Alberta and Great Waterways Railway Scandal - Background

Background

Alberta's first years as a province were optimistic ones, and one way that this optimism manifested itself was in a desire for railroads. The public, media, and politicians were all calling for the rapid development of new lines and expansion of existing ones. Rutherford's Liberals had set up a framework that allowed almost anybody to enter the railroad business, but few firms had done so by 1909. The opposition Conservatives called for the government's direct entry into the industry through the construction of new lines. Rutherford's government instead opted for a regime of loan guarantees: the Grand Trunk Pacific Railway and the Canadian Northern Railway had their bonds, which were to pay 4% per year over their thirty-year term, guaranteed at a rate of $13,000 per mile of railway constructed. The legislature had the right to increase this to $15,000. In exchange, the railways were expected to lay down their lines at a minimum rate: CN was required to build 125 miles (201 km) and the Grand Trunk Railway 50 miles (80 km) before the end of 1909.

Besides the established companies, guarantees were also offered to new companies. One company to take advantage of this was the Alberta and Great Waterways Railway, which was founded by two Kansas City bankers, William R. Clarke and Bertrand R. Clarke, and a Winnipeg accountant, William Bain. The company proposed to build a "line from Edmonton north-easterly to a point at or near the west end of Lac la Biche, thence to a point at or near Fort McMurray." Guarantees to the so-called "A&GW" were more generous than to the established companies: $20,000 per mile for 350 miles (560 km) and $400,000 for its Edmonton terminal. The bonds also paid better interest (5%) over a longer term (fifty years) than for the established companies. Upon the bonds' sale, the money was to be placed in a bank account controlled by the government, and paid to the railway as the line was constructed.