marginal influence on economic growth.15 To put it more simply, modern municipalities appear much more interested in business than businesses are in them. In this study, the origins of this contemporary municipal condition are explored. Particular emphasis is given to direct municipal industrial policy instruments – namely, the much-maligned municipal bonus, in its various forms. As the reader will see, a view commonly expressed at the time, and occasionally expressed now, is that municipalities were too liberal and fiscally irresponsible in awarding such bonuses. Hence, the province was compelled to prohibit such practices to save its municipalities from ruinous competition and to protect its own credit rating as well as those of the municipalities. Others, viewing the Canadian experience from a US perspective, argue that provincial governments, constitutionally and politically unrestrained in their legal domination over municipalities, drove municipalities out of policy areas that they sought for themselves, including those related to industry.16 Here, from the vantage of municipalities, a different picture emerges. The third theme in this study cuts across the first two and concerns the interrelationships between changes in the structure, scope, scale, and geography of petroleum manufacturing and in the prevailing municipal condition that the industry encountered. It is widely understood that the process of industrialization had profound effects on municipal government in North America. Early scholarly contributions

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focused on how the industrial corporations that began to emerge in the late 1800s and early 1900s increasingly sought suburban locations to accommodate the adoption of mass-production techniques in large, single-floor factories and to escape labour unrest in the central city.17 Others emphasize that municipalities were not merely passive observers in this process. Central cities could enable this outward migration through the provision of physical infrastructure, often deliberately, with their own territorial expansion in mind, only to have that goal thwarted by stubbornly independent suburban municipalities.18 In other cases, such as Paul André Linteau’s history of Maisonneuve, industry was lured to the suburbs by unscrupulous developers who used the debt-capacity of newly formed suburban municipalities to finance their profits.19 Regardless of the extent of municipal involvement in the process, most agree that this outward industrial migration led to the fragmentation of municipal authority across urban areas, with deleterious consequences for local public finance and the quality of locally provided public services.20 As this study shows, these conclusions generally hold for the petroleum manufacturing industry and the municipalities around which it came to be centred. Viewing the relationship from the other direction, existing research suggests that municipalities contributed to the industrialization process in central Canada, particularly in its early stages. As Gilbert A. Stelter summarizes, “While government at the federal level helped shaped some of the contours of industrialization, the specific location of an industry and the extent of its expansion often depended on local promotional activity channelled through municipal governments.”21 Even the relocation of industry to new suburbs could encourage further industrial development. Robert Lewis’s particularly detailed accounts of industrial suburbanization in Montreal and Chicago reveal industrial suburbs and manufacturing districts that were much more complex and dynamic than is generally assumed.22 While municipal government did contribute to the industrialization of petroleum manufacturing in southern Ontario, and much of this did occur in a suburban location, it was not through the promotional side of the municipal condition. Regulations played a much more significant role. In the following chapters, these themes are taken up as the industry’s history is examined in chronological order. Chapter 2 studies the concentration and development of the industry in London East during the period 1860–83. Here, the influence of municipal government is initially negative, as concerns about the city’s regulatory powers drove the refiners to their suburban location, where they used municipal

Introduction 11

incorporation to protect themselves from being annexed to the city. This afforded them a location where they could operate free from regulatory constraints and yet also realize the economic benefits of being located in an urban centre. It also had the effect of forcing the refineries to cluster closely together, and this intensified the external benefits of agglomeration, which helped attract new investment and appeared to contribute to the industry’s first two major breakthroughs: the discovery and rapid diffusion of a new refining process in the late 1860s and the formation of Imperial Oil in 1880. The growth of petroleum manufacturing in London East, then, was stimulated not by any direct municipal actions but by the presence of a municipal boundary, which at once both prevented the city from imposing regulations on the industry and worked to concentrate industry investments in a small area where their external benefits could be magnified. Chapter 3 examines the industry’s shift to Petrolia during the period 1883–99. In Petrolia, the village at the centre of the crude oil producing region, the absence of competitive railway shipping had worked to stunt the growth of secondary manufacturing there, as refineries had located further down the main transportation route, at the first point of railway competition. After numerous railway and pipeline schemes had been proposed and then eventually abandoned, direct municipal investments in Petrolia’s second railway finally allowed the monopoly over the industry’s transportation to be overcome and led to the concentration there of petroleum manufacturing during the last two decades of the nineteenth century. Chapter 4 accounts for the industry’s relocation to Sarnia at the turn of the century, and its subsequent growth into a massive petrochemical complex during and after the Second World War. The petroleum manufacturing industry was brought to Sarnia in the late 1890s by Standard Oil and strengthened shortly thereafter by the company’s acquisition of Imperial Oil, and its subsequent decision to centralize its Canadian refining operations in Sarnia. A generous tax concession was awarded by the town of Sarnia to Standard Oil to encourage its investment there, but all signs pointed towards the company making that investment regardless of whether or not the concession was given. Thus, the tax concession was not particularly effective in stimulating growth along particular lines of industry strength or in drawing resources to more productive locations more generally. The available evidence suggests that this was also generally the case for the direct incentives deployed by Ontario municipalities to attract industry in the late nineteenth and early twentieth century.

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During the first few decades of the twentieth century, Standard Oil’s refinery in Sarnia remained the most advanced in Canada. By the 1930s, however, its productive dominance was eroded by new installations in Montreal and in the west. The relative decline of the petroleum manufacturing sector in Sarnia was suddenly and dramatically reversed during the Second World War by the federal government’s decision to locate its synthetic rubber plant – Polymer – in Sarnia and by the explosive development of petroleum and petrochemical manufacturing that subsequently took place around Polymer; this was stimulated, at least initially, by the policies and actions of the federal government and of those who had been placed in charge of the plant. These involved offers of low-cost utilities and production by-products, as well as assistance with overcoming regulatory obstacles within the federal government. But a particularly important inducement was the provision of large, contiguous tracts of land suitable for industrial development that Polymer officials had stockpiled through the liberal use of the company’s expropriation powers. In Sarnia, then, the municipal condition had become largely irrelevant to the much larger and more complex petroleum manufacturing industry sector, whose local needs were instead met by federal government officials. Finally, Chapter 5 revisits the three themes laid out here and presents conclusions. These, in turn, are then brought to bear on contemporary questions about the role of municipal government in stimulating the growth of local industry sectors.

2 London East: 1860–1883

I Introduction The Canadian petroleum industry was born in the early 1850s with Charles Tripp’s initial experimentations in the gummy oil beds of Lambton County, and it took its first hesitant steps towards industrialization with James Miller Williams’s commercialization of refined petroleum products a few years later. In 1857, Williams erected Canada’s first refinery in a swampy creek bed near his oil wells.1 There, he boiled off the lighter and more volatile petroleum fractions, running them off into the creek, using the “middle cut” as lamp oil and the heavier residue as lubricants. As Williams quickly learned, however, his simple distillation process did not render a lamp oil that was widely marketable. The unusually high sulphurous content of Lambton crude produced an illuminating oil that smoked the oil lamp glass, encrusted the lamp wick, and smelled terrible. So an enterprising Williams built a “rectifying factory” in Hamilton, where he treated his distilled petroleum with sulphuric acid and caustic soda, a process borrowed from the rival coal-oil industry and explained to him by professor Henry Croft of the University of Toronto, then Canada West’s foremost chemist.2 For aspiring industrialists like Williams who came to dominate petroleum refining, the small cities of Canada West were a more logical choice for refineries than the boggy wilderness of Lambton County. The cities provided local markets, better transportation facilities, and more abundant supplies of capital and industrial provisions from the local foundries, cooperages, and chemical wholesalers. Hence, when the Globe chronicled the expansion of the young refining industry in

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early 1863, it reported refineries as far outside of the oil-producing region as Brantford, Ingersol, Hamilton, London, Port Credit, and Toronto.3 The urbanization of petroleum refining was not entirely well-received. In the beginning, at least, refineries were welcomed with that kind of curious local boosterism typically extended to any new manufacturing concern. In 1861, two years before the first refinery would be built in London, the London Free Press was encouraging the establishment of the refining industry there.4 The Sarnia town council quickly granted its first application for a refinery within town limits, having “no desire to interfere in the erection of a refinery.”5 But once the refineries began their operations in earnest, their noxious and overwhelming pollutants quickly turned the tide of local opinion against them. In Hamilton, where Williams operated, the pollution from the refineries was more than an aesthetic issue: It is said that the water on certain mornings is covered for a considerable distance with oil, and the effect has been to drive away the fish from the beach. The subject is not without difficulty. In the infancy of the coal oil business it would be inexpedient to place restrictions on the operations of the refineries, but at the same time it would be disastrous to the fishing interest if the fish are to be driven from the beach by the noxious effluvia arising from coal oil.6

By the early 1870s, a decade of pollution brought the Sarnia town council full circle in its stance towards the industry, and it forced a prospective firm to locate outside of the city even though the town was advertising a blanket tax exemption for any immigrating manufacturers.7 In the span of a decade, refined petroleum had become one of the few industrial goods that most cities preferred to import. In London, tensions between refineries and the local community arose quickly but were forestalled by the settling of the refineries on the city’s outskirts, though they were not forced there as they were in Sarnia. In 1863, William Spencer, a business associate of Williams, built London’s first refinery just outside of the eastern city limits in partnership with Herman Waterman, a Jewish-German immigrant who owned a clothing shop in London.8 Attracted to the industry by Williams’s success, Spencer had built a small refinery in Cedar Springs, a village outside of Woodstock, but had moved it to London one year later.9 Spencer and Waterman were soon followed into the local refining business by

London East: 1860–1883

15

James and William Duffield, who built a refinery a few hundred yards east of that owned by Spencer and Waterman. For these two firms, there must have been some compelling reason for settling beyond the city’s boundary. Even though both firms located near the Great Western Railway line, the railway’s oil depot was actually located one mile closer to the city centre, meaning that their oil would need to be drawn by horse and cart to and from the depot.10 And there was plenty of vacant land available closer to the depot, with the city’s eastern ward remaining only sparsely populated well into the 1870s (see Map 2a). Of course, transport costs needed to be traded off against other considerations. Municipal taxes were invariably lower in the township and so, too, was the price of land. These early refineries, however, were not large, capital-intensive operations, their land requirements were not that substantial, and their municipal taxes would not be that high. Moreover, London’s taxes had yet to push any other industrial establishments beyond the city’s limits, as the first refineries shared the western portion of London Township with only a small school and a few scattered farms. What experienced oilmen knew, however, was that refineries made for poor neighbours; many citizens would invariably find that the taxes and jobs generated by petroleum refining insufficiently compensated them for the pollution that was billowed into the air and dumped into local waterways. Hence, the city’s regulatory powers needed to be respected – or better, escaped. The choice of suburban location, then, was almost certainly a precautionary one, intended to place the refineries beyond the regulatory reach of city council but no farther, an astute decision that was emulated by every subsequent entry to the refining business in London. In the autumn of 1864, when the two refineries started gearing up to fill winter orders, an appalled and shocked citizenry made its objections known, with some of the more poetic complainants making their case in the pages of the London Free Press. The refineries only “added to the nuisances of this doomed city,” one writer lamented, for the stench was inescapable: “Why, sir, if I ever do sleep – which is very rare – I dream of a rock of asafoetida, against which a sea of rotten eggs is forever beating, with islands of solid carrion windward, and not far in the distance.”11 To this and other similarly “squeamish” objections, the refiners offered only a meek defence, suggesting that “the effluvia is not so disagreeable when you are accustomed to it” and adding the more outlandish claim that it was actually “decidedly healthy.”12 Still, no defence was needed beyond that provided by the municipal boundary.

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Map 2a City of London and the Village of London East, 1875 Source: Illustrated Atlas of the County of Middlesex, Ontario (Toronto: H.R. Page & Co., 1878), 57.

London East: 1860–1883

17

No matter how gruesome the refineries actually were, the fact that they were beyond the physical limits of the city’s regulatory authority made debating their appropriateness essentially futile. As one commentator dejectedly pointed out, “The whole matter may be put in a nutshell: Can the people of London prevail upon the oil men to remove at all? If they could be legally indicted, the course would be plain. But they cannot, and [we] must only groan at it and suffer on.”13 The question of regulating the refineries could have been pursued further. City council could have committed to the cause and pressured the township, county, province, or even Parliament to intervene on its behalf. But it did not, and the matter died quietly that winter. In the following spring, any lingering hostility towards the refineries was lost in the general madness of oil fever that swept through the peninsula of Canada West, taking prominent Londoners, their money, and their sensibilities along with it. People of all stripes scoured creek beds and river shores for the discoloured limestone and surface oil seepages that were thought to mark untold instant fortunes. The Board of Trade brought in prominent US geologists to lecture Londoners on the origins and nature of petroleum and to guide explorations.14 Respected members of the business community cast their lot into oil speculation and even launched a local oil exchange of their own, led by John Carling, who is better remembered as the founder of Carling Brewing & Malting Company.15 By early 1866, the London Free Press had returned to the side of the refining industry, calling for a large joint-stock refining company to be formed by local businessmen, though it hastened to add that the operations would need to be located several miles outside of the city.16 Reality eventually set in during the autumn of 1866. The most promising local well had produced more water than oil – a fact that the Toronto Globe took much pleasure in noting – and Carling had recovered enough of his judgement to fold his London Oil Company, admitting that “the search for oil having so far proved a failure.”17 Elsewhere, speculators had been more handsomely rewarded, with Captain Benjamin King’s discovery of a flowing well near Petrolia in 1866 leading to the concentration there of much of the exploratory activity.18 These new wells produced far more oil than could be consumed domestically, and with foreign markets closed to Canadian oil because of its objectionable odour, the oil industry fell into a general depression. While attempts were made to limit production on both the crude oil and the refining sides of the industry, none proved durable, for there was simply too much cheap oil and too small a market for it to sustain any price-fixing

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arrangement for very long.19 A solution soon came in the form of the discovery of a new chemical-refining method, and it came from two refineries operating in what had become a burgeoning refining district on the outskirts of London. II Externalities During its infancy, the petroleum-refining industry in Canada relied on technology that was simple and borrowed and thus proved to be of little value for addressing that particularly troublesome feature of Ontario petroleum, its high sulphur content. The sulphuric acid and caustic soda treatment that Williams had first learned about from professor Croft only masked the sulphurous compounds and only did so temporarily, with the oil reverting to its disagreeable form occasionally during shipment but always upon burning. That sulphuric acid only altered but did not remove the sulphur could not be explained to the refiners either, for the study of organic chemistry, itself still in its infancy, would only understand this long afterward. The fledgling scientific community in Canada was also of little help, for its contributions to the trials of petroleum refining had been exhausted by Croft years earlier. The markedly less sulphurous oil that was by then flowing prodigiously out of Pennsylvania confined this problem to Canada and made its resolution that much more imperative. While the ultimate solution lay years ahead, awaiting more systematic research and the corporate organizational form to sustain it, two neighbouring firms in London’s burgeoning refinery district happened upon a new refining method that sweetened Canadian oil enough for it to be exported to more expansive foreign markets. For his part, William Spencer had avoided getting too caught up in oil land speculation and continued to operate his refinery outside of London throughout the 1860s, though he switched partners in 1866 when Herman Waterman left to start another refinery down the street with his brother, Isaac. The Duffields also remained in the refining business, and by 1866, they, along with the Waterman brothers and Spencer (and his new partner, Anthony Keenleyside), were joined by two more refineries. Within two years, four more firms entered the local refining business. In 1868, there were ten refineries operating just outside of the city proper and none within it.20 By then, the cluster of oil refineries that had sprouted up on London’s periphery had gained sufficient mass to draw specialized service industries into its orbit, with two foundries

London East: 1860–1883

19

and a barrelling cooperage locating in the suburb.21 In 1867, Canada’s first sulphuric acid plant, the Canadian Chemical Manufacturing Company, was built amongst the refineries, and it was so successful that it was followed by a second firm the following year.22 The Canadian Chemical Manufacturing Company was founded by William Bowman, Elijah Leonard, George MacBeth, and Thomas Smallman – long-time Londoners all – with Bowman serving as the company’s main promoter and its first president and Smallman as its manager. Bowman and Smallman had known each other through their mutual employer, the London and Port Stanley Railroad, for which Bowman was the superintendent and Smallman a ticket agent. It was through this railroad that the London refineries had been importing their sulphuric acid, purchasing it in Cleveland and shipping it across Lake Erie in glass carboys loaded on steamer decks. In autumn, when the refining business was brisk and the demand for sulphuric acid the greatest, stronger winds made cross-lake shipments more treacherous. With the fragile glass carboys easily broken, and the sailors’ fears more easily aroused, “shipment after shipment found its way to the bottom of Lake Erie,” and the refiners found their sulphuric acid orders unmet.23 In this Bowman and Smallman saw an opportunity. The company began modestly, supplying local refineries with its capacity of three thousand to four thousand pounds of sulphuric acid per day, but its margins were healthy enough to sustain subsequent expansions (even after the company had attracted local competition), and the company became an important contributor of its own to the city’s export base.24 With the founding of a local sulphuric acid industry, the refiners were assured of a steadier supply of one of their most important inputs, and with the addition of the second firm, they probably realized at least some savings. Yet no matter how much sulphuric acid they bought and how much they saved in doing so, they faced a serious and growing problem in overproduction. By most estimates, the refining industry’s manufacturing capacity outstripped domestic demand by at least half. This was a problem that the refiners could only solve by enlarging their market or rationalizing their production. The first comprehensive attempt at the latter was made in 1868 by judge Ebenezer Higgins of Chicago and his silent financial partners, a group of US capitalists who had fled to Canada after making “more money in illicit whiskey ... than any other house in the trade.”25 Higgins leased all fifty-two Ontario refineries through the busy fall season, leaving them idle and selling off their stocks at inflated prices.26

20

Cities of Oil

For Higgins, this audacious scheme was reported to have netted him slim profits, if any, for speculative wholesalers had begun to stockpile oil when rumours of the scheme were first whispered earlier in the year, and he abandoned it when the leases expired in December. For the refiners, however, the short-lived combination finally brought about a solution to their problem of excess production, though not through rationalization. The terms of Higgins’s leases required the refineries to remain idle unless producing for export, which none of them had yet been able to do successfully.27 But these idled refineries made for perfect laboratories, the exclusion of exports from the terms of the leases provided a strong incentive, and the leisured operators could afford to be patient innovators. By the time the leases expired, a new refining method had been discovered. This new refining method involved giving the petroleum distillate a final treatment with an alkaline solution of lead oxide, then commonly known as litharge. As chemists could explain by the 1920s, the litharge brought about the oxidation of the troublesome mercaptans into less malodorous organic disulphides, which greatly improved the oil’s odour.28 This was not a perfect solution. The disulphides remained suspended in the oil, so they could (and often did) revert to mercaptans during prolonged periods of storage and continued to hamper the oil’s burning qualities. Although a more permanent solution to the problem of sulphurous petroleum – the removal of the mercaptans – was still decades away, litharge sweetening did significantly improve the oil’s colour and odour, and that alone was enough for it to gain acceptance in European markets, though its less than ideal burning characteristics meant that it did so at a discount.29 The true discovery of this process cannot be definitively attributed to anyone, but William Spencer is reported as crediting himself to be the first to successfully apply it commercially.30 As professor McBryde has recently established, the litharge process first received parenthetical mention in a European scientific journal in 1866. From there, knowledge of the process was somehow transported to Canada during 1868 – by a travelling Quebec merchant, Mr. John S. Fry, who claimed to have learned of the process during a visit to France and patented it in Canada upon his return; by a mysterious Scottish chemist, “Mr. Allen,” as one contemporary account alleges; or by gradual diffusion through an overlapping network of scientific journals, as professor McBryde reasonably speculates and carefully traces.31 It is most unlikely that either Mr. Fry or Mr. Allen were responsible. Mr. Fry was a Quebec

London East: 1860–1883

21

merchant with no traceable connection to the oil industry other than his patent, which was registered only after shipments of Canadian oil had already been successfully exported to England.32 His belated patent also contained a crucial error that, if followed, would have rendered the litharge treatment ineffective and the quality of the oil unimproved.33 A certain “Mr. Allen,” on the other hand, does appear in one newspaper description of the refining industry printed in the spring of 1869, but as a US investor, not a Scottish chemist, attracted to the industry by the promise of the export trade after the discovery of the litharge process.34 Professor McBryde, then, is probably correct. Of the four North American journals in which he found descriptions of the litharge process, at least one was locally available through the library of the London Mechanics’ Institute, an early form of vocational instruction and then the only institution of its kind in London.35 But this was not a public library, and Spencer never purchased the $2 per year membership required to consult the institute’s holdings.36 Moreover, two newspaper accounts of the development of the Canadian petroleum export trade acknowledge two refining firms as the innovating pioneers: Spencer’s firm and that owned by his neighbour, Samuel Peters.37 Peters, as it turns out, was a member of the London Mechanics’ Institute, and his surviving records indicate that he had been investigating the petroleum export trade since 1867.38 Between August 1868 and March 1869, Peters shipped slightly more than 500 barrels of refined oil to England, and his records list litharge among his supplies and include detailed instructions for its use.39 However Peters and Spencer learned of the process and whoever learned of it first, it is clear that they were both using litharge by the winter of 1868 to manufacture an improved oil, which Spencer’s partner, Anthony Keenleyside, was successfully marketing in England. Together they shipped 3,500 barrels of oil to London and Liverpool by Christmas.40 As the three men surely realized, this was an opportunity that they lacked the capital to fully exploit, and the litharge process was a secret that they could not hope to keep. Whatever steps they had taken to “discover” the litharge process could be easily repeated by someone else (at least two other oilmen were members of the institute), and their litharge shipments would be difficult if not impossible to hide in such proximity to their competitors. As Spencer’s son would later recall, “Distilling and refining was then a great secret and the refineries were well-fenced and guarded.”41 But even if the fences and guards served their purpose, the litharge needed to come from somewhere and

22

Cities of Oil

be supplied by someone, and that chain of chemical wholesalers, stock boys, and freight handlers would be difficult to trust. A more profitable course would be to sell the process to their most interested rivals. Hence, by the spring, the London Free Press was reporting that four additional refineries had joined in the export trade.42 A thesis on the economic history of London, which lists William M. Spencer among the interviewees, claims that “Mr. W. Spencer greatly improved the quality of the oil produced in his refinery by the discovery that litharge would ‘sweeten’ the oil. This process he sold to other refineries that had by this time been established in London.”43 The export trade that Spencer and Peters appear to have made possible proved to be a great boon to the Canadian petroleum industry – and to London’s economy. Exports of Canadian oil grew exponentially from the meagre start of 3,500 barrels in 1868 to 130,000 barrels two years later, peaking at 240,000 barrels in 1873, almost double that sold domestically.44 Such tremendous growth in the industry both required and attracted a significant infusion of capital. In 1869 and 1873, two massive distilleries were built in the central oil town of Petrolia, adding to the few small refineries already operating there. Refining, however, continued to be concentrated on London’s periphery, with two large and well-financed refineries, as well as a handful of smaller ones, built in the township during the early 1870s. The largest was built in 1869 by a young Jacob L. Englehart with the support of New York investors, at a cost rumoured to have exceeded $100,000.45 Shortly thereafter, Frederick A. Fitzgerald, a native Londoner and grocery wholesaler and furniture-maker, opened a sizeable refinery of his own. In 1872, two-thirds of the Canadian refining industry’s total output came from the refineries operating in London Township; in 1871, so, too, did nearly one-quarter of London’s overall industrial production.46 By the mid-1870s, however, the refineries were sharing the city’s industrial base and their industrial suburb with growth that they had induced. Two large railcar companies were built on the city’s outskirts in 1872 to capitalize on the thriving petroleum shipping trade, with the Great Western Railway Car Works and the Ontario Car Works employing around 400 persons each. Many of these employees took up residence near the factories, and they, along with the several hundred refinery and chemical plant workers, pushed the suburb’s workingclass population beyond two thousand; it had numbered more cows than people only a decade prior.47

London East: 1860–1883

23

It was probably inevitable, then, that all of this industrial growth would eventually arouse annexation interests within city council, especially since the city’s fire brigade had assumed responsibility for attending the suburb’s fairly regular conflagrations and since city council was contemplating various ambitious waterworks schemes. In March 1872, the London council announced its desire to annex “that portion of ratepayers in the vicinity of the Refiners in Township of London” and went about it gently, striking a committee to hold meetings with the refiners in the hopes of “procuring their assent.”48 That assent was not forthcoming, and, despite infrequent reports of progress from the committee’s chairperson, the annexation movement faltered.49 That annexation was unappealing to the refiners is not surprising, for it was concerns over the city’s regulatory powers that had driven them outside of the city in the first instance. Moreover, the city continued to be inundated with complaints about pollution from the refineries, to which council’s responses appeared increasingly sympathetic.50 While the annexation committee was holding its meetings, city council was presented with a petition signed by fifty-two ratepayers living in the ward adjacent to the refining district, complaining “of the nuisance caused by the refineries” and alleging that the “wells in the vicinity of the Oilworks [were] being destroyed by spent acid and oil.” With the annexation movement floundering, city council referred the matter first to the local board of health and then to the county, with both replying that they were powerless to take any formal action against the refineries.51 When the complaints continued the following spring, city council sent in its own committee to investigate, only to have it report that the city was on the same legally baseless footing as the health board and the county.52 With no local government willing or able to take up their cause, those in objection to the refineries – and their ranks were swelling – were given a brief reprieve by the complete collapse of the Canadian petroleum export trade during the latter half of 1873. But the industry’s depression was hard on London’s economy, with “a large number of men having been thrown out of employment, and all the shipping and banking business created by the handling of millions of gallons of petroleum having almost ceased.”53 City council, too, shared in the financial hardship. After the local capital market declined to tender on its debentures, city council was forced to search abroad and at length for investors willing to absorb its consolidated debt.54 Municipal debentures were analysed in light of the assessed value of the municipality’s taxable

24

Cities of Oil

property, so, for city council, the most obvious and immediate means of enhancing the attractiveness of its securities lay at its doorstep. When an opportunity arose in the spring of 1874, city council acted quickly. Still reeling from the loss of the export trade, a deputation of the city’s prominent refiners embarked for Ottawa to plead for the repeal of the excise duty on illuminating oil. Within days of departure, city council pronounced the annexation movement renewed and hastily organized a town hall meeting in the refinery district to outline the terms of the offer.55 The meeting was well-attended despite the short notice, with 200 suburbanites crowding into a small, dimly lit schoolhouse to weigh their municipal options. Alderman Magee, chair of the city’s annexation committee, presented the case for annexation in the most appealing and urgent terms that he could: “Arrangements could be made,” he promised, “by which you can reap the advantages enjoyed by the city without having to pay the city debt.” But there was little time for contemplation, he added, for “the City Committee would meet next week, and form a basis upon which they would be asked to pronounce, if a disposition was shown for annexation.” At this, the few refiners in attendance balked. William Spencer rose to the podium and declared annexation to be “perfect suicide,” and he, along with fellow refiners Andrew Ross and Herman Waterman, made a rousing call for municipal incorporation to put an end to these repeated attempts at “forcing the suburb into the city.” The outcome of the meeting was never really in doubt. Those in attendance overwhelmingly sided with the refiners, nominating Spencer, Ross, and Waterman to lead the municipal incorporation process, even though Ross was the only true suburban resident among them.56 Alderman Magee and his handful of annexation proponents were chased from the schoolhouse with “a few ancient eggs.”57 The incorporation committee swiftly set in motion the necessary legislative mechanisms, and on 4 January 1875 the village of London East was officially incorporated.58 Andrew Ross served as the village’s first reeve, a position fittingly held by a refiner through five of the village’s first six years.59 It was the refiners, after all, who had turned farmland into suburb, township into industrial village. Though the village itself covered seven hundred acres, its sixteen refineries were huddled together in a fifty-acre strip running down Adelaide Street and onto Hamilton Road, as close as they dared to get to the city’s railroad junctions and shipping depots (see Map 2a).60 Hauling their oil by wagon to and from the city, ten barrels at a time, was hardly efficient, so by 1870

London East: 1860–1883

25

several refiners had jointly built tramways connecting their refineries to the city’s freight yards.61 In 1877, the railroad finally came to them when the Great Western Railway built a branch line into London East, with the village’s approval.62 As inconvenient as such close quarters initially were, with the guards, fences, traffic congestion, and concentrated pollution, the latent benefits that cumulatively accrue to such dense industrial clusters had begun to manifest themselves. III Imperial Oil Partnerships, combinations, price-fixing agreements, and other such arrangements for mutual benefit were recurring fixtures in the capricious Canadian petroleum industry, functioning as both cause and consequence of the industry’s seemingly unshakeable plague of overproduction. Collusive associations prevailed episodically on both the refining and crude oil production sides of the industry as early as 1862, but their very success, obvious to all through their inflated prices, unfailingly encouraged overproduction, rewarded betrayal, attracted new entrants, and stimulated vertical expansion. Control over the industry’s narrowing margins thus swung from producers to refiners to no one at all throughout the late 1860s and 1870s. Combinations rose and fell; collusion met with collusion; refiners dug oil wells and crude oil producers built refineries. In this ruthless and unstable environment, sustained cooperation among the London East refiners was slowly built from the ground up. Two decades of operating and living in such close proximity had built up durable relationships among them. Over time, these relationships slowly coalesced into formal institutions: rival neighbouring firms formed partnerships, and competing partnerships eventually merged to become a dominating joint-stock company. These relationships, along with some enlisted help from the federal government, led to the founding of Imperial Oil Limited in 1880. The original refining firm was the archetypal single-unit enterprise, one refinery owned and operated by a sole proprietor or by a small, intimate partnership.63 In 1868, two of the nine refineries operating in London Township were family affairs (the Duffields and the Watermans), one was a co-partnership (Spencer and Keenleyside), and the rest appear to have been individually owned.64 The largest of these refineries, the Watermans’, had a throughput capacity of about 400 barrels a week.65 All of this changed with expansion of the export trade in the early 1870s. As the industry grew, the number of partners in a typical

26

Cities of Oil

refinery rose but not in pace with the enlarged scale of operations. The Duffields, for example, added their three sons to the company ledger, but they also added a large steam-powered barrelling cooperage and five acres of land to their original one-and-a-half acre refinery works. William Melville Spencer joined his father in the refining business, and they doubled the refinery’s capacity to 800 barrels per week.66 With the export trade also came an influx of foreign ownership, bringing with it the position of the export firm and the role of the financier: Jacob Englehart opened his refinery in 1870 in partnership with Ebenezer Higgins and his New York capitalists, and together they handled much of London’s export trade, buying “any amount of oil that may be forthcoming” from the local refineries and shipping it overseas via New York.67 Still, by 1872, even though the average London refinery had doubled its throughput capacity to 800 barrels of oil per week and the number of refineries in the township had grown to at least thirteen, the average firm only included three partners and no firm operated more than one refinery.68 The industry’s dispersed ownership structure made cooperation among the refineries that much more important. The first attempt at institutionalized cooperation was launched by Judge Higgins in the second half of 1868, when he imposed it through the conditions of his leases. Although the scheme may not have been profitable for Higgins, the lesson in industrial organization was not lost on the refiners, for they held a “convention of oil refineries” in London only days after the leases expired to create their own Oil Refiners Association of Canada.69 The association’s all-London executive board (Samuel Peters served as president, William Duffield as vice president, L. C. Leonard as secretary, and Charles Hunt as treasurer) negotiated a fixed rate on crude oil purchases for its members, allocated production quotas, and coordinated all domestic sales at a fixed rate of thirty-five cents per wine gallon – or a little less for orders of “five carloads and upward.”70 The association was tentatively renewed four months later at another general meeting in London, but there was too much growth outside of its membership. Within weeks, it had “finally collapsed beyond resurrection,” as S.D. Elwood, president of the rival Crude Oil Association, triumphantly remarked to a fellow crude producer.71 The price of illuminating oil tumbled from its fixed price of thirty-five cents per wine gallon to twenty-one cents by August 1869, while crude oil moved in the opposite direction, more than tripling from the negotiated price of seventy-five cents per barrel to $2.50.72 For the next two

London East: 1860–1883

27

years, the refiners tried to organize “so as not to cut each other’s throats by glutting the home market” and to check the crude producers’ organizational strength.73 Finally, after negotiations had been stalled for months by the logistical problems of foreign ownership, the refiners enacted a price-fixing agreement that bridged the industry’s division of labour, with producers and refiners alike agreeing to a schedule that pegged both crude and refined prices to the latter’s listing on the New York wholesale market. This truly mutual combination operated more or less effectively until the beginning of 1873, when the entire industry was sent reeling by the loss of the export market. While industry-wide cooperation was proving elusive for the London refiners, formal cooperation among them was only marginally more prevalent. The first merger came in the summer of 1872, when a frustrated Jacob Englehart sought a partnership with the Watermans to “address several technical problems” with his refinery.74 And Englehart had had more than his share of problems: his refinery had caught fire three times in 1870, killing one employee and badly injuring several others. On parity, proximity, and personality, this was a natural fit. Their refineries were the largest in the city by far and were only one block apart, they lived together in the city’s most prominent hotel, and all three were Jewish.75 With Englehart’s capital and the Watermans’ technical expertise, the partnership flourished, using its throughput capacity of six thousand barrels per week to become the dominant firm during the early 1870s.76 Their partnership was so successful, in fact, that in the winter of 1872 the two firms joined with William Duffield in leading an effort to connect their refineries to the Petrolia oil fields by pipeline. This was an ambitious scheme in the best of times, and its timing could not have been worse, for the export trade was suddenly slowing to a trickle. Still, even the thought of such a monopoly over the industry’s transportation was enough to set into action “all of the principal oil producers and refiners” in Petrolia, who ensured its demise by launching their own large-scale refinery there.77 The loss of the export trade returned the problem of excess manufacturing capacity to the Canadian petroleum industry with a vengeance. The industry had been exporting a clear two-thirds of its production before the discovery of large crude oil reserves in Pennsylvania throughout 1873 led to dramatic reductions in the price of US refined oil and displaced the inferior Canadian product from any market other than its own.78 By Christmas 1873, illuminating oil could be had for sixteen cents per wine gallon in Toronto and crude for sixty-five cents per

28

Cities of Oil

barrel at the well head.79 Such depressed conditions exacted a heavy toll on the London East refiners, who saw their average weekly throughput plummet from its high of 414 barrels for the year ending 30 June 1873, to 162 barrels per week for the following year.80 By the summer of 1874, the partnership between Englehart and the Watermans was dissolved; by autumn, Englehart’s refinery, once the jewel of the London East refining community, had finally run aground. At Englehart’s ensuing sale, the Monetary Times reported that there was “rather a tussle between the Refiner’s [sic] Association and the crude producers” with the refiners emerging victorious – and with a bargain at that, having paid only $40,000 for a refinery that cost in excess of $100,000 to build a few years earlier.81 The winning bidder, however, was not a general association but a separate partnership of five London East refineries that flanked Englehart’s refinery to the north along Adelaide and York Streets and to the south along Adelaide Street and Hamilton Road. This partnership, the London Oil Refining Company, was formed by William Spencer and his son, William M. Spencer; their long-time refining neighbours the Duffield brothers; Frederick Fitzgerald and his partner, Joseph Fallows; their refining neighbour Edward Hodgens; and John Minhinnick, William English, and John Geary, who together owned a refinery across the street from the Duffields’ cooperage. With Englehart’s large refinery safely wrestled away from the crude producers, the company’s founders arranged to “lease out most of the existing refineries,” using Englehart’s refinery (which they renamed the Victor Oil Works) to manufacture their oil at a price set “just high enough to exclude American oil.”82 This leasing scheme was too effective. Its inflated prices and monthly rents attracted new entrants to the industry in droves, many of them nothing more than “mere speculations” looking to “draw blood if possible from the Association.”83 Here, the industrial suburb that the partners had more or less built up was working against them. Prospective refiners needed to only scan the pages of the London Free Press or stroll the streets of London East to find any one of the handful of boilermakers and foundries that specialized in outfitting refineries and pick from among their advertised inventories of portable stills, agitators, and condenser pipes. By 1877, two full years of the London Oil Refining Company’s leasing scheme had induced seven new refinery start-ups in London East, including one co-owned by William English, who had left the London Oil Refining Company in 1876, and another by Richard Winnett, who opened the refinery as an offshoot of his family’s

London East: 1860–1883

29

foundry business.84 When a reduction in tariff protection finally broke the London Oil Refining Company’s grip on the industry in early 1877, the number of licensed refineries in London East had tripled from six to eighteen; in Petrolia, the rival refining centre, it had only increased slightly, from eight to eleven.85 The demise of the leasing scheme swung industry control back to the crude producers. The London Oil Refining Company possessed only enough organizational strength to initiate a predatory pricefixing agreement among the industry’s largest refiners, with the hopes of driving “the price of refined so low that small refineries cannot compete,” as the Monetary Times noted disapprovingly.86 By 1878, the four largest refiners – the London Oil Refining Company, the Watermans, the producers’ Home Oil Works in Petrolia, and Jacob Englehart (who had been lured back to the industry in late 1876 by a brief revival in exporting and was now operating the former Carbon Oil refineries in Petrolia and Hamilton) – had collectively agreed to a minimum price on illuminating oil, but they continued to individually market their products and negotiate their own crude purchases.87 Not all of the small refineries were so easily deterred, however, with five London East refiners merging their three refineries together in the spring of 1878 to form the industry’s third multi-unit partnership, the Mutual Oil Refining Company of London.88 Included in this company were John Walker, W. D. Cooper, David and Moses Wilson, and William English, now aligned against his former partners in the London Oil Refining Company. All of this jostling for industry control had not endeared the Canadian petroleum industry to its domestic consumers. The federal government was thus brought in from the industry’s sidelines to administer some market discipline, pushed there by a distrustful, monopoly-loathing public but pulled even deeper by the petroleum industrialists themselves, who seized the opportunity to shape the regulatory outcome so as to trim the industry of its fringe competitors. By April 1877, the London Oil Refining Company’s modestly successful collusive efforts had earned the industry an unwanted reduction in tariff protection from nine cents to five cents per wine gallon of illuminating oil, a concession made by the federal government to the industry’s disgruntled consumers, especially those in the west and in the Maritimes, who had been paying the highest prices for the lowest grades of oil (see Table 2c). Two years later, when one million gallons of

30

Cities of Oil

US oil was pouring into Canada – almost double the amount of imports in 1877 and nearly one-fifth of the overall domestic market, as shown in Table 2a – the federal government pushed through some seemingly minor changes to its otherwise bare regulation of the petroleum industry. As the minister of inland revenue briefly explained when he introduced the amendment, “The only thing changed in the law was that the fees were doubled. In every other respect it remained the same as before.”89 He was referring to those fees charged for the inspection of illuminating oil, a regulation that applied equally to domestic and imported oil and one that was first introduced in 1868, with the schedule of inspection fees reduced in 1877 to partially offset the tariff reduction.90 The inspection fees were not simply doubled; they were differentiated on the basis of whether the oil was domestically produced or imported. Imported oil was to be charged a fee twice that of the new domestic rate, in effect more than quadrupling the inspection fees on imports from five to thirty cents per barrel of refined oil. Even more important, as far as Canadian petroleum interests were concerned, was that the inspection test itself was also amended to discriminate against imports, instituting a substantial non-tariff barrier on petroleum imports – another fact the minister had somehow failed to disclose.91

Table 2a Imports of Illuminating Oil to Canada, 1877–84 Imports (Wine Gallons in Thousands)

PROVINCES Ontario Quebec New Brunswick Nova Scotia P.E.I. Manitoba British Columbia N.W.T. CANADA

*1877

1878

1879

1880

1881

1882

1883

1884

109.8 65.3 143.2 140.3 67.3 37.7

154.7 54.6 235.1 211 87.4 2.5 54.6

240.8 93.1 257.2 280.8 107.5 6.6 62

173.5 63.8 147.7 168.4 73.6 0.6 57.9

462.9 223.4 265 282 122.6 7.2 72.8

1106.7 661.1 519.4 430.2 130.6 78.6 77

1138.5 534.9 524.5 611.8 392.2 119.1 113.6

1127.5 507.1 529.6 678.1 50.4 119.4 145.9

570.1

1.6 801.4

2.5 1050.4

2.1 687.6

1.7 1437.5

4.1 3007.6

4.9 3086.3

2.3 3160.3

*Year ends June 30 Source: Canada, Tables of the Trade and Navigation of the Dominion of Canada (1878–85).

London East: 1860–1883

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Table 2b Inspected Barrels of Refined Oil, 1880–4

Year*

Domestic

1880 1881 1882 1883 1884

7338.5 6827.8 5659.7 6328.9 7108.4

Domestic as % of Total 99.9 93 87.7 89.3 91.6

Imports as % of Total

Imports 4.7 510.8 792.7 760 652.3

0.1 7.0 12.3 10.7 8.4

Total 7343.2 7338.7 6452.3 7088.9 7760.7

*Year ends June 30 Source: Canada, Department of Inland Revenue, “Annual Returns,” Sessional Papers (1881–5).

Table 2c Average Value of Illuminating Oil Imports, 1877–84 Average Value (per Wine Gallon)*

PROVINCES Ontario Quebec New Brunswick Nova Scotia P.E.I. Manitoba British Columbia N.W.T. CANADA

*1877

1878

1879

1880

1881

1882

1883

1884

$0.30 0.30 0.27 0.27 0.25 0.53

$0.20 0.23 0.20 0.21 0.19 0.25 0.47

$0.17 0.18 0.16 0.17 0.14 0.19 0.37

$0.17 0.17 0.17 0.20 0.16 0.27 0.35

$0.17 0.18 0.18 0.19 0.17 0.20 0.30

$0.11 0.15 0.12 0.13 0.13 0.12 0.32

$0.11 0.12 0.13 0.11 0.20 0.25 0.12

$0.11 0.12 0.12 0.11 0.18 0.25 0.12

0.37

0.50 0.22

0.46 0.18

0.35 0.19

0.26 0.18

0.27 0.13

0.36 0.12

0.25 0.12

*Year ends June 30 Source: Canada, Tables of the Trade and Navigation of the Dominion of Canada (1877–85).

The only non-discriminatory regulation in the act was a gravity test that applied equally to “all petroleum, whether manufactured in Canada or imported” and limited the content of heavier, waxier distillate fractions in illuminating oil.92 That the act was introduced with such little fanfare suggests that it was hardly another response to the still-festering consumer antagonism towards the Canadian petroleum industry, especially since its discriminatory provisions would be hardest felt in the frontier and border towns

32

Cities of Oil

where that angst was most clearly and frequently expressed. And the government wanted no part in claiming responsibility for the legislation once its anti-competition provisions had been explicated by the opposition. Had the legislation been implemented, it would have restored much of the protectionist wall around the Canadian petroleum market, adding several cents per wine gallon to the price of US illuminating oil at a time when it had been declining steadily for several years.93 The protectionist regulations, however, were as incoherently designed as they were ill-fated. The act delegated the task of inspecting petroleum imports not to customs officers but to inland revenue officers, who had neither the technical experience nor the time to administer the complex test, nor even the testing instruments. Moreover, the instrument specified in the act was notoriously inconsistent and unreliable, producing results that varied as much by the test administrator as they did by room temperature, barometric pressure, and other environmental factors.94 Predictably, then, less than 1 percent (4,700 of 687,600 wine gallons; see Table 2b) of imported illuminating oil was inspected during the act’s short, one-year lifespan.95 Thus, even though illuminating oil imports fell by more than one-third in Canada during the period 1879–80, this had little to do with the act’s discriminatory provisions and more to do with the disorganized state of the domestic industry. Following the demise of the crude producers’ Mutual Oil Association earlier in the year, the warring refiners had purchased large crude oil inventories at bargain prices using their “cheap stocks” to enter into season-long contracts with wholesale distributors at prices low enough to exclude US imports – a task made that much easier by the fact that the price of US oil had failed to decline for the first time in four years.96 That the act was not responsible for the increased price of oil imports mattered little to those in the Maritimes and along the frontier. By the fall of 1879, five months after the bill had passed, the Monetary Times reported that the legislation had incited the “usual amount of loud talk ... in the lower Provinces and points contiguous to the American frontier.”97 By the spring, the “loud talk” had moved to the floor of the House, where the opposition attacked the legislation for giving “factitious and unreasonable protection” to the Canadian petroleum industry “under the guise of a new fire test.” The opposition dared the government to go about its protectionism the hard way:98

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Some time ago, it was considered, in the interest of the Maritime Provinces, who are large consumers of American oils, that the duty was too high, and should be reduced. The people of the Maritime Provinces invariably used the American oils, even at the payment of this very high duty ... In 1868, the first Act in reference to inspection, the fire test for petroleum was made 115. It was, after some years, in 1871, reduced to 105 on Canadian and foreign oils. No reason has been assigned why the fire test should have been increased last session ... If the Government are determined to apply their policy of protection to the manufacture of Canadian oils, if they desire to protect oil rings, let them do so by raising the duty.99

With the differential fire test soundly exposed as scientifically unjustifiable and with the further privileging of oil rings over consumer interests being politically untenable, a flustered Hon. Mr. Baby, minister of inland revenue, backpedalled and narrowed the difference between the two fire tests from twenty-five to five degrees (Fahrenheit) in May 1880 and removed it altogether the following year.100 While the discriminatory fire test provided little to the Canadian petroleum industry other than some unwanted controversy and a marginally increased fire test on its own products, the second and less scrutinized regulatory aspect of the 1879 Petroleum Inspection Act had a more pronounced effect on the industry. The gravity test, first applied to the Canadian petroleum industry by this act, specified the maximum weight of a gallon of illuminating oil, which in turn limited the amount of the heavier, waxier particles that could be included in the final product. This test was easily administered, and, most importantly, it directly penalized those refiners who had not yet mastered the precise application of heat during the important process of destructive distillation, or “cracking.”101 Cracking gained prominence in the early 1860s when petroleum refiners accidentally discovered that redistilling the heavier and higherboiling portions of crude could break the large molecules into smaller ones and thus increase the lucrative middle cut of illuminating oil by as much as 20 percent. By the 1870s, cracking was clearly common practice among Canadian refiners looking to wring every gallon of illuminating oil from a barrel of crude; indeed, they were chastised by the Monetary Times for “using the residuum from export distillate to supply the home market” and “flooding the market with inferior oil.”102 For refiners

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Cities of Oil

such as Samuel Peters, the additional yields were tempting: while he could only convert half of a barrel of crude into a suitable exporting oil, cracking increased that ratio to 70 percent when he manufactured for the captive home market.103 But if the cracking was done too hastily and the heat applied too highly or too intensely, the molecules separated unevenly and the process yielded an “abominable burning oil” full of waxy paraffin particles and other impurities easily measured by their additional weight. This was the case more often than not, as cracking remained an elusive art through the 1870s. William English and his partners in the Mutual Oil Refining Company, for example, were clearly apologizing for a hastily cracked batch of illuminating oil when their products were returned by an evidently unsatisfied John Fisken (oil wholesaler): “We are very sorry that the oil on hand is of a dark color owing to an accident in the heating and not suitable for the Toronto market.”104 The refiners, who for the most part seemed uninterested in the fate of the fire test once it became apparent, were acutely aware of the gravity test’s implications for the industry: significantly less illuminating oil could be produced (or, more specifically, cracked) per barrel of crude, which meant for many of the smaller and less technologically proficient firms “a change in the system of manufacture.”105 Of course, for the large refining firms – and for the crude producers – this was precisely the point. An industry-wide gravity test would help rid the marketplace of the cheap, inferior products made by those marginal firms operating on the basis of price alone, whose cracked oils were often mixed with the industry’s higher grades by cost-conscious oil wholesalers. By establishing a minimum product standard, the gravity test would in effect raise both the cost of raw materials and the capital requirements for manufacturing illuminating oil, thereby raising the barrier to industry entry. For the crude oil producers, the gravity test fell in their favour because it would clearly increase the industry’s crude requirements and thus bolster demand for crude.106 Producers and refiners alike thus waited anxiously in the spring of 1880 for the government’s decision on the petroleum inspection question. They had done all that they could to further their position, as a backbencher noted when the bill was introduced, for they had “availed themselves to the services of a very intelligent and active gentleman, who has resided at the Capital during the Session, and who has endeavoured to impress their views on the members privately.”107 When

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the Petroleum Inspection Act was passed on 4 May 1880, confirming that the gravity test would remain (and remain the same) for both domestic and imported oil and that the fire test on imports oils would be reduced, Imperial Oil was exactly four days old. Through the formation of Imperial Oil, the refineries managed to rationalize much of the industry’s manufacturing capacity; through the implementation of the gravity test, the federal government made the rest of the industry’s manufacturing capacity more or less redundant, at least for a while. Federal intervention, then, facilitated the rationalization of production and the concentration of ownership, but it did so by establishing minimum product standards as much as it did by exposing the industry to heightened foreign competition. It was the raising of the price floor, after the lowering of the price ceiling, that made all the difference. Imperial Oil, in the first instance, was not formed by “sixteen prominent London and Petrolia oilmen,” nor was it “established by ten of the leading refiners.”108 It was, instead, a merger of four companies, one layer of consolidation on top of another; it was a union of old neighbours, the formalizing of relationships that spanned one decade and two suburban blocks. Formed as a co-partnership on 30 April 1880, Imperial Oil merged together the remaining partners of the London Oil Refining Company (Edward and Thomas D. Hodgins, John Geary, Joseph Fallows, Frederick Fitzgerald, John R. Minhinnick, and William, William M., and Charles N. Spencer), the Mutual Oil Refining Company (William D. Cooper, William English, and John Walker), the Waterman brothers (Isaac and Herman Waterman), and J.L. Englehart & Company (Jacob Englehart and Isaac Guggenheim).109 All were London East refiners, save Englehart and Guggenheim, who were now once removed, having purchased the assets of the bankrupt Carbon Oil Works in 1875 (one year after they sold their London East refinery) and subsequently built a new Silver Star Works refinery on the old Carbon Oil site in Petrolia in 1878.110 Although Imperial Oil began as a partnership of London East refiners, most London East refiners were not partners in Imperial Oil. In total, the company included seven London East refineries, but thirteen more were left outside of it. These seven refineries were generally the oldest and largest in the suburb, a status revealed by their central location near the intersection of Adelaide Street and Hamilton Road,

Map 2b Village of London East, 1875 Source: Illustrated Atlas of the County of Middlesex, Ontario (Toronto: H.R. Page & Co., 1878), 57.

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the industrial core of the suburb (see Map 2b). Two of the refineries bore Adelaide Street addresses: the Victor Oil Works (assessed by the village at $25,000) and the Fitzgerald Refinery ($5,000). The Hodgens Refinery ($2,600) abutted the eastern edge of the Fitzgerald Refinery and opened onto York Street. Three refineries – the Spencer Refinery ($9,000), the Watermans’ Atlantic Works Refinery ($11,000), and W.D. Cooper and John Walker’s Cooper City Plant Refinery ($2,500) – were located on Hamilton Road between Adelaide and Rectory Streets. William English’s Refinery ($4,500) was on the south side of Simcoe Street, a few hundred yards east of the Spencer Refinery. Of the thirteen refineries not included in Imperial Oil, ten were located on the more southern Nightingale Avenue, a sure sign of their latecomer status, as the street held no refineries in 1868. Only one of these refiners, that owned by Stephen Adams ($3,500), had a property assessment greater than $3,000.111 The three other firms left outside of the company were the Duffields’ refinery ($2,000), which they now used to supply their adjacent gas works; a small refinery operated by two boilermakers, the Winnett brothers ($1,500); and J.W. McIntosh’s refinery ($2,600), which had first opened in 1878. Imperial Oil absorbed three more refineries during its first year of operations, though none were from London. The company’s board of directors (Fitzgerald, T.D. Hodgens, Walker, and H. Waterman) also served as its valuating committee, which appraised the constituent refineries, using that assessment as the basis for allocating the company’s stock. For the original partners, their refinery valuations and the attendant stock allocations were settled by 1 June 1880, one month after the partnership had been formed. For the three refineries subsequently added to the company, these negotiations took longer the farther away the refineries were. Frank Smith’s refinery in St. Thomas was not added until July 1880, and Francis Ward’s refinery in Wyoming was not included until August 1880, even though the valuating committee had been negotiating with both firms since early April. A settlement for the Home Oil Works in Petrolia was not finalized until January 1881, delayed for almost one year by disagreements over its value between its owners and the committee.112 Thus, by the time Imperial Oil was officially registered as a jointstock company in September 1880, it had assumed the characteristics of a modern industrial enterprise. The company controlled ten of the industry’s largest refineries (adding the eleventh in January) in four

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Cities of Oil

different locations with a nascent managerial hierarchy that included three separate plant managers, one general foreman, three executives, and a board of directors. The company immediately concentrated production in its two largest refineries, the Silver Star Works in Petrolia and the Victor Oil Works in London East, and the ensuing high-volume throughput produced large profits for the company’s shareholders during its first few years. By November 1880, after only six months of operations, the company had netted a profit of $116,049 on $492,556 in total sales.113 IV Conclusion From the mid-1860s until the early 1880s, London East served as the centre of petroleum manufacturing in Canada. In 1862, William Spencer and Herman Waterman opened a small refinery at an unpopulated intersection on the eastern outskirts of London and were soon followed there by nearly two dozen other refineries, two chemical plants, two large rail car shops, several wax works and candle shops, a handful of specialized foundries and boilermakers, and about one thousand labourers and their families. This dense clustering of industry not only accounted for the majority of petroleum manufactured in Canada during this period, but it also produced the industry’s first two major innovations: the discovery of the litharge refining process in 1868 and the formation of Imperial Oil in 1880. The initial emergence of London East as a location for petroleum refining was a function of the industry’s transportation costs, which favoured locations near the point of resource extraction and the agglomeration economies associated with production in urban areas. The eventual dominance of London East as the location for petroleum refining was a function of the localization economies that built up in the suburb and accrued to those firms located within it. Petroleum refining was among the first forms of new industrial activity to appear in Ontario, and the municipal response to the industry reflected two important changes to the municipal condition that occurred during this period. First, as the initial municipal reception to petroleum refining illustrated, there was a growing acceptance that the authorities and resources of municipal government could be legitimately used to promote industrial development, primarily by inducing private investment and swaying location decisions made by business. Second, as the experiences in London made clear, it was also understood that if the institution of municipal government could be used to promote

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industry, then it was also perfectly acceptable that those industrial processes could be subject to its control. Both dimensions of this emerging municipal condition would encounter their limits in the decades to follow, but it was the latter idea, the expansion of municipal regulatory authority, that had the most profound effect on the refining industry’s development. In London, the refineries had initially located outside of the city’s eastern limits so as to avoid regulations that might be imposed on them by the city.114 When the city threatened annexation, in part to capture the industry’s tax base but also to bring it under their regulatory control, the refiners mobilized to incorporate the area as a village. Incorporation, as the refiners surely understood, effectively precluded annexation without local consent, as the province was not yet in the habit of imposing boundary adjustments on incorporated urban municipalities. Thus, the territorial limits on the city’s authority to regulate urban economic activity, which were reinforced by the relative ease with which suburban municipal incorporation was obtained and by the province’s unwillingness to intervene in local boundary disputes, prevented the city from responding to local concerns about refinery pollution through regulatory controls and allowed the petroleum manufacturing industry to flourish in London East. Residents there, many of whom were employed in the refineries, accepted the pollution generated by the refineries, perhaps because they deemed it a fair trade for the jobs and bare municipal services that the refineries provided or perhaps because they had little choice. For the refiners, then, municipal government conferred a singular benefit: autonomy. They asked little else of it. Although they effectively controlled the suburban municipality, its resources were not obviously channelled to their operations, nor were its regulatory authorities used to prevent new industries from establishing themselves there. When the refiners sought policy changes to improve their profits, they marched to Ottawa. The spatial limits to the city’s regulatory authority also stimulated the industry’s development in another way. Generally, the prevailing pattern of industry location in North American cities during this period was near the centre, so as to minimize transportation costs to the physical infrastructure of railway shipping hubs and ports. There, in central business areas densely populated by businesses and residents, manufacturing faced much competition for suitable sites from commercial and retail industries and from residents seeking to be near their places of work. The refiners would have similarly preferred to

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have been closer to London’s central oil shipping depot but had recognized that their presence would not be welcomed there and so were constrained to locations on the periphery, of which the most suitable were to the east. This raised transportation costs for the refiners, but it also had the effect of confining their location choices to one small part of the urban area where – initially, at least – there was little competition for land from other industries or from residents. In this way, it forced the refineries to locate near each other when there existed reasons to remain apart – to avoid traffic congestion, to reduce land costs, and to protect valuable trade secrets. The dense clustering of refineries that followed worked to stimulate the rise of the external benefits of industry agglomeration. Close proximity defied trade secrecy among the refiners and thus facilitated the spread of technological innovation. It also reduced the monitoring costs of industry partnerships and other collusive arrangements by allowing them to be more easily policed in person and thus encouraged cooperation among the refiners. And it also attracted other service industries to the area and thus lowered the cost of those inputs. As these localization economies built up, more investment in petroleum manufacturing followed, and industry expansion continued. Thus, the accelerated, sustained growth of petroleum manufacturing in London East during this period was stimulated not by any direct municipal actions but by the presence of a municipal boundary, which at once both prevented the city from imposing regulations on the industry and worked to concentrate industry investments in a small area where their external benefits could be magnified. This process of industrial suburbanization was certainly not unique to petroleum manufacturing in London.115 Industry began to migrate outward in many North American cities during the late nineteenth and early twentieth century, drawn to suburban locations by the adoption of mass-production techniques and consequent need for large plant sites, by labour unrest in central cities,116 by incentives deployed by speculative suburban land developers,117 or, as shown in Muller’s account of the steel and glass industries in Pittsburgh, by all three.118 At the time, this “industrial suburbanization” was generally regarded as parasitic.119 But the fragmentation of municipal authority across urban areas, coupled with the decentralization of regulatory functions to the local level, could stimulate industry growth by inducing competition among municipalities for new investment and by allowing mobile entrepreneurs to evade local economic restrictions. In London East, as in Muller’s metropolitan Pittsburgh, the concentration of industry sectors in specialized, independent suburban

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municipalities clearly appeared to provide a stimulus to further growth: “As capital deepened and interdependence among firms grew, more participants arose, external economies from agglomeration accrued, and localized production systems formed around these industries.”120 To a large extent, the importance of London’s municipal boundary to the petroleum refiners was a function of the province’s policy towards municipal structures, which, at the time, permitted the incorporation of new municipalities with relative ease and left municipal boundary disputes to be resolved locally.121 Such is the prerogative of provincial governments in Canada, for better or for worse, and so the extent of municipal fragmentation in urban areas, and thus the economic significance of municipal boundaries, is generally beyond the control of any single municipality. But the case of petroleum manufacturing in London East does have implications for municipalities seeking to stimulate the rise of industry sectors. Land-use policies, and zoning laws more specifically, can be used to constrain the location of industry sectors to specific areas within municipal jurisdictions and to minimize competition for land-sites, much as the city’s boundary did for the petroleum refiners in London.122 Such policies can be justified when the dense clustering of industry sectors is expected to generate external agglomeration benefits and when competition for land from other industries or from residents threatens to drive firms within the industry sector apart.123 Zoning by-laws, in other words, can be used to encourage the geographical clustering of industry sectors within municipalities. The economic significance of municipal boundaries, and of municipal fragmentation more generally, during this period also depended on the financial viability of newly incorporated suburban municipalities. In many cases, the high fixed costs of municipally provided physical infrastructure, such as roads, sewers, and water systems, meant that the independence of small suburban municipalities was unsustainable in the long run, especially in those suburbs where industry had been given tax concessions or other location inducements. Under these circumstances, suburban municipalities could forgo investments in physical infrastructure, incur them at substantial financial risk, or attempt to purchase services at lower average costs through agreements with central cities, which were not always inclined to be cooperative. Often, however, the long-run result was the same. When citizens and businesses in suburban municipalities grew weary of deficient municipal services or of the frustrating wrangling with city governments, or when financial insolvency threatened to push their municipalities into bankruptcy, most eventually opted to be annexed by a larger adjacent

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Cities of Oil

municipality, which was usually the central city.124 Such was the fate of London East. On a Saturday afternoon in the autumn of 1884, the Great Western Division Car Works of the Grand Trunk Railway (the two were amalgamated in 1882) in London East caught fire.125 The city’s fire brigade was summoned, as was customary for large conflagrations in London East, for the suburb had no professional fire service of its own. The twentyman fire brigade raced to Adelaide Street, the city’s boundary, with teams of horses pulling boiler pumps, hose carts, and ladder wagons, but there they waited for either a $100 indemnity fee from London East or the mayor’s special permission to proceed, as per their instructions from city council. When neither materialized, they eventually crossed the boundary anyway. Once they finally arrived at the fire, they discovered that the nearest water hydrant held no water, for although the suburb had laid a network of water mains and fire hydrants two years earlier, it had not been able to secure its own water source and had been refused in its attempts to purchase access to the city’s water system.126 By the time the fire brigade secured a source of water, the car works had been engulfed in flames for two hours. Hours later, it had burnt to the ground, destroying $200,000 of the railway’s plant and equipment and displacing its 400 employees.127 Within one year of the fire, London East was annexed to the city of London.128 One of the conditions of annexation was that the city would not “swoop down and compel the removal of the refineries,” so long as they remained within their original area in London East.129 But aside from a handful of small firms, which did include Herman Frasch’s legendary Empire Oil Works laboratory, there were few refineries left to swoop down and remove. Since 1883, the petroleum manufacturing industry had shifted to Petrolia, a movement which had been largely triggered by strategic municipal investments made there in physical infrastructure. But for the better part of the preceding two decades, London East had served as the centre of petroleum manufacturing in Canada. During that period, the distinction in land-use and regulatory policies created and reinforced by a municipal boundary stimulated the accelerated, sustained growth of an industry sector.

3 Petrolia: 1883–1899

I January 18, 1878 At the front of the room John Henry Fairbank stood, his long, narrow face moving only when he spoke. Turning from their small tables and half-empty plates, the men sat, listening, nearly 200 of them pressed between the walls of Petrolia’s Oil Exchange Hall, most with their hands folded over their stomachs, unfolding them only to raise their glasses or to pound their open palms on the linen-clothed tables, their heads nodding and mouths moving as Fairbank spoke.1 This was the most important day in the town’s short history, began Fairbank. The town, and before it the village, and before it the place, Petrolia, whose name was its identity and that of most of the men assembled there in the hall, had faced its share of difficulties in matters of transportation, but no more. Prosperity was finally here, Fairbank assured them, arriving on that very day with the official opening of the town’s second railway line, the Sarnia, Chatham and Erie Railway. For more than a decade, Petrolia had been the centre of crude oil production in Canada, but efforts there to harness the full value of the resource had been disappointing, as London East had prevailed as the centre of petroleum refining and manufacturing. What could be done to tilt the balance of the industry’s costs to favour Petrolia’s, to overcome the locational advantages that London East conferred upon the refineries, and to uproot the industrial cluster that had grown there and deliver it to its natural location alongside the oil wells? Could municipal government, despite its limited resources and the territorial and legal constraints on its authority, help trigger the industry’s relocation? Petroleum refining was a volume-reducing process, and transportation

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costs were a significant portion of total costs, so Petrolia possessed obvious inherent advantages as a location for manufacturing. But London East had its advantages, too. Refining required more than just crude oil, and the other inputs – sulphuric acid, caustic soda, coal, tin, barrel staves, labour – also had high transportation costs and so were more cheaply obtained in London. And then there were the other apparent benefits of refining there, the locational externalities, the technological and informational spillovers among the firms, that enhanced its appeal as a centre for refining. Finally, and perhaps most importantly, London possessed competitive rail transportation, while Petrolia, for more than a decade, did not. And so, after a long struggle in which municipal institutions figured prominently, the Sarnia, Chatham, and Erie, “the second string in their bow,” as Fairbank described it, was to finally end the Great Western Railway’s monopoly over rail transportation in Petrolia, assuring producers and refiners alike of fair shipping terms east to Toronto and so tilting, once and for all, the balance of manufacturing costs towards their town and away from London East. For a time, it did. II Petrolia Petrolia, like so many other Ontario towns, began as a flour mill built on a creek bed in the 1840s, serving the agrarian settlement that was creeping southward from the shores of Lake Huron. It was not until the late 1850s, after oil had been discovered ten kilometres south around a small village that was to be called Oil Springs, that the first sustained oil drilling began in Petrolia, along the creek flats west of the mill, where oil seepages were visible at the surface.2 Those early drillers hauled their oil, a few barrels at a time, the eight kilometres north to the Wyoming stop along the Sarnia-Toronto branch of the Great Western Railway, their oxen pulling long sleighs in the winter and flat-bottomed concrete sleds during the other months, the animals often haunch-deep in the slick grey mud along the road the old drillers called the canal. As oil production increased, that canal gave way to a planked road from Oil Springs through Petrolia and to Wyoming in 1862,3 financed by a collection of unknown oil producers and passable only when the planks were not themselves submerged in the muck or heaved by the frost, which was not often. Down that road the teamsters carted, hauled, or otherwise dragged the oil, ten barrels at a time, for forty cents per barrel – then about 20 percent of the price of crude.4 During the next few years, traffic down the plank road from Petrolia increased steadily, for yields had declined sharply in Oil Springs,

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driving prospectors, drillers, and speculators alike northward to Petrolia, including Fairbank himself, who arrived on scene in 1865. That year, in 1865, the explorations of Fairbank and others led to the discovery of several flowing, large volume wells just west of town, including, in 1866, captain Benjamin King’s “gusher,” then the most prodigious strike in Canadian history at 500 barrels a day.5 The boom was on. From its settlement of six log homes and perhaps 100 labourers scattered among shanties along the Bear Creek in 1865, Petrolia exploded to nearly 2,300 persons by the end of 1866, serviced by nine hotels, four churches, and a half-dozen general retail stores.6 Such immediate, explosive growth over land that had just previously been scarcely inhabited presented many basic challenges: roads needed to be laid, safe drinking water secured, the saloons and their patrons policed, and the stick-framed and wood-cladded buildings protected from conflagrations. To those ends, and others as well, municipal incorporation was sought and received, with Petrolia incorporating as a village on 13 December 1866. Yet the most pressing issue hampering the village’s expansion and development, the lack of adequate transportation, required a more immediate response. III The Great Western The Great Western Railway was a southern Ontario enterprise, with lines arching across the belly of the peninsula, eastward from Sarnia and Windsor, through London, and on to Hamilton, Niagara Falls, and Toronto, a route primarily designed to connect existing railways in Michigan and New York. The railway had begun as the London and Gore Rail Road Company, incorporated in 1834 to connect by rail the towns of Hamilton and London, and had been directed and promoted by prominent business men in both places. But lacking finances, the scheme languished until British investors purchased a majority interest in the company in the 1840s. With funds secured, the road’s main and branch lines were built and fully operational by the mid-1850s, during that first great decade of railway construction in Ontario.7 It was not until 1861 when the Great Western first noted the development of oil production around Oil Springs: The earth oil, lately discovered, to which great importance is beginning to be attached, is found in abundance in the district between the Main Line and Sarnia Branch; considerable quantities have already been

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Cities of Oil conveyed by this company. It is obvious that this may lead to important results.8

The company closely monitored the region’s development. One year later, their initial optimism proving warranted, the directors were prepared to fully service the new industry: The anticipations respecting the importance of the Earth oil district as a source of fresh traffic seem likely to be realized, and the plank road to Wyoming Station from Bear Creek being found totally inadequate to accommodate the business, the Directors request the sanction of the Proprietors to an outlay of about £10,000, which would be sufficient, as they are informed, to provide a rough rail or tramway sufficient to meet the present requirements of the district and prevent the trade from taking another channel.9

The request was authorized, and the survey for the short, eightkilometre line was administered in the spring of 1862. Construction did not immediately proceed, however, for the directors began to express doubts about the true “value and requirements of the Earth Oil district.”10 Moreover, it had become apparent that the company’s charter did not actually confer the right of way for the proposed line, an oversight that, once apparent, was easily remedied through an amendment to the company’s charter obtained in May of 1863.11 Nevertheless, construction did not proceed. To some extent, the delay may have been strategic. It was common practice for railways to withhold branch line construction until local revenues would clearly cover the financing and operating costs of the line; hence, the need for local public subsidies to stimulate branch line construction in advance of local demand, or so it was claimed. As the sole possessor of the right of way to the line, Great Western could wait. Its nearest potential competitor, the St. Mary’s-Sarnia branch of the Grand Trunk, was ten miles further north and would require an amendment to its charter and a survey of the route before construction could begin – ample time for Great Western to proceed itself or to quietly negotiate a compromise. Meantime, the company could monitor the fluctuating yields in the region, adjust its projections accordingly, and capture what profits it could from the trade, as all of it was eventually being shipped down its railroad anyway. Yet when Great Western secured the right of way to the line, the company was in turmoil. The British shareholders had grown increasingly

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distrustful of their Canadian directorate and the company’s chief operating officer, Charles John Brydges, to whom they considered the directors largely and unduly subservient. Brydges had been reckless in his pursuit of expansion, it was alleged, and had disguised the company’s consequently declining financial position through shoddy accounting and incomplete reporting. Worse, the directors had permitted this; some even appeared to have benefitted directly, having held equity in branch railways acquired by the company, which they failed to disclose. And so, in late 1863, the Canadian board, its chairman, and its chief official, Brydges, were summarily dismissed and replaced by Britons, and the company’s head office was relocated from Hamilton to London, England.12 By the time the new management was in place, oil yields had fallen sharply, and so, strategic or not, the branch line project was shelved indefinitely. The issue was not raised again until early 1866, when, at the onset of Petrolia’s boom, the British directors reported having been “strongly urged to construct the projected Branch Line.”13 Hampered by slow and costly horse-drawn transportation, the oil producers had organized under Fairbank to press the company for the branch line’s construction. Yet despite the flourishing oil production and the heightened demand for rail service, management remained unresponsive to the oil producers’ requests. Instead, a curious alternative approach to constructing the line developed through the office of the company’s chief engineer. George Lowe Reid had served as Great Western’s chief engineer since at least 1860. He had survived the company’s restructuring in 1863, though perhaps barely, for an auditor employed by the British shareholders had criticized Reid for his excessive loyalty to Brydges and for failing to produce accurate reports on the poor condition of certain of sections of the company’s lines.14 By late 1866, however, Reid’s efficient oversight of the relaying of most of the company’s lines had won him the confidence of the board’s new chairman and chief operating officer Alderman Dakin.15 During that period of reconstruction, probably sometime in early 1866, Reid purchased the right of way to the Petrolia branch line from the company, a decision almost certainly within the discretion of the chief operating officer.16 Reid had overseen the surveying of the line in 1862, if he had not carried it out himself, and so knew the land, its promise, and that of the men working it. Fairbank and a few other large producers, all of whom Reid likely knew well, financed the road’s construction, with Fairbank himself donating the land for the Petrolia station, while Great Western supplied the

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machinery, equipment, and labour.17 The branch line opened in December 1866 and was sold back to Great Western in January 1867 for the cost of construction – about £10,000, very near the original estimate.18 Though their course had been a cautious one, probably overly so, and though the accomplishment was certainly not theirs alone to claim, the short branch line proved to be an outstanding acquisition for Great Western. In its first six months of operation, the branch line generated gross receipts of almost £9,00019 – in its first four years, they neared £50,000.20 For the oil producers, such as Fairbank, the branch line meant reduced transportation costs and improved access to markets. The congestion and storage problems created by the old horse-drawn method of trans-shipment would be reduced, as would their expenses, freeing resources for further exploration, land acquisition, and expansion into manufacturing. By assuming the capital costs of construction – and thus presumably also the risk, should production have collapsed in the interim – the producers secured the railway’s completion likely sooner than otherwise would have been the case. For Petrolia, the railway gave the place a sense of permanency and a status exceeding its wild, frontier image. More concretely, the railway would ease the chronic shortages of equipment and supplies that had plagued the village and stimulate further settlement and development. And for Petrolians, and the oil producers in particular, the struggle to obtain the village’s first railway provided an early lesson in the economics of rail transportation, particularly that of a profit-maximizing monopolist. IV The Sarnia, Chatham, and Erie The Great Western Railway had served them well, Fairbank said. That was partly true. In the decade since it opened, the branch line had carried out innumerable quantities of oil, most of it in crude form destined for refineries in London East. Many producers, particularly Fairbank, had become quite wealthy during Great Western’s reign. From 1872 to 1875, a period for which data exist, the Great Western shipped an average of three hundred thousand barrels of oil per year, essentially all of which originated in the fields around Petrolia.21 And, to its credit, the company had made periodic investments to accommodate the growing industry’s changing requirements: additional sidings were laid in Petrolia, tankage facilities and loading cranes were constructed at the company’s main freight yard in Hamilton,22 and tank cars were added to the company’s rolling stock to facilitate bulk shipments.23

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But the Great Western was also a monopoly in Petrolia, and so mostly it behaved like one.24 Fairbank, along with several other large oil producers, had spent the better part of the last decade struggling to overthrow it. Certainly, there were limits to Great Western’s market power and thus to the rates it could set on oil shipments from Petrolia. In the short term, the firm constraints were the price at which US illuminating oil was selling, domestically and internationally, which set the price ceiling for Canadian oil generally and the cost of the closest substitute for the company’s transportation services: trans-shipment by horse cart to the Grand Trunk, whose line was about twelve miles north of Petrolia (seven miles north of the Great Western), with connections to London and Toronto. In the long term, excessive profits would likely attract transportation rivals to the region and thus threaten the profitability of the line, perhaps entirely, should cooperation between the rivals not prevail. Competition was to be avoided. Yet, even within these constraints, the railway still had to tread carefully, for its monopoly over the industry’s transportation extended only to London; thereafter, it was in direct competition with the Grand Trunk, especially on shipments to and through Toronto, where the Great Western had no special cost advantage, as it did on shipments to New York. Exorbitant prices on the Petrolia-London line might drive the oilmen and their shipments to the Grand Trunk, not out of spite, or at least not entirely, but as a retaliatory measure to bring Great Western’s rates back into line. Such a threat was particularly credible if the refiners were sufficiently organized and disciplined to collectively withstand being lured away from the Grand Trunk by heavily discounted rates; that is, if they could prevent defection. Thus, Great Western’s optimum strategy was to charge rates on the Petrolia-London line that captured as much of the industry’s potential profits as possible, yet were low enough not to attract rival entry, and to threaten a price war if it appeared that they would, to attempt to collude if they did, and to make concessions as necessary in order to capture the Toronto-bound traffic out of London. Great Western’s position was soon challenged on several fronts. The first threat came sometime in early 1872: A curious scheme is afoot to settle the question of oil transportation from Petrolia to London. It is gravely proposed to lay a pipe the entire distance – about sixty miles – and by placing pumps at intervals to force

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Cities of Oil the oil forward. When first mooted we regarded the project as a bugbear to frighten the Great Western Railway into a reduction of rates, and greater promptitude in dealing, and it is still liable to this interpretation; but as projectors give notice of application for charter in the Ontario Gazette, it may be that the matter is seriously contemplated. There is nothing impossible about it, the only question being whether it will pay – and this point remains to be demonstrated.25

The idea of constructing a pipeline between London and Petrolia had been contemplated since at least 186926 and, unlike most ventures in the industry, had been conceived of as a vertical enterprise, designed to benefit both producers and refiners, with ownership divided between the two groups, as each had grown frustrated with Great Western’s service: The owners of hundreds of oil wells at Petrolia and adjacent lands, the refiners in London city, of whom there are a score, have borne the onerous traffic for transportation as long as they can endure it. Genius, skill, enterprise and capital combined have organized to relieve both producer and refiner.27

In March 1873, the London and Petrolia Pipe Line Company received its provincial charter, with an authorized capital of $500,000; the right of way through all highways, roads, and streets; and the power to expropriate private lands.28 At that very same session of provincial parliament, two further challenges to Great Western’s monopoly also materialized: two railway companies were formed, with both proposing to build new lines into the heart of the oil region. The Erie and Huron Railway was to traverse the entire peninsula, stretching from Rondeau Harbour on Lake Erie due north to Lake Huron; passing through Blenheim, Chatham, Dresden, Oil Springs, and Petrolia; connecting with the Grand Trunk in Erroll, a small village near Lake Huron; and then extending west along the lakeshore to Sarnia.29 The Dresden and Oil Springs Railway, in contrast, was a shorter, local line. As originally conceived, the railway would only connect the two villages to each other, which were about sixteen miles apart (see Map 3a).30 But shortly after the company petitioned for its charter, the Canada Southern, whose trunk line ran from Fort Erie to Amherstburg along the shore of Lake Erie, began construction of a branch line that would pass just north of Oil Springs on route to Courtright, which was to completed by early 1874.31 The plans for the Dresden and Oil Springs were consequently revised so that its right of way continued past Oil Springs, where it would intersect the

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Map 3a Railways of Southwestern Ontario, 1880 Source: Christopher Andreae, Lines of Country (Erin, Ontario: Boston Mills Press, 1997), 129.

Canada Southern and go on to Petrolia, an additional distance of about six miles.32 As this revised right of way exactly duplicated a portion of the Erie and Huron’s proposed route, the two railways were squarely in competition with each other.

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Among these three companies, the pipeline project was the most ambitious and fantastical; certainly, it was unprecedented. Pipelines had been employed in Pennsylvania’s oil regions as early as the mid-1860s and had become widespread by the early 1870s, but their use was primarily limited to small systems of gathering lines that linked oil wells to storage tanks and railheads. Long-distance pipelines that connected crude oil fields with refineries were not attempted until the mid-1870s, for they required considerable pumping capacity and had to be buried at greater depths so as to lessen the risk of being ruptured by land uses above, both of which raised costs significantly.33 Though gathering lines were used in Petrolia by the early 1870s,34 the London and Petrolia Pipeline was the first proposal to construct one over a long distance. The project, were it to proceed, would require considerable resources: the cost of construction alone, excluding land purchases, would be at least $350,000.35 The investment was especially risky, considering the variability of crude oil production in the region, the capriciousness of international and domestic illuminating oil markets generally, and the very obvious fact that the pipeline could serve no other purpose. Yet the railways were not minor investments, either. The cost of the short Dresden and Oil Springs line, including rolling stock, was estimated to be $322,000,36 while that of the Erie and Huron was nearly three times that figure, at $850,990.37 The task of attracting investors, both private and public, was made more difficult by events in the year following the incorporation of the three companies. Between 1873 and 1874, the output of the Canadian oil industry fell by half. New, vast crude oil discoveries in Pennsylvania, efficiency gains in refining, and the resurgence of competition in the US oil industry had combined to drive inferior Canadian products out of European markets and thereafter confine them, with only slight exceptions, to the home market. The sharp decline of the Canadian oil industry also coincided with an international economic depression in 1873, which, too, had been hard on local railway traffic receipts. A ratefixing agreement between Great Western and Grand Trunk, which had existed since the late 1860s, collapsed under the strain.38 A short, vicious price war ensued, and petroleum freight rates were among those slashed. In the summer of 1874, Great Western announced deep cuts to its petroleum freight rates: rates on oil shipments from London to Toronto were reduced by one-third to $20 per carload, and on crude oil shipments from London to Petrolia, by one-half to $10 per carload. But the rate reductions were not uniform; freight rates on refined oil shipments from Petrolia to London remained fixed at $20 per carload. The

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net effect of the new rates was to “give a decided advantage in freight to London refiners.” Oil refined in London and sent to Toronto now bore shipping costs of about $30 per carload, while the same oil, drawn up in the same Petrolia fields, rolling down the same Great Western tracks, only refined in Petrolia instead of in London, now incurred freight charges of $40 per carload.39 The dramatic decline in Canadian oil production coupled with the sudden emergence of competition for rail transportation of Torontobound oil shipments dampened support for establishing new transportation alternatives, especially among London refiners, who now had competitive shipping rates to points east of London and a steep discount on crude oil shipments from Petrolia, and so were at a competitive advantage over their counterparts in Petrolia. The pipeline scheme, which had ultimately favoured them, was soon forgotten. In Petrolia, however, Great Western’s new rates served as further evidence of a collusive pact between the railway and London refiners and so underscored the necessity of securing alternative means of transportation for Petrolia’s manufactured oil products.40 The new rates were particularly injurious to Fairbank and another dozen of Petrolia’s largest crude oil producers, as they had recently expanded their operations vertically into manufacturing by collectively constructing a massive refinery in Petrolia in the spring of 1873. Thus, despite the oil industry’s difficulties, there remained much support in Petrolia for a second railroad. The Erie and Huron Railroad, as the better-organized of the two companies, pushed ahead in pursuit of financing. At the time, railway construction was as much a public undertaking as it was a private one. Since the late-1840s, the province had aggressively promoted railway construction by extending land grants, bond guarantees, and cash subsidies to prospective railways and had permitted, if not encouraged, its municipalities to do the same by delegating to them the necessary legislative authority and by pooling and underwriting their associated debt through the province’s Municipal Loan Fund. In the early 1870s, state support of private railway enterprises intensified. Provincial subsidies for railway construction were increased, and additional funds were promised on a yearly basis to defray future railway operating costs.41 In 1873, a large provincial cash transfer relieved many municipalities of their outstanding debts to the Municipal Loan Fund, in most cases entirely, while injecting all but the most indebted of them with funds to be spent on provincially approved infrastructure projects.42

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It was to these freshly endowed municipalities that the Erie and Huron’s directors first turned for funds. For most railways built during this period, especially branch lines such as the Erie and Huron, this was the normal course taken through the system of state aid: municipal bonuses were secured first, which were then presented to the province as a measure of informed, vested local support for the road so as to help justify provincial aid. Beginning in the spring of 1874, the company’s directors poured their energies into “working up the bonuses” and by the summer, had successfully petitioned the Counties of Kent and Lambton to hold referendums on the granting of municipal aid to their railway. At the time, provincial law required such bonuses to be approved by the electorate. counties could administer the referendum on behalf of their constituent municipalities affected by the railway and finance the bonus through a separate tax on properties in those municipalities. By autumn, the Erie and Huron had secured cash bonuses of $155,000 and $110,000 from Kent and Lambton, respectively. In neither county, however, were the municipalities unanimous in their support. In Kent, the three largest townships had voted against the bonus, but still it had passed by a slim margin,43 as provincial law then required only a majority in the aggregate, rather than in each separate municipality.44 In Lambton, where Fairbank had campaigned hard on behalf of the railway,45 only one township voted against the bonus, though opposition was fierce, with physical harm threatened to those supporting the by-law. There, too, the bonus passed, though by a wider margin.46 With municipal bonuses in hand, the directors turned to the province. That winter, they managed to secure a private meeting with Premier Mowat, where they requested aid through the province’s Railway and Railway Subsidy funds. Though Mowat was said to have been “favorably impressed with the claims of the proposed Railway,” the request was rejected, for, as Mowat explained, that year’s share of the funds had already been allocated, and new funds would not be available until after the provincial election scheduled for early next year.47 Though the promoters were encouraged to return then and make their case for provincial aid again, it was becoming clear that the province’s priorities in railway construction were in the north, where railways were to stimulate forestry and mining and where municipalities could not assume as large a share of state aid as they did in the more populous south.48 Provincial aid for the Erie and Huron would not likely be forthcoming.

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The failure to secure provincial aid did not, by itself, condemn the Erie and Huron. Railways built during this period, particularly regional branches in the province’s south, were far more reliant on municipalities than the province for direct subsidies. Of the 1,750 miles of railways constructed in Ontario between 1867 and 1877, municipalities were reported to have funded 28 percent ($6.4 million) of their capital and operating costs, while the province contributed only 8 percent.49 The most the Erie and Huron’s directors could have hoped to receive from the province was about $130,000,50 which was less than either of the county bonuses and which still would have left the bulk of construction costs to be raised privately. The future of the road would depend on private support. In the winter of 1874, only weeks after their meeting with Mowat, the directors of the Erie and Huron began canvassing for investors. In April 1875, the stock books were opened and toted from community to community through which the railway would pass. At month’s end, with no stocks having been sold and the railway seriously in jeopardy, for the Lambton bonus was set to expire if the county’s portion of the road was not built and opened by the year’s end, Fairbank and six of his associates subscribed 820 of the company’s 1,500 shares, with Fairbank himself acquiring 760 of the $100 stocks. This not only gave Fairbank a controlling interest in the company but also a full complement of directors (including himself) to elect to the company’s board.51 The railway’s provisional directors were furious. Fairbank’s efforts had been instrumental in receiving the Lambton bonus, and it was unlikely that a railroad could be built in the region without some contribution from Petrolia’s amassed capital, of which Fairbank had the largest share. But the directors, almost all of whom were from Kent, had obviously not anticipated such “sharp practice on the part of Petrolia,” despite the reputation oilmen generally carried for ruthlessness in business dealings. They complained loudly that Fairbank was interested only in securing rail connections for Petrolia, a fact that he did not bother to dispute, and further alleged that under his direction, no rails would be laid south of Petrolia, which they considered a violation of the company’s charter and the spirit in which the bonuses had been given.52 Fairbank responded by pointing to their own timidity – “On each and every occasion of the opening of the stock books of the Erie and Huron during the past six months, Kent has not been ready to subscribe a dollar of stock” – and by challenging them to purchase his stocks and assume control of the company – “Can the Kent

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gentlemen do better?” – provided they could guarantee (in cash, of course) the completion of the Lambton portion of the road by year’s end.53 Rather than accept, the directors refused to relinquish control of the company by withholding the stock books. When that strategy failed, they hastily arranged a board meeting before Fairbank could depose them and awarded themselves compensation totalling $11,445, an act which directly contravened a clause in the company’s charter and which exhausted all of the company’s funds, including the 10 percent deposit Fairbank and his associates had recently made on their stock purchases.54 With the railway effectively bankrupt and soon mired in legal actions, Fairbank cut his losses. The Lambton bonus lapsed, and the line languished. Once it was obvious that the Erie and Huron was floundering, the Petrolia oil men sought viable alternatives. Despite the setback, achieving some measure of competition in their industry’s shipping remained a priority, as the oil industry had rebounded strongly from its collapse in 1873. Accordingly, in early 1876, a second pipeline company was incorporated. Unlike the first, the Petrolia Oil Pipe Company was solely a Petrolia venture, organized by several of Fairbank’s co-investors in his large Home Oil Works. The company was granted the authority to lay underground pipes linking refineries and tankage facilities in Petrolia to railheads, north, at the Grand Trunk and, south, at the Canada Southern, a route which was clearly designed to circumvent the Great Western.55 Though construction costs for this pipeline were likely less than half of its predecessor’s, for it was to travel less than half of the distance and would likely employ smaller pipes and pumps, the oilmen would, again, likely be required to shoulder the entire financial burden. The question of pipeline financing was resolved, again, by the appearance of a more attractive alternative. Since its incorporation alongside the Erie and Huron in 1873, the Dresden and Oil Springs Railway had patiently waited on the sidelines while the demise of its rival slowly unfolded. Then, precisely as Fairbank and the Erie and Huron’s provisional directors feuded publicly over control of the company, the organizers of the Dresden and Oil Springs began to promote their railway in earnest. First, they established the company: by May of 1875, the company’s stock had been fully subscribed, its board and officers elected, and its route planned and surveyed.56 Armed with clear cost projections and construction schedules, the directors then began soliciting municipal aid.57 They first targeted the villages of Dresden

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and Oil Springs, where they received expressions of strong support.58 Though both Dresden and Oil Springs were technically still obligated to finance their shares of the Kent and Lambton bonuses (respectively) to the Erie and Huron, if they were actually dispensed, by the summer of 1875 it seemed highly improbable that the terms of either bonus would be met. When it was clear that the Lambton bonus would officially lapse, Petrolia indicated its willingness to subsidize the railway, too.59 Referendums on bonuses to the Dresden and Oil Springs Railway were not immediately held in the three communities, however, because the railway’s directors had sensed that the failure of the Erie and Huron created a wider opportunity for them, which they promptly seized. Sometime in late 1875, they petitioned to have the railway’s route altered and the company’s name changed. In early 1876, the Dresden and Oil Springs Railway became the Sarnia, Chatham, and Erie Railway, whose route was now practically identical to that of the defunct Erie and Huron Railway.60 The directors spent the rest of the 1876 campaigning for municipal bonuses. By 1877, their efforts had produced bonuses amounting to $80,000 from Dresden, Oil Springs, Petrolia, and the two townships within which the three communities were nested.61 While the directors continued to press for aid in the west, where their efforts had worn down opposition to the railway in Sarnia, and in the south, where the Kent organizers of the Erie and Huron had resurrected the company and mobilized against the Sarnia, Chatham, and Erie, the bonuses that had already been awarded were more than sufficient to begin the construction of the central portion of the railway. In the late autumn of 1877, ground was broken on the short line between Petrolia and Oil City, a tiny place about six miles south of Petrolia along the Canada Southern Railway (see Map 3a). By early 1878, the section was completed. Through the line would later be extended to Oil Springs, the remaining sections of the railway were never completed. Operation of the short railway was immediately handed over to Canada Southern, which, in turn, leased it to the Michigan Central Railway in 1882.62 The inaugural excursion of the Sarnia, Chatham, and Erie Railway occurred on 17 January 1878, with five first-class coaches arriving in Petrolia from St. Thomas, having travelled over mostly Canada Southern rails. About 200 local elites gathered at Petrolia’s Oil Exchange Hall to mark the occasion and to honour those responsible.63 The mood, as captured in the local newspaper, was triumphant:

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Cities of Oil After being at the mercy of the Great Western Railway for the last twelve years, during which time she has been shed of the last cent that could have been taken from her, she is now able to throw off that yoke of railway monopoly and oppression, and assert her independence and just claims for a fair show in railway freights and competition for that product of which she alone in this Dominion is the producer.64

Thirty miles east, in London, the significance of the day’s events was also immediately understood: With the raw material at their doors and the choice of roads for shipping the manufactured articles to all parts of Canada, the Petrolia refiner has an advantage over his London competitors that the latter may not be able to resist.65

V Relocation Fairbank finished lauding the new railway to those sitting before him in the Oil Exchange Hall, and he was replaced at the front of the room by Jacob L. Englehart; the applause, which had subsided but had not entirely ceased, resumed with vigour. Englehart had first arrived in Petrolia in the spring of 1868 at the tender age of twenty-one, having emigrated from New York, where he had worked as a salesman for a brewer and whiskey rectifier – that is, as a bootlegger – until legal difficulties drove him, his employers, and their amassed capital north to Canada.66 In the decade that followed, he established himself as Canada’s foremost petroleum refiner, the captain of the industry, and had acquired a reputation as a shrewd but honest businessman. He had pioneered the opening of the export trade in the early 1870s, along with New York associates, and had been a driving force behind several attempts at organizing ownership and production among Canadian refiners. His Silver Star refineries were considered models of modern industrial design, and his brand marketing strategies were equally sophisticated for the time.67 Quietly, he had also become the second largest crude oil producer in Petrolia, behind only Fairbank.68 To the crowd seated before him, Englehart provided a mostly positive assessment of the state of the Canadian oil industry. Trade prospects were improving, he reported, particularly in the far east, where US firms had not penetrated as deeply as they had in Europe, and the

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domestic market appeared stable, at least in the short term, though he could not help but emphasize that profits could be larger if producers and refiners could cooperate to regulate price and output. He concluded by noting that access to both domestic and international markets would now be greatly improved through the addition of this second railway and congratulated those who had seen the development through. More interesting than Englehart’s bland pronouncements about the industry’s prevailing economic conditions was an issue that he chose not to address. Within only a few months, a rumour would begin to circulate that Englehart was contemplating the relocation of his refining operations from Hamilton quite possibly to Petrolia.69 He had operated the Hamilton plant since 1875, after creditors had forced the sale of his massive London East refinery,70 but the plant was mostly equipped for finishing and packaging bulk shipments of distillate and thus was not a complete refining operation, as he was accustomed to operating.71 An advertisement in a May issue of the Toronto Globe confirmed that the Hamilton plant was indeed for sale and fuelled speculation that his operations would soon be moved.72 That the speculation was accurate, and that Petrolia was indeed his intended destination, was revealed in June when Englehart approached the town’s council to negotiate tax concessions for a new refinery.73 Eventually, council capitulated to his request, waiving all local taxes on the proposed refinery. Construction began that summer. When the refinery opened in January 1879, Englehart’s new Silver Star Works was heralded as the largest and most modern of its kind in Canada.74 The opening of Englehart’s refinery marked a pivotal moment in the economic history of Petrolia and of the Canadian petroleum manufacturing industry more broadly. Before, London East had functioned as the centre of petroleum refining in Canada. The output of refineries in Petrolia had never exceeded that of those operating in London East and, as recently as 1876, had declined to account for only one-quarter of the illuminating oil manufactured in Canada and only one-third of that produced in London East. Of those refineries operating in Petrolia during this period, the two largest by far (the Home Oil Works and the Carbon Oil Works) were distilleries only and so required the final stages of processing to be completed by other refineries, almost all of which were in London East, except for Englehart’s facility in Hamilton. Slightly more than one year after Englehart’s refinery was opened, Imperial Oil was formed. Nine refineries were originally incorporated into the company, but only Englehart’s Silver Star Works was

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located outside of London East. The company began operations by restricting production to its two largest and most valuable plants: the Silver Star Works, whose value the company had recorded as $63,000; and Englehart’s old refinery in London East, the Victor Oil Works, whose worth was set at $70,000. Together, the two plants amounted to more than half of the company’s physical assets and probably accounted for at least 75 percent of all refined oil manufactured in Canada from 1880 to 1883.75 Initially, Imperial Oil concentrated production at its Victor Oil Works refinery in London East, as sales from the Victor consistently exceeded those from the Silver Star during the company’s first two years, though by a fairly narrow and steadily decreasing margin. Yet, over that same period, funds invested in the Silver Star outpaced those sunk into the Victor by a factor of ten, and when rising competition and more stringent government regulations moved the company to hire an industrial chemist, Herman Frasch, in early 1882, it was to the Silver Star that he was assigned, and more funds followed.76 By autumn, sales from the Silver Star had surpassed those of the Victor, as shown in Chart 3a. One year later, the Victor was closed permanently, and the Silver Star became the company’s only operating refinery. Two years after that, in the early summer of 1885, the transition was made official when Chart 3a Imperial Oil Sales by Refinery Location, 1882–4 90000 80000

Victor Oil Works Silver Star Oil Works

Sales ($)

70000 60000 50000 40000 30000 20000

1882

1883

Source: Imperial Oil Private Journal, 1880–1898, Imperial Oil Archives.

1884

Nov.

Sep.

Jul.

May

Mar.

Jan.

Nov.

Jul.

Sep.

May

Mar.

Jan.

Nov.

Sep.

Jul.

May

Mar.

0

Jan.

10000

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Imperial Oil quietly relocated its headquarters from London East to Petrolia.77 Several factors were behind Imperial Oil’s decision to shift its operations to Petrolia, as the company’s secretary would divulge years later to a prospective investor: When the Company was formed, they owned and operated a number of refineries in London, Petrolia, and elsewhere. The question of concentrating these plants naturally required consideration and it resulted finally in coming to Petrolia. Many considerations tended towards this and the result simply shows the wisdom upon this matter, as Petrolia possesses naturally many points of advantage over any other place, being the centre of the Crude Oil producing district and in the matter of tankage, nature has provided in the heavy clay soil here, the most perfect tankage material that can be formed anywhere. Railroad competition was also available so as to secure the best possible facilities for the transportation of the output of the works and receiving of necessary supplies used in the various branches of the refinery.78

For Petrolia, it was the last of these factors that had proved decisive. The natural advantages afforded Petrolia by its proximity to the wells and by its mucky soil had existed, and had been known to exist, for more than a decade. Underground storage tanks had been widely used there since 1867 and had been linked to the oil wells through dense networks of small-diameter pipelines to reduce transportation costs.79 Nevertheless, the refining industry had remained concentrated in London East, where other inputs for refining could be more cheaply purchased and where certain locational externalities also appeared to exist, until Petrolia finally secured competitive railway transportation. The important sequence of events, from the town’s perspective, was explained by Martin Woodward, a Petrolia oil producer and refiner, in his testimony before Ontario’s Royal Commission on Natural Resources: “In 1870 there were forty refineries ... and they were mostly in London and Ingersoll, the majority being in London. The business gradually began to centre at Petrolia after the Michigan Central came here.”80 VI Conclusion From the very beginning, the development of the petroleum industry in Petrolia was hampered by poor infrastructure. The primary sector, crude oil extraction, had been late to develop there, in part because

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transportation was slow, cumbersome, and expensive. With the only available watercourse a small and shallow creek, producers were forced to move their products over land, through a road trenched out of the boggy wilderness to a junction of the Great Western Railway several miles north. Concerted, organized action by the producers soon improved the road but not greatly. And when yields appeared ample and reliable enough to justify the road’s replacement with a short branch railway line, Great Western failed to act beyond securing the legal right of way. As pressure from the producers mounted, a mutually acceptable arrangement was struck between them and Great Western, with the former’s capital and the latter’s legal authority assigned to a trusted third party, who finally but belatedly brought the railway to Petrolia. The primary sector did benefit greatly from the railway, and crude oil production flourished, but the absence of competitive shipping worked to stunt the growth of secondary manufacturing there, as refineries developed further down the main transportation route at the first point of railway competition. Once it became obvious that sustained industrial expansion depended on overcoming the railway monopoly, the producers proposed and supported various alternate transportation schemes. Of these, they came to favour a second railway as the preferred solution, not the least because of the cost savings it represented for themselves when compared to the alternative, a pipeline. At the time, railways carried the promise of low-cost transportation for local inhabitants and industries; of accelerated settlement and industrial expansion for those that stood to benefit – primarily merchants and landowners; and of thickened tax bases for governments in search of revenue. Southwestern Ontario was no exception during this period, even though it had already been crossed by several trunk railways, and so branch railways, such as those proposed for Petrolia, enjoyed broad popular support and were all but assured of state aid, especially from local governments, as was facilitated and encouraged by provincial legislation, whose own priorities had drifted north. Pipelines, in contrast, served a singular purpose and employed unproven technologies and so represented a substantial, risky investment that the producers would necessarily be required to make on their own. Though a railway was a more cost-effective solution, it was not necessarily more expedient. “Working up the bonuses” was a complex undertaking that involved bargaining about routes, construction schedules, and cost-sharing arrangements across a number of locales, each

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with its own interests and ambitions. Reconciling divergent regional interests was not an easy task and was made even more difficult in this case by Petrolia’s involvement, which was necessary for any local railway because of the town’s disproportionate wealth and demand for railway services but which was distrusted for those very same reasons. Hence, the Erie and Huron failed once provincial aid was denied and the oil producers were forced to supply much of the capital, while the Sarnia, Chatham, and Erie, a much shorter line, prevailed. The reliance on the local state for finances and certain powers (e.g., rights of way) made municipal involvement in railway development indispensable, as the producers understood, but it also conferred other distinct advantages. Financing construction costs through the local tax base was preferable, even when those taxes fell mostly on the producers themselves, because it was at once more equitable, more flexible, and more permanent – more equitable because it distributed the costs widely, especially to those operating outside of the industry but benefitting from its growth; more flexible because the tax base could expand and contract as new firms entered and old firms left; and more permanent because it ultimately assigned costs to a place rather than to the producers, and so could be abandoned, along with the town, if industry conditions deteriorated. Municipal government, despite its legal, fiscal, and territorial limits, proved to be a useful mechanism for overcoming the problems of collective action in the provision of non-divisible, shared infrastructure for the industry. Yet industry conditions did not deteriorate, at least not in the short term. The shift of refining activities from London East to Petrolia was sudden and dramatic following the opening of the town’s second railway in 1878. At the turn of the century, a restructuring of the industry’s ownership would result in the relocation of petroleum manufacturing to Sarnia. But in the intervening years, an opportunity to stimulate economic growth had been seized by Petrolia. There, as probably elsewhere, municipal actions stimulated the growth of a local industry sector by accommodating its transportation requirements through timely, strategic infrastructure investments.

4 Sarnia: 1899–1960

I June 10, 1942 A bulldozer crept across the ground, pushing back the earth in strips that looked neat and even from a distance. Thigh-tall goldenrods, spent milkweeds, and lavender thistles clumped on its blade as it rumbled away from the slow-moving river towards a field opening 100 yards away, where a dump truck and excavator waited, idling. On the gravel road behind them sat three smaller flat-bed trucks, their drivers walking towards the field, talking with their hands and holding up large white sheets of paper that did not flap because there was no wind. The heavy, humid air filled with the stench of diesel exhaust, the musty coolness of turned earth, and the putrid odour of petroleum, which wafted in from the gasoline refinery just upriver and which had hung over that field for half of a century. It was not yet noon, but it was June, so the men were all probably sweating. They worked steadily without hurrying. Soon they were joined by more workers and more heavy machinery. Weeks later, the underbrush was gone and the barren earth beneath it was exposed and carved into pits and mounds and embankments marked by white-tipped wooden stakes. Months later, winter comes. It was cruel and cold and endless, even for Sarnia. Over the snow-covered site that was no longer a field, thousands of men swarmed, working. Hundreds more toiled inside the buildings that had since been built and were being built around them. There were nearly six thousand workers on the site by mid-winter. When autumn returned, there now stood on the site an enormous industrial plant, a sprawling, garish village of small factories—looming cold, mechanical, and foreign above the river which rolled slowly behind it.

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There were eight acres of buildings in total, the tallest among them set back on the river’s bank, beside a half-eaten coal hill and beneath five billowing smokestacks. Between this building and the rest stood several giant spheres and many narrow towers, most of them being at least two stories in height, with the towers, spheres, and buildings overlaid by five miles of paved road. Under these roads ran six miles of sewers, and above them, between all of the buildings, were mazes of exposed pipes, cylinders, and conduits, stacked and girdled together, passing steam and gases and electricity from buildings to towers to spheres and back again. At the front entrance to the plant, visible from the once-rutted road which had since been paved, there were was a wide, low-standing white sign whose raised black letters read: POLYMER.1 Polymer was a synthetic rubber plant, built in great haste by the federal government during the Second World War and operated by it as a crown corporation – successfully, it should be emphasized at the outset – for many years afterward. Its construction marked roughly the midpoint in Sarnia’s near century-long dominance as the centre of petroleum manufacturing in Canada. More than four decades earlier, the industry had been brought to Sarnia by Standard Oil, but, aside from several large expansions made to this plant, no new investments were made in the industry there until the federal government selected Sarnia as the site for its synthetic rubber plant. The addition of Polymer greatly accelerated the concentration of Canadian petroleum manufacturing in Sarnia, initially, through the $52 million investment that the plant itself represented and, shortly after it was built, through the new private investment that sprang up around it, which those who had been placed in charge of Polymer had helped attract. By the late 1960s, more than a dozen petroleum and petrochemical manufacturing firms were clustered around Polymer and the Imperial Oil refinery. By the late 1970s, the total cumulative postwar investment in these sectors in the Sarnia area exceeded $1 billion. Over the long course of the development of petroleum manufacturing industry in Sarnia, what role did municipalities play in inducing the industry’s relocation from Petrolia and stimulating its further development—and, later, during and after the Second World War, stimulating its rapid development into a petroleum refining and petrochemical manufacturing complex? Moreover, what forces of agglomeration were behind the rapid growth of the petroleum refining and petrochemical manufacturing complex there during and after the

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Second World War? In the very beginning, the town had encouraged Standard Oil to invest there by awarding the company’s refinery a generous tax concession, but this industrial policy, like so many others awarded by Ontario municipalities at that time, probably carried little weight in the company’s investment decision. Much later, the dramatic, accelerated growth of the petroleum manufacturing industry in Sarnia during and after the Second World War was not directly stimulated by municipal governments. Partly this was because the scope of municipal industrial policy-making had been much reduced by the province, but the scale and pace and complexity of development in Sarnia also overwhelmed the area’s municipalities, especially the rural township in which most of the new industry development occurred. While the municipalities struggled to cope with the intense demands made on their infrastructure and residential services, and fought each other over control of the industrial property tax base, it was Polymer that assumed the task of stimulating further industrial growth. Through the strategic and deliberate manipulation of its inputs and outputs, Polymer attracted firms upstream and downstream of its operations and thereby expanded both the scale and scope of the industrial cluster in Sarnia. II Relocation The first few years of Imperial Oil were successful ones. The company’s refineries accounted for nearly three-quarters of the oil manufactured in Canada, and its margins were wide enough for the company to claim nearly a fifth of its sales as profits. Shareholders received healthy dividends, and the Petrolia Silver Star refinery was retooled to accommodate the centralizing of the company’s operations there. By the mid-1880s, however, Imperial’s position had begun to weaken. Although sales remained fairly constant, the company’s profitability had deteriorated, for it had lost market share to a handful of smaller refineries that had sprung up around it – some of which were owned by the company’s shareholders themselves – and had seen the cost of its raw materials driven upward by diminishing crude oil supplies. In response, the company struck deals with the independent refiners, who were largely content to follow Imperial Oil’s leadership on prices. The crude oil shortage was also lessened somewhat by the new exploration that the higher prices attracted and by the more extensive use of the company’s own oil wells. To a certain extent, the strategies were

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successful, and Imperial Oil’s position stabilized. After reporting losses to its shareholders in 1883 and 1884, the company broke even again in 1885, and by 1887, it could afford to issue a small dividend.2 Despite the recovery, the company’s financial outlook was still uncertain. The Canadian oil manufacturing industry had come to rely heavily on a variety of trade barriers to shelter the domestic market from international competition.3 But the barriers were not insurmountable: by the end of the 1880s, the dominant US refining firm, Standard Oil, had established a strong presence in Canadian markets by distributing its oils through networks of commissioned agents and wholesale distributors.4 Some oils were sold in central Canada, where their superior quality made them something of a luxury, but mostly they found consumers on the country’s periphery, where, as Fairbank recounted, their closer proximity and more direct shipping routes at least partially compensated for the penalties imposed at the border: “The sharpest competition is on the eastern coast; there the freight on the US oil is very low, while we have 1,200 miles of railway. Having that advantage, they push us very hard, and they also make a great push for Manitoba and British Columbia. Competition presses hard upon the frontier, and it is difficult to do anything in the Niagara district, though we send our best oil to those districts.”5 By 1890, about one-fifth of all illuminating oils sold in Canada were flowing through Standard Oil. At the time, there was a strong and swelling undercurrent of popular opposition to the protectionist aims of the National Policy, which had always been viewed in certain parts as an instrument to benefit central Canadian business elites at the expense of consumers on the periphery. Resentment ran especially deep against those industries, such as petroleum manufacturing, where market protection had failed to yield significant improvements in either product quality or price and instead had appeared to facilitate the concentration of industry ownership and control behind the tariff walls. And it was true that the quality of Canadian illuminating oil had scarcely improved since the late 1860s, when Spencer’s litharge treatment had yielded a lamp oil less offensive in storage but still accompanied by a pungent odour and thick, acidic smoke once lit. Of the Canadian oils produced, only the premium water white brands were considered widely suitable for use in lamps, with the inferior economy grades often used only as stove fuel. Imperial Oil, once formed, had done little to address this. When the company hired Herman Frasch as its industrial chemist in 1882, he was deployed

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to redesign the Silver Star plant in Petrolia with an eye towards improving efficiency, not quality; indeed, Frasch experimented with the refining and treatment of Canadian oil on his own time and at his own facilities in London East.6 US illuminating oils, in contrast, were superior largely because the crude oil drawn from the Pennsylvanian fields contained fewer sulphurous compounds. When large oil deposits were discovered in swampy northwestern Ohio in the mid-1880s and were found to contain the same sulphurous compounds that contaminated the Canadian oils, Standard Oil responded, in part, by hiring the industry’s best chemist – Herman Frasch – and throwing him at the problem. In 1887, less than one year into his tenure with Standard Oil and working mostly from his refinery and laboratory in London East, Frasch had patented a breakthrough refining method that effectively – and, most importantly, efficiently – removed the sulphurous compounds. Further improvements followed, and by the decade’s end, Standard Oil was successfully employing Frasch’s copper oxide refining process on a commercial scale.7 By the 1890s, then, Standard Oil was producing a better illuminating oil, and Canadian consumers knew it. Public support for the trade barriers protecting the Canadian oil industry, which had always been precarious, was appreciably waning. Standard Oil responded by intensely lobbying the federal government to dismantle its trade barriers and by mobilizing to the cause its expanding consumer base, who complained bitterly to government representatives about the “double injury” of paying higher prices for inferior goods while openly welcoming competition and who were joined in their efforts by manufacturers seeking discounts on lubricants and fuel oils.8 Eventually, Ottawa capitulated, and concessions came in 1893, when the federal government was moved to reduce slightly the duty on imported oil from six to five cents per wine gallon, to eliminate altogether the discriminatory inspection rates for imported oil, and to end the prohibition on bulk oil imports by railway tank car.9 Of these, it was the last that was the most significant. Previously, US companies had shipped their oil in tank cars to the Canadian border, where it had to be repackaged in barrels, inspected, and then stacked on freight cars shipped to distributors, a process that added as much as five cents in handling and shipping charges to each gallon of imported oil and had been justified, mostly by Canadian oil interests, on the flimsy grounds that it somehow reduced the risk of major fires breaking out in the shipping hubs along the border.10 Under the new regulations, US companies would be free to ship directly

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by tank car, though only to approved inspection stations located near the major Canadian markets (this condition was relaxed the following year), where repackaging in barrels was still required for inspection. Though a ban on bulk imports by tank vessel remained, despite the objections of those in the Maritimes whom the regulation was purportedly designed to protect,11 the new trade regulations were felt immediately by the Canadian oil industry: the wholesale price of illuminating oil tumbled by one-fifth; imports, almost exclusively those of Standard Oil, rose sharply to capture one-third of the Canadian market; and several of the smaller, niche refineries were purged from the industry.12 But Ottawa was not done bringing competition to the oil industry. Four short years later, a new federal government, one which had openly stood in support of trade liberalization, made new promises to undertake a wholesale review of the federal tariffs, with an eye towards increasing the efficiency of their use (that is, to maximize government revenues while minimizing hardship for consumers) and engendering better trade relations with the nation’s major trading partners – namely, Britain and the United States. The petroleum sector was an obvious target, partly because public sentiment ran mostly against it but also because the remaining significant non-tariff barrier – the ban on bulk imports by tank vessel – was difficult to justify and, perhaps more importantly, earned the government no revenue. So when a commission of senior cabinet ministers was struck in late 1896 to examine the federal tariffs and to hold hearings across the country to which interested parties – manufacturers, merchants, boards of trade, industry representatives, farmers’ groups, labour organizations, and so on – were invited to send delegates to present their views, the Canadian oil men prepared to fight for their professional lives. Hearings were held on the petroleum industry in Petrolia, and in Ottawa in the late autumn of 1896 and early spring of 1897.13 At both, representatives from the oil industry – mainly Fairbank, Englehart, and Fitzgerald (then president of Imperial Oil) – made their case for maintaining, at the very minimum, the protection presently afforded to the domestic oil industry. The ban on oil tanker vessels was necessary, they explained, to protect not only the safety of maritime harbours but also the interests of Canadian consumers, since such large shipments could not be properly inspected and would thus leave the Canadian market vulnerable to the dumping of “adulterated or under-proof goods.” And tariffs worked in the interests of consumers, they argued, especially in the long run, by maintaining some degree of indigenous oil production

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and manufacturing capacity, which would serve as the only credible check on the otherwise inevitable monopolization of the market by Standard Oil. Against the Canadian oil men stood an array of farmers’ groups, manufacturers, and oil dealers, with many of the last having been recently – and largely secretively – acquired by Standard Oil.14 And they registered familiar complaints: that Canadian oil products were significantly inferior, particularly the lamp oils; that the price of Canadian illuminating oils was fixed to the price of imports, which was considered as evidence of collusion; and that monopoly from abroad was no worse than monopoly from home, but at least the products were superior. In the end, the position taken by the Laurier government, announced in the spring budget of 1897, was something of a compromise, but one decidedly tilted against the Canadian oil men. The ban on oil tankers was to be repealed at once, and the duty was to be reduced further by one cent per imperial gallon.15 Only a prohibition on tanker wagons remained (Standard Oil’s preferred method of distribution in urban markets), but that too was to fall in the following year.16 Standard Oil responded to the lowered trade barriers by continuing to expand its operations in Canada, largely through acquisitions made by its British and Canadian corporate subsidiaries. Shortly before the revisions were announced, the Bushnell Company of Montreal (a wholly owned subsidiary of Standard Oil) purchased the Fairbank, Rogers, and Company refinery in Petrolia, and shortly after, it also acquired the Alpha refinery in Sarnia, which had long sat unused. For the latter, Standard Oil had ambitious plans. A municipal bonus negotiated with the City of Sarnia, upon which the sale of the refinery had been conditional, committed the company to investing at least $150 000 in “buildings and improvements” on the site by the following autumn, nearly three times the price the company paid for the refinery,17 for which in exchange the refinery would receive a five-year exemption from municipal taxes.18 When the renovations were completed the following year (with Standard Oil investing more than twice the promised amount), the company continued to close ground on Imperial Oil by purchasing five more refineries, including all three of the remaining active refineries not owned by Imperial Oil.19 Imperial Oil, for its part, responded to the lowered trade barriers by doing very little. The company focused on marketing and expanding its distribution network, mainly in the western provinces and territories where genuine opportunities for expansion existed, and made modest

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investments to its Silver Star plant in Petrolia, which by then had come to represent more than half of the company’s total assets. But these were largely routine expenditures. Mostly, the directors pushed for the sale of the company. Since 1895, in fact, the directors had been engaged in intense negotiations over the sale of the company with a consortium of British investors, acting through the Colonial Development Corporation. In these negotiations, carried out through encrypted telegrams, Imperial Oil was clearly the more aggressive party, and the company was portrayed as a highly successful one with a dominant market share, though ultimately constrained by a shortage of capital.20 More than once it appeared to the directors that an agreement had been reached, and in the autumn of 1896 they even prepared and delivered a prospectus for the issuance of the company’s stock in England by the Colonial Development Corporation. But the investors continued to delay, despite the persistent urging of Imperial Oil’s directors, and the deal finally collapsed in the spring of 1898. Less than one month later, the shareholders dispatched Englehart and Frederick Fitzgerald, then the company’s president, to New York with the authority to negotiate the sale of the company to Standard Oil.21 On 1 July 1898, the Standard Oil Company (New York) acquired control of the assets and business of Imperial Oil.22 The terms of the deal had been generous, as had become Standard Oil’s common practice in acquisitions.23 Once inventories had been liquidated and old receivables collected, which would take several years, the shareholders would receive $324 per share of $100 par value (slightly more than $810,000 in total) for 75 percent of their shares, while retaining a 25 percent share in the company, which proved to be far more profitable under Standard Oil’s direction.24 In addition to the nearly $700,000 in dividends Imperial Oil had issued during its previous nineteen years of operations,25 the shareholders saw their initial investment repaid almost four times over. In January 1899, months after the agreement had been struck, the directors of Imperial Oil assembled behind the wood-cladded walls of their modest, one-storey office in Petrolia to make preparations for the final transfer of control to Standard Oil.26 Accounts were settled and old by-laws repealed. Among the actions taken that day, the very last was a motion declaring Petrolia as the company’s “chief place of business.”27 Since the sale had been finally announced in the summer of 1898,28 there had existed much anxiety in Petrolia over the future there, which the dramatic expansion of the Sarnia refinery and the construction of a

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pipeline connecting it to the surrounding oilfields had only heightened. The declaratory motion, of course, was entirely symbolic. When new directors were elected three months later and control swung to Standard Oil’s offices in New York and Buffalo, one of the board’s first decisions was to declare that “the chief place of business of the Company shall changed from the Town of Petrolia to the Town of Sarnia.”29 For the citizens of Petrolia, the company’s announcement confirmed that hard times did indeed lay ahead: We have lost the refining business and we must make the best of things. Those of us who are here have a large fixed interest in the town, the battle of our lives has to be fought out here and necessity demands that we look a little outside of oil.30

But nothing was to be found. As Sarnia emerged as the centre of petroleum manufacturing in Canada, Petrolia fell sharply into decline.31 III Bonusing Reconsidered The tax concession granted by Sarnia to the Bushnell Company had come with several strings attached. In March 1897, it was reported that “several gentlemen occupying prominent positions in the Standard Oil Company”32 had quietly arranged the purchase of the long-disused oil refinery and several adjoining plots of land along the eastern banks of the St. Clair River, nearing the southern edge of the town limits. The sale, however, was reported as being conditional on the company receiving suitable incentives from the town. In what marked the beginning of his long career with Standard Oil, a young, astute, and politically ambitious William J. Hanna negotiated with the town over the terms of the municipal incentives.33 When an agreement was finally reached, it was revealed that the town council had waived taxes on the refinery for five years, so long as the company invested at least “$150,000 in buildings and improvements before next fall” and employed “not less than 60 or 70 men, and possibly twice that number,” and, further, that “the men employed would be nearly altogether taken from the working men of Sarnia.”34 At the time, such performance conditions were commonly attached to the inducements Ontario municipalities awarded to industry. Provincial law had evolved to empower municipalities in this regard, and the actions taken by municipalities to stimulate industrial growth

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had become increasingly sophisticated as a result. At the same time, however, provincial law had also become more restrictive about the conditions under which municipalities could grant aid to industry. Eventually, successive waves of provincial legislation dismantled the entire system, and by 1922, municipalities were no longer permitted to directly provide incentives to industry. This record of legislative change, and the debates which surrounded it, allows the effects of such municipal policies to be assessed and thus the consequences of direct inter-municipal competition for industry to be better understood. Ontario’s system of municipal industrial aid grew out of state involvement in railway promotion. In 1868, a full decade after the province’s first railway construction boom had sputtered to a halt, the legislative authority under which municipalities conferred aid to railroads was extended to include “any manufacturing establishment.” Initially, municipal aid to industry was limited to tax concessions, which could apply to the entire tax owing but could only be granted for a maximum of five years. Three years later, however, the authority to grant aid to industry was loosened to be equal to that over railroads: municipalities were permitted to grant aid in virtually any conceivable form, including land, loans, cash, and tax concessions. The first modifications to the municipal power to aid industry came in 1873. Municipalities were empowered to “take security for compliance with terms and conditions,” which were usually specified as the “number of hands employed” and the amount of capital invested. The security taken was typically a first mortgage on the business being aided, and though the amount of aid granted often exceeded the resale value of the business, some collateral was better than none and so the measure was commonly used. Limitations were also imposed on municipalities: cash subsidies would require the formal consent of a majority of the electorate, although land grants, tax concessions, and loans remained strictly within the purview of council.35 With these reforms in place, the system of municipal industrial aid was left untouched for the better part of a decade, while the municipalities preoccupied themselves with the province’s second, and last, railway boom.36 It was, in hindsight, entirely predictable that the completion of this railway network, the forging of this urban system, would only intensify the competition among municipalities for new investment, for it loosened the very bonds between industry and place that had so evenly distributed manufacturing throughout the province.37 With old capital shaken free by the railroad and with new capital pouring in over

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the National Policy tariff wall,38 competition among locales intensified, municipal aid to industry increased, and a second wave of legislative reforms was triggered. In 1880, all forms of municipal industrial aid involving direct expenditures were made to require approval by the electorate, a stipulation that may have proved too stringent, for it was relaxed to the more obtainable fraction of two-fifths in 1882.39 In the year following, anyone with a vested financial interest in a company being considered for aid was prohibited from voting on the relevant by-law.40 But these changes, however sensible they appeared to be, did not go far enough for some, and mounting protests drew an official response from Ontario’s Commission on Municipal Institutions in early 1888. Ontario’s Commission on Municipal Institutions had an ambitious agenda, charged with nothing less than investigating and reporting on the systems of local government throughout North American and Western Europe. It was, for the most part, an exercise in self-congratulation – the commissioners prefaced their final report by confessing that they were “forced to the conclusion” that Ontario’s system was “now one of the best in the world”41 – but the commission’s hearty endorsement of government by commission, and the heavy emphasis it placed on prudence and efficiency in municipal decision-making, distinguish it as an early advance in the municipal reform movement.42 In their two volumes and three hundred pages of findings, the commissioners spared slightly less than one paragraph on the issue of municipal bonusing: From many parts of this province, a demand now comes that municipalities be deprived of the power to grant sums of money in aid of business undertakings ... At present a mania for promoting the growth and prosperity of towns and villages by subsidising manufacturing enterprises is widespread. The people of some of these places would feel much aggrieved, no doubt, if they were prevented from doing what they believe will enhance the value of their properties and give them greater opportunities of becoming wealthy. It would not be an unreasonable restriction on the right of any community to use its own means in the way that seems to it best, to require that when it is proposed to give a subsidy or loan, or special assistance of any kind, involving the taxation of all residing in the municipality, this should be approved by the votes of three-fifths or of at least a majority of all the ratepayers on property.43

The amended bonusing laws handed down by the Mowat government in the late spring of 1888 went considerably beyond the passing

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recommendations of its appointed commission. The principle that public spending on industry required the consent of taxpayers was upheld, and the threshold of approval was raised further: direct expenditures on industry thereafter required the support of two-thirds of the eligible electorate, replacing the previous standard of two-fifths and marginally exceeding the commission’s recommendation of three-fifths. To guard against reckless municipal indebtedness and to protect the value of municipal and provincial bonds more generally, municipalities were prohibited from borrowing beyond 10 percent of their annual taxation revenues to finance industrial aid. A provincial view on municipal industrial was imposed elsewhere in the legislation, too: “No bonus shall be granted,” the act stipulated, “to secure the removal thereto of an industry already established elsewhere in the Province.” And, finally, fair treatment of manufacturers was also legislated, as bonuses were no longer to be given “to a manufacturer who proposes to establish an industry of similar nature to one already established in the municipality without such bonus.”44 The main effect of the 1888 reforms was to reduce significantly the scale of direct municipal investment in industry. As shown in Chart 4a, during the period 1881–8, total municipal grants to industry within the province averaged slightly more than $50,000 (thirty-five cents per capita), which included a flurry of expenditures of approximately $100,000 in 1887 and again in 1888, brought on by the pending reforms. Over the three years that the 1888 amendments remained in force, municipal grants to industry fell by nearly half to an average of about $33,000 (sixteen cents per capita) per year. Not only were overall expenditures reduced, but they were further concentrated among the province’s smaller urban centres, primarily the towns, as Chart 4a also shows. The new debt-financing restrictions greatly constrained the fiscally weaker villages and townships, while both the raised referendum threshold and the new requirement that existing firms be aided before their rivals worked against the more populous and industrially diversified cities. Thus, during the period1889–92, none of Ontario’s thirteen cities and only four of its sixty-eight villages reported giving any direct aid to industry, whereas three cities and twentythree villages had done so during the 1880s. Meantime, seventeen towns had made direct investments in industry, accounting for 95 percent of all municipal bonuses given during this period and outspending cities and villages by more than five-to-one, even though their share of total provincial population had actually fallen slightly from 36 to 33 percent from 1881 and 1891.45

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Chart 4a Annual Value of Municipal Bonuses Given to Industry in Ontario, 1870–99 100,000 90,000

Cities

80,000

Towns

70,000

Villages

($)

60,000 50,000 40,000 30,000 20,000 10,000 1870 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899

0

Year

Source: Ontario, “Return respecting bonuses and exemptions to manufacturing industries granted by each municipality in the Province since the year 1870,” Sessional Papers 69 (1900).

The Ontario government likely did not intend to channel industry investment towards smaller urban locales, nor, does it seem, did it intend for municipalities to remain as active as they had been in attempting to induce new investment. Thus in 1892, the provincial government was forced to admit that the 1888 amendment was largely a failure and, moreover, that its system of municipal industrial aid appeared to have outlived its usefulness. The obvious remedy was to prohibit municipalities from giving aid directly to manufacturers, and in late 1892, the province did exactly that, explaining the action as simply a matter of some unfinished provincial business: The Province was to-day in a very different position from that of 1871 when the Legislature conferred on municipalities the power to grant bonuses. Many of our now prosperous industries were then in their infancy and needed encouragement. It was believed that the system would lead to the establishment of many new industries not then in existence in the Province. It had not done so. In a few cases it may have operated in that direction; in other cases it had wrought serious injury, and upon the while

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it had certainly outlived its usefulness. Four years ago the House recognized the force of this view when it passed the compromise amendment of 1888. The argument then used was that the amendment would practically put an end to the bonus system by making it inoperative, and that was the intention of the House. The House then committed itself to the principle that the bonus system was injurious and useless and in very extreme cases ought to be abolished. The amendment has proved practically useless, and the House is face to face with the fact that what it attempted to do in 1888 remains to-day undone. No compromise amendment will accomplish what the house aimed at and what it admitted to be an evil four years ago.46

The Liberal member from North Brant was certainly not alone in holding this view, though he took more care than most in articulating it. Other politicians, including the leader of the Conservative opposition party, William Meredith, and the legislation’s sponsor, William D. Balfour, shaded such arguments with the dark imagery of unscrupulous “bonus hunters” and victimized firms being “crushed to the wall” by their bonused rivals.47 There did exist a minority view that municipalities were perfectly capable of weighing the costs and benefits of such industrial policies and acting accordingly and that doing so was a reasonable exercise of their political rights. “In granting a bonus,” one dissenting politician explained, “a municipality did not consider a manufacturer at all, but the amount of benefit they were likely to receive, and this right ... should not be taken from them. The whole question was whether the people should be trusted to spend their own money or not.”48 Ultimately, such arguments failed to dissuade Mowat and his government, for the bill was passed, and municipal industrial aid, at least in its most transparent form of direct expenditures, was prohibited twenty-one years after it had been introduced.49 Once municipalities could no longer award grants and loans to manufacturers, they turned to other instruments and mechanisms to promote development. The most commonly used instrument became the tax concession. Since 1868, municipalities had possessed the authority to waive local taxes on manufacturing firms, initially through a simple majority vote of council. After 1873, provincial legislation had established and maintained a distinction between tax concessions and cash grants to industry and had made comparatively minor reforms to the former: while

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cash grants required approval from a majority of the electorate after 1873 and a supermajority of three-fifths after 1888, tax concessions could be awarded by a simple majority vote of council until 1884,50 when the threshold of council support was raised to two-thirds; later, in 1892,51 tax concessions were restricted to exclude school taxes. Thus, after 1873, municipalities could confer tax concessions much more simply and rapidly than they could grants to industry. Nevertheless, as shown by Chart 4b, tax concessions remained seldom used until the late 1880s: only a handful of municipalities gave tax concessions to industry, and the value of those concessions was generally but a fraction of that distributed through grants. Almost certainly this reflected the preferences of industry and the strength of its bargaining position over municipalities in negotiating industrial policy, though it is possible that capital was in short supply, particularly in smaller locales. Regardless, the restrictive conditions placed upon municipal grants to industry by the province in 1888, and their abolishment entirely in 1892, gave municipalities – and industry – little

Chart 4b Annual Value of Municipal Tax Concessions Given to Industry in Ontario, 1870–99 100,000 90,000 80,000 70,000

($)

60,000

Cities Towns Villages Total

50,000 40,000 30,000 20,000 10,000 1870 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899

0

Year

Source: Ontario, “Return Respecting Bonuses and Exemptions to Manufacturing Industries Granted by Each Municipality in the Province since the year 1870,” Sessional Papers 69 (1900).

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choice over the instrument. After 1888, municipal tax concessions to industry proliferated and after 1892, became more prolific still. Tax concessions became so widely used that, unlike the provision of grants to industry, they soon pervaded all ranks of Ontario municipalities. Toronto, like all five of Ontario’s most populous cities (in descending order of population size in 1891: Toronto, Hamilton, Ottawa, London, and Kingston), had taken no part in the cash bonusing system prior to it being repealed in 1892, nor had it been moved to offer tax concessions. But circumstances began to change in the early 1890s. Some pressure came from the actions of rival industrial centres. Peterborough, to the city’s north, and Hamilton, to its west, began to liberally deploy tax concessions in their efforts to stimulate local industrial expansion and to combat the sheer magnetism of Toronto’s economy. But more immediate competition came from just outside of Toronto’s city boundary. Two largely industrial suburbs had sprouted to the city’s west in 1888 (West Toronto Junction) and 1890 (New Toronto) and were offering inducements of free land, subsidized utilities, and exemptions from municipal taxes to draw industry out of the city – with evident success.52 As several large manufacturers relocated from the city to the suburban municipalities, associations of industrialists, ratepayers, and labour groups mobilized and demanded an immediate response to the city’s apparent “manufacturing crisis.” Finally, and despite the strong objections of the mayor, city council relented in the late spring of 1892 and voted to exempt the machinery, plant, and tools of all manufacturing establishments within the city limits for ten years, commencing in January of 1893.53 Outside of Toronto, the use of tax concessions continued apace. By 1899, only 1 of the province’s 13 cities, 12 of its 99 towns, and 53 of its 135 villages reported having granted no tax concessions to industry; even 69 of Ontario’s 498 predominantly rural townships admitted giving tax concessions to industry. Partially, Toronto was blamed for this, as its exemption policy was considered “to some extent the cause of bonusing in smaller places.”54 But even the conservative Monetary Times, which had long opposed the use of inducements by municipalities, recognized that Toronto’s government was responding to forces largely beyond its control and had simply conformed to what had become a common practice: The principle of the “bonus” system, whatever form it takes, is wrong; but it is a bold man that will take the ground that Toronto is in a position to take a strong stand and fight this evil alone among Canadian municipalities.55

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Within Toronto, however, the partial exemption was quickly deemed insufficient amidst the intensifying competition among municipalities for new investment. Beginning in 1897, water rates for businesses were cut in half, a measure that cost the city about as much per year in lost revenue as did its partial tax exemption – about $30,000. Economic development was also made a regular, full-time administrative responsibility. The locus of industrial policy-making was shifted down from a subcommittee of council to the office of the assessment commissioner, so that policy implementation could be better coordinated and new initiatives launched. Cultivating and promoting an image of the city as an attractive site for industry was among the duties assigned to the office, but its main new function was to assess cases for full tax exemptions as they were advanced by prospective and existing businesses. Thus, in the span of a few short years, the city had done much to actively promote industrial expansion and had abandoned its old position of refusing to extend selective – and, in the view of many, preferential – treatment to certain industries and businesses. It seemed, for some, that the next course of action involved essentially two options: The sentiment is growing strongly among the Aldermen that the city will either have to make a campaign at the Legislature for the absolute prohibition of all bonuses or exemptions of industrial concerns or decide to free all such establishments within the limits of any taxation.56

In the spring of 1899, the province passed new legislation requiring municipal tax exemptions for industry to be approved by two-thirds of the electorate.57 The bill, introduced by a backbencher, had originally proposed to abolish all forms of municipal industrial aid, including exemptions, but had been softened in committee after second reading following protests that such a ban “would greatly handicap the rural municipalities” and that “the effect might be to attract many industries to Toronto.”58 Nevertheless, the new legislation meant that exemptions would be all but impossible for municipalities to grant, except in the smallest of locales, where voters were more easily mobilized and the cost of administering a referendum more justifiable against the value of exemptions. Thus, as all others forms of municipal industrial aid had already been prohibited, it once again appeared that municipalities were no longer to be actively involved in directly subsidizing industry growth and development.

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Yet this was not the case. Ever since bonusing powers had first been afforded to municipalities through general provincial legislation, the provincial legislature had occasionally passed private legislation permitting individual municipalities to grant aid in a manner that deviated from the general public legislation. From 1869 to 1892, the number of such “exceptional cases” was slight – sixteen in total and never more than two in one year59 – and the deviations were for the most part minor: the term of a tax expenditure might be lengthened beyond the generally allowed limits;60 a clumsily worded by-law might have its legal meaning “confirmed and validated”;61 a municipality might have its permissible indebtedness increased slightly so as to allow a bonus.62 But after 1892, after the province prohibited cash bonusing, the deviations grew both in volume and in magnitude. And after tax exemptions were subjected to approval by the electorate in 1899, a flood of private legislation followed, with seventeen such acts passed in 1899 and twenty-one more in 1900.63 Thus, an alternative mechanism for aiding industry had become available to municipalities. This flood of private legislation had been triggered, it seems, by an act of private legislation passed in the late spring of 1893. As the act’s preamble explained, a “disastrous” fire had stricken the “principal industrial establishment” in the small town of Strathroy, twenty miles west of London. The town’s council, anxious to stimulate redevelopment, had petitioned the Ontario legislature for the power to confer cash bonuses, which the Private Bills Committee had granted, subject to all of the terms and conditions specified in the 1888 legislation which had been so recently repealed.64 Over the next several years, this gradually became the position implicitly adopted by the Private Bills Committee: so long as the petitions demonstrated that the requirements of the old 1888 legislation had been met, they were granted.65 Among provincial politicians, the proliferation of special bonusing legislation was considered to be both a problem and a nuisance. Not only did it lack transparency and undermine the reforms made to the general bonusing law and thus render the province’s position incoherent, but it also inundated the committee with the affairs of municipalities. Some provincial politicians maintained that no special bonusing legislation should be passed and that municipalities should be required to strictly adhere to the limits on bonusing powers prescribed in the municipal act. Resolutions were introduced to this effect and defended on

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the grounds that municipal bonusing was generally ill-advised and that the blind sympathy shown by the Private Bills Committee towards the petitions did neither the province nor the hard-luck municipalities any favours: “The bonuses now being asked for were mostly the pitiable efforts of decaying towns, decaying industries and decaying men to stem a movement which was irresistible. The result was the very few bonuses that had been granted accomplished the object intended. In some cases they have prolonged the agony of existence, but they have not promoted healthy growth or saved industries which modern conditions had decreed must die out.”66 Others were less harsh and viewed the rising number of special bonusing acts as evidence that the general legislation had been too tightly drawn. Included among the latter, importantly, was the Liberal premier George Ross, who enjoyed a strong majority in the legislature and who had personally sponsored the special legislation for Strathroy in 1893 – the legislation which, as the opposition leader James Whitney repeatedly charged in the spring of 1900, had “caused all the trouble.”67 The solution, Ross declared, was to “arrive at a modus vivendi between the act of 1888 and the course of the Private Bills Committee since 1893.”68 One month later, Ross followed through and introduced new legislation restoring the municipal power to grant aid directly in the form of cash bonuses, loans, and loan guarantees. The legislation passed by Ross’s government in the spring of 1900 was very similar to that of 1888. Municipalities would not be permitted to use industrial aid so as to induce the relocation of businesses established elsewhere in the province, nor could they offer aid to a prospective firm if industry rivals were already operating in the municipality, unless those firms provided written consent. Electoral assent was again required, and the threshold was set at two-thirds of the electorate, though an affirmative vote by three-fifths of the electorate would be satisfactory if less than one-fifth voted against the bonus. Also, the financing of bonuses could not exceed 10 percent of annual taxation revenues. The principal difference, however, between the acts of 1888 and 1900 was the latter’s attempt to comprehensively define broadly and treat equally all forms of municipal industrial aid. Cash grants, gifts, loans, loan guarantees, tax exemptions, subsidized land and utility sales, and public works of a specifically beneficial nature were all considered to be a bonus and were subjected to the same restrictions.69 The provincial government also made clear that the legislation was to be closely followed by municipalities, for the province intended to “adhere to it in the future and allow no more violations by way of private bills.”70

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The new legislation resembled the old in one further respect: it proved to be practically unworkable in large cities and small villages. The city of Toronto, for one, was not pleased. Five months after the legislation was passed, Robert Fleming – formerly mayor of the city of Toronto, then its assessment commission and chief economic development officer – stood before a provincially appointed commission on municipal assessment and taxation and passed harsh judgement on the legislation: Now in reference to the question of exemptions, that is the vote upon that by law to give a manufacturer consideration, I think it is wholly wrong. I am satisfied that it was conceived against the larger municipalities in favour of the smaller ones ... I can see no reason in the world if a manufacturer asks for an exemption that may amount to possibly $500 a year – in no case that I know of would it amount to $1,000 a year, perhaps $200 would be the outside – why that question has to be submitted to the ratepayers at a cost of possibly of a couple of thousand dollars – a cost possibly as much as the manufacturer would receive during the ten years.71

Industry shared this view too, as P.W. Ellis explained on behalf of the Canadian Manufacturers’ Association: “The members of the Association are practically unanimous in urging that the municipalities should retain to power to grant exemptions to industrial concerns, but with equal unanimity they object to the provisions of the law requiring the assent of a certain proportion of voters qualified to vote in the municipality, instead of a certain proportion of those actually voting, for the reason that the present statute makes the granting of exemptions feasible in small municipalities while it is practically impossible to pass in large municipalities.” Ultimately, however, industry was more interested in reducing taxes than they were in expanding municipal industrial aid: “It will be clear on consideration that the repeal of the present onerous law of personalty assessment would tend to greatly minimize the importance of exemptions and bonuses. They owe their existence partly at least to the necessity for the mitigation of hardship involved in taxing personalty.”72 The commission eventually sided with industry and recommended replacing the municipal tax on personal property with a less arbitrary business occupancy tax and also exempting all manufacturing equipment from local taxes, a position later endorsed by the municipalities themselves, which found its administration cumbersome.73 In 1904, the province implemented both

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of the recommendations.74 Tax concessions for some had become tax reform for all. Even with the subsequent reforms to the property tax, the 1900 bonusing legislation did little to stem the tide of private legislation that it was intended to supplant. Over the two decades, special bonusing legislation continued to flow from the Private Bills Committee, softening the legislation’s stringent referenda requirements in larger urban areas and loosening its revenue cap in smaller ones, with the general legislation guiding rather than framing the system of municipal industrial aid during this period.75 This framework, however inefficient it might have been, persisted with only minor legislative tinkering into the early 1920s, and the number of private acts gradually slowed to a more manageable, single-digit yearly volume following the war.76 In the spring of 1922, another anti-bonusing bill found its way onto the House floor, coming, not unpredictably, during the short reign of premier E.C. Drury and his stoutly anti-protectionist United Farmers Organization.77 This bill, which bore a striking resemblance to the 1892 legislation, repealed the municipal power to grant cash bonuses or provide loans to industry.78 During the bill’s second reading, while the members debated whether or not municipalities should continue to be allowed to give aid through discounted land and utilities (they were), a new dimension was introduced to Ontario’s system of municipal industrial aid. W.E. Raney, the attorney general and one of the few true urbanites among United Farmers’ ranks, announced that there was an added incentive for abolishing municipal industrial aid altogether, for he had personally “received, unofficially, an intimation from Quebec that if Ontario persisted in its present policy of bonusing industries, then Quebec would consider if it ought not to revise its views on the question.”79 The threat was not enough to move the legislature any further that session, nor would it dissuade the Private Bills Committee from passing nineteen special bonusing acts during the subsequent twenty-four months, but the Quebec premier, the patient and stately LouiseAlexandre Taschereau, persisted.80 Early in 1924, Taschereau pressed the newly elected Ontario premier, G. Howard Ferguson (Conservative), for an interprovincial pact abolishing municipal industrial aid.81 With Ontario in need of Quebec’s cooperation for the development of water power along the St. Lawrence and Ottawa Rivers, and even more

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Table 4a Private Municipal Bonusing Legislation Passed by the Ontario Legislature, 1869–1945 Session

Number of Acts

Session

Number of Acts

1869

1

1908

18

1870–1

1

1909

3

1871–2

2

1910

10

1873

1

1911

11

1875–6

2

1912

13

1877

2

1913

10

1878

1

1914

14

1879

0

1915

2

1880

1

1916

3

1881

0

1917

6

1882

0

1918

4

1883

1

1919

1

1884

0

1920

6

1885

2

1921

1

1886

0

1922

1

1887

0

1923

10

1888

0

1924

9

1889

0

1925

1

1890

2

1926

1

1891

0

1927

2

1892

0

1928

1

1893

2

1929

0

1894

2

1930

1

1895

4

1931

3

1896

2

1932

2

1897

5

1933

3

1898

2

1934

10

1899

17

1935

2

1900

21

1936

0

1901

6

1937

1

1902

9

1938

1

1903

14

1939

0

1904

7

1940

0

1905

11

1941

0

1906

9

1942

0

1907

14

1943

1

Source: Ontario, Statutes of Ontario (1869–1945).

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so for its ongoing constitutional dispute with the federal government over the public rights to that water power, Ferguson could scarcely afford to deny Taschereau this relatively minor request, even if he was so inclined.82 In April of 1924, Ontario passed the Bonus Limitation Act. In keeping with its title, the act banned all forms of municipal industrial aid, save the fixing of property assessments (upon the approval of two-thirds of the electorate and three-fourths of council), with similar legislation passed concurrently in Quebec.83 The pact held, for a time. Ferguson honoured his promise and his government passed no general bonusing legislation and only a handful of special acts (six in six years) through the 1920s.84 But as the depression settled across Ontario, the special acts began to flow under the tenure of George S. Henry, Ferguson’s successor as premier and provincial Conservative leader, with ten private bonusing acts passed in the spring of 1934. That summer, Henry was swept from office by the exuberant and adventuresome Mitchell F. Hepburn. Once Hepburn had settled into office, Taschereau wrote his Liberal counterpart to sound out his views on this nuisance of municipal bonusing. “When Hon. Mr. Ferguson was Prime Minister of Ontario,” Taschereau explained, “I came to an agreement with him in regard to bonuses and guarantees given by municipalities to new industries. Many municipalities of our Province became financially embarrassed on account of these bonus guarantees and it was therefore resolved that the government of Ontario and Quebec would refuse all such favours. Experience taught us that it became a regular bidding among the municipalities to attract industry by more and more advantageous conditions.” Then he moved to the heart of the matter: “We are now receiving quite a number of demands which have been refused, but we are told that they are granted in the Province of Ontario. I should be grateful to you if you would confidentially, or officially, let me know that your policy is on this subject.”85 Hepburn’s reply arrived quickly. “Dear Mr. Taschereau,” he wrote, I have read with a great deal of interest and satisfaction your communication of January 18th with reference to municipalities bonusing industries. I agree with you that this business is becoming highly competitive, and operates to the distinct disadvantage of the municipalities in question. Since assuming office we have steadfastly refused to grant our consent to this practice. It might be of interest to you that in most cases the promoters

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use as their main argument the fact that they were promised certain consideration in the province of Quebec. I have just been in touch with the Minister of Municipal Affairs, and we are prepared to assure you that we shall cooperate to the fullest extent in this regard, and will stop at once for all the practice to which I have just referred.86

Although Hepburn would make – and end – his political career by antagonizing federal interests, especially those of Mackenzie King, and he and Taschereau would soon collaborate quite fruitfully in this regard, he was no diplomat nor great contemplator of consequences; he simply agreed with the man.87 Pleased but unsatisfied, Taschereau wrote back immediately, hoping to have their exchange become a matter of public record, where it could do him the most good: “I notice that your letter is marked personal. Would it be possible for you to send me an official letter stating what your views are on this matter?”88 Hepburn was indifferent. “I regret that the former communication with reference to the bonusing of industries was marked personal,” he replied somewhat belatedly. “Please feel free to use the letter in any way you may see fit.”89 The very next day, the two premiers jointly announced the resurrection of their interprovincial pact against municipal industrial aid.90 This time the pact held. Although the House did pass one private bonusing act in 1937 and another in 1938, no more were passed until 1943, when the province approved its final piece of private municipal bonusing legislation.91 That particular act, like so many of the others, had been passed at the request of a municipality struggling to stave off the decline of its principal industry sector. The town of Petrolia had petitioned to freeze the assessment of a refinery owned and operated by the Canadian Oil Companies Limited at a point well below its actual value, a continuation of a long-standing exemption granted to the refinery, ostensibly to compensate for town’s “lack of water transportation.”92 Here, as elsewhere, the exemption appeared to work: the company remained in Petrolia until the early 1950s, when it relocated to the nearby shores of the St. Clair, alongside the large Imperial Oil refinery there, where a massive petrochemical industrial complex had since begun to sprawl.93 In the late eighteenth and early nineteenth centuries, Ontario municipalities actively attempted to stimulate industrial development

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through an array of instruments. Loans, bond guarantees, discounted utilities and land, tax concessions, and cash grants were all offered as inducements to industry, though, among these, the last two figured most prominently. The province had encouraged this, first, by affording municipalities the necessary legal authority and, later, by injecting them with funds through Mowat’s resolution of the Municipal Loan Fund crisis and allowing those funds to be spent on investments in industry. And municipalities participated vigorously. Explosive population growth, rapid industrialization, and accelerated urbanization combined to produce significant, apparent change within Ontario’s urban system, and some municipalities used industrial aid to seize the genuine opportunities for economic development, while others deployed it to cope with relative and absolute local economic decline. Over time, popular dissatisfaction with municipal industrial aid grew, and municipal bonusing powers were gradually, but not entirely evenly, stripped away. The provincial legislative framework governing municipal bonusing evolved in cycles, and at a broad level, the reforms can be interpreted as attempts by the province to strike a balance between the need for equity and transparency in municipal industrial policy, on the one hand, and maintaining the fundamental right of communities to distribute their common resources as they saw fit, on the other. Debt financing constraints were imposed to protect future generations from inheriting large fiscal burdens, and referendum approvals were required to ensure that local expenditures on industry enjoyed broad popular support; both were relaxed when municipalities found them too constraining and then drawn more tightly when circumstances and prevailing provincial attitudes changed. As the legislative framework became increasingly more restrictive, municipalities found that it could be circumvented by petitioning for special provincial legislation, a mechanism which did afford the province some flexibility and discretion in treating special cases but which proved difficult to implement selectively, as the preferential treatment extended to some municipalities invariably raised expectations and demands for equal treatment in others. Only when Quebec threatened to retaliate to Ontario’s practice of passing special bonusing legislation did such acts, and the provincial backsliding which generally followed them, finally cease to flow, long after the general legislative framework had been disassembled. But the legislative framework was also moulded to reflect broader provincial interests. Not only did the debt financing constraints protect future generations, but it also helped ensure that “no municipality was

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allowed a free hand to engage in speculations that would prejudice the debentures of other municipalities.”94 Prohibiting municipalities from targeting each other’s industries ensured that the provincial economy would not be weakened by having resources wasted on the unproductive relocation of existing investments. Moreover, it also meant that one locale could not improve its economic standing at the direct expense of another. And, on those occasions when the province did reduce the scope of municipal bonusing powers, a common explanation given was that inter-municipal competition for new investment had engendered hostile relations among them and thus was hindering cooperative ventures they might undertake in other policy areas. Municipalities, after all, were more than simply an instrument through which provincial objectives could be realised; they were a constitutional responsibility of the province, an important one, and so the legislative framework reflected this. Yet in other ways the provincial bonusing laws did not serve the interests of its citizens. Most of the provincially imposed restrictions on municipal industrial aid worked to channel new investments in industry away from the most and least populous of Ontario’s municipalities – that is, its cities and villages – and towards those with more moderate populations levels and with fairly narrow, yet at least partially developed, industrial bases – its towns. Referendum approvals discriminated against large urban municipalities, as did the prohibition on aiding industries in municipalities where rivals were already established. And debt financing constraints hurt villages, townships, and small towns, where tax bases were narrow and revenues were small. Special legislation could be used to mitigate these effects, and it was but only in some cases and during certain periods and rarely for large urban municipalities, where economic prospects were generally regarded as sufficiently strong that such interventions were unnecessary. That the provincial legislative framework on municipal bonusing worked to privilege investments in small- to medium-sized locales did not appear to have been part of an overall provincial economic strategy. To the extent that such locales existed on the economic and geographic periphery of the province, stimulating investments there was at least broadly congruent with provincial goals at the time, which included the expansion of secondary manufacturing using the province’s abundant mineral, timber, and agricultural resources.95 And a good number of the province’s pulp mills, grain elevators, saw mills, sugar refineries, and iron smelters did receive substantial amounts of municipal aid over this

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Cities of Oil

period. But this was not an intended result, at least not initially. Provincial policies did not explicitly aim to retard growth in its urban centres, nor would such an approach have been wise to adopt. Rather, the discriminatory effects of the provincial legislative framework emerged as a largely unintended consequence of the various reforms undertaken, whose objectives were more squarely concerned with notions of equality and equity than they were with efficiency. Once it became clear, however, that provincial law disproportionately concentrated bonusing among the province’s mid-sized municipalities, the effect was politically difficult to reverse, and claims of unfair treatment made by cities such as Toronto could be easily dismissed as avarice. Hence, over the course of most of the municipal bonusing period, the provincial legislative framework was decidedly tilted, not intentionally but also not unknowingly, to direct investment to areas where it was likely be less productive. The provincial legislative framework also failed to maximize returns on municipal investments in industry in other ways. As some theorists of economic growth contend, inter-regional competition for industry can improve the allocation of productive resources, by drawing resources to those areas where they are the most valuable. Policy-makers can weigh the benefits that new industry will bring to existing firms – which investors themselves would not consider – and adjust their industrial policies accordingly, so as to stimulate the rise of inter-firm linkages, knowledge spillovers, and thick markets of skilled labour within and across local industry sectors.96 After 1888, however, the provincial legislative framework did not facilitate such industrial clustering. Municipalities could only offer aid to new industry once existing firms within that sector had received similar assistance. After 1900, existing firms were essentially given veto powers over the offering of municipal inducements to new firms within their sector. Although these restrictions could have reflected the influence of established manufacturing interests within the provincial government, the province was not likely entirely to fault. Municipalities may have requested that these clauses be introduced, or at the very least found them to be reasonable, for they raised no objections when the amendments were passed, nor did they demand later that the clauses be repealed, not even Toronto, where such restrictions made it effectively impossible to offer aid directly to new industry. Manufacturing interests were powerful at the local level, too, and thus were difficult for councils to ignore, even before the province passed the restrictive clauses, as is illustrated

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in Plewman’s account of Adam Beck’s attempt to launch a cigar box manufacturing business in London, Ontario: The company did well from the start, and after several years the brothers decided that they should remove the business to London, then a city of 30,000 people, that had become an important centre of the cigar business. They applied to the London City Council on April 28, 1884, for free water and five years’ exemption from taxation, and promised to employ twenty persons. A competitor in the business objected to this bonusing of newcomers and the city council rejected the application by a vote of seven to three. The Beck brothers renewed their application on June 17th, saying the competitor had gone out of business [which it had]. They promised to add a veneering plant to their business and to increase the number of employees ultimately to forty. This time the application was granted.97

Thus, provincial legislation likely reinforced what had become common practice among municipalities. Municipal industrial aid was probably not much used to stimulate growth within established local industry sectors, even before provincial legislation made it practically impossible to do so, and most certainly afterward. Since municipal bonusing in Ontario likely failed to boost growth along lines of established industry strength or direct it towards more productive urban locales, it might be tempting to conclude that instead of generating a more efficient allocation of the resources, intermunicipal competition for industry was actually destructive and led municipalities to implement policy changes that were otherwise undesirable.98 This was a view commonly expressed by provincial and municipal politicians at the time and is an argument often advanced against municipal inducements for industry in those jurisdictions where their use remains widespread, such as much of the United States. And it remains true that municipal grants to industry generally escalated until they were prohibited by provincial law in 1892 and that tax concessions spiralled upward thereafter. Moreover, the rapid increase in tax concessions awarded by municipalities after 1892 did appear to have been triggered, at least in part, by Toronto’s decision to partially exempt manufacturers from property taxes, which itself was a response to similar policies enacted in other cities and in adjacent industrial suburbs. And as tax concessions came to be more widely used, the province moved to eliminate taxes on the “personalty” of businesses (that is, on the assessed value of their moveable assets, such as machinery,

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inventories, and tools) and replace it with a flat occupancy tax. But the province had done so on the basis of recommendations made by an independent commission, and municipalities generally supported this change, at least publicly, for it simplified tax administration and was not expected to significantly reduce local revenues. Hence, although municipal bonusing did eventually lead to province-wide tax reform, the effect of the reforms was likely positive and thus should not be misconstrued as evidence of a “race to the bottom.” Nevertheless, municipal industrial aid did come to be regarded unfavourably, and by the 1920s, municipal authority to provide direct inducements to industry had been slowly but finally stripped away. Some sector-specific interventions did continue to occur until the 1940s through special provincial legislation, but these, like the last one issued for Petrolia, were sad cases and were designed not to stimulate growth but to stave off (or at least prolong) local sectoral decline. Generally, however, municipal industrial policy in Ontario had been largely confined to the broader instruments of land-use planning, infrastructure, tax policy, utility rates, and land dealings. Of what use would such instruments be in addressing the challenges of economic growth that lay in the decades ahead? IV Polymer By the turn of the century, nearly all petroleum manufacturing in Canada occurred through the Imperial Oil refinery in Sarnia. Almost as soon as the old Alpha refinery had been renovated and operations at Imperial Oil’s Silver Star refinery in Petrolia subsequently wound down and moved there, new expansions were planned for the Sarnia site. The wharf was enlarged, so as to accommodate tanker shipments of crude, and the distilling, refining, and tankage facilities were all greatly expanded, as Standard Oil poured a further $750,000 in the Sarnia refinery.99 Further stimulus to growth came in 1905, when Ottawa repealed its duty on crude oil imported for domestic manufacturing,100 and again in 1911, when the United States Supreme Court ordered the dissolution of Standard Oil on the grounds that it violated antitrust laws, which effected the transfer of control of Imperial Oil (and thus of Canadian petroleum manufacturing generally at the time) from New York to Canada, to offices constructed in Sarnia and in Toronto.101 The Imperial Oil refinery in Sarnia underwent another dramatic expansion and was directly linked to the Lima oil fields in Ohio in 1914 by the construction

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of a 150-mile, $1 million pipeline – Canada’s first international petroleum pipeline.102 Though the refinery was modestly enlarged again in the 1920s, its share of total Canadian petroleum manufacturing capacity declined, as rising demand for petroleum, driven largely by automotive gasoline consumption, was met by Imperial Oil through new installations elsewhere – primarily in Montreal (Quebec), Dartmouth (Nova Scotia), and Ioco (British Columbia) – so that regional markets could be more efficiently served and crude oil from Middle Eastern and Central American sources more easily imported.103 By the 1930s, the refinery in Sarnia accounted for less than 10 percent of Canada’s petroleum manufacturing capacity and about only one-quarter of the capacity owned by Imperial Oil.104 After two decades of explosive growth, petroleum manufacturing in Sarnia had slipped into a state of relative decline. All of this changed during the Second World War. Wartime production created extraordinary demand in many industries, and petroleum manufacturing was no exception. Fuel purchases by the federal government pushed Canadian oil refineries to their capacity but, initially at least, led to no new installations – in Sarnia or elsewhere. Expansion in the petroleum manufacturing industry was stimulated instead by a shortage in another sector crucial for war production: rubber. The Allied forces had understood the vulnerability of international natural rubber supplies well before they were cut off by Japanese forces on 7 December 1941.105 For its part, Canada had taken various measures to rationalize and stockpile this “strategic and crucial” material, but those efforts had only really begun in earnest after April 1940, after the Norwegian invasions. Unlike most of the other materials and inputs being consumed by booming war production – steel, electricity, timber, and coal – rubber supplies could not be simply augmented by ramping up extraction, processing, and production. At the time, essentially all international rubber supplies supply came from Malaya and the Dutch East Indies – an area controlled by the Japanese as of December 1941 but made treacherous for trans-ocean shipments well before then. Although Canada’s program to rationalize and reclaim civilian rubber consumption proved to be surprisingly effective,106 it was clear well before Pearl Harbour that those stockpiles could not sustain the principal contribution of Canadian industry to the war effort – automotives. The key federal politician involved in the wartime rubber sector was C.D. Howe, who had reluctantly accepted prime minister Mackenzie King’s appointment to organize a federal Department of Minister of

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Cities of Oil

Munitions and Supply on the eve of the Norwegian invasions. Clarence Decatur Howe, a New Englander by birth, was trained as a civil engineer at the Massachusetts Institute of Technology and immigrated to Canada to teach at Dalhousie University, a post which he soon resigned to embark on a successful career in grain elevator construction. He entered federal politics in the midst of the Great Depression as the Liberal member for Port Arthur and quickly rose to hold many cabinet posts, sometimes several at once, acquiring the moniker “minister of everything.”107 As minister of the Department of Munitions and Supply, Howe led central planning for the wartime economy and was responsible for managing and rationing the supplies and materials needed for the war effort.108 Among the scarcest and most important of these materials was rubber. Two days before the bleak Christmas of 1941, two of Howe’s handpicked senior bureaucrats from the Department of Munitions and Supply met in Ottawa to consider Canada’s response to the looming rubber crisis. As Jack Nicholson, a lawyer by training and then serving as the deputy controller of supplies, would later record, he and the deputy controller of rubber, J.A. Martin, agreed that the only conceivable solution was “obtaining by manufacture or otherwise a supply of synthetic rubber.”109 Synthetic rubber, as both men knew well, had yet to be successfully manufactured on an industrial scale, and the only realistic prospect of doing so in Canada required participating in the ongoing experimental synthetic rubber program in the United States, which the federal government there had been coordinating and directing for almost two years.110 On Howe’s orders, Nicholson spent Christmas Day recruiting a Rubber Substitutes Advisory Committee from among the senior ranks of the Canadian rubber industry.111 On the shortest of notice, the committee was dispatched to Washington, D.C., arriving there the day after Boxing Day in time to attend a meeting of the Rubber Reserve Company, the organization which Roosevelt had placed in charge of producing synthetic rubber.112 It was a long meeting, and when it finally finished, a wearied Nicholson and his advisors crossed the city to meet with Howe, who had been in Washington for several days, negotiating access to key US supplies. Howe, known for his decisiveness, was impressed by the group’s report and immediately instructed Nicholson to organize a meeting of all parties conceivably interested in the development of a Canadian synthetic rubber program, which, of course, would closely parallel that underway United States. Among those invited were officials from Standard Oil (New Jersey),

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which was unmistakably the driving force behind the US synthetic rubber program, the National Research Council, then the epicentre of the Canadian scientific community, and Imperial Oil, “whose Sarnia facilities would probably be required if any large scale production is to be attempted in Canada.”113 The meeting was held on 3 January 1942. There it was decided that engineers from Imperial Oil, Standard Oil (New Jersey), and the federal Department of Chemicals and Explosives would jointly conduct a preliminary investigation on the feasibility of a Canadian synthetic rubber facility. Their report, which was hurried to completion in less than four weeks, made clear that the technical problems surrounding the production of synthetic rubber were entangled with those surrounding the production of alkylate (the principal ingredient in aviation gasoline), for both products used the same elemental hydrocarbon fractions and petroleum-refining equipment, all of which were in desperately short supply in Canada and the United States. If alkylate plants were hastily constructed at Imperial Oil refineries in Calgary and Montreal East and additions were made to the existing alkylate facilities in Sarnia, it was possible, the report concluded, that a plant could be built in Sarnia capable of producing 30,000 long tons of synthetic rubber per year without undercutting Canada’s aviation gasoline requirements. But the synthetic rubber plant would have to be located in Sarnia, the report emphasized, for its more advanced refining processes could be “so controlled that practically as much raw material for rubber and alkylate production can be made available [there] as can be obtained from all the other refineries in Canada combined.”114 Moreover, as the report explained, the Sarnia plant was connected by pipeline to the mid-continent US oil fields115 and thus had a secure supply of crude oil that was not vulnerable to submarine warfare or to ship hull shortages. The St. Clair River, which ran alongside the Imperial Oil refinery, also afforded shipping connections to the Steel Company of Canada in Hamilton and to Algoma Steel in Sault Ste. Marie, whose coke ovens would supply ethyl-benzene, a principal ingredient in styrene. Since both the primary and secondary base materials (butadiene and styrene, respectively) were most optimally produced in Sarnia, the manufacturing plant which melded the two materials together to from synthetic rubber should be located there, too, for the continental shortage of high-pressure rail tank cars – everything was in short supply – made shipping either product infeasible. On this last point, Standard Oil’s engineers were particularly emphatic.116 And since synthetic rubber

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would need to be distributed to rubber manufacturers for final processing into various components – mainly tires, but also hoses, gaskets, and tubes – and since most of these manufacturers were located in southern Ontario, Sarnia was deemed to be “just about as convenient ... as any other location.” Days after he received the report, Howe recommended to the Cabinet War Committee that the project proceed and that the plant to be located in Sarnia. Projected construction costs would likely fall between $35 and $40 million.117 Two weeks later, Polymer Corporation Limited was incorporated as a crown corporation, with broad powers to “acquire, construct, install and establish the necessary land, buildings, machinery, equipment and plant for the manufacture, production and storage of synthetic rubber.”118 Over the next eighteen months, the design and engineering of Polymer’s facilities proceeded at a feverish and almost reckless pace, with almost all of the expertise being imported from the United States, an arrangement with which Howe became increasingly uncomfortable and displeased. The US synthetic rubber program had been more or less fashioned by Standard Oil (New Jersey), which had acquired the relevant European patents during the 1920s and 1930s through its subsequently scandalized partnership with the German monolith, I.G. Farben Industries, and was clearly determined to have its manufacturing processes adopted by the nascent industry.119 In Canada, Standard Oil (New Jersey) and Standard Oil Development (New York) were only too willing to lend their expertise to Polymer’s board of directors; they granted Polymer access to their synthetic rubber patents royalty-free for the duration of the war and for six months afterward, and they also handled much of Polymer’s industrial design, which they modelled closely after their own facility in Baytown, Louisiana. As Polymer’s board of directors reported to Howe in May 1942, the Standard Oil engineers were “all agreed” that Canada’s synthetic rubber plant should be built next to the Imperial Oil refinery in Sarnia – a subsidiary of Standard Oil (New Jersey) – and that petroleum should be used to produce butadiene, the principal ingredient in synthetic rubber. Petroleum, the engineers had cautioned, was “appreciably cheaper” to use than industrial alcohol, the main alternative, and even more importantly, it would save time, for “a great deal of the detailed engineering necessary for the erection of plants for the manufacture of butadiene has been done and factories in the U.S. are already preparing dies, machines, and equipment

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necessary for the manufacture of the special equipment required for the manufacture of butadiene from petroleum.”120 Yet Howe was not convinced. There existed a strong minority opinion within the North American scientific community that industrial alcohol could be used instead of petroleum, an option that would save time, if not money, by putting to use the idled alcohol distilleries, rather than constructing new refineries, and the mounting stockpiles of prairie wheat. In the United States, steel shortages and “agitation on the part of Farmer block Senators,” which had been incited in no small part by the distillers themselves, had convinced the Rubber Reserve Company to divert a significant amount of its scheduled production to a base of grain alcohol.121 Despite similar protests from prairie farmers in Canada,122 which resonated deeply in Howe, for he had built many of the grain elevators which now stood overflowing,123 Polymer’s strict dependence on US technology via Standard Oil left little room for deviation. Although Howe himself confessed that he found his appointed Polymer staff to be “weak on the technical side and too much impressed with the wisdom of those with whom they have come in contact in Washington,”124 he reluctantly wrote to J.B. Carswell, his correspondent in Washington, D.C., that he had decided to “drop all plans for using alcohol a base for synthetic rubber,” as he was “convinced that the uncertainty about the manufacture of butyl alcohol in Canada is such that we cannot afford to proceed here.”125 The decision to use petroleum rather than butyl alcohol as the primary raw material for producing synthetic rubber meant that the facility would almost certainly be located in Sarnia. Nevertheless, as rumours of the project radiated out from Ottawa, despite the secrecy with which the preliminary discussions had been carried out, unsolicited appeals began to pour in from locales across the country, each promoting its advantages as a location for the prospective facility. Mostly these were sent by municipal councils, but boards of trade sent briefs, too, as did a few interested industrialists. T.H. Bartley, on behalf of the Toronto Industrial Commission, advocated Toronto as a site for any secondary synthetic rubber manufacturing plants and was supported in writing by the Toronto Harbour Commission. The Saint John Board of Trade reminded Howe of the crude oil, limestone, and coal deposits in their area, as well as the pulp and paper mills, though the latter’s relevance, in particular, was not clear. Private land developers in Montreal offered industrial sites and promised reasonable prices. To

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the west, several municipalities urged Howe to consider using wheatbased industrial alcohol to produce synthetic rubber and to locate the rubber manufacturing and distillery facilities there.126 Such requests had little effect, and most of them did not even receive an official reply. The choice of location for the synthetic rubber plant was a technical one, predetermined by access to raw materials and markets, and there was little room for political considerations. No location other than Sarnia was ever seriously contemplated. Even when Howe was temporarily moved to reconsider the basic feedstock for the facility, its location was never questioned. Had wheat-based butyl alcohol been used, the synthetic rubber plant would nevertheless have been constructed in Sarnia.127 V Expansion Construction began in August 1942. The pace was terrific and unrelenting, despite shortages of labour and key construction materials and the cruel working conditions imposed by an unusually long and harsh winter. Thirteen months later (and two months ahead of schedule), on the backs of nearly 5,500 labourers, the Polymer industrial complex in Sarnia was essentially completed. The result was breathtakingly garish: five miles of paved road, six miles of sewers, eight acres of permanent buildings, and an unmeasurable distance of pipes and conduits linking Polymer’s ten plants together into one industrial compound that sprawled across an area the size of eighty city blocks.128 The cost was equally enormous: in total, the construction of Polymer cost about $51 million, then the largest single public expenditure on any single wartime project in Canadian history, as Howe would often fondly recall. And Polymer made rubber. In the first two years of operations, Polymer produced 95,000 tonnes of synthetic rubber, a figure that significantly exceeded expectations.129 As a wartime project, Polymer was widely considered a stunning success. Synthetic rubber production met wartime needs and ensured that the military effort was not hampered by shortages of rubber-based products and implements. After the war, however, the company’s future was unclear. Howe had long expressed his intention to continue operating Polymer as a crown corporation in the postwar period, in part because he considered it strategically important to maintain indigenous rubber production capacity but also because, quite frankly, private industry was not much interested in acquiring the plant, given the

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great uncertainty clouding the future of the synthetic rubber industry.130 Hence, it was of no great surprise when, in the spring of 1946, Howe declared to the House that Polymer, along with Dominion Arsenals Limited and Eldorado Mining (which more directly served strategic military purposes), would continue operating as a crown corporation, with the rest of the thirty-one crown corporations established by the Department of Munitions and Supply during the war ignobly sold off, mothballed, or closed.131 From the very outset, Howe and Polymer’s directors recognized that the war’s end would drastically change the company’s economic position. Gone would be the company’s almost idyllic wartime incubator of insatiable demand, strict price controls, and the unquestioning financial support of a country at war, to be replaced by a less voracious and more fickle market and more critically attentive public shareholders. By the board’s own estimates, Polymer needed to sell about forty thousand tons of synthetic rubber per year to meet its operating costs, yet the postwar Canadian market was projected to consume only half of that amount. The directors pleaded for federal assistance through price controls and domestic quotas, but Howe steadfastly refused, even as the natural rubber industry recovered with surprising quickness once Japanese forces were expelled from the rubber fields in the south Pacific, which were found unexpectedly intact.132 Long-term economic stability was to be achieved through product improvement and market expansion, Howe insisted, and not at the expense of Canadian consumers: “The fact that the government owns a synthetic rubber plant will not be used to deprive anyone of the privilege of purchasing natural rubber.”133 Accordingly, a large research department was added to Polymer in 1944, and experienced scientists were recruited and allotted generous budgets, and much emphasis was placed on promoting international sales.134 In the short term, however, Polymer could be kept afloat by focussing on the intermediary sales of its manufacturing by-products and surplus utilities, a strategy which necessitated drawing other industries to the Sarnia area. Dow Chemical was the first industry recruited to Sarnia by Polymer. In an arrangement that was never intended to be permanent, Willard Dow, the studious son of Dow Chemical’s eccentric founder and then the company’s president, agreed to build and operate Polymer’s styrene plant, a role which his company was also fulfilling in the US synthetic rubber program.135 With his company’s head office located only about 100 miles west in central Michigan, Willard Dow began to contemplate opening a plant of his own in Sarnia. Over the next few years,

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as Polymer was being built, Willard Dow toyed with what had become his “pet project” of opening a Canadian branch plant and even made some passing inquiries about the availability of land around Polymer.136 In 1944, as it became clear that Polymer could produce more styrene monomer than it would need for postwar production, representatives from Dow inquired about purchasing the anticipated styrene surplus, along with land adjacent to Polymer, and electricity and steam, if those were also available, all of which Dow intended to use for a proposed polystyrene (plastics) plant.137 One year later, after the Hydro-Electric Power Commission of Ontario authorized Polymer to sell its surplus sixty-cycle electric power to Dow because the commission was unable to do so, Polymer’s board agreed to all of Dow’s requests.138 On 15 October 1945, construction began on Dow Chemical of Canada’s $1 million polystyrene plant; four months later, the company’s first international branch was officially opened in Sarnia.139 The arrangement proved beneficial for both Dow Chemical and Polymer, for it was replicated the following year when Dow added a $2.75 million ethylene glycols plant (a primary ingredient in antifreeze) to their industrial site just south of Polymer, using surplus ethylene from Polymer.140 In the autumn of 1946, as the construction of Dow’s ethylene glycols plant neared completion, Polymer’s financial position was deteriorating badly. As Howe explained to his friend W.E. Phillips, the difficulties were expected to be transitory and could be overcome, at least partially, through the sustained and coordinated expansion of the local petroleum manufacturing sector: We must recognize that the market for synthetic rubber is likely to weaken during the last six months of 1947. I rather think that technological advances will put it back in due course, but at the moment, the public preference is for crude rather than synthetic [rubber]. The future of the Polymer plant will then rest in selling its raw materials to chemical industries that can be located in the area. Sarnia is already becoming the centre of a great organic chemical industry, and I am doing all that I can to promote further expansion in that direction.141

Phillips, who then presided over Fiberglas Canada, had conveyed to Howe weeks earlier that his company was considering “the possibility of building a fiberglass plant at Sarnia” and had inquired about the availability of surplus butane gas from Polymer.142 Howe responded by divulging “in confidence” that Polymer was on the verge of recruiting

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another large refinery to Sarnia, which would bring cheaper and more abundant petroleum gases to the area.143 In the meantime, however, Polymer would gladly assist Phillips in launching his new facility in Sarnia, as Howe so instructed Nicholson: “Eric Phillips ... wishes to build a plant to manufacture fiberglass and also flat glass in the area. He will require steam and also fuel in the form of butane or propane.” As it turned out, Phillips also “required” twenty-five acres of land, sixty-cycle electric power, and water for his $2.5 million facility, all of which was provided by Polymer.144 At this same time, Nicholson was also instructed by Howe to accommodate the needs of another company, Standard Chemical Company, Ltd., whose $3 million chlorine and caustic soda plant Howe had also helped recruit to the Sarnia area: “I have no doubt that you can supply them with some land across the street from your operation, and you could also sell them processed steam. I have told them that you will help in any way that you can.”145 At Howe’s urging, Polymer’s management freely used the crown corporation’s exceptionally broad corporate powers to facilitate further local industrial expansion. By 1946, Polymer had exhausted its supply of one of its more important industry inducements: land. Dow Chemical had purchased almost all of Polymer’s original surplus land (50 of its unused 55 acres), so in order to supply land to Fiberglas, Standard Chemical, and other prospective companies, Polymer expropriated nearly 300 acres of nearby land during the period 1946–7, which the company then subsequently sold at or below cost to recruited firms, including the 25- and 50-acre plots that were provided to Fiberglas and Standard Chemical, respectively. Polymer also delicately negotiated the expropriation of leasing rights to further 118 acres of land held by a local First Nations band, the Chippewas of Sarnia, and promptly transferred the land to the Sun Oil Company, which had been planning to build a refinery in the Sarnia area. In 1950, another 50 acres were sold to Ethyl Corporation, though the company delayed construction of its $15 million gasoline additives plant until 1955. In 1951, another 18 acres were provided to Cabot Carbon of Canada to accommodate its $16 million oil furnace carbon black plant, which produced a compound that was mysteriously important for reinforcing tires made from synthetic rubber and which Polymer had previously been forced to import from the United States.146 In total, Polymer provided industrial land to five firms during its first ten years of operating. Only one company, Canadian Oil (formerly of Petrolia), opened a petroleum manufacturing plant in the Sarnia area during this period

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without receiving land from Polymer and that was because Canadian Oil did not need any land, as it already owned 450 acres in Froomfield township, three miles south of Polymer along the St. Clair River, where its new refinery was opened in 1952.147 Of course land was not the only input Polymer supplied to stimulate local industrial expansion. Each company that acquired land through Polymer also purchased various combinations of the company’s surplus utilities. In particular, Dow Chemical purchased such large amounts of styrene and ethylene from Polymer that they could hardly be considered by-products anymore. In the year ending 30 September 1947, Polymer’s sales of utilities and by-products increased dramatically: from 1.2 (1946) to 12.3 (1947) million pounds of styrene; from 2.2 to 34.6 million pounds of butane; from 30,000 to 768,892 kilowatts-per-hour of electricity; and from 124,339 to 410,411 million pounds of steam.148 And, as was intended, these sales did stabilize Polymer’s financial position during the company’s “worst year” of 1947, generating $2.5 million in revenue (14 percent of total sales) and nudging the company – along with some questionable accounting – to a tiny profit of $25,000.149 Of all of these commodities, electricity was by far the most lucrative. Polymer’s electricity sales were so successful, in fact, that it eventually made the Hydro-Electric Power Commission uneasy, which was struggling through a postwar power shortage. In early 1947, just days before the power shortage controversy would finally cost Thomas Hogg his commission chairmanship, the Power Commission informed Polymer that a more legally appropriate arrangement would be necessary, whereby the commission would buy Polymer’s excess sixty-cycle power and distribute it to local manufacturers at the commission’s rates.150 After all, as Nicholson had once explained to an agent from the Department of Mines and Resources inquiring about buying electricity for the local First Nations band council office, Polymer was not chartered to distribute electricity: “While we are able to manufacture power for our own operations, it is not possible for us to either sell or distribute such power to third parties. The Hydro-Electric Power Commission of Ontario is the only body in the Province which is permitted to sell power.”151 Polymer complied with the Power Commission’s request, but electricity production remained lucrative under the new arrangement, accounting for the majority (71 percent) of Polymer’s thin profits during the period 1947–50.152 In addition to offering materials, land, and utilities, Polymer also encouraged local industrial expansion by intervening on behalf of

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prospective firms in their relations with federal administrators in Ottawa. In the mixed economy of the immediate postwar period, scarce construction materials and production inputs, including chemicals, steel, and labour, remained subject to federal regulation and control. Petroleum manufacturing companies contemplating new investments in Sarnia found that federal regulations could be more easily navigated, and in some cases circumvented, by the interventions of Polymer’s senior executives, who had maintained close contact with senior officials within the federal Department of Reconstruction, the central federal institution for postwar economic planning – or, if that failed, by Howe himself. When Dow was planning its second plant in Sarnia, for example, Nicholson escorted Nathan Crawford, the president of Dow Chemical Canada, to Ottawa to private meetings he had arranged with Howe and other senior government officials, including the minister of trade and revenue (J.A. McKinnon), the deputy minister of national revenue (David Simms), the Commission of Immigration (C.E.S. Smith), the chairman of the Tariff Board (Hector McKinnon), and the deputy minister of Reconstruction (V.W. Scully). As a result, the immigration applications for Dow’s senior executives were hurriedly pushed through, and favourable job classifications (and corresponding wage rates) and depreciation schedules were obtained. Hence, after the meetings, Crawford could report to Dow that he had managed to “cut all the red tape ... thanks mostly to Jack Nicholson who sponsored me in person.”153 Later, when Dow Chemical sought tariff protection from US-based polystyrene manufacturers exporting to Canada, Howe was enlisted to support its case, even though such a position did not accord with his general view on trade policy.154 When Polymer was trying to lure Cabot Carbon to Sarnia, senior executives travelled from Sarnia to Ottawa and Montreal to help ensure that Cabot Carbon’s steel and chemical needs could be readily accommodated.155 Such was the importance that Howe and Polymer’s management attached to the expansion of the petroleum manufacturing sector in Sarnia. This was, in sum, the postwar economic strategy for Polymer crafted by Howe and executed by him and, at his direction, by the company’s management: to attract downstream and upstream industries to the area by offering low-cost utilities, production by-products, and land, and by providing assistance in overcoming regulatory obstacles within the federal government. The rapid expansion of the petroleum and petrochemical manufacturing sector in Sarnia was actively encouraged mainly to augment Polymer’s lagging revenues during a difficult

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transition period but also to stimulate the development of an emerging and promising industrial sector. Both goals were soon realized. As was shown, Polymer’s sales of utilities and production by-products did have the effect of carrying it through a deep postwar recession in the synthetic rubber industry. By the mid-1950s, the company’s position had reversed, due largely to the increased international demand for rubber triggered by the onset of the Korean War but also to significant improvements made in Polymer’s products and production processes. During the years 1951–6, Polymer declared annual profits averaging $5.9 million on annual sales that averaged about $50 million.156 And around Polymer, the petroleum and petrochemical manufacturing sector grew spectacularly. Between 1945 and 1960, total private-sector investment in petroleum refining and petrochemical manufacturing in the Sarnia area exceeded $140 million. Nearly four thousand new manufacturing jobs had been created, pushing total local employment in petroleum refining and petrochemical manufacturing in the Sarnia area to 6,700 persons by 1961, which accounted for 85 percent of all manufacturing employment in the Sarnia area and about one-third of total employment.157 Of this new investment, about $90 million took place on land acquired through Polymer. VI Local Responses In the early stages, the dramatic expansion of the petroleum manufacturing sector in Sarnia did not much involve the local municipalities. Sarnia township, the predominantly rural municipality (directly south of the City of Sarnia) where Polymer would be located, was informed of the federal government’s decision in late February 1942 but mostly as a courtesy. Updates on construction plans were infrequent, and local input certainly was not solicited. The lack of communication was partly due to the secrecy surrounding the project, but it was also true that the construction of Polymer required very little from the township to proceed. Imperial Oil had agreed to provide 185 acres of vacant land to Polymer, and any additional land requirements could be, and were, easily met through the use of Polymer’s expropriation powers.158 The extensive infrastructure for the plant was to be built and maintained by Polymer.159 Polymer dealt directly with the Hydro-Electric Power Commission of Ontario for electricity during construction, and the plant’s operational power needs would be met through on-site production, through two antiquated steam turbine generators given to Polymer by

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the Power Commission but refurbished and moved at the Polymer’s expense.160 The only service which the township did directly provide to Polymer was potable water but only as a third party to an agreement between Polymer and the city of Sarnia and only because the water needed to flow through township’s pipes before it could reach Polymer.161 Some minor actions were taken to accommodate the anticipated development: a few housing permits were hurriedly approved, and drainage systems were improved on lots near Polymer.162 Later, when Polymer sought to attract new industry to the area and began developing adjacent land, the township was contacted about closing roads and rerouting ditches, but here, too, the work was to be done by Polymer – the township merely had to consent to the plan.163 Once construction began, however, the demands made on local infrastructure and services were enormous. The 120 heavy trucks that were used daily to haul aggregate to and from the Polymer construction site decimated township roads. Construction workers on the Polymer plant, nearly 5,600 in total during the winter of 1942–3, overwhelmed the area’s housing stock and residential services. About 2,200 of Polymer’s construction workers found accommodations within the city and a further 2,500 resided in a construction camp on the Polymer site, but the remaining 900 workers lived in hurriedly built wood-framed cottages, trailers, and shanties scattered throughout the township, and many of the workers had brought families containing school-age children.164 By February 1943, the strain on local services led Thomas Guthrie, the reeve of Sarnia township, to plead with Polymer for “some compensation” to help offset the costs of repairing the “excessive damage” on local roads and providing schooling to children of the construction workers, all of which the township had incurred without any receiving any corresponding increase in property tax revenues.165 Polymer’s board of directors responded by issuing a grant of $6,000 to assist the township with road maintenance, but they emphasized that subsequent grants would not be made once construction was completed.166 The grant fell well short of the township’s fiscal needs and sharpened concerns about future finances, and so the township turned to an alternative, novel instrument to raise revenues. As a crown corporation, Polymer was constitutionally immune to municipal taxes, but the same was not true of its employees. Hence, in April 1943, the township approved a by-law imposing a seldom-used poll tax of $5 on all male inhabitants in the township not paying municipal taxes elsewhere in the province. The poll tax obviously targeted Polymer’s employees but was

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made necessary, the township argued, because of a clause in the apportioning of health care costs to Ontario municipalities, which required it to cover the local share of health care costs of former residents until they had resided elsewhere in the province for at least three months.167 Construction work was hazardous, and labourers often moved quickly from one job site to the next, and so, as Polymer neared completion, township officials reported that “the bills were already coming in and many more were to be expected as the workmen began to drift away from the Polymer project.”168 The poll tax certainly caught the attention of Polymer management. Attracting enough skilled labour to meet Polymer’s extraordinary requirements during construction had proven difficult, and management feared that “any attempt to collect the tax would have further aggravated the acute labour shortage problem.”169 Nicholson, who quietly sympathized with the township’s position, was sent to meet with Guthrie and managed to persuade him to postpone implementing the tax so that other options could be considered. But when negotiations stalled, Guthrie and the township council retaliated by increasing the poll tax to $10 per inhabitant and arranging to proceed immediately with collection.170 Reluctantly, and at Nicholson’s urging, Polymer’s board of directors agreed to issue a grant in lieu of property taxes to the township of $5,000 (well short of the $12,000 originally requested by the township), provided the township repealed the poll tax, which it did, and understood that Polymer would only commit to “revisit” the issue again next year.171 When that time came in August 1944, construction was almost completed. Since construction of Polymer had begun, the township’s annual expenditures had increased by 25 percent ($47,931 in 1941 to $59,829 in 1944), while revenues had actually fallen slightly ($49,620 to $49,170), pushing the township from a small surplus ($1,689) to a large deficit ($10,660).172 Nicholson was instructed by a certain Mr. Pettigrew, the acting deputy minister for the Department of Munitions of Supply, to renew the $5,000 grant to the township and agree to it a for a three-year term, as the department had begun regularly reimbursing “some” of the municipalities in which its crown corporations operated, and given the amount of these other grants, which in at least one case was $15,000, it was considered that “$5,000 sounded reasonable.”173 When it came time for the grant to be reissued in 1945, Nicholson wondered if a more permanent and equitable solution could be devised and suggested to Howe that federal legislation be passed to enable some

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form of “fixed property assessment to be levied against the company” for the purposes of municipal taxation. But Howe rejected this, for he “was of the opinion that a Crown company which was still producing munitions of war should not have to pay taxes,” even though Canada’s involvement in the war had effectively ended earlier that summer.174 Hence, a grant of $5,000 was issued again.175 A similar approach was taken to compensating the city of Sarnia for services provided to the twenty-five executive homes that Polymer owned within the city. When property tax bills were issued to the twenty-five homes in 1945, Nicholson instructed Polymer’s chief solicitor to negotiate a payment with the city but stressed that it be made in the form of a grant: In view of the dangerous precedent which would be created if the Company paid the taxes levied by the City, any payment to the City for the services supplied by it should be made as a grant in lieu of taxes ... and is not to be construed as an admission by the company of any obligation to pay any taxes.176

In case the solicitor had misunderstood his position, Nicholson clarified it again one week later: “In your negotiations with the civic officials ... I want you to be sure to make it clear that neither Polymer nor the Crown is accepting any responsibility for the taxes.”177 The federal government’s intransigence on recognizing and fulfilling Polymer’s local financial obligations did attract some criticism. In the spring of 1946, two weeks after Howe had announced that Polymer would continue operating indefinitely as a crown corporation, Joseph Murphy, a former Sarnia township councillor and then the Progressive Conservative member for the Lambton West (Sarnia) riding in which Polymer was located, rose in the House to illuminate the financial burden being imposed by Polymer on the township and to push for a more equitable long-term fiscal arrangement. Were Polymer privately owned, Murphy calculated, local taxes would amount to “at least $70,000 a year,” far more than the $5,000 the federal government had meagrely issued to the township annually in grants.178 Howe responded by reminding Murphy that Polymer was no under obligation to pay municipal taxes, but the company had nevertheless paid about $35,000 per year to the township for local services, an amount he considered quite reasonable.179 This figure was a large exaggeration, as Nicholson uneasily pointed out to the deputy minister of Reconstruction several weeks later,180 but

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Howe also stressed that Polymer’s contributions to local finances could not be measured through its grants alone. The company was busily attracting private industry to the area, and those firms would certainly be subjected to local taxes, and so, by Howe’s estimation, “the town of Sarnia and the adjacent township will have no financial reason to regret that the Polymer Corporation has been established there.”181 Murphy’s criticisms did seem to have some effect. In the following spring, the three-year contract between Polymer and the township expired. The township prepared a report, showing its swelling budgetary deficits and rapidly escalating tax rates (the mill rate had increased by 20 percent in the last year and was projected to increase by about 25 percent in the following year), and submitted it, along with a request for a threefold increase in Polymer’s annual grant, to the company’s management.182 Nicholson, acting on the strict instructions of V.W. Scully, deputy minister for the Department of Munitions of Supply, agreed only to double the amount of the grant to $10,000 and again stressed that this was “not to be considered a precedent.” Like Howe, he pointed to new industry growth as a more permanent solution to the township’s difficulties: “When the new, privately owned industries which are being established in the Township assume their share of the municipal tax burden it will not be necessary for the Township to make special appeals to us for financial assistance.”183 But competition soon materialized over the resources promised by the new industrial growth. The city of Sarnia, too, had struggled to cope with the pressures of rapid postwar development. Population had increased sharply, yet industrial growth had lagged. An industrial committee had been struck and was led by the mayor, and a full-time industrial commissioner had been hired, but little progress had been made on attracting industry to the city, as there were few suitable sites for new development within city limits, and attempts to open land by reclaiming abandoned federal railway lands had failed.184 Hence, in the autumn of 1947, the mayor began to push for the annexation of the industrial development in Sarnia township to the city.185 The township initially responded to the city’s annexation proposal by severing its coordinative administrative ties with the city (including withdrawal from a recently established city-township joint planning board) and by canvassing its large industry entities to ascertain their position on the issue.186 While privately Polymer’s directors considered their company’s interests best served by remaining within the township, where lower taxes and lighter regulations would help encourage

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industrial expansion, V.W. Scully, Howe’s deputy minister of Reconstruction, insisted that the company remain neutral on the issue, for, as an agent of the federal government, it should not interfere with local affairs.187 And so this was the position communicated to the township. The views of Dow Chemical, Imperial Oil, and Fiberglass on the proposed annexation, if they were expressed, were probably not much different than Polymer’s – to quietly prefer the status quo but to remain neutral in public, so as not to antagonize the city and colour future relations with it, since annexation was likely to occur at some point. Certainly, the township postured that industry was against annexation, as were, at least according to township council, the majority of affected residents. Nevertheless, the city continued to push for boundary expansion, and some headway was made when the township acknowledged that the city should receive some land so as to accommodate further industrial expansion and appeared willing to consider transferring the entire built-up industrial area to the city.188 But the main obstacle to agreement remained the plight of some shoddy suburban homes along the southwest border between the township and city, which the city did not want but which the township insisted be packaged together with the industrial area in any annexation agreement. It was on this issue that negotiations stalled, and so, in the spring of 1950, the city brought the matter before the Ontario Municipal Board, a quasi-judicial agency of the provincial government that had been delegated authority to resolve local boundary disputes. At the hearing, the city claimed that its residents had been unfairly burdened by the area’s rapid industrial expansion, which had produced some modest growth in commercial and retail services within the city but little new industry, and a surge of residential development, much of which had occurred through various federal War Time Housing projects (637 houses in total), which, like Polymer, were not directly taxable. By the city’s calculations, it had spent more than $300,000 developing and servicing the land upon which the War Time houses had been built, yet had only received slightly more than $60,000 in federal grants-in-lieu from 1944 to 1949.189 The shortfall, in their view, needed to be made up on the industrial properties that had made all of the residential developments necessary in the first place. In the township’s defence, its solicitor made some perfunctory remarks against annexation, but this line of argument was quickly abandoned for one that tied the fate of the township’s industrial properties to that of its suburban areas. The suburban homes, the solicitor “frankly

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admitted,” had been hastily built and poorly planned, and it had become obvious that the entire area would soon need its dysfunctional septic system replaced with sewers, a point on which residents, local developers, and the Ontario Department of Health were all in agreement.190 With the total debt for municipal services in the township already inflated from $64,000 to in 1940 to nearly $600,000 by 1949, the necessary capital expenditures could not be easily financed, especially if the industrial tax base was lost to the city.191 Moreover, as these suburban areas continued to expand, and their interests diverged from those of the township’s otherwise predominantly rural population, it was considered to be only a matter of time before they sought to incorporate as independent municipalities. It was this last possibility that preoccupied the chair of the Ontario Municipal Board: “The real issue placed before the Board in these proceedings was whether the Sarnia area should be permitted to develop into a number of adjacent urban municipalities with wasteful duplication of many services, limited financial resources, unequal distribution of industrial and commercial assessment and all the other disadvantages of an artificial and illogical division. The Board has no hesitation in saying that it must do everything in its power to prevent such a development in the interests of present and future residents of this great area.”192 Fortunately, at least for the board’s chair, the provincial government had recently expanded the Ontario Municipal Board’s authority over local boundary disputes to include the discretionary power to order annexations differing in size than those specified in the original application.193 Thus, when the board issued its sweeping annexation order in the autumn of 1950, it transferred to the city the 1,600 acres of industrial land originally sought by the city, the 3,650 acres of troubled suburban development that neither the city nor the township had wanted, a portion of a small village north of the city where residents had favoured annexation, and 3,600 acres of the Chippewa of Sarnia First Nations reserve that the board had included in case the band continued to parcel out its land for industrial development.194 Annexation took effect in the spring of 1951. The city’s territory had been nearly quadrupled and now included large swathes of undeveloped land on which both new industrial and residential development could be situated. Control over the local property tax base had also been centralized within the city and would no longer be divided among three separate municipal governments (township, city, and county). Thus, the orderly growth of the urban area could be planned and managed from

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its centre and would not be impeded by inadequate public resources. And, in the short term, some measures did follow. To accommodate rapid population growth, planning staff approved new subdivisions. Later, the entire troubled subdivision that neither the township nor the city had wanted was razed, and its residents were relocated elsewhere within the city, largely through federal funds for urban renewal.195 On the industrial policy front, the office of the industrial commissioner was revived and strengthened and allotted a generous budget to cultivate and promote Sarnia’s image as “Chemical Valley.” Minor regulatory accommodations were also frequent. Roads were closed or relocated to facilitate the assembly of large industrial sites, and rights of way for pipelines were granted, provided, in both cases, that industry undertook and paid for the work themselves. Opportunities for broader initiatives did arise, but they were not acted upon. For example, a private land development firm offered 500 acres of attractive industrial land to the city, but the city declined, for the scale of investment was considered too great given the city’s resources (the asking price was $1.6 million) and because it appeared that new industry’s land needs were being met, initially through the actions of Polymer and later through those of private real estate investors drawn in by the rapidly escalating land values.196 Earlier that year, another land development company had asked the city to provide financial inducements to help seal a land transfer deal from the First Nations band government, but there too the city declined.197 Generally, then, the approach taken by the city towards industrial development after annexation was not substantively different than the one previously adopted by the township. Not much was done to directly stimulate industrial development. Restructuring, whatever effects it might have had, did not lead to new industrial policy initiatives. This is understandable, since petroleum and petrochemical manufacturing appeared to have reached a certain critical mass in Sarnia and had acquired a momentum of its own. Beginning in the early 1950s, an infrastructure of pipelines was laid down, connecting Sarnia refineries to developing oil and gas fields in western Canada and to a network of US pipelines linked to the Gulf Coast. The expanded local supply of crude oil and natural gas further cemented the area’s advantages as a site for petroleum-based manufacturing, and new investments followed. That decade, Imperial Oil expanded downstream into petrochemicals.198 Dow Chemical announced major additions to existing facilities or entirely new installations or both on an almost yearly basis throughout

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the 1950s and 1960s.199 The 1960s also saw investments from new firms, including plants built by Du Pont, Allied Chemical, Chinook Chemicals, Dome Petroleum, and Union Carbide as well as Canadian Industries Limited’s sprawling $55 million fertilizer facility.200 The growth in petrochemical manufacturing and subsequent demand for hydrocarbon feedstocks helped stimulate further expansion in petroleum refining: by the mid-1970s, both the Sun Oil and Canadian Oil (which had been acquired by Royal Dutch Shell in 1963) refineries had more than doubled their throughput capacity (from 20,000 to 70,000 and 38,000 to 80,000 barrels per day, respectively).201 Later, in 1978, Du Pont, Union Carbide, and Polymer (which had changed its name to Polysar in 1973) jointly built the area’s fourth refinery, Petrosar, a $570 million megaproject.202 None of these developments owed much to the direct actions of the city or any of the area’s other municipal governments. Moreover, as industry expanded, it began to spill outside of the city’s boundaries into nearby townships, including Sarnia township. As early as the late 1950s, boundary disputes had once again become a distraction.203 VII Conclusion In 1899, Sarnia became the centre of petroleum manufacturing in Canada. The industry had been brought there by Standard Oil and strengthened shortly thereafter by the company’s acquisition of Imperial Oil and subsequent decision to centralize its Canadian refining operations along the clay banks of the St. Clair River. Over the first few decades of the twentieth century, Standard’s Imperial Oil refinery in Sarnia remained the most advanced in Canada, though by the 1930s, its productive dominance was being eroded by new installations in Montreal and in the west. The relative decline of petroleum manufacturing in Sarnia was suddenly and dramatically reversed during the Second World War by the federal government’s decision to locate its synthetic rubber plant there and by the explosive development of petroleum and petrochemical manufacturing which subsequently took place around it and which had been stimulated, at least initially, by the policies and actions of the federal government and of those it had placed in charge the synthetic rubber plant. In all of this, municipalities played only a small and relatively inconsequential role. While Standard Oil had been drawn to Sarnia by a tax concession, or so it was reported, the location best suited the company’s clear objective of entering petroleum refining in Canada

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on a large scale. The nearby oil wells around Petrolia, though their yields were slipping, remained an important source of tariff-protected raw materials for manufacturing illuminating oils, lubricants, waxes, and other petroleum-based products to be sold in Canadian markets. The St. Clair River afforded deep-water access to Standard Oil’s fleet of crude oil tanker ships and thus provided a cheap method for importing the crude oil needed to augment Canadian supplies, which Standard Oil had fought hard to secure. There were alternatives – a new site could have been developed further down the St. Clair River; a refinery could have been built in Hamilton or Toronto and Canadian crude oil shipped there by railway; or, once Imperial Oil had been acquired, its Silver Star refinery could have been expanded, and US crude oil could have been piped there from Sarnia’s harbour – but none were as cost effective or as consistent with Standard Oil’s longterm plans for expansion into Canada as the site of the old Alpha refinery in Sarnia. Thus, as was likely the case for so many other municipal bonuses given to industry during this period, the tax concession was probably awarded after the investment decision had already been made. At most, it might have helped trigger a more timely relocation of the industry within the region and perhaps could be credited for drawing the industry to an area whose geography was more conducive to its future growth. The sudden, dramatic expansion of petroleum-based manufacturing in Sarnia during and after the Second World War owed even less to the actions of municipal governments. Here, the decisive government actions were federal ones: the initial large investment decision, made by a powerful and determined federal politician facing the exigencies of war, and the regulatory accommodations and land expropriations made afterward to attract downstream and upstream firms to the area so as to protect that substantial investment. Municipalities were not much involved, and when they were, their policy responses were reactive and mostly minor. The township in which the development initially took place was quickly overwhelmed by the scale and pace of it all and soon found itself buckling under the attendant strain, pushed there, in part, by the federal government’s intransigence over meeting its local fiscal obligations. The city just to its north remained more concerned with capturing the industry’s tax base than with further stimulating its development. And after the city’s boundaries were expanded to include the industrial development, this did not change. Hence, it cannot be said that the sustained, accelerated postwar development of petroleum

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refining and petrochemical manufacturing in Sarnia was stimulated by the actions of municipal governments. The story, then, of the making of Canada’s Chemical Valley in the second half of the twentieth century is mostly a federal one: a large public investment followed by timely and appropriate public policies and actions to accommodate the requirements of a growing industry sector, which nudged together a dense nucleus of private sector companies that stimulated further investment. Nevertheless, a lesson can be extracted for municipal governments. Among the most important federal interventions in Sarnia was the land expropriation undertaken to assemble large, contiguous tracts of land suitable for industrial development. This ensured that development during the early, critical “take-off” stage would not be delayed or ultimately thwarted by individual landowners holding out for exorbitant or unrealistic profits, and it simplified the investment decision for prospective firms such as Dow Chemical and Cabot Carbon.204 Mostly, this was done to advance Polymer’s short-term interests in securing both customers for its production by-products and cheap supplies of hydrocarbon feedstocks, but it did also conform to Howe’s grand vision for the future of the industry in Sarnia. Once Polymer’s needs were met and the company had recovered financially, it ceased actively recruiting industry to Sarnia, and no further expropriations were made. Gradually, private land development firms emerged to assume what had become the lucrative business of assembling land for industry. But in that critical period, expropriation facilitated economic growth. The power of eminent domain, the right to expropriate real property for public purposes, is among those powers traditionally vested in municipal governments.205 Generally, it is most commonly exercised to accommodate large physical infrastructure projects, such as railways, highways, and expressways, and also to site controversial public facilities, including landfills and waste-water treatment facilities. But it can also be used to realize economic objectives, such as the redevelopment of blighted urban core areas or the expansion of large industry on the periphery of cities.206 In the latter case, municipalities can, as the federal government did during the making of Canada’s Chemical Valley, stimulate the accelerated, sustained growth of industry sectors by accommodating their land assembly needs at critical moments through the use of expropriation powers.

5 Conclusion

For a century, Canadian petroleum manufacturing was concentrated in southern Ontario. Following the discovery of large crude oil deposits in Lambton Country in the late 1850s, the nascent petroleum manufacturing that developed consisted of the simple distillation of crude oil to produce a lighter oil that was mainly used in lamps, and this was mostly done at the well head. The high sulphur content of Lambton crude oil led manufacturers to further refine their distilled petroleum with washes of sulphuric acid and caustic soda and so drew their operations to urban centres in southern Ontario, where those inputs could be more easily (and thus more cheaply) acquired; where packaging supplies, service industries, and sources of capital were more abundant; and where consumers resided or at least could be easily accessed through the transportation links between urban centres. By the early 1860s, the petroleum manufacturing industry had begun to centre on the eastern outskirts of London in a place that came to be named London East. London East afforded all of the advantages of locating in one of southern Ontario’s larger urban centres and was the point closest to the crude oil producing region along the industry’s main transportation route that possessed competitive railway shipping. The industry remained concentrated there until the early 1880s, when, following the consolidation of much of the industry’s production in the formation of Imperial Oil, it shifted to Petrolia, a village in the centre of the crude oil producing region which had acquired competitive railway shipping of its own. When Imperial Oil was acquired by Standard Oil around the turn of the century, the industry shifted again, this time to Sarnia, where the St. Clair River allowed for the bulk imports of US crude oil by tanker vessel. The Canadian petroleum manufacturing industry

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remained in Sarnia through the first half of the twentieth century and was greatly expanded during and shortly after the Second World War by the development there of petrochemical manufacturing. Over this long course of the industry’s development, government policies and actions exerted much influence. It was behind the protective trade policies of the federal government where investments in petroleum manufacturing occurred, and when these policies changed, so, too, did the industry’s scale, structure, and scope. The lowering of tariff and non-tariff trade barriers and the introduction of regulations governing the quality of illuminating oil in the late 1870s both encouraged and facilitated the consolidation of the industry’s ownership and production in the form of Imperial Oil. And the further reduction of these barriers led to Standard Oil’s takeover of Imperial Oil in the late 1890s and favoured the relocation of Imperial Oil’s existing facilities to Sarnia. Later, the federal government’s investment in a synthetic rubber plant built beside Imperial Oil, and its subsequent actions to recruit downstream and upstream firms to the area to protect that investment, provided a great stimulus to the development of the petrochemical industry in Sarnia. Did municipal government exert similar influence over the industry’s development? Do municipal actions and policies help explain the industry’s changing geography, from its initial clustering in London East to the successive relocations to Petrolia and Sarnia? The answer here must be a qualified no, though municipalities did have a role to play. The obvious exception is Petrolia, where direct municipal action in the form of a railway allowed a monopoly over the industry’s transportation to be overcome, leading to the concentration there of petroleum manufacturing during the last two decades of the nineteenth century. In this case, municipal actions in Petrolia positively influenced both the industry’s geography and its development. In London East, concerns about the city’s regulatory powers drove the refiners to a suburban location and led them to use municipal incorporation to protect themselves from being subsequently annexed to the city. This afforded them a location where they could operate free from regulatory constraints and yet also realize the economic benefits of being located in an urban centre. It also had the effect of forcing the refineries to cluster tightly together, and this magnified localization economies, as it was refiners in London East and not elsewhere that were responsible for the industry’s two major breakthroughs during its early history: the discovery and rapid diffusion of the litharge refining process in the

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late 1860s and the formation of Imperial Oil in 1880. In London East, then, it was the negative aspects of the municipal condition – namely, regulation – that influenced the industry’s geography by driving the refineries to the fringe, but that ultimately proved to be positive for the industry’s development. In Sarnia, the municipal condition was neutral in its influence on the industry’s geography and development. A tax concession was awarded to Standard Oil in the 1890s to encourage its investment there, but all signs pointed towards Standard Oil making that investment regardless of whether or not the concession was given. Such incentives were widely deployed by Ontario municipalities to attract industry during the late nineteenth and early twentieth century, but the available evidence suggests that, like in Sarnia, they were not generally effective in stimulating growth along particular lines of industry strength or in drawing resources to more productive locations generally. Certainly, municipal incentives to industry did not significantly influence the development of petroleum manufacturing – in Sarnia or elsewhere. Much later, the development of the petrochemical industry in Sarnia was similarly suburban in form, but this was mostly a function of the unavailability of land within the city, not municipal regulations, and it conferred no distinct advantages. Rather, the suburban development of the industry during and after the Second World War actually threatened to inhibit the industry’s growth, for the rural township in which the development took place lacked sufficient resources to accommodate the requirements of the rapidly growing sector. Were it not for the actions taken by the federal government to stimulate growth, the industry’s development in Sarnia may well have stalled. This included providing low-cost utilities and manufacturing by-products, as well as assistance with overcoming regulatory obstacles within the federal government, but it also involved the expropriation and development of nearby land suitable for large manufacturing installations. Thus, in Sarnia, the influence of municipal government on the industry’s initial relocation there and its subsequent development was neither positive nor negative. What, then, can be concluded about the nature of the relationship between the petroleum manufacturing industry and municipal government and its evolution over this period? Certainly, the relationship fits within the broader scholarly narrative about the rise of the modern capitalist industrial corporation and the subsequent decline of the relevance of municipal corporations for industry and of urban autonomy more generally. Almost immediately, the refining industry operated on

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a national and sometimes even international scale, with little regard for local and regional markets. A corporate organizational structure was adopted early, separating ownership from management, with the fortunes of both groups becoming increasingly detached from any sense of place. Technological innovation and capital investment facilitated the adoption of mass-production techniques that were implemented in factories and complexes built on the urban fringe and in the resourceextracting periphery. As the scale and scope of the industry expanded over time, municipal government ceased to be an important institution for promoting its development or regulating its processes. A closer examination of the evidence, however, does reveal some important departures from this general narrative. Unlike many other industries in Ontario during the period, the petroleum manufacturing industry passed through the initial stages of industrialization without receiving the benefits of municipal industrial promotional policies. Partly, this could have been a matter of timing. Petroleum refining entered industrialization early compared to many other industries and so encountered a municipal condition that had not yet bent itself towards industrial growth.1 But the nature and character of refining processes also clearly mattered. Petroleum refining, particularly in its first few decades, was a noxious and hazardous industrial activity. For most municipalities, the dis-amenities of refining likely outweighed any potential benefits that the industry would bring through increased employment. Not only was petroleum refining denied the benefits of municipal industrial promotion, at least initially, but it was also subjected to the other side of the relationship, regulation. The early refiners were driven to the periphery before the size and scale of their operations made such locations attractive. Thus, it was not only large, integrated corporations that sought out suburban locations or were lured there by unscrupulous developers. Small, proprietorial shops and factories could be pushed there by municipal regulatory measures, where, despite the added transportation costs, their spatial concentration could stimulate the rise of localization economies and spur further industrial development. Leaving aside the petroleum manufacturing industry for a moment, what remains to be said about the evolution of the municipal corporation over this period, particularly as it relates to business? Municipalities entered the twentieth century as active participants in the promotion of industrial enterprise, dedicating their modest resources and authority to the task with considerable vigour, as the history of bonusing makes

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clear. By the century’s midpoint, however, this role had greatly diminished for municipalities, and their preferred instrument, the bonus, was no longer available to them. To be sure, this can be interpreted as a consequence of the changing needs and requirements of industry, whose operational size and complexity had outgrown the benefits that could be found at city hall and whose customers and shareholders lived in a world well beyond the city limits. But such economic determinism is more obvious in hindsight; the historical record shows much more complexity. Nor was it the case of a provincial government, constitutionally and politically unrestrained in its legal domination over municipalities, driving municipalities out a policy area that they sought for themselves, or benevolently saving them from their own ruinous competition. The province had been more than willing to let municipalities assume their share of the financial burden of promoting industry in Ontario, and it was with both reluctance and repeated failure that the province intervened. Some provincial and local politicians did view the practice of bonusing as wasteful and destructive, and the province did impose conditions intended to eliminate the worst of these practices. But the province’s interventions were also tempered by a recognition of the inherent right of communities to use their own resources as they saw fit, as long as that did not conflict with provincial interests. Over time, such a balance proved to be impossible to strike, and the practice of municipal bonusing was prohibited. Thereafter, businesses could no longer expect to receive special financial treatment at the hands of municipal councils. Finally, what lessons can be drawn from the development of the petroleum manufacturing industry in Ontario for those engaged in the modern pursuit of local economic growth? It may be tempting to infer from all of the preceding that modern municipalities are incapable of stimulating the growth of local industry sectors. Municipalities today still operate within the same general jurisdictional, fiscal, and territorial constraints. Industries are no less complex in their operations, and many function in markets that are now effectively global. Despite these realities, the cases explored here do illustrate ways in which modern municipalities can play a direct role in stimulating economic growth. The effect of the municipal boundary on the location of refineries in the London area can be achieved through municipal land-use policies that constrain the location of industry sectors to specific areas within municipal territories and that minimize competition for land sites within those areas from residents and other industries. Municipalities

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in Canada have broad authority (conferred to them by provincial governments) to divide their territories into zones or districts in which certain activities are permitted and others are prohibited.2 The standard, historical justification for such zoning policies is that they ensure the physical separation of incompatible land uses and so minimize the negative externalities that can arise, for example, when heavy industry locates adjacent to an established residential neighbourhood. But zoning policies can also be used to realize other objectives, including economic ones, such as maximizing the positive externalities that can arise when firms operating within an industry sector are located close to each other. Such policies might be necessary only when there exist strong diseconomies of industry co-location, as appeared to have been the case for the secretive refiners operating in the industry’s early period; or, only for those first few entrants to a local industry sector, when agglomeration benefits have yet to materialize and provide incentives for firms to cluster together on their own; or, when local industrial clusters face heightened competition for land sites from workers seeking shorter commutes, for example, or from other industries valuing those sites for their own purposes. But in such cases, municipal land-use policies can stimulate economic growth by promoting the formation of local industrial clusters. Municipalities can also stimulate the growth of local industry sectors by accommodating their land needs at critical moments through the use of expropriation powers, as the federal government did, through Polymer, in Sarnia. Land expropriations might only be necessary when the transactions costs of acquiring suitable production sites are high, as they often are when firms require large numbers of contiguous parcels of land or when sunk investments confer monopoly status to individual landowners, as in the common example of a landowner positioned directly in the path of an advancing railroad or pipeline or in the somewhat analogous case of land directly adjacent to an established local industrial cluster, when the cluster itself cannot be easily relocated and when the external agglomeration benefits of locating near the cluster fall sharply (perhaps exponentially) over distance. Under such circumstances, municipal land expropriations can stimulate the growth of local industry sectors. Timely, strategic investments in industry-specific infrastructure can also encourage the growth of those industry sectors, as was the case in Petrolia when the town’s financing of the second railway directly stimulated investment in petroleum manufacturing there. The provision

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of physical infrastructure is one of the primary responsibilities of municipal government in Canada. Upon it, nearly all economic activity depends. But infrastructure can also be built to accommodate the specific requirements of local industry sectors, as in the construction of a highway access ramp for local automotive manufacturers, for example, or in the laying of fibre-optic cables to enhance connectivity among local high-technology firms. Strategic municipal investments in physical infrastructure such as these might be important only when industry sectors face relatively high transportation costs or when the large fixed costs of those investments discourage industry sectors from providing the infrastructure themselves. But in those cases, strategic, timely infrastructure investments can stimulate the growth of local industry sectors. Interventions such as these do not necessarily require that municipalities be given new powers or endowed with greater resources, though, as municipal officials would surely insist, it would not hurt. Cooperation with neighbouring municipalities, local universities and colleges, and higher levels of government may also be fruitful avenues for municipalities to explore in their pursuit of local clustering opportunities, as others have emphasized.3 But there, nevertheless, remains scope for independent municipal action in stimulating the rise of local industrial clusters. As the case of petroleum manufacturing in southern Ontario illustrates, municipalities can stimulate the growth of local industrial clusters by accommodating the industry sector’s land assembly and infrastructure needs at critical moments and by implementing land-use policies that encourage the dense spatial clustering of industries within their territory.

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Notes

1. Introduction 1 Ian R. Gordon and Philip McCann, “Industrial Clusters: Complexes, Agglomeration, and/or Social Networks?” Urban Studies 37, no. 3 (2000): 513–32; and Ron Martin and Peter Sunley, “Deconstructing Clusters: Chaotic Concept or Policy Panacea?” Journal of Economic Geography 3 (2003): 5–35. 2 The literature here is voluminous, but a relevant point of entry is the published findings of a recent large-scale, comparative study of twentysix industrial clusters across Canada. An overview of this project and a summary of the preliminary findings can be found in David A. Wolfe and Meric S. Gertler, “Clusters from the Inside and Out: Local Dynamics and Global Linkages,” Urban Studies 41, no. 5/6 (2004): 1071–93. The individual case studies can be found in J. Adam Holbrook and David A. Wolfe, ed., Innovation, Institutions, and Territory: Regional Innovation Systems in Canada (Montreal: McGill-Queen’s University Press, 2000); J. Adam Holbrook and David A. Wolfe, ed., Knowledge, Clusters, and Regional Innovation: Economic Development in Canada (Montreal: McGill-Queen’s University Press, 2002); David A. Wolfe and Matthew Lucas, ed., Clusters in a Cold Climate: Innovation Dynamics in a Diverse Economy (Montreal: McGill-Queen’s University Press, 2003); David A. Wolfe, ed., Clusters Old and New: The Transition to a Knowledge Economy in Canada’s Regions (Montreal: McGill-Queen’s University Press, 2003); and David A. Wolfe and Matthew Lucas, ed., Global Networks and Local Linkages: The Paradox of Cluster Development in an Open Economy (Montreal: McGill-Queen’s University Press, 2005). 3 Paul Krugman, Geography and Trade (Cambridge, MA: MIT Press, 1991); and Masahisa Fujita and Jacques-Francois Thisse, Economics of

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6 7 8

9

10

11

12

13

14 15 16

Notes to pages 5–9 Agglomeration: Cities, Industrial Location, and Regional Growth (Cambridge: Cambridge University Press, 2002). J. Peter Neary, “Of Hype and Hyperbolas: Introducing the New Economic Geography,” Journal of Economic Literature 39, no. 2 (2001): 536–61. Harold F. Williamson and Arnold R. Daum, The American Petroleum Industry: The age of illumination (Evanston, Ill: Northwestern University Press, 1959), 295. I am indebted to H.V. Nelles for this particular phrasing. George Nader, Cities of Canada, Theoretical, Historical and Planning Perspectives, vol. 1 (Toronto: Macmillan of Canada, 1975), 155–80. K.G. Crawford, “The Independence of Municipal Councils in Ontario,” Canadian Journal of Economics and Political Science 6, no. 4 (1940): 543–54; and Christopher Armstrong and H.V. Nelles, Monopoly’s Moment: The Organization and Regulation of Canadian Utilities, 1830–1930 (Philadelphia: Temple University Press, 1986). Gilbert A. Stelter, “The City-building Process in Canada,” in Shaping the Urban Landscape: Aspects of the Canadian City-building Process, ed. Gilbert A. Stelter and Alan F.J. Artibise (Ottawa: Carleton University Press, 1982), 1–29. Crawford, “The Independence of Municipal Councils in Ontario,” 543–54; and John H. Taylor, “Urban Autonomy in Canada: Its Evolution and Decline,” in Power and Place: Canadian Urban Development in the North American Context, ed. Gilbert A. Stelter and Alan F.J. Artibise (Vancouver: University of British Columbia Press, 1986), 269–91. Andrew Sancton and Robert Young, ed., Foundations of Governance: Municipal Government in Canada’s Provinces (Toronto: University of Toronto Press, 2009). Meric S. Gertler, “Economic Development,” in Urban Policy Issues: Canadian Perspectives, ed. Richard A. Loreto and Trevor Price (Toronto: McClelland & Stewart, 1990), 35–57. Laura A. Reese and Gary Sands, “Marking the Least of Our Differences? Trends in Local Economic Development in Ontario and Michigan, 1990–2005,” Canadian Public Administration 50, no. 1 (2007): 88. Harry Kitchen, The Role for Local Governments in Economic Development (Toronto: Ontario Economic Council, 1985). Ibid. Jason Kaufman, “Town and Country in the Redefinition of State-Federal Power: Canada and the United States, 1630–2005,” in The City in American Political Development, ed. Richardson Dilworth (New York: Routledge, 2009): 64–74.

Notes to pages 10–15

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17 David Gordon, “Capitalist Development and the History of the American Cities,” in Marxism and the Metropolis: New Perspectives in Urban Political Economy, ed. William Tabb and Larry Sawers (New York: Oxford University Press, 1978), 25–63. 18 Richardson Dilworth, The Urban Origins of Suburban Autonomy (Cambridge, MA: Harvard University Press, 2005). 19 Paul Andre Linteau, The Promoters’ City: Building the Industrial Town of Maisonneuve, 1883–1918, trans. Robert Chodos (Toronto: James Lorimer & Co., 1985). 20 Jon C. Teaford, City and Suburb: The Political Fragmentation of Metropolitan America (Baltimore: Johns Hopkins University Press, 1979). 21 Stelter, “The City-building Process in Canada,” 21. 22 Robert Lewis, Manufacturing Montreal: The Making of An Industrial Landscape, 1850 to 1930 (Baltimore: Johns Hopkins University Press, 2000); and Robert Lewis, Chicago Made: Factory Networks in the Industrial Metropolis (Chicago: University of Chicago Press, 2008). 2. London East 1 T. Sterry Hunt, Canadian Naturalist and Geologist 6, no. 4 (1861): 241–55. 2 W.A.E. McBryde, “Ontario Pilot Plant for the Chemical Refining of Petroleum in North America,” Ontario History 79, no. 3 (1987): 203–5. 3 Toronto Globe, 13 February 1863; and Edward Phelps, “John Henry Fairbank of Petrolia, 1831–1914: A Canadian Entrepreneur” (master’s thesis, University of Western Ontario, 1965), 26. 4 London Free Press, 13 March 1861. 5 Town of Sarnia, Minutes, 25 February 1862. 6 Canadian News, 3 July 1862. 7 Sarnia Observer, 17 February 1871; Town of Sarnia, Minutes, 25 May 1871. 8 John S. Ewing, “The History of Imperial Oil,” vol. 1 (unpublished manuscript, Harvard Business School, Cambridge, MA, 1951), 122; and Hugh M. Grant, “The ‘Mysterious’ Jacob L. Englehart and the Early Ontario Petroleum Industry,” Ontario History 85, no. 1 (1993): 70. 9 Benjamin S. Scott, “The Economic and Industrial History of the City of London, Canada, From the Building of the First Railway, 1855, to the Present, 1930” (master’s thesis, University of Western Ontario, 1930), 57. 10 A contemporary description of the Watermans’ refinery in London Township can be found in Canadian News 28 February 1867. 11 London Free Press, 26 August 1864. 12 London Free Press, 29 August 1864.

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13 London Free Press, 6 September 1864. 14 London Free Press, 30 September 1865; London Free Press, 5 October 1865. The geologists were General Wallbridge, New York City; professor James Hall, geologist for the state of New York; and professor C.D. Wilber, geologist for the State of Illinois. Professor Wilber’s lectures were reprinted in the London Free Press, 16 November 1865 and 17 November 1865. 15 London Free Press, 14 November 1865. 16 London Free Press, 27 January 1866. 17 London Free Press, 12 October 1866. 18 Ontario, Report of the Royal Commission on the Mineral Resources of Ontario (Toronto: 1890), 153–67. 19 Phelps, “John Henry Fairbank,” 55–64. 20 Township of London, Assessment Records (1868); and James Sutherland, ed., City of London and County of Middlesex Directory, 1868–1869 (Toronto, 1868). 21 History of the County of Middlesex, 2nd ed. (Toronto: W.A. & C.L. Goodspeed, 1890), 371. 22 J.T.H. Connor, “A Note on Sulphuric Acid Production in Victorian Ontario,” Ontario History 79 (1987): 290–8. 23 James H. Bowman, “London’s Contribution to the History of the Chemical Industry,” Canadian Chemistry and Metallurgy 12 (1928): 194. 24 Ibid., 193–5; J.T.H. Connor, “A Note on Sulphuric Acid Production,” 290–8; and Scott, “The Economic and Industrial History of London,” 67–72. 25 R.G. Dun & Co. Collection, Baker Library, Harvard Graduate School of Administration, New York City, vol. 348, 900FF, 900P10, as quoted in Grant, “The ‘Mysterious’ Jacob L. Englehart,” 68–9. 26 Ewing, “The History of Imperial Oil,” vol. 1, 19–21; and Grant, “The ‘Mysterious’ Jacob L. Englehart,” 66–7. 27 London Free Press, 29 July 1868. 28 G. L. Wendt and S. H. Diggins, “The Chemistry of ‘Sweetening’ in the Petroleum Industry,” Industrial and Chemical Engineering Chemistry 16 (1924): 1113–5. 29 W.A.E. McBryde, “Petroleum Deodorized: Early Canadian History of the ‘Doctor Sweetening’ Process,” Annals of Science 48 (1991): 103–4; G. A. Purdy, Petroleum: Prehistoric to Petrochemicals (Toronto: Copp Clark Company, 1957), 208–9. 30 McBryde, “Ontario Pilot Plant,” 212; McBryde, “Petroleum Deodorized,” 108; and Scott, “The Economic and Industrial History of the City of London,” 59.

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31 J.S. Fry, Canadian Patent No. 2,933 (24 December 1868); Ontario, Report of the Royal Commission on the Mineral Resources of Ontario (Toronto: 1890), 163; and McBryde, “Petroleum Deodorized,” 103–11. 32 London Free Press, 11 December 1868. 33 McBryde, “Petroleum Deodorized,” 107. 34 London Free Press, 7 April 1869. 35 The London Mechanics’ Institute Library: Catalogue (London, 1881); and History of the County of Middlesex, Canada, 321–2. 36 William Judd, ed., “Minutes of the London Mechanics’ Institute, 1841–1895,” London Public Libraries Occasional Paper 23 (1976): 57–71. 37 Canadian News and Dominion Review, 3 December 1868; London Free Press, 7 April 1869; and Sutherland, City of London and County of Middlesex General Directory, 1868–1869. 38 Judd, “Minutes of the London Mechanics’ Institute, 1841–1895,” 64; and Untitled journal entry (7 December 1867), Samuel Peters Papers, Book 11: Surveyor’s Book no. 17, Archives and Research Collections Centre, University of Western Ontario. 39 Untitled journal entries (25 August 1868), Samuel Peters Papers, Book 11: Surveyor’s Book no. 17, Archives and Research Collections Centre, D.B. Weldon Library, University of Western Ontario. 40 London Free Press, 11 December 1868; and London Free Press, 7 April 1869. 41 As quoted in Scott, “The Economic and Industrial History of the City of London,” 58. 42 London Free Press, 7 April 1869. 43 Scott, “The Economic and Industrial History of the City of London,” 59. 44 Canada, Department of Inland Revenue, “Annual Report,” Sessional Papers 2 (1875): 60–61. 45 Monetary Times, 6 November 1874. 46 Canada, Department of Inland Revenue, “Annual Report,” Sessional Papers 6 (1873): 56–7; and Canada, Census of 1871, 408, 448. 47 History of the County of Middlesex, Canada, 410. 48 City of London, Minutes, 25 March 1872. 49 City of London, Minutes, 22 April 1872, 25 November 1872, and 16 December 1872. 50 London Advertiser, 13 December 1872. 51 City of London, Minutes, 30 September 1872, 9 December 1872. 52 City of London, Minutes, 3 March 1873. 53 Monetary Times, 21 November 1873; William Marr and Donald G. Paterson, Canada: An Economic History (Toronto: Gage Publishing, 1980), 343–4.

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Notes to pages 23–5

54 City of London, Minutes, 7 November 1873. 55 City of London, Minutes, 23 March 1874; and London Free Press, 18 April 1874. 56 Ian Christopher Ross, “London East, 1854–1885: The Evolution, Incorporation, and Annexation of a Satellite Municipality” (master’s thesis, University of Western Ontario, 1977), 21, 28. 57 London Free Press, 18 April 1874. 58 Incorporation as a village required a census return showing at least 750 inhabitants living “sufficiently near to form an incorporated village” and a petition of “not less than one hundred resident freeholders and householders of the village and neighbourhood, of whom not fewer than one half shall be freeholders.” These were easily met with a census of 2,416 and a petition in excess of 200. The village of London East was incorporated through a London Township by-law on 6 June 1874, with the first elections held on 4 January 1875. Township of London, By-law no. 243, “A By-law to Incorporate the Village of London East,” 6 June 1874; see also Ross, “London East,” 29. 59 Ross, “London East,” 33. In this otherwise well-documented thesis on the municipal history of London East, Ross hastily concludes that the motivations behind this incorporation movement were “rather nebulous,” having failed to uncover either of the city’s preceding annexation campaigns (Ross, “London East,” 28). A recent study of the origins of six suburban municipalities in late nineteenth-century Ontario similarly concludes that “in London East the motivations for incorporation remained ambiguous.” See Greg Stott, “Enhancing Status Through Incorporation: Suburban Municipalities in Nineteenth-Century Ontario,” Journal of Urban History 33, no. 6 (2007): 901. 60 Village of London East, Assessment Records (1875). 61 Illustrated Historical Atlas of the County of Middlesex (Toronto: H.R. Page & Co., 1878), 16; Valuation of A.M. Ross & Co., Dominion Oil Works Refinery (4 December 1871), Samuel Peters Papers, Samuel Peters, Book 11: Surveyor’s Book no. 24, Archives and Research Collections Centre, D.B. Weldon Library, University of Western Ontario. 62 Village of London East, By-law no. 54 (23 July 1877). 63 The classic work here is Alfred D. Chandler, Jr. The Visible Hand: The Managerial Revolution in American Business (Cambridge, MA: Harvard University Press, 1977). 64 London Township, Assessment Records (1868). 65 Sutherland, City of London and County of Middlesex General Directory 1868–1869, 264.

Notes to pages 26–7

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66 London Ontario Registry Office, City of London Co-partnership Registry Index, 1870–1974, vols. 1–5. Throughput estimates were provided in London Free Press, 13 December 1872. 67 London Free Press, 19 July 1869. 68 London Ontario Registry Office, City of London Co-partnership Registry Index, 1870–1974, vols. 1–5. 69 London Free Press, 11 December 1868. 70 London Free Press, 29 January 1868. 71 S.D. Elwood to J. H. F. Fairbank, 28 April 1869, Fairbank Papers, vol. 4078, Archives and Research Collection Services, D.B. Weldon Library, University of Western Ontario. 72 J.H. Dagher, “Effect of the National Oil Policy on the Ontario Refining Industry” (Ph.D. diss., McGill University, 1968), 14, 15. 73 Monetary Times, 21 April 1871. 74 Grant, “The ‘Mysterious’ Jacob L. Englehart,” 70; and London Ontario Registry Office, City of London Co-partnership Registry Index, 1870–1974, vols. 1–5. 75 London Township, Assessment Records (1871); and City of London, Assessment Records (1871). 76 London Free Press, 13 December 1872; Monetary Times, 3 January 1873. 77 Monetary Times, 31 January 1873, 2 May 1873. On this Home Oil Works refinery, see the deed and a contemporary description reprinted in Phelps, “John Henry Fairbank,” Appendix H. 78 As a correspondent for the Monetary Times noted, the fatal blow was dealt to Canadian exporters in January 1873 when a moratorium on crude oil production in the United States ended prematurely: “It appears that the United States agreement to shut down their wells for 60 days has broken through and caused quite a fall in their markets, both for crude and refined. This places our crude combination in a fix, and no refiner will pay the prices of the last month ... but they are waiting to see if things will be patched up across the line.” See Monetary Times, 24 January 1873. But there was no “patching up across the line,” as Harold F. Williamson and Arnold R. Daum document in their definitive history of the early US petroleum industry: “The year 1873 was a climatic one in oil production ... output soared a third higher than the previous year’s record high, hitting an alltime peak of nearly 10 million barrels, while prices plummeted from $3.75 [per barrel of crude] to a demoralizing average of $1.80.” By the end of 1873, the Canadian export trade had utterly collapsed. Harold F. Williamson and Arnold R. Daum, The American Petroleum Industry, 1859–1899: The Age of Illumination (Evanston: Northwestern University Press, 1959), 135.

130

Notes to pages 28–30

79 Dagher, “Effect of the National Oil Policy on the Ontario Refining Industry,” 14, 15. 80 Canada, Department of Inland Revenue, “Annual Report,” Sessional Papers 6 (1873); and Canada, Department of Inland Revenue, “Annual Report,” Sessional Papers 2 (1874). 81 Monetary Times, 6 November 1874. 82 Monetary Times, 28 August 1874, 6 November 1874, and 4 January 1878. 83 Monetary Times, 27 August 1875. 84 London East, Assessment Records (1875, 1876, 1877); and London Ontario Registry Office, City of London Co-partnership Registry Index, 1870–1974, vols. 1–5, (filed 25 April 1876). 85 Monetary Times, 23 February 1877. 86 Monetary Times, 8 June 1877. 87 In May 1878, the Home Oil Works informed oil wholesaler John Fisken of this price-fixing arrangement: “Now that the price of refined oil is fixed, that is so far as LORC, Waterman Bros, Englehart, and ourselves are concerned. We will be prepared to fill all orders you may favour us with at London prices and terms.” Home Oil Works to Fisken, 29 May 1878, John Fisken Papers, vol. 2: Business Correspondence, Archives of Ontario. 88 On 5 April 1878, the Monetary Times reported that the “small Refiners in London are forming an association of their own.” By June, the Mutual Oil Refining Company of London was soliciting its oil to John Fisken, a prominent oil wholesaler in Toronto. The company’s co-partnership declaration was filed in August 1879. Mutual Oil Refining Company to Fisken, 29 June 1878, John Fisken Papers, vol. 2: Business Correspondence, Archives of Ontario; London Ontario Registry Office, City of London Co-partnership Registry Index, 1870–1974, vols. 1–5. 89 Canada, House of Commons Debates (2 May 1879), 1697. 90 An Act to Increase the Excise Duty on Spirits, to Impose an Excise Duty on Refined Petroleum and to Provide for the Inspection Thereof, Statutes of Canada 1868, c. 50; and An Act to Amend Certain Acts Respecting Duties of Customs and Excise, Statutes of Canada 1877, c. 14. 91 An Act to Provide for the Inspection of Petroleum, Statutes of Canada 1879, c. 18. The important clause, section 4 of the act, read: “Standard fire test for Canadian petroleum: 105 degrees Fahrenheit, anything below is deemed explosive; for imported Petroleum: 130 degrees Fahrenheit.” As Williamson and Daum describe, the fire (or ‘flash’) test referred to the “temperature at which an oil gives off enough vapours to form an explosive mixture with air and flash when ignited by a small flame” (Williamson and Daum, The American Petroleum Industry 1859–1899, 209). Raising the

Notes to pages 31–4

92

93

94 95 96 97 98 99 100

101 102 103

104 105

131

fire test limited the amount of the lighter, more volatile naphtha fractions that could be included in the final illuminating oil product. This reduced the likelihood of oil lamp explosions, but it also lessened the amount of illuminating oil that could be produced from a barrel of crude oil. The gravity test (which in this case was 0.807 of the weight of an equal measure of distilled water) established the maximum weight of illuminating oil and was designed to reduce the amount of heavier petroleum distillates in the oil, which tended to freeze in cold temperatures and often encrusted the lamp wick. The tariff on imported illuminating oil was six cents per wine gallon, and the additional inspection fees charged on foreign illuminating oil varied depending on the size of the container but averaged slightly less than one cent per wine gallon. See An Act to Amend Certain Acts Respecting Duties of Customs and Excise, Statutes of Canada 1877, c.11; and An Act to Provide for the Inspection of Petroleum, Statutes of Canada 1879, c. 18. See Canada, Department of Inland Revenue, “Annual Report,” Sessional Papers 4 (1881), xxii–xxvii. Ibid., 80; and Canada, Tables of the Trade and Navigation of the Dominion of Canada 1880, 231. Monetary Times, 6 February 1880; Williamson and Daum, The American Petroleum Industry, 495. Monetary Times, 5 September 1879. Canada, House of Commons Debates (21 April 1880), 1649–50. Canada, House of Commons Debates (3 May 1880), 1918–9. An Act to Amend the Act Respecting the Inspection of Petroleum, Statutes of Canada 1880, c. 21; and An Act to Amend the Petroleum Inspection Act 1880, Statutes of Canada 1881, c. 23. See Canada, Department of Inland Revenue, “Annual Report,” Sessional Papers 4 (1881), xxii. Monetary Times, 1 September 1871. Undated journal entry, “Oil made from August 1868 until March 1869,” Samuel Peters Papers, Book 24: Field Notes “F,”Archives and Research Collections Centre, D.B. Weldon Library, University of Western Ontario. Mutual Oil Refining Company to Fisken, 30 October 1878, John Fisken Papers, vol. 2, Business Correspondence, Archives of Ontario. Ontario, Report of the Royal Commission on the Mineral Resources of Ontario (Toronto: 1890), 157. Martin Woodward, a refiner in Petrolia, further elaborated on the gravity test’s impact on the industry: “At first we were allowed to manufacture oil of any gravity, but some years ago the law in that respect was changed and the gravity clause was put in; that caused

132

106 107 108

109 110 111

112

113 114

Notes to pages 34–9 a change in the system of manufacture ... Our percentage of illuminating oil now is hardly 40 percent, while under the old system it was 60 percent. Our percentage was reduced when the gravity test was made.” See Ontario, Report of the Royal Commission on the Mineral Resources of Ontario, 157. A corroborating estimate is provided by the correspondent for the Monetary Times, 15 August 1879: “The result of the new law upon crude is that a considerably larger quantity of crude is required to make the same quantity of refined as was made before. A barrel of crude would produce an average of about twenty-five wine gallons of the old quality of refined. A barrel of crude now will not produce over 19 or 20 gallons of the new standard oil, yet the twenty gallons now contains nearly, if not quite, all the light giving powers of the old 25 gallons, and it is in all respects a more desirable article and a safer oil at the same fire test, as it less liable to crust the wick–a cause from which many accidents to lamps arise.” The gravity test’s effect on the industry was summarized by the Monetary Times in its year-end review of the petroleum trade, 7 January 1881: “The change in the legal standard of the article revolutionized the process of refining, and the season began with a scarcity of refined stock and an immediate scarcity of plant to make it.” London Advertiser, 15 September 1880. Canada, House of Commons Debates (21 April 1880), 1645. Ian M. Drummond, Progress without Planning: The Economic History of Ontario from Confederation to the Second World War (Toronto: University of Toronto Press, 1988), 95; Hugh Grant and Henry Thille, “Tariffs, Strategy, and Structure: Competition and Collusion in the Canadian Petroleum Industry, 1870–1890,” The Journal of Economic History 61 (2001): 396. “Imperial Oil Company Co-partnership Declaration,” filed 30 October 1880, City of London Co-partnership Registry Index, 1870–1974, vols. 1–5. Monetary Times, 22 October 1875; and Petrolia Advertiser, 24 January 1879. Village of London East, Assessment Records (1880); and Valuation of Plants, 1 June 1880, Imperial Oil Private Journal, 1880–1898, 1, Imperial Oil Corporate Archives. “Inventories, Accounts, Agreements, Re: Formation of the Company, 1880,” vol. 8, file 2, Imperial Oil Corporate Archives; and “Stock Settlement Memos Inventories, Accounts, 1880,” vol. 8, file 3, Imperial Oil Corporate Archives. All calculations are made from data recorded in Profits and Sales, Imperial Oil Private Journal, 1880–1898, 75–78, Imperial Oil Corporate Archives. Although the exact regulatory threat does not appear to have been formally specified (or at least recorded), it almost certainly would have

Notes to pages 40–1

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116 117

118

119

120 121

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occurred through a strategic modification to the London’s fire limits. Since their creation, municipal corporations in Ontario had been granted the authority to pass legislation for the purpose of preventing fires, as a natural extension of their “police powers” to regulate public and private action so as to preserve public health, safety, and welfare. During the mid- to late 1800s, urban municipalities throughout North America increasingly used this authority – as well as other police powers – to achieve other objectives, including regulating the location and processes of noxious industries, protecting established local firms from new competition, and maintaining neighbourhood class distinctions. Such uses appear to have gone largely unchallenged. For a detailed study of such practices in Toronto, see Raphael Fischler, “Development Controls in Toronto in the Nineteenth Century,” Urban History Review 36, no. 1 (2007): 16–31. A critical discussion of the politics behind the use of fire limits in Chicago can be found in Robin N. Einhorn, Property Rules: Political Economy in Chicago (Chicago: University of Chicago Press, 1991). A recent review of studies on industrial suburbanization in North American cities during this period can be found in Richard Walker and Robert D. Lewis, “Beyond the Crabgrass Frontier: Industry and the Spread of North American Cities, 1850–1950,” Journal of Historical Geography 27, no. 1 (2001): 3–19. William K. Tabb and Larry Sawers, eds., Marxism and the Metropolis, 2nd ed. (Oxford: Oxford University Press, 1984). Paul Andre Linteau, The Promoters’ City: Building the Industrial Town of Maisonneuve, 1883–1918, trans. Robert Chodos (Toronto: James Lorimer, 1985). Edward K. Muller, “Industrial Suburbs and the Growth of Metropolitan Pittsburgh, 1870–1920,” Journal of Historical Geography 27, no.1 (2001): 58–73. For a contemporary book-length exposition of this view, see G. Taylor, Satellite Cities: A Study of Industrial Suburbs (New York: D. Appleton and Company, 1915). Muller, “Industrial Suburbs,” 68. The first case of the Ontario government imposing changes to municipal boundaries against the wishes of local residents appears to have occurred in the midst of the Great Depression, when the province amalgamated four municipalities together in the Windsor area. See Larry Kulisek and Trevor Price, “Ontario Municipal Policy Affecting Local Autonomy,” Urban History Review 6, no. 3 (1988): 255–70. On the significance of this case, see Andrew Sancton, “The Significance of Municipal Incorporation

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125 126

127 128 129

Notes to pages 41–3 for Urban Government: Exploring the Differences between the United States and Canada” (paper presented at the conference “The City in North American: Historical and Comparative Perspectives on Public Works and Services, the Environment, and Political Culture,” Mexico City, 2001). After all, as Thomas Holmes wrote in his study showing the tendency of manufacturing firms to cluster just inside the boundaries of US states with right-to-work laws, “What differs at the border is policy.” See Thomas J. Holmes, “The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders,” Journal of Political Economy 106, no. 4 (1998): 671. For a formal defence of this argument, see Esteban Rossi-Hansberg, “Optimal Urban Land Use and Zoning,” Review of Economic Dynamics 7 (2004): 69–106; also see Robert E. Lucas Jr. and Esteban Rossi-Hansberg, “On the Internal Structures of Cities,” Econometrica 70, no. 4 (2002): 1445–76. This was also generally true for suburban municipalities in the United States; see Jon C. Teaford, City and Suburb: The Political Fragmentation of Metropolitan America (Baltimore: Johns Hopkins University Press, 1979). A.W. Currie, The Grand Trunk Railway of Canada (Toronto: University of Toronto Press, 1957), 220–45. After meeting with city officials about purchasing water from the city, the mayor of London East reported to residents at a town hall meeting that “[we] were soundly abused, an unreasonable rate was asked, and the only argument made was that London East should come into the city.” See London Free Press, 30 June 1883. London Advertiser, 22 September 1884; and London Advertiser, 4 October 1884; see also Ross, “London East,” 64–5. A more detailed account of the events surrounding annexation can be found in Ross, “London East,” 61–96. London Free Press, 21 January 1885. This condition was included in provincial legislation establishing the amalgamation. See An Act Respecting the City of London and the Town of London East, Statutes of Ontario, 1885, c. 63, s. 19.

3. Petrolia 1 A detailed account of the evening’s festivities is provided in Petrolia Advertiser, 25 January 1878.

Notes to pages 44–7

135

2 Charles Whipp and Edward Phelps, Petrolia: 1866–1966 (Petrolia, Ontario: Petrolia Advertiser-Topic and the Petrolia Centennial Committee, 1966), 2–3. 3 The location of these communities is shown in Map 3a. 4 Toronto Globe, 25 April 1865. The reported cost of the road was $20,000, though only $13,000 was paid. The price of crude oil is given in J.H. Fairbank’s diary for the period: Diary no. 25, John Henry Fairbank Papers, Archives and Regional Collections Centre, D.B. Weldon Library, University of Western Ontario. 5 Toronto Globe, 24 January 1867. 6 Christina Burr, Canada’s Victorian Oil Town: The Transformation of Petrolia from a Resource Town into a Victorian Community (Montreal: McGillQueen’s University Press, 2006), 87–96; and McEvoy & Co., Gazetteer and Directory of the Counties of Kent, Lambton, and Essex, 1866–1867 (Toronto, 1866), 277. 7 A.W. Currie, The Grand Trunk Railway of Canada (Toronto: University of Toronto Press, 1957), 161–7; see also Robert Wendell Camm, “History of the Great Western Railway (of Canada)” (master’s thesis, University of Western Ontario, 1947). Twenty-five percent (2,299 miles) of all of the railroad track laid in Ontario between 1853 and 1914 (9,081 miles) was laid in the 1850s; see M.L. Bladen, “Construction of the Railways in Canada to the Year 1885,” Contributions to Canadian Economics 5 (1932): 43–60; M.L. Bladen, “Construction of the Railways in Canada to the Year 1885,” Contributions to Canadian Economics 7 (1934), 61–107; and W. Randy Smith, Aspects of Growth in a Regional Urban System: Southern Ontario, 1851–1951 (Downsview, Ontario: York University, 1982), 93–125. 8 Report of the Board of Directors, no. 14 (31 January 1861), Great Western Railway Papers, vol. 13,333, Library and Archives of Canada (hereafter cited as Great Western Railway Papers), 19. 9 Report of the Board of Directors, no. 16 (31 January 1862), Great Western Railway Papers, vol. 13,333, 20. 10 Report of the Board of Directors, no. 17 (31 July 1862), Great Western Railway Papers, vol. 13,333, 20. 11 An Act to Enable the Great Western Railway Company to Connect the Oil Springs in the Township of Enniskillen by a Branch Railway, and Further to Amend Their Acts of Incorporation, Statutes of Province of Canada, 1863, c. 15. 12 Currie, Grand Trunk Railway, 183–6. 13 Report of the Board of Directors, no. 24 (31 January 1866), Great Western Railway Papers, vol. 13,333, 20.

136

Notes to pages 47–9

14 Currie, Grand Trunk Railway, 177–8. 15 Currie, Grand Trunk Railway, 189. 16 Edward Phelps, “John Henry Fairbank of Petrolia, 1831–1914: A Canadian Entrepreneur” (master’s thesis, University of Western Ontario, 1965), 53–54. 17 That Fairbank and other oil producers financed the road’s construction was local knowledge, as was the use of Great Western employees and equipment, though nowhere is that mentioned in the company’s records. See Donald John McLeod, “A History of the Petroleum Industry in Western Ontario” (master’s thesis, University of Western Ontario, 1936), 18. Land registry records show that Fairbank donated the land for the Petrolia railway stations; see Phelps, “John Henry Fairbank,” 80. 18 As noted in the company’s semi-annual report: “The requirements of the Oil District of Enniskillen have had the attention of the Directors, and a short line of five miles from Wyoming to Petrolia, constructed by independent parties, has been taken over by this Company for the cost of construction amounting to £10,038.10s.2d. The line was partially opened for traffic on the 17th of December, and on the 1st of January, came into full operation.” See Report of the Board of Directors, no. 26 (31 January 1867), Great Western Railway Papers, vol. 13,333, 20. On the opening of the line, see also the announcement in the Toronto Globe, 21 December 1966. 19 Report of the Board of Directors, no. 27 (31 July 1867), Great Western Railway Papers, vol. 13,333, 21. 20 Currie, Grand Trunk Railway, 200. 21 Report of the Board of Directors, no. 42 (31 January 1875), Great Western Railway Papers, vol. 13,333, 44. 22 Report of the Board of Directors, no. 25 (31 January 1866), Great Western Railway Papers, vol. 13,333, 44. 23 Seventy-five tank cars were purchased by the company in 1873, marking the first widespread introduction of the device to the Canadian oil industry. See Report of the Board of Directors, no. 39 (31 July 1873), Great Western Railway Papers, vol. 13,333, 26. See also Dianne Newell, Technology on the Frontier: Mining in Old Ontario (Vancouver: University of British Columbia Press, 1986), 130–1; and Ontario, Report of the Royal Commission on The Mineral Resources of Ontario (Toronto: 1890), 163–6. 24 Grant and Thille deny that a monopoly existed in petroleum transportation during the early history of the Canadian oil industry: “The proximity of the oil fields to the major market of southwestern Ontario prevented the monopolization of transportation as occurred in the United States.” Not so, at least between 1866 and 1878. See Hugh Grant and Henry Thille,

Notes to pages 50–2

25 26 27 28 29 30 31

32

33

34 35

137

“Tariffs, Strategy, and Structure: Competition and Collusion in the Ontario Petroleum Industry, 1870–1880,” The Journal of Economic History 61 (2001): 395. Monetary Times, 13 December 1872. London Free Press, 28 July 1869. London Advertiser, 19 December 1872. An Act to Incorporate “The London and Petrolia Pipe Line Company,” Statutes of Ontario, 1873, c. 115. An Act to Incorporate “The Erie and Huron Railway Company,” Statutes of Ontario, 1873, c. 70. An Act to Incorporate “The Dresden and Oil Springs Railway Company,” Statutes of Ontario, 1873, c. 69. Robert D. Tennant Jr., Canada Southern Country (Erin, Ontario: Boston Mills Press, 1991), 11–24, 37–48; see also Walter Neutal, “From ‘Southern’ Concept to Canada Southern Railway, 1835–1873” (master’s thesis, University of Western Ontario, 1968). M.H. Taylor, president, to T.B. Pardee (26 April 1875), Ontario, Provincial Secretary’s Office, Return of Correspondence and Papers relating to the “Dresden and Oil Springs Railway Ontario,” Sessional Papers 33 (1875). Harold F. Williamson and Arnold R. Daum, The American Petroleum Industry: The Age of Illumination (Evanston, IL: Northwestern University Press, 1959), 396–462; Elizabeth Granitz and Benjamin Klein, “Monopolization by ‘Raising Rivals’ Costs’: The Standard Oil Case,” Journal of Law and Economics 39, no. 1 (1996): 31–3; Arthur Menzies Johnson, The Development of American Petroleum Pipelines: A Study in Private Enterprise and Public Policy, 1862–1906 (Ithaca, NY: Cornell University Press, 1956), 1–25; and Leslie J. Cookenboo, Crude Oil Pipelines and Competition in the Oil Industry (Cambridge, MA: Harvard University Press, 1955). Newell, Technology on the Frontier, 131. This is a rough estimate calculated using data on US pipeline construction reported by Williamson and Daum (The American Petroleum Industry, 187–8, 460), as none appears to exist for this period in Canada. In 1866, a six-inch diameter oil pipeline cost, on average, $3.60 per foot to build. In 1884, the cost had fallen to $1.30. Assuming the decline in cost was linear, a six-inch pipeline would have cost $2.45 per foot to build in 1874 or $13,000 per mile. As the reported planned size of the London and Petrolia Pipeline was four-and-a-half inches in diameter (London Advertiser, 19 December 1872), it would have cost about $1.84 per foot ($9,740 per mile) to build in 1874, as the cost of pipe is a function of its circumference. The projected London and Petrolia Pipeline was probably about thirty-five

138

36

37

38 39 40

Notes to pages 52–3 miles in length (not fifty as quoted in the Monetary Times, 13 December 1872), so its construction would have cost about $341,000 in 1874. This is a very conservative estimate, as not all construction costs were a direct function of pipe size. Moreover, according to Dianne Newell, pipe had to be imported from the United States and so bore additional transportation costs (Newell, Technology on the Frontier, 131). Pipelines also required pumps (comprised of boilers and engines), which, in 1866, probably had to be placed about every five miles and cost about $2,800 each. Assuming that the cost of pumps fell at the same rate as did pipe construction and that by 1874 they were twice as efficient in moving oil as they were in 1866 – especially over the comparatively flat terrain of southwestern Ontario – and so could be placed every ten miles instead of five, the cost of pumps for the London and Petrolia Pipeline would have been about $8,000. The total cost of the pipeline’s construction, therefore, would have been at least $350,000, a highly conservative figure which does not include land purchases. Finally, with a diameter of four-and-a-half inches, the pipeline would likely have a throughput capacity somewhere between 7,000 and 9,000 barrels per day (Williamson and Daum, The American Petroleum Industry, 406), depending on the size and number of pumps installed. That would have easily accommodated all of the crude oil used by London refiners during the year ending 30 July 1873 (368,571 barrels) and probably all of that used in Canada (717,143 barrels). M.H. Taylor to T.B. Pardee (26 April 1875), Ontario, Provincial Secretary’s Office, “Return of Correspondence and Papers relating to the ‘Dresden and Oil Springs Railway,” Sessional Papers 33 (1875). Ferguson to D.A. MacDonald (30 January 1877), Ontario, Provincial Secretary’s Office, “Return of Correspondence and Papers relating to the ‘Erie and Huron Railway,” Sessional Papers 41 (1877); and “Erie and Huron Railway Statement of Cost, 1880,” Ontario, Provincial Secretary’s Office, “Return of Correspondence and Papers Relating to the ‘Erie and Huron Railway,’” Sessional Papers 37 (1880). Currie, Grand Trunk Railway, 229. Monetary Times, 12 June 1874. At least three other contemporary sources also allege that the Great Western Railway discriminated against Petrolia refiners in favour of London refiners through discriminatory rates and rebates: H. Beldon & Co., “Historical Sketch of the County of Lambton,” Illustrated Historical Atlas of the Dominion of Canada (Toronto, 1880), viii; Charles Jenkins to J.H. Fairbank, 7 April 1883, Fairbank Papers, vol. (v), Archives and Research Collections Centre, D.B. Weldon Library, University of Western Ontario; and Canada, Senate Debates (1 March 1881), 471–9. Unfortunately, the surviving records

Notes to pages 53–5

41

42

43

44

45 46 47 48 49

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of the Great Western Railway are unhelpful on this issue, as they do not contain sufficiently detailed information on freight rates or receipts, and although the financial journals do list rebates paid by the company – and several were paid to oil refineries, none of which were based in Petrolia – they do not list why the rebates were awarded, and rebates for overcharges and damaged shipments seemed common, so common, in fact, that separate journals were kept to record them. This claim appears to have been more accurate than has usually been thought, at least in the United States during the period 1850–1910, as shown in one particularly careful analysis: Jac C. Heckelman and John Joseph Wallis, “Railroads and Property Taxes,” Explorations in Economic History 34 (1997): 77–99. On the Municipal Loan Fund, the single best historical source is the correspondence between the province and the municipalities on the subject, which was reprinted in Ontario, “Municipal Loan Fund,” Sessional Papers 17 (1873); but see also the general overview in W.T. Easterbrook and Hugh G.J. Aitken, Canadian Economic History (Toronto: Macmillan, 1956), 314–6; and the discussion of the politics surrounding the fund’s failure in A. Margaret Evans, Sir Oliver Mowat (Toronto: University of Toronto Press, 1992), 78–79, 88; and S.J.R. Noel, Patrons, Clients, Brokers: Ontario Society and Politics, 1791–1896 (Toronto: University of Toronto Press, 1990), 243–8. M.H. Taylor to O. Mowat (17 February 1877), Ontario, Provincial Secretary’s Office, “Return of Correspondence and Papers relating to the ‘Sarnia, Chatham and Erie Railway Company,’” Sessional Papers 26 (1878). This county “grouping clause” was a source of much resentment among adversely affected municipalities and was subsequently repealed in 1876. See Municipal Act, Statutes of Ontario, 1876, c. 22, s. 6. Lambton County Council, Minutes, printed in Petrolia Advertiser, 4 September 1874. Petrolia Advertiser, 2 October 1874. Petrolia Advertiser, 11 December 1874. Evans, Sir Oliver Mowat, 88–90. Ontario, Provincial Secretary’s Office, “Return Showing the Amount of Aid Granted by Way of Loan, Bonus, Stock, or Otherwise, by the Several Municipalities of Ontario, to Railway Enterprises since July, 1867,” Sessional Papers 15 (1875–6); Ontario, Clerk’s Office, Legislative Assembly, “Return of Railways Received Aid from the Ontario Government,” Sessional Papers 9 (1877); and Ontario, Provincial Secretary’s Office, “Return Showing All Railways Receiving Aid from Provincial Funds since 1870,” Sessional Papers 56 (1880).

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Notes to pages 55–9

50 The average total provincial grant per mile was about $2,000. See Ontario, Clerk’s Office, Legislative Assembly, “Return of Railways Received Aid from the Ontario Government,” Sessional Papers 9 (1877); and Ontario, Provincial Secretary’s Office, “Return Showing All Railways Received Aid from Provincial Funds since 1870,” Sessional Papers 56 (1880). 51 Petrolia Advertiser, 28 April 1875; An Act to Incorporate “The Erie and Huron Railway Company,” Statutes of Ontario 1873, c. 70, s. 8, 9; and Ontario, Court of Common Pleas, “Michie v. Erie and Huron Railway Co.,” 26 UCCP 566 [1876] O.J. No. 223. 52 Chatham Planet, n.d., as printed in Petrolia Advertiser, 25 June 1875. 53 J.H. Fairbank, letter to the editor, Chatham Planet, 12 May 1875, reprinted in, Petrolia Advertiser, 21 May 1875, all quotes. 54 Ontario, Court of Common Pleas, “Michie v. Erie and Huron Railway Co.,” 26 UCCP 566 [1876] O.J. No. 223. 55 An Act to Incorporate “The Petrolia Oil Pipe Company,” Statutes of Ontario 1876, c. 81. 56 Ontario, Provincial Secretary’s Office, “Return of Correspondence and Papers Relating to the ‘Dresden and Oil Springs Railway,’” Sessional Papers 33 (1875). 57 Petrolia Advertiser, 7 May 1875. 58 Petrolia Advertiser, 25 June 1875. 59 Petrolia Advertiser, 28 May 1875. 60 An Act to Amend the Act Incorporating the Dresden and Oil Springs Railway Company, and to Change the Name to the Sarnia, Chatham and Erie Railway Company, Statutes of Ontario, 1876, c. 70. 61 Petrolia Advertiser, 10 August 1877; 17 August 1877. 62 Tennant, Canada Southern Country, 91. 63 Petrolia Advertiser, 18 January 1878; 25 January 1878. 64 Petrolia Advertiser, 25 January 1878 (emphasis in original). 65 London Advertiser, 8 February 1878. 66 Albert Tucker, “Jacob Lewis Englehart,” in Dictionary of Canadian Biography, vol. 15 (Toronto: University of Toronto Press, 2005); and London Free Press, 19 July 1869. 67 Hugh M. Grant, “The ‘Mysterious’ Jacob L. Englehart and the Early Ontario Petroleum Industry,” Ontario History 85, no. 1 (1993): 65–76. 68 Monetary Times, 24 September 1875; 22 October 1875; 17 November 1876. 69 Petrolia Advertiser, 29 March 1878. 70 Monetary Times, 6 November 1874. 71 Monetary Times, 22 October 1875; 15 September 1876. 72 Petrolia Advertiser, 24 May 1878. 73 Petrolia Advertiser, 14 June 1878.

Notes to pages 59–67

141

74 Town of Petrolia, Minutes, 29 July 1878. 75 “Valuation of Plants” (1 June 1880), Imperial Oil Private Journal, 1880–1898, Imperial Oil Corporate Archives, Toronto (hereafter cited as Imperial Oil Archives), 1. 76 Frasch was a prolific industrial chemist. He was born in Germany in 1851, immigrated to the United States in 1868, and entered the US petroleum refining industry in 1877. Frasch left Imperial Oil in 1885 to run his own Empire Oil Company refinery in London East, which served more as a laboratory for his experiments than it did as a site for manufacturing. There, in 1886, Frasch discovered the copper oxide desulphurization process that Standard Oil later acquired. On the career and life of Herman Frasch, see William R. Sutton, “Herman Frasch,” (PhD diss., Louisiana State University and Agricultural and Mechanical College, 1984). 77 The heading in the company’s journal changes from “London East” to “Petrolia” between 30 April and 30 June 1885. See Imperial Oil Private Journal, 1880–1898, Imperial Oil Archives, 133–134. 78 Pratt to Frederick White, Colonial Development Corporation (n.d. but probably late 1895), Imperial Oil Letterbook 1895–1899, Imperial Oil Archives, 185. 79 Subsurface oil storage tanks were developed in Petrolia by John Noble in 1867, after lightning struck and destroyed his above-ground wooden storage tank. Subsurface tanks proved to be less expensive to construct, as they required less construction materials and were also less prone to leaking and less susceptible to lightning strikes. Rockier soils in London meant that storage tanks could only be partially submerged. See Noble’s testimony in Ontario, Report of the Royal Commission on the Mineral Resources of Ontario, 165–6; and also Newell, Technology on the Frontier, 130. 80 Woodward mistakenly identified the railway as the Michigan Central because, since 1882, Michigan Central had leased and operated the Sarnia, Chatham, and Erie Railway line. See Ontario, Report of the Royal Commission on the Mineral Resources of Ontario, 157. 4. Sarnia 1 For photographs of Polymer’s construction, see Sarnia Observer (23 February 1944) and Polysar Rubber Corporation, Polysphere Fifty: A Special Issue to Commemorate Polysar Rubber Corporation’s 50 Years, 1942–1992 (Sarnia: Agfa Imaging Systems and Supplies, 1992). 2 Dividend Account, Imperial Oil Private Journal, 1880–1898 (various dates), 80, Imperial Oil Corporate Archives, Toronto (hereafter cited as Imperial Oil Archives).

142

Notes to pages 67–71

3 As Hugh Grant and Henry Thille document, these barriers included duties, discriminatory inspection fees, and a prohibition on bulk oil imports, which combined to a penalty of about 9.7 cents per wine gallon on imports, which was then roughly equal to the ex-refinery price of illuminating oil. Hugh Grant and Henry Thille, “How Standard Oil Came to Canada: The Monopolization of Canadian Petroleum Refining, 1886–1898,” (unpublished paper, July 2004), 4–5. 4 Ralph W. Hidy and Muriel E. Hidy, History of the Standard Oil Company (New Jersey): Pioneering in Big Business, 1882–1911 (New York: Harper & Brothers, 1955), 254–6. 5 Ontario, Report of the Royal Commission on the Mineral Resources of Ontario (Toronto, 1890), 161. 6 William R. Sutton, “Herman Frasch” (PhD diss., Louisiana State University and Agricultural and Mechanical College, 1984), 66–86. 7 Ibid., 80–96. 8 Canada, House of Commons Debates (1 May 1894), 2235; Canada, House of Commons Debates (9 February 1893), 533. 9 An Act to Further Amend the Petroleum Inspection Act, Statutes of Canada, 1893, c. 36. 10 Toronto Globe, 15 February 1893. 11 Toronto Globe, 1 April 1893. 12 Grant and Thille, “How Standard Oil Came to Canada,” 8. 13 Toronto Globe, 8 December 1896; 4 February 1897. 14 Hidy and Hidy, History of the Standard Oil Company (New Jersey), 254–6. 15 An Act Further to Amend the Petroleum Inspection Act, Statutes of Canada, 1897, c. 20; An Act to Consolidate and Amend the Act Respecting the Duties of Customs, Statutes of Canada, 1897, c.16; John S. Ewing, “The History of Imperial Oil” vol. 1 (unpublished manuscript, Harvard Business School, Cambridge, MA, 1951), 39; and Robert Craig Brown, Canada’s National Policy, 1883–1900: A Study in Canadian-American Relations (Westport, CT: Greenwood Press, 1964), 275. 16 Canada, Order-in-Council, 10 February 1898, Canada Gazette, vol. xxxi, 1714. 17 Ewing, “History of Imperial Oil,” vol. 1, 272; Sarnia Observer, 8 October 1897. 18 Town of Sarnia, Minutes, 4 March 1897. 19 Ewing, “History of Imperial Oil,” vol. 1, 272. 20 Imperial Oil Letterbook, 1895–1899, various dates, Imperial Oil Archives. See also Robert Page, “The Early History of the Canadian Oil Industry, 1860–1900,” Queen’s Quarterly 91, no. 4 (1984): 849–66.

Notes to pages 71–3

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21 “Agreement,” 3 May 1898, box 24, file 9: P.F. Egerton Files, Imperial Oil Archives. 22 Ewing, “History of Imperial Oil,” vol. 1, 275. 23 Hidy and Hidy, History of the Standard Oil Company, 151–2; see also Grant and Thille, “How Standard Oil Came to Canada.” 24 Ewing, “The History of Imperial Oil,” vol. 1, 275–319. 25 Dividend Account, Imperial Oil Private Journal, 1880–1898 (various dates), 80, Imperial Oil Archives. 26 By-law no. 85, box 9, file 22, Imperial Oil Archives. 27 By-law no. 81, box 9, file 22, Imperial Oil Archives. 28 Toronto Globe, 30 June 1898. 29 By-law no. 85, Box 9, File 22, Imperial Oil Archives. 30 Petrolia Advertiser, 30 April 1899. 31 Oil production also continued to decline, and many of the local oil drillers and riggers left to pursue exploration opportunities abroad; for details, see Christina Burr, Canada’s Victorian Oil Town: The Transformation of Petrolia from a Resource Town into a Victorian Community (Montreal: McGill-Queen’s University Press, 2006), 158–88. The decline of petroleum and natural gas production in Ontario during this period is documented in Ian M. Drummond, Progress without Planning: The Economic History of Ontario from Confederation to the Second World War (Toronto: University of Toronto Press, 1987), Table 6.1. 32 Town of Sarnia, Minutes, 4 March 1897. 33 Hanna was first elected to the Provincial Legislature in 1902 as a Conservative candidate in the riding of West Lambton, having been defeated in both of his two previous attempts. In 1905, he ascended to the post of provincial secretary in the Whitney cabinet, a position which he held until his resignation in 1916 after being passed over in the selection of Whitney’s successor as party leader. He left politics shortly thereafter. Throughout, Hanna remained actively involved in the legal affairs of Imperial Oil, eventually assuming its presidency in 1918, which he held for one year until his death. See Gayle M. Comeau, “William John Hanna,” in Dictionary of Canadian Biography, vol. 14 (Toronto: University of Toronto, 1998). 34 Town of Sarnia, Minutes, 4 March 1897; Sarnia Observer, 12 March 1897. 35 Municipal Institutions Act, Statutes of Ontario, 1873, c. 48; see also Elizabeth Bloomfield, “Municipal Bonusing of Industry: The Legislative Framework in Ontario to 1930,” Urban History Review 9, no. 3 (1981): 59–76. 36 M.L. Bladen, “Construction of Railways in Canada to the Year 1885,” Contributions to Canadian Economics 5 (1932): 43–60; and M.L. Bladen

144

37 38 39 40 41 42 43 44 45

46 47 48 49 50 51 52

53 54 55 56 57 58 59

Notes to pages 73–81 “Construction of Railways in Canada Part II: From 1885 to 1931,” Contributions to Canadian Economics 7 (1934): 61–107. James M. Gilmour, Spatial Evolution of Manufacturing: Southern Ontario, 1851–1891 (Toronto: University of Toronto Press, 1972), 48–69. William L. Marr and Donald G. Paterson, Canada: An Economic History (Toronto: Gage Publishing, 1980), 385. An Act Respecting Municipal Assessments and Exemptions, Statutes of Ontario, 1888, c.27; Municipal Amendment Act, Statutes of Ontario, 1882, c. 23. Municipal Institutions Act, Statutes of Ontario, 1882–3, c. 18. Ontario, Commission on Municipal Institutions, “Second Report,” Sessional Papers 13 (1889), 6. John C. Weaver, “The Meaning of Municipal Reform: Toronto, 1895,” Ontario History 66, no. 2 (1974): 89. Ontario, Commission on Municipal Institutions, “First Report,” Sessional Papers 42 (1888), 56. Municipal Amendment Act, Statutes of Ontario 1888, c. 28, all quotes. These figures are calculated from the data found in a special financial return by Ontario municipalities to the provincial secretary in 1900, documenting the grants and expenditures that the municipalities had given to industry since 1870. Ontario, “Return Respecting Bonuses and Exemptions to Manufacturing Industries Granted by Each Municipality in the Province since the Year 1870,” Sessional Papers 69 (1900) [unprinted]. Toronto Globe, 19 March 1892. Toronto Globe, 15 March 1892. Ibid. Municipal Amendment Act, Statutes of Ontario, 1892, c. 43. Municipal Amendment Act, Statutes of Ontario, 1884, c. 32. Consolidated Municipal Act, Statutes of Ontario, 1892, c. 42. A detailed account of these events can be found in Dean Beeby, “Industrial Strategy and Manufacturing Growth in Toronto, 1880–1910,” Ontario History 76, no. 3 (1984): 199–232. Hamilton’s industrial strategies through this period are reviewed in Diana J. Middleton and David F. Walker, “Manufacturers and Industrial Development Policy in Hamilton, 1890–1910,” Urban History Review 8, no. 3 (1980): 20–46. Beeby, “Industrial Strategy and Manufacturing Growth in Toronto,” 206–7. Toronto Globe, 26 March 1895. Monetary Times, 17 December 1897. Toronto Globe, 4 August 1897. Municipal Amendment Act, Statutes of Ontario, 1899, c. 26. Toronto Globe, 9 March 1899. See Table 4a.

Notes to pages 81–4

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60 See, for example, An Act to Authorize the Town of Dundas to Pass a By-Law Exempting the Canada Screw Company from Taxes, Statutes of Ontario, 1877, c. 45. 61 See, for example, An Act to Legalize a Certain By-Law of the Village of Alliston, Statutes of Ontario, 1885, c. 55. 62 See, for example, An Act of Confirm Certain By-Laws of the Town of Peterborough and for Other Purposes, Statutes of Ontario, 1890, c. 99. 63 See Table 4a. 64 An Act to Confer Certain Powers on the Town of Strathroy, Statutes of Ontario, 1893, c. 82. 65 Eventually, this standard was written into the special legislation; for example, “where it has been made to appear that the granting of the said bonus will not interfere with any industry of a similar nature already established in the said town without any such bonus, and that in other respects the case would come within the terms of the repealed provisions of The Municipal Amendment Act, 1888, respecting aid to industrial enterprises.” See An Act Respecting the Town of Cobourg, Statutes of Ontario, 1899, c. 43. 66 Toronto Globe, 15 March 1900. 67 Ibid. 68 Ibid.. 69 Municipal Amendment Act, Statutes of Ontario, 1900, c. 33. 70 Toronto Globe, 6 April 1900. 71 Ontario Assessment Commission, Report (Toronto, 1901), 385. 72 Ibid., 367. 73 For details, see J. Harvey Perry, Taxes, Tariffs, and Subsidies: A History of Canadian Fiscal Development, vol. 1 (Toronto: University of Toronto Press, 1955), 108–36. 74 Assessment Act, Statutes of Ontario, 1904, c. 23. 75 See Table 4a. 76 See Table 4a. 77 As his biographer notes, “One must concede Drury’s preoccupation, indeed obsession, with free trade as a cure-all for the nation’s varied ailments. If only protection could be done away with, the whole of society would be immeasurably improved and a new and more liberal age ushered in.” See Charles M. Johnston, E. C. Drury: Agrarian Idealist (Toronto: University of Toronto Press, 1986), x; see also E.C. Drury, Farmer Premier (Toronto: McClelland and Stewart, 1966). 78 Consolidated Municipal Act, Statutes of Ontario, 1922, c. 71. 79 Toronto Globe, 16 March 1922. Unfortunately, the history of municipal bonusing in Quebec has not been documented, but some details can be found in Ronald Rudin, “Boosting the French Canadian Town: Municipal

146

80 81

82

83 84 85

86 87 88 89 90

91

92 93 94

Notes to pages 84–9 Government and Urban Growth in Quebec, 1850–1900,” Urban History Review 9, no. 1 (1982): 1–10; and Paul-Andre Linteau, The Promoters’ City: Building the Industrial Town of Maisonneuve, 1883–1918 (Toronto: James Lorimer, 1981), 63–85. Toronto Globe, 31 August 1923. As observed in the Toronto Globe, 24 February 1924: “The Premier, Provincial Treasurer and Deputy Attorney-General of Quebec would not have journeyed to Toronto in midwinter unless they had attached great importance to the subjects which they discussed on Saturday with the Ontario Government. Foremost among these is the proposal to forbid competition for industries by means of bonuses or tax exemptions.” Christopher Armstrong, The Politics of Federalism: Ontario’s Relations with the Federal Government, 1867–1942 (Toronto: University of Toronto Press, 1981), 160–77; see also Bernard L. Vigod, The Political Career of Louis-Alexandre Taschereau (Montreal: McGill-Queen’s University Press, 1986), 124–6. The Bonus Limitation Act, Statutes of Ontario, 1924, c. 56; see the announcement in Toronto Globe, 10 March 1924. See Table 4a. Taschereau to Hepburn, personal (18 January 1935), Hepburn Papers, RG 3-10-0-368, Vol. 249, File: Taschereau, Hon. L.A., Private Correspondence 1935, Archives of Ontario (hereafter cited as Hepburn Papers). Hepburn to Taschereau, personal (22 January 1935), Hepburn Papers, Vol. 249, File: Taschereau, Hon. L.A., Private Correspondence 1935. On Hepburn, see John T. Saywell, “Just call me Mitch”: The Life of Mitchell F. Hepburn (Toronto: University of Toronto Press, 1991). Taschereau to Hepburn, personal (24 January 1935), Hepburn Papers. Hepburn to Taschereau, personal (8 February 1935), Hepburn Papers. Toronto Globe, 9 February 1935. This agreement marked the beginning of a short but fruitful period of cooperation between the two premiers, the details of which are reviewed in René Durocher, “Taschereau, Hepburn et les relations Québec-Ontario, 1934–1936,” Revue d’histoire de l’Amérique française 24 (1970): 248–75. Table 4a; see also Stewart Fyfe, Municipal Assistance to Location of Industry: A Canadian Study of Tax Concessions and Other Inducements (Halifax: Dalhousie University and Canadian Federation of Mayors and Municipalities, 1962), 33–4. The Town of Petrolia Act, Statutes of Ontario, 1943, c. 45. Sarnia Observer, 20 September 1950. Toronto Globe, 15 March 1900.

Notes to pages 89–93

147

95 See, for example, H.V. Nelles, The Politics of Development: Forest, Mines & Hydro-Electric Power in Ontario, 1849–1941, 2nd ed. (Montreal: McGillQueen’s University Press, 2005), 48–153. 96 For a review, see Timothy J. Bartik, Who Benefits From State and Local Economic Development Policies? (Kalamazoo, MI: W.E. Upjohn Institute for Employment Research, 1991). 97 W.R. Plewman, Adam Beck and The Ontario Hydro (Toronto: Ryerson Press, 1947), 21. 98 Harold Wolman, “Local Economic Development Policy: What Explains the Difference between Policy Analysis and Political Behavior?” Journal of Urban Affairs 10, no. 1 (1988): 19–28. 99 Sarnia Observer, 5 May 1899 100 J.H. Dagher, “The Effect of the National Oil Policy on the Ontario Petroleum Refining Industry” (PhD diss., McGill University, Montreal, 1968), 89–90. 101 On the Supreme Court’s dissolution decree, see: Hidy and Hidy, History of the Standard Oil Company (New Jersey), 639–718; and George Sweet Gibb and Evelyn H. Knowlton, History of the Standard Oil Company (New Jersey): The Resurgent Years, 1911–1927 (New York: Harpers & Brothers, 1956), 130–1. On the effects of the decree on Imperial Oil’s management and operations, see Ewing, “History of Imperial Oil,” vol. 3, pp. 45–99; and Sarnia Observer, October 14, 1911; 10 December 1913. 102 Ewing, “History of Imperial Oil,” vol. 3, 97; Sarnia Observer, 15 August 1913. 103 Ewing, “History of Imperial Oil,” vol. 3, pp. 21–43; see also Hugh M.K. Grant, “The Petroleum Industry and Canadian Economic Development: An Economic History, 1900–1961” (PhD diss., University of Toronto, 1986), 88–124. 104 Dagher, “The Effect of the National Oil Policy,” 171–3. 105 Robert Solo, Synthetic Rubber: A Case Study in Technological Development Under Government Direction, Study No. 18 for the Sub-Committee on Patents, Trademarks and Copyright, Committee on the Judiciary, U.S. Senate, 85th Cong., 2nd sess., 1959, Committee Print, 93; reprinted as Across the High Technology Threshold: The Case of Synthetic Rubber (Norwood, PA: Norwood Editions, 1980), 1–6; and Peter J.T. Morris, The American Synthetic Rubber Research Program (Philadelphia: University of Pittsburgh Press, 1989). 106 On this program, administered by a crown corporation, Fairmont Company Limited, see John de N. Kennedy, History of the Department

148

107 108 109 110

111

112 113

114 115

116

Notes to pages 94–5 of Munitions and Supply: Canada in the Second World War, vol. 1 (Ottawa: Queen’s Printer, 1950), 344–8. A more general discussion of the rubber conservation efforts in Canada can be found in Matthew J. Bellamy, Profiting the Crown: Canada’s Polymer Corporation, 1942–1990 (Montreal: McGill-Queen’s University Press, 2005), 23–30. On Howe, see Robert Bothwell and William Kilbourn, C.D. Howe: A Biography (Toronto: McClelland and Stewart, 1979). On this activities of this department, see the voluminous account given in Kennedy, History of the Department of Munitions and Supply, 2 vols. J.R. Nicholson to G.K. Shiels (13 February 1942), Polysar Papers, vol. 30, Library and Archives of Canada (hereafter cited as Polysar Papers). Nicholson to D.W. Ambridge, president of Abitibi Power and Paper Company (8 January 1943), Polysar Papers, vol. 8. For details on this program, see V. Herbert and A. Bisio, Synthetic Rubber: A Project that Had to Succeed (Westport, CT.: Greenwood Press, 1985); Morris, The American Synthetic Rubber Research Program; and Solo, Across the High Technology Threshold. This committee, which Nicholson chaired, was comprised of G.W. Sawin, vice president of B.F. Goodrich; A.J. Partridge, president of Goodyear Tire & Rubber; and W.J. Funston Jr., president of Dominion Rubber. See “Polymer Corporation Ltd. and Canada’s Synthetic Rubber Program,” J.R. Nicholson to G.K. Shiels, deputy minister of Munitions and Supply (13 February 1942), Polysar Papers, vol. 30. Bothwell and Kilbourn, C.D. Howe, 159. Also included were staff members belonging to the Office of the Oil Controller and the director general of Chemicals and Explosives. See J.R. Nicholson to G.K. Shiels (13 February 1942), Polysar Papers, vol. 30. “Preliminary Investigation of the Possibility of Synthetic Rubber Production in Canada,” (28 January 1942), Polysar Papers, vol. 30. This occurred in 1913, following the Supreme Court’s dissolution decree against Standard Oil and the consequent expansion of Imperial Oil’s refining facilities in Sarnia. On the decree, see Hidy and Hidy, History of the Standard Oil Company (New Jersey), 639–718; on the effects of the decree on Imperial Oil’s management and operations see Ewing, “History of Imperial Oil,” vol. 3, 45–99, and Sarnia Observer, 14 October 1911; 10 December 1913; and, finally, on this pipeline specifically, the first international oil pipeline in North America, see Ewing, “History of Imperial Oil,” vol. 3, 97; and Sarnia Observer, 15 August 1913. Nicholson to Sheils (10 February 1942), Polysar Papers, vol. 30.

Notes to pages 96–8

149

117 Howe to A.D.P. Heeney, secretary, Cabinet War Committee (31 January 1942), C.D. Howe Papers, vol. 47, file 11: Polymer Corp., 1942, Library and Archives of Canada (hereafter cited as C.D. Howe Papers). 118 P.C. 2369, 27 March 1942, 1. 119 See Solo, Across the High Technology Threshold, 7–35. 120 “Report of the Board of Directors and Management of Polymer Corporation Limited to the Hon. Minister of Munitions and Supply on the Programme for the Production of Synthetic Rubber in Canada” (18 May 1942), Polysar Papers, vol. 1, book 1: Minutes of the Board of Directors. 121 Sir Clive Baillieu to Capt. Lyttelton (16 May 1942), C.D. Howe Papers, vol. 47, file 10: 1942–1943. 122 Robert Gardiner, president of the United Farmers of Alberta to James G. Gardiner, House of Commons, forwarded to Howe (18 June 1942), C.D. Howe Papers, vol. 47, file 10: 1942–1943. 123 On Howe’s career in grain elevator construction, see Bothwell and Kilbourn, C.D. Howe, 25–51. 124 Howe to Dr. Speakman, director of the Ontario Research Foundation (16 May 1942), C.D. Howe Papers, vol. 47, file 10: 1942–1943. Speakman was Canada’s lone dissenting voice on the feedstock question, and Howe consulted him frequently on the issue. 125 Howe to J.B. Carswell, director general of the Washington Office, Department of Munitions and Supply (17 August 1942), C.D. Howe Papers, vol. 47, file 10: 1942–1943. The “plans” that Howe dropped were not insignificant. In early July, he had organized a meeting of the owners of Canada’s large distillers. And only two days before he ordered the butyl alcohol program to be aborted, he had drafted a report-to-council authorizing the granting of financial assistance to the Canadian Industrial Alcohol Company for the manufacturing of butyl alcohol. Sheils to Howe (10 July 1942), Nicholson to Howe (15 August 1942), C.D. Howe Papers, vol. 47, file 10: 1942–1943. 126 See, for example, J.W. Corman, mayor, City of Moose Jaw to Howe (16 October 1942), and Ted Tundal, secretary-treasurer, Taber-Irrigation District, Alberta to Howe (25 August 1942), C.D. Howe Papers, vol. 47, file 11: Polymer Corp., 1942; Resolution of the City of North Battlefield (17 May 1943), C.D. Howe Papers, vol. 46, file 8: 1942–1944; F.M. Sclanders, Saint John Board of Trade, to Howe (3 February 1942), C.D. Howe Papers, vol. 47, file 11: Polymer Corp., 1942. 127 Days before Howe cancelled the butyl alcohol program, he and Nicholson considered filing a materials request with the American War

150

128 129 130

131 132 133 134

135

136

137 138

Notes to pages 98–100 Production Board in order to accommodate the construction of a $500,000 butanol dehydration plant in Sarnia. Nicholson to Howe (15 August 1942), C.D. Howe Papers, vol. 47, file 10: 1942–1943. Kennedy, History of the Department of Munitions and Supply, 394–5. Bellamy, Profiting the Crown, 58. Canada, House of Commons Debates (16 June 1943), 3713; and Howe to Nicholson (25 November 1944), C.D. Howe Papers, vol. 46, file: Polymer Corporation 1944–1945. Canada, House of Commons Debates (14 May 1946), 1512. Board of Directors to Howe (4 November 1946), C.D. Howe Papers, vol. 45, file: Polymer Corp. (5), 1946–1957. Canada, House of Commons Debates (14 May 1946), 1516. These developments, which included adding both a corporate sales and a research and development division, are chronicled in Bellamy, Profiting the Crown, 57–86. The terms of this arrangement were speedily arrived at in the spring of 1942, with a contractual agreement signed on 1 May 1942 between Polymer and Dow Chemical of Canada, one full month before the latter was actually incorporated as a legal entity. On the negotiations, see Nicholson to Shields (26 June 1942), Polysar Papers, vol. 30, file: DMS Canadian Project (part 1) 1942; Minutes of the Board of Directors (28 April 1942), Polysar Papers, vol. 1, book 1. A copy of the agreement can be found in “Agreement between Polymer Corporation Limited and Dow Chemical of Canada Limited” (1 May 1942), Department of Munitions and Supply Papers, series A, vol. 541, Library and Archives of Canada. The discrepancy between the dates of the agreement and the incorporation of Dow Chemical of Canada is noted in “The First Ten Years, 1942–1951” (presented to Dow Chemical shareholders on 5 September 1951), Post Street Archives, Chemical of Canada Papers, vol. 0016, Midland, Michigan. E.N. Brandt, Growth Company: Dow Chemical’s First Century (East Lansing: Michigan State University Press, 1997), 195. In June 1942, Nicholson reported to his directors that Dow Chemical had been inquiring about buying land from Polymer, from which he correctly inferred that they were “contemplating the erection of a chemical plant of some kind in the area after the war.” See Minutes of the Board of Directors (28 April 1942), Polysar Papers, vol. 1, book 1. Minutes of the Board of Directors (12 January 1944), Polysar Papers, vol. 1, book 2. R.T. Jeffrey, chief engineer for Municipal Affairs, Hydro-Electric Power Commission of Ontario to G.R. Henderson, chief engineer, Polymer

Notes to pages 100–2

139 140

141 142 143 144

145

146 147 148 149

150

151

152

151

Corp. (21 November 1945), Polysar Papers, vol. 15, file: Hydro-Electric Power Commission of Ontario, 1944–1947. Chemical Division, Shell Oil Company of Canada, Limited, The Canadian Petrochemical Industry (Toronto: Ryerson Press, 1956), 34–5. Board of Directors to Howe (4 November 1946), C.D. Howe Papers, vol. 45, file: Polymer Corporation Limited, 1946–1947; Chemical Division, Shell Oil Company of Canada, Limited, The Canadian Petrochemical Industry, 34–5. Howe to Eric Phillips (12 November 1946), C.D. Howe Papers, vol. 45, file: Polymer Corporation Limited, 1946–1947. W. E. Phillips to Howe (19 October 1946), C. D. Howe Papers, vol. 45, file: Polymer Corporation Limited, 1946–1947. Howe to Phillips (12 November 1946), C.D. Howe Papers, vol. 45, file: Polymer Corporation Limited, 1946–1947. “Agreement,” Polymer Corp. and Fiberglas Canada (1 August 1947), Polysar Papers, vol. 13, file: Fiberglas Canada Limited, 1946–1947; see also Sarnia Observer, 12 July 1947; and Financial Post, 29 March 1947. Howe to Nicholson (9 December 1946), C.D. Howe Papers, vol. 45, file: Polymer Corporation Limited, 1946–1947; and Sarnia Observer, 25 January 1947; 26 March 1947. Thomas D. Cabot to Polymer Corp. (23 October 1950), Polysar Papers, vol. 9, file: Godfrey L. Cabot, Inc. 1945–1951. Sarnia Observer, 9 January 1965. Kennedy, History of the Department of Munitions and Supply, 401. Polymer Corporation Limited, Annual Report (March 1948); Canada, House of Commons Debates (19 June 1948), 5526; and Bellamy, Profiting the Crown, 78–80. Nicholson to Ambridge (14 January 1947), Polysar Papers, vol. 15, file: Hydro-Electric Power Commission of Ontario, 1944–1947; and “Agreement between Polymer Corporation Limited and Hydro-Electric Power Commission of Ontario” (17 November 1947), Polysar Papers, vol. 15, file: Hydro-Electric Power Commission of Ontario, 1944–1947. On the power shortage controversy, see Neil B. Freeman, The Politics of Power: Ontario Hydro and Its Governments, 1906–1995 (Toronto: University of Toronto Press, 1996), 87–118. Nicholson to M.W. McCracken, Indian agent, Department of Mines and Resources (14 November 1944), Polysar Papers, vol. 34, file: Other Government Agencies, Department of Indian Affairs, 1943–1947. Polymer’s average monthly profit during this period was $42,361, and the net monthly profit of Polymer’s contract with the Power Commission

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153 154

155

156

157

158

159 160

161 162 163

Notes to pages 103–5 was $30,000. See Polymer Corporation Limited, Annual Report (March 1948–50); and Wilk to Nicholson (6 September 1950), Polysar Papers, vol. 15, file: Hydro-Electric Power Commission of Ontario, 1947–1950. Crawford to Dow (15 May 1956), Post Street Archives, Vol. WHD 00047, file: WHD-Dow Canada Correspondence, 1946–1948, Midland, Michigan. Howe to Habbot (31 July 1946), C.D. Howe Papers, vol. 45, file: Polymer Corporation Limited, 1946–1947; and L.E. Ryan, vice president, Monsanto Canada, and N.R. Crawford, president, Dow Chemical of Canada to Howe (17 June 1946), C.D. Howe Papers, vol. 45, file: Polymer Corp. (5) 1946–1947. E.R. Rowzee, vice president, Polymer to J.R. Donald, chemicals controller, Department of Defence Production (24 July 1951), Polysar Papers, vol. 9, file: Godfrey L. Cabot, Inc., Plant Proposal, 1951. “Annual Reports (1950–1956),” Polysar Papers, vol. 6, file: Polymer Corporation: Annual Reports, 1950–1956; see also, Bellamy, Profiting the Crown, Appendix 1, 224–8. Canada, Census, 1941, vol. VII, Tables 9, 10; 1951, vol. V, Table 26; 1961, vol. III, Table 27. Firm-level data for petroleum refining and petrochemical manufacturing companies in Sarnia is provided in William Alexander Ferguson, “A Proposed Official Plan for Urban Development of the St. Clair Planning Area” (master’s thesis, Faculty of Graduate Studies, University of Western Ontario, 1964), Table 6.1. “Report of the Board of Directors and Management of Polymer Corporation Limited to the Hon. Minister of Munitions and Supply on the Programme for the Production of Synthetic Rubber in Canada,” reprinted in Minutes of the Board of Directors (18 May 1942), Polysar Papers, vol. 1, book 1. One month later, the board agreed that it would be wise to expropriate additional lands around Polymer “in case it became necessary to expand the activities in Sarnia.” See Minutes of the Board of Directors (22 June 1942), Polysar Papers, vol. 1, book 1. Kennedy, History of the Department of Munitions and Supply, 394–5. Colonel A.L. Bishop, chairman of the Polymer Board of Directors, to T.H. Hogg, chairman of the Hydro-Electric Power Commission of Ontario (27 July 1942), Polysar Papers, vol. 14, file: Hydro-Electric Power Commission of Ontario (part 1), 1942–1944. Report of the general manager, printed in Minutes of the Board of Directors (7 January 1943), Polysar Papers, vol. 1, book 2. Township of Sarnia, Minutes, 3 March 1942; 22 July 1942. Nicholson to A.G. Forbes (18 June 1947), Polysar Papers, vol. 13, file: Fiberglas Canada Ltd., 1946–1947.

Notes to pages 105–6

153

164 Kennedy, History of the Department of Munitions and Supply, 396–7; and Dougan to Nicholson, re: Publicity – Department of Munitions and Supply (11 August 1943), Polysar Papers, vol. 30, file: Publicity Branch (Folder 1), 23 June 1942 – 2 September 1943. 165 Guthrie to Polymer Corporation Limited (18 February 1943), Polysar Papers, vol. 21, file: Township of Sarnia. 166 Township of Sarnia, By-law no. 73 (1943), printed in Township of Sarnia, Minutes (27 March 1943). 167 Township of Sarnia, By-law no.11 (1943), printed in Township of Sarnia, Minutes (27 April 1943). 168 Minutes of meeting between Nicholson and Guthrie, regarding By-law no. 11 of 1943 “Poll Tax” (18 May 1943), Polysar Papers, vol. 21, file: Township of Sarnia, 1943–1951. 169 Grant to the Township of Sarnia, printed in Minutes of the Board of Directors (14 October 1943), Polysar Papers, vol 1, book 2. In order to “help ensure adequate labour supply,” Polymer negotiated with the National War Labour Board for a special wage scale for the synthetic rubber program, which would later draw criticism from other, lessfavoured industries in the war production effort. For details, see “Report of the Managing Director,” printed in the Minutes of the Board of Directors (12 January 1944), Polysar Papers, vol. 1, book 2; and Nicholson to Harold Crabtree, president of Allied War Supplies (3 July 1945), Polysar Papers, vol. 8, file: Allied War Supplies, 1943–1945. 170 Township of Sarnia, By-law no. 72 (1943), printed in Township of Sarnia, Minutes (31 August 1943). 171 Memorandum of “Agreement between the Corporation of the Township of Sarnia and the Majesty and the Polymer Corporation Limited” (26 October 1943), Polysar Papers, vol. 21, file: Township of Sarnia, 1943–1951; and “Grant to the Township of Sarnia,” printed in the Minutes of the Board of Directors (14 October 1943), Polysar Papers, vol. 1, book 2. 172 Township of Sarnia, “Statement of Receipts and Expenditures (1944),” Township of Sarnia Records, Lambton Room Archives, Wyoming, Ontario (hereafter cited as Lambton Room Archives). 173 “Grant to Sarnia Township,” printed in Minutes of the Board of Directors (9 August 1944), Polysar Papers, vol. 1, book 3. The contract detailing the preceding year’s grant was modelled by Munitions and Supply staff after an analogous agreement between the town of Montreal East and the Canada Wire and Cable Company (27 January 1943), with the main difference being that the latter contract was for $15,000, not $5,000.

154

Notes to pages 107–8

174 Minutes of the Board of Directors (8 August 1945), Polysar Papers, vol. 1, book 3; and J.L. Granatstein, Canada’s War: The Politics of the Mackenzie King Government, 1939–1945 (Oxford: Oxford University Press, 1975), 419. 175 Memorandum of “Agreement between The Corporation of the Township of Sarnia and His Majesty the King in Right of Canada,” represented by the honourable the minister of Munitions and Supply acting through Polymer Corporation Limited (1945), township of Sarnia Records, Lambton Room Archives. 176 Nicholson to W.J. Dyke (20 June 1945), Polysar Papers, vol. 10, file: City of Sarnia - Agreement Re: Taxes, etc., 1942–1945. 177 Nicholson to W.J. Dyke (27 June 1945), Polysar Papers, vol. 10, file: City of Sarnia - Agreement Re: Taxes, etc., 1942–1945. 178 Canada, House of Commons Debates (27 May 1946), 1909. 179 Ibid., 1916. 180 “I have read with interest the portion of Hansard for May 27th in which the Polymer program is dealt with at length. The Minister’s answer to the municipal taxation question from a legal standpoint is undoubtedly adequate but his statement that we have been making a contribution of approximately half of $70,000 per annum to the municipality in lieu of taxes is hardly correct. For the past two years the annual payments that we have made to the municipality have been 5,000 each. We did make a larger payment during the first year when we had to compensate the municipality for damage done to municipal roads by heavily loaded trucks that operated to and from the project while the plant was under construction. In addition to the 5,000 that we have been paying annually to the municipality we also make a small payment to the city in lieu of taxes on the 25 houses which are leased to senior members of our staff. This total falls far short of 35,000 per annum.” Nicholson to Scully (3 June 1946), Polysar Papers, vol. 31, file: DMS Correspondence (part 1), 1946–1949. 181 Canada, House of Commons Debates (27 May 1946), 1916. 182 A.G. Forbes, reeve of Sarnia Township, to I.P. Cameron, treasurer, Polymer Corp. (22 May 1947), Polysar Papers, vol. 21, file: Township of Sarnia, 1943–1951. 183 Nicholson to Forbes (17 June 1947), Polysar Papers, vol. 21, file: Township of Sarnia, 1943–1951; and V.W. Scully to Nicholson (26 June 1947), Polysar Papers, vol. 21, file: Township of Sarnia, 1943–1951. 184 Sarnia Observer, 26 July 1946. 185 Sarnia Observer, 19 September 1947. 186 A. Hillier, Sarnia township clerk, to Nicholson, .J.D. Smithers, manager, Dow Chemical of Canada, and J.D. Bradley, general superintendent,

Notes to pages 109–11

187 188 189

190

191

192 193 194 195

196

155

Imperial Oil (17 September 1947), Polysar Papers, vol. 21, file: Township of Sarnia, 1943–1951. Minutes of the Board of Directors (29 September 1947), Polysar Papers, vol. 2, book 1. Sarnia Observer, 27 May 1948. J. Cowan, solicitor, city of Sarnia to the Ontario Municipal Board (19 April 1950), R.G. 37-6-1, Ontario Municipal Board Selected Case Files, Archives of Ontario, vol. 1-a, file: City of Sarnia, Annexation. Ontario Municipal Board, Annual Report (1952) P.F.C. 1289, no. 17, 66; and “Report: Storm and Land Drainage,” A.E. Berry, director, Sanitary Engineering Division, Ontario Department of Health (n.d.), Meadowlea Development Company to OMB (19 April 1950), R.G. 37-6-1, Ontario Municipal Board Selected Case Files, Archives of Ontario, vol. 1-a, file: City of Sarnia, Annexation. Less than $40,000 of this debt was actually directly borne by the township, with the balance being school board debt and homeowners’ share of local improvement charges. See Ontario Municipal Board, Annual Report (1952), P.F.C. 1289, no. 17, 68. Ontario Municipal Board, Annual Report (1952), P.F.C. 1289, no. 17, 71–72. Municipal Act, Statues of Ontario, 1947, c.69, s.2. Ontario Municipal Board, Annual Report (1952), P.F.C. 1289, no. 17, 68. Sarnia Observer, 31 May 31, 1956; 31 December 1964; 16 February 1966; see also Nancy Mary Pringle, “Urban Renewal Decision-Making in the city of Sarnia, Ontario” (master’s thesis, University of Western Ontario, 1984), 45–52. R. Stone, attorney at law, New York, to mayor M.M. Gowland and Council of the City of Sarnia (3 September 1957), City of Sarnia Correspondence, Reel M1560, Archives and Research Collections Centre, D.B. Weldon Library, University of Western Ontario; and G.A.M. Thomas, clerk, City of Sarnia to R. Stone (12 October 1957), City of Sarnia Correspondence, Reel M1560, Archives and Research Collections Centre, D.B. Weldon Library, University of Western Ontario. Not only did the potential for large profits on industrial land sites around Sarnia attract investors, but it also drew controversy, especially in the case of the purchase of a large tract involving the Hydro-Electric Power Commission of Ontario, the Chippewas of Sarnia First Nations band, and a New York– based investment consortium. In 1959, the New York firm purchased 3,100 of the 3,450 acres of land held by the Chippewas of Sarnia at a price of about $2,000 per acre. Only weeks later, 176 of those acres were sold to the Hydro-Electric Power Commission of Ontario at a price of $7,000 per

156

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198 199

200

201

202 203

Notes to pages 111–12 acre, arousing suspicions of insider trading within the provincial government and allegations of bribery against the investors. Eventually, political pressure forced the Conservative provincial government to strike a royal commission to investigate the land deal. For details, see Ontario, Report of the Royal Commission on the Purchase of Lands in the City of Sarnia by the Hydro-Electric Power Commission of Ontario from Dimensional Investments Limited (Toronto, 1960). V. Maclean Howard to Colter, city manager, City of Sarnia (25 February 1957), City of Sarnia Correspondence, Reel M1560, Archives and Research Collections Centre, D.B. Weldon Library, University of Western Ontario; and G.A.M Thomas, Clerk, City of Sarnia to V.M. Howard (14 March 1957), City of Sarnia Correspondence, Reel M1560, Archives and Research Collections Centre, D.B. Weldon Library, University of Western Ontario. Sarnia Observer, 5 July 1956. Sarnia Observer, 8 June 1961; 20 June 1962; 21 March 1963; 2 October 1963; 29 January 1964; 6 February 1964; 14 May 1964; 22 July 1964; 20 January 1966; 6 November 1968. Most major investments in new plants or expansions of existing facilities were closely reported in the local newspaper. On Du Pont, see Sarnia Observer, 31 August 1956; 4 February 1957; 16 October 1958; 1 November 1962; and also H.H. Lank, The Du Pont Canada History (Toronto: Du Pont Canada, 1982). On Allied Chemical, see Sarnia Observer, 18 April 1960; 19 April 1960; 1 November 1960; 9 February 1961; 12 October 1961; 3 May 1862. On Chinook Chemicals, see Sarnia Observer, 28 July 1965; 28 September 1965; 15 March 1966. On Dome Petroleum, see Sarnia Observer, 31 August 1968; 29 January 1969; 15 April 1969. On Union Carbide, see Sarnia Observer, 19 February 1966; 29 April 1966; 18 November 1966. On Canadian Industries, see Sarnia Observer, 26 August 1964; 7 October 1964; 3 December 1964; 4 December 1964. Industrial Development Commission of Canada’s Chemical Valley, Canada’s Chemical Valley (Sarnia and District Chamber of Commerce, 1973), 35–8. Sarnia Observer, 9 June 1978. These disputes persisted until 1991, when the township was finally amalgamated with the city. For details, see Byron Montgomery, Annexation and Restructuring in Sarnia-Lambton: A Model for Ontario County Government (London, Ontario: University of Western Ontario, 1990); and G. Peter Nixon and Maurice A. Campbell, Four Cities: Studies in Urban and Regional Planning (Toronto: McClelland and Stewart, 1971), 43–72.

Notes to pages 114–21

157

204 For an analytical description of the problem of “holding out” in land assembly and a defence of the use of expropriation as a solution, see Lloyd Cohen, “Holdouts and Free Riders,” Journal of Legal Studies 20, no. 2 (1991): 351–62. 205 On the history and use of expropriation powers in Canada, see George S. Challies, The Law of Expropriation (Montreal: Wilson & Lafleur, 1963). 206 Useful reviews of US municipal experiences here can be found in Matthew L. Cypher and Fred A. Forgey, “Eminent Domain: An Evaluation Based on Criteria Relating to Equity, Effectiveness, and Efficiency,” Urban Affairs Review 39, no. 2 (2003): 254–68; and J.M. Klemestrud, “The Use of Eminent Domain for Economic Development,” North Dakota Law Review 75 (1999): 783–813. 5. Conclusion 1 Alfred D. Chandler, Jr. The Visible Hand: The Managerial Revolution in American Business (Cambridge, MA: Harvard University Press, 1977). 2 Felix Hoehn, Municipalities and Canadian Law: Defining the Authority of Local Governments (Saskatoon: Purich Publishing, 1996), 151–210. A particularly thorough (but US) analysis of zoning can be found in William A. Fischel, The Economics of Zoning Laws: A Property Rights Approach to American Land Use Controls (Baltimore: Johns Hopkins University Press, 1985); see also, Richard A. Posner, Economic Analysis of Law, 7th ed. (New York: Aspen Publishers, 2007), 55–68. 3 For Canadian examples, see Jen Nelles, Allison Bramwell, and David A. Wolfe, “History, Culture, and Path Dependency: Origins of the Waterloo ICT Cluster,” in Global Networks and Local Linkages: The Paradox of Cluster Development in an Open Economy, ed. David A. Wolfe and Matthew Lucas (Montreal: McGill-Queen’s University Press, 2005), 247; see also Jeffrey Roy, “Canada’s Technology Triangle,” in Local and Regional Systems of Innovation, ed. John de la Mothe and Gilles Paquet (Boston: Kluwer, 1998), 239–56; and Joseph Leibovitz, “Institutional Barriers to Associative Cityregion Governance: The Politics of Institution-building and Economic Governance in ‘Canada’s Technology Triangle,’” Urban Studies 40, no. 13 (2003): 2613–42.

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