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Alberta and Great Waterways Railway Reporting mark: A&GW

The Alberta and Great Waterways Railway (A&GW) began with great fanfare in February 1909.

Under newly minted Premier A.C. Rutherford, the provincial government came up with an ambitious plan to promote railway development. The goal was to bolster colonization and industrial development in the far north. A new railway act was passed in 1907 and followed by an extension policy in 1909.

John Duncan McArthur
Archives of Manitoba. McArthur, J. D., 1.

The railway act offered loan guarantees of $13,000 per mile with potential increases of up to $15,000 for more difficult terrains, along with government guarantees on bonds. To qualify, the railways had to meet specific time frames for laying down track as well as minimum construction standards. Those guarantees were available to both established railways and speculative or colonization railways that were promoted by newcomers.

The A&GW was among the first of the new arrivals to jump on the bandwagon. Backed by a combination of US and Canadian interests, the company proposed a line from Edmonton to Lac la Biche and then onwards to Fort McMurray. As soon as the company received its charter, the promoters lost no time in establishing bond issues on the international market.

Scandal erupted once the terms and conditions of the A&GW contract became known. Cost estimates for construction had ranged from $14,000 per mile to a high of $27,000, the latter of which was considered grossly exaggerated. The A&GW was granted loan guarantees of $20,000, well in excess of the provincial standards. This enabled the promoters to sell bonds at 10 per cent above par and offer a generous interest rate of 5%. Not surprisingly the bonds were oversubscribed. The government in the meantime only received par value. Proceeds from the sale of the bonds were deposited in three separate banks.

Rutherford ordered an immediate inquiry. Unfortunately for him the damage was done. Although he was exonerated from any wrongdoing, the inquiry concluded that he used very poor judgment. The contract was rescinded and Rutherford was replaced in office by Arthur Sifton who pursued a far less aggressive railway strategy than his predecessor.

Sifton, despite having a renowned legal background, blundered badly by introducing a bill allowing the bond money to be transferred into the provincial treasury. The banks, questioning the legality of such a move, refused to release the funds. This led to a series of lawsuits and appeals that seesawed back and forth until 1913, when the courts finally ruled in favour of the banks.

Once the legal wrangling was over, the government awarded the contract for completion of the railway to J.D. McArthur, a well-regarded but somewhat controversial contractor from Winnipeg.

Under McArthur, construction proceeded well until 1915 when things got bogged down in muskeg and labour problems. The labour problems were twofold. Working conditions were difficult and the pay was low which led to a number of strikes. The outbreak of World War I let to labour shortages which in turn created financial problems for McArthur. Proposed settlement in the area had not materialized and McArthur was unable to sell bonds or attract additional financial interest.

Finally in 1920, the government, which had guaranteed the bonds, worked out an agreement with McArthur to take over the railway. McArthur remained on contract and continued to operate the completed portions of the railway, while the government hired another contractor to improve and finish the work begun by McArthur. The railway was fully completed in 1925.

The Alberta government retained ownership and control over the railway until 1929 when it obtained a charter to form the Northern Alberta Railways. The A&GW, along with several other railways also under government control, was repackaged and sold jointly as an affiliate to the Canadian National (CN) and Canadian Pacific Railways in 1930. In 1981 CN bought out the CPR's share to become the sole owner. Today much of the original railway remains in operation under CN.