Lines Leased to the Canadian Northern via the Province of Manitoba, 1901
From research at the Minnesota Historical Society by Jerry R. Masters, P.E.,
and Canadian Railway Historian Roger G. Burrows of North Vancouver, B.C.
Roger Burrows, December 7, 2005
Why did NP lease the Northern Pacific and Manitoba Railway? The short answer is that the NPM was losing a lot of NP money. T. D. Regehr, in his Canadian Northern Railway [McMillan, Toronto, 1976] dedicates a 25-page chapter to ''The Manitoba Branch Lines,'' including the Northern Pacific and Manitoba Railway system, which explains all.
In his intro chapter paragraph, Regehr relates how in 1898 Canadian Northern's builders, William Mackenzie and Donald Mann, were just starting-out in Manitoba with 161 miles in operation. They were trying to reach the Lakehead at Port Arthur (now part of Thunder Bay) but were having difficulty raising funds.
Some key quotes from Regehr p. 84: ''The help came from Mackenzie and Mann's first and most important benefactor, the provincial government of Manitoba. The primary objectives of that government's railway policy were the construction of new branch lines, and the establishment of a competitive rail service to the Lakehead that would provide stiff rate competition for the CPR.''
''At the same time the Northern Pacific Railroad approached the Manitoba government and asked to be relieved of its obligations under the Northern Pacific and Manitoba Railway agreement. The parent Northern Pacific Railroad had taken over the Manitoba line from President Henry Villard's privately organized syndicate in 1891, but operations on the Canadian lines had never been profitable.''
So, why wasn't the NPM profitable? On page 85, Regehr suggests that NPM president James McNaught, a former NP solicitor, was probably siphoning money out of the NPM for his personal use. In 1900, the company lost 185,000 on gross earnings of 392,000 and operating expenses of 578,000. Also, Manitoba wanted NP rate reductions to the Lakehead, but NP's president Mellon wouldn't provide them. Further, NP talks with the government about a through line to Duluth had collapsed.
The CPR wanted to buy the NP&M, but Manitoba didn't want that for political reasons, and CNoR couldn't afford to buy. So, a deal was made for the province of Manitoba to lease the NP&M from NP (at 4% of the $7 million assessed value) with an option to purchase at that price. The lease was reassigned to CNoR. The government also provided bond guarantees for CNoR to complete its lines to the Lakehead in exchange for rate guarantees. So, everyone got what they wanted (except the CPR).
Regehr concludes [p. 99] that ''The takeover of the Northern Pacific lines and the securing of provincial bond guarantees on the line to Port Arthur established the Canadian Northern Railway as a major railway system in Canada.''
[G.R.] Stevens has very little on the NPM [in his history of CN]. Just that Canadian Northern acquired the lines from Northern Pacific, how they integrated them, Canadian Pacific's reaction, how Mackenzie and Mann became western heros, etc.
By the way, the 1889 NP depot is still [I believe] standing in Miami, Manitoba on the former NPM Morris to Brandon line.
According to my notes, the Great Northern built three lines and a terminal railway in Manitoba:
1. Under the Brandon Saskatchewan and Hudsons Bay Railway (a 1903 charter) GN built in 1905 and 1906 from St. John to BRandon, 69.5 miles. South of the border, this was the line from Churchs Ferry on the GN mainline, now the BNSF Rolla Subdivision to Rolla.
2. Under the Midland Railway Co. of Manitoba (a 1903 charter), GN built in 1906 from Neche to Portage La Prairie, 77.0 miles. South of the border, this was the line from Grand Forks and Grafton, now the BNSF Glasston Subdivision to Glasston.
3. Under the Midland Railway Co. of Manitoba charter, GN built in 1907 from the border north of Walhalla to Morden, 15.2 miles. South of the border, this was the line from Grand Forks, Grafton and Walhalla, now the BNSF Walhalla Subdivision.
4. Under the Midland Railway Co. of Manitoba charter, GN built in 1911 their Winnipeg Freight Terminal to St. James Jct. trackage, 6.0 miles. In 1913, the Midland was granted use of Canadian Northern, Grand Trunk Pacific and National Transcontinental Railway (all now CN) joint facilities in Winnipeg. In 1914, the Midland acquired ''joint section'' with the Canadian Northern Railway (ex NP&M and later CN) from the border at Noyes/Emerson to Portage Jct. in Winnipeg. So, GN trains operated on CN's former Northern Pacific and Manitoba Railway. South of the border, this was the GN line that diverged from the mainline at Crookston, now the BNSF Noyes Subdivision.
In 1909, the Midland properties to Portage La Prairie and Morden were sold to GN's newly-chartered Manitoba Great Northern Railway. The Portage line was removed in 1926-1927 (some parts went to CPR and BS and HB), and the Brandon and Morden lines in 1936. I don't have a date for NP buying into the Midland, but they were listed in the late 1940s as jointly owning and operating the Midland with GN. In the BN-era, it was [I believe] the Burlington Northern (Manitoba) Ltd. BNSF continues to operate the Midland lines in Winnipeg with a geep numbered in the single-digits. The Midland SW was sold to BCER/BCH and now hangs-out on Dennis Washington's SRY not far from here. Not sure of the corporate name that BNSF operates the Midland under now.
Sources for my notes include Hidy, Statutory History of Canadian Railways, ETTs, maps, and probably other data.
John William Kendrick, second vice-president, to Charles Sanger Mellen, president, April 17, 1899
I have your confidential letter of April 15.
I hardly know what to say of the proposed exchange of the Soo road for our lines north of the [i]international boundary in Manitoba. I understand that this proposition is due to a desire on our part to avoid in the U.S. competition of the Canadian Pacific Railway, and on its part to prevent our further occupation of, and competition in, Manitoba.
The proposed exchange is not a simple proposition, and it seems to me that there are a good many difficulties connected with it. The lines of this [c]ompany in Manitoba serve to feed our Red River Valley [s]ystem and the main line from Winnipeg Junction east. Our business is continually growing. We are menaced, however, first by the duplication of our existing lines by the Canadian Pacific Railway, which I do not much fear, because I believe we can hold our own even if such duplicate lines are built. We are also threatened by the proposed construction of a line along the [i]nternational [b]oundary, in Canadian territory, ostensibly being built by Mackenzie [and] Mann as a proposition hostile to the Canadian Pacific, but which I will venture to assert is really in its interest. I cannot believe that these parties, who have made their fortunes by their connection with the Canadian Pacific as contractors, who are at present engaged in the construction of the Crow’s Nest Pass line, and who have the first opportunity to build any new road for the Canadian Pacific, would actually engage in an enterprise inimical to its interests.
It seems to me that the construction of this line under charter conditions providing for the reduction of wheat rates from Manitoba to points to Lake Superior, to [ten] cents per hundred will eventually prove detrimental to our interests in Manitoba. [Handwritten note by Kendrick: “I understand that they agree in consideration of bonus of $1,000,000 to secure the rate of (ten) cents(.)”]
It has been recently proposed to you, I believe, that this [c]ompany should accept a bonus of $70,000 per year and immediately put in force a rate of [ten] cents per hundred between Manitoba points and Duluth. I have given this mater considerable thought, and am of the opinion that we cannot safely do this.
If we do, we can find no possible excuse for maintaining equal or higher rates from points in Minnesota and Duluth, involving only one-half the haul, and if we first established the precedent in Manitoba and are obliged to make corresponding reductions in Minnesota, the Interstate Commerce Commission would certainly give such relief to Dakota as would suffice to place that state on a parity with the more favored districts on either side. As we cannot, in my judgment, afford to make a rate of [ten] cents per hundred, even for a consideration of $70,000 per annum, and must eventually, upon the completion of a line down the Rainy Lake River, make this rate or go out of the business, it is for us to consider whether we should not take a possible opportunity to dispose of our foreign property.
On the other hand, the Soo road has very little local business. It serves as a portion of the trunk line of the Canadian Pacific. Whatever revenue it has, or is likely to have, must for the most part be wrested from American roads by means which can be employed by the Canadian Pacific without any special difficulty, as it is not accountable to the Interstate Commerce Commission, and is, as a matter of fact, preying upon the American roads with the knowledge of the American people and of said Commission; but as soon as the transfer of this property to an American [l]ine takes place, the conditions will change.
The line from Gladstone and the Soo to St. Paul and Minneapolis, and the Duluth, South Shore [and] Atlantic from the Soo to Duluth, operated, as they are, in connection with the Canadian Pacific, compete with all the Chicago-St. Paul and Minneapolis lines, and the lines from Duluth to St. Paul.
The Soo Line is celebrated for its reckless disregard of all rates, and we have means of knowing beyond any doubt that even at times when it claims to be maintaining rates, is handling the business at a substantial reduction from tariff. I know this not only because of information that has come to me from personal friends, but because the Soo has for a long time occupied our station at Minneapolis and carried on this business through our agent, who also acts for them. I have never commented upon this, or made any statement concerning their methods, because it is a matter which has never affected us in any way.
Query: Can we operate these lines to advantage without incurring the active hostility of the strong roads which are now our allies? Would not our operation of these lines result in straining these relations, and diverting from us to the Great Northern and other transcontinental lines all of the business that could be diverted?
The line form Minneapolis northwesterly to Portal is, I believe, of very little value as a local proposition, and was built to serve as part of the American link of the Canadian Pacific transcontinental line. What are we to do with it when acquired? If it is not operated in connection with the Canadian Pacific, their line from Portal to Moose Jaw, or the point at which they make connection with their main line, will be of comparatively little value. If it is [emphasis Kendrick’s] operated in connection with the Canadian Pacific, we shall be competing with ourselves, and as such an alliance would undoubtedly be very prejudicial to our interests.
I am inclined to believe that the proposed retreat from Canadian territory, and he acquisition of the holdings of the Canadian Pacific in this country, would ultimately a wise thing for this [c]ompany to do; but I believe that we must, at the same time, consider that it will ultimately be desirable for us to extend our lines to Chicago; that is, I believe we cannot reach as far as the Soo and handle business to Minneapolis and St. Paul territory and the country adjacent thereto, in connection with the Canadian Pacific and the lakes, without suffering a loss of business which we now secure from the Chicago lines, and that in order to make this loss good we shall be obliged to go to a point where we can meet business from the East—i.e., from the Atlantic seaboard and middle states, and that means Chicago.
In this day of great consolidations, it seems to me that it should be possible to effect the agreement which I suggested to you last winter, which would result in preventing the invasion of our territory by a powerful rival, and would also give the Northern Pacific System a large mileage which has an unquestioned standing in the railroad and commercial world, and which can, beyond a doubt, be made to yield at least $3,000,000 per annum more revenue than at present, without any increase in gross revenue.
In connection with the proposed transfer of our properties in Manitoba, I would like to call your attention to a provision in clause 25 on the Charter of the Northern Pacific [and] Manitoba Railway, which is intended to prevent the transfer of this property to the Canadian Pacific Railway or the Manitoba Southwestern Colonization Railway Company, or to any other railroad or any other person or corporation, whereby in any manner the [r]ailway [c]ompanies above referred to can directly or indirectly obtain entire or partial control of the railway or its management, etc.
It seems to me that this clause is quite sweeping and liable to make a great deal of trouble, as there can be no question concerning the attitude of the people of Manitoba in regard to a proposition of this kind.
James Jerome Hill, president, Great Northern, telegram to Daniel Scott Lamont, vice-president, Northern Pacific, New York, New York, January 6, 1901
In order to secure a reduction averaging nearly forty [percent] of the present grain rates the Province of Manitoba has decided to built its own line or acquire Northern Pacific’s Canadian lines. Shaughnessy [president, Canadian Pacific] has offered them a large concession on present rates which they have refused. If [the] Northern Pacific retains its lines it must meet whatever rates are made and the reduction in [the] [p]rovince would entail a like reduction in [North] Dakota and Minnesota. An American line has not chance to protect itself in Canada. I have gone over the matter with [Charles Sanger] Mellen [president, Northern Pacific] and strongly recommended acceptance of the [p]rovincial offer. If the [p]rovince builds a line or deals with [the] Canadian Pacific, rates will be reduced, making [the] Northern Pacific[’s] property of little value; and it would then be impossible to get any fair price under lease or sale. Can give you particulars on arrival Tuesday.
Charles Sanger Mellen, president, St. Paul, to Robert Bacon [director for J.P. Morgan & Co.], 23 Wall Street, New York City, February 21, 1901
I have just concluded an interview with Mr. James Fisher, our counsel in Winnipeg, and have thought you might be interested in the developments occasioned by the lease of our Manitoba lines to the [p]rovincial [g]overnment.
Immediately the lease was perfected, the Canadian Pacific Railway made an offer to the [g]overnment to re-lease the lines, paying a considerably advanced rental over that given us, and, furthermore, promising reductions in freight rates, extending over a period of six years, which, at the end of that time, will make the rate on wheat from Manitoba points to Lake Superior [ten] cents per 100 pounds, while the minimum rate today is [fifteen] cents.
On account of the bad standing of the Canadian Pacific within the [p]rovince, the [g]overnment was afraid to adopt this proposition, and turned it down, meanwhile making a contract with Mackenzie [and] Mann, who are constructing a line in opposition to the Canadian Pacific, within the [p]rovince, assigning the lease of our lines to Mackenzie [and] Mann’s [c]ompany (which is known as the Canadian Northern Railway Company) under a contract which gives the [g]overnment the right to fix the rates that shall be charged, for a long period of years, the [g]overment, however, agreeing to pay any deficit that may be occasioned through any reduction in rates made by it.
It appears that Mr. [James Jerome] Hill has been interested with Mackenzie [and] Mann in securing our lines; his interest being in a promised connection at the [i]nternational [b]oundary through an extension of his line from Hibbing, and the promised diversion of all the contributive business of our Manitoba system from our line, which now has it, to his line through the proposed new connection.
I have this information from a perfectly reliable source, and have no doubt of its correctness. I think you will be pleased to know of Mr. Hill’s disinterested [emphasis Mellen’s] efforts of advise in inducing the disposition of our Manitoba lines.
The Canadian Pacific, upon the rejection of its proposition, and concluding the contact between the [g]overment and Mackenzie [and] Mann, started all of its forces at work to prevent the legislative confirmation of the trade with us for the lease of our lines, and with Mackenzie [and] Mann for the assignment of such lease and other things provided in the contract made by the [p]rovincial authorities with the Canadian Northern Railway, and, at the present writing, it would appear as if the bill for the confirmation of the lease, and for the approval of the contract with Mackenzie [and] Mann, had a hard fight before it. But, in the midst of all these proceedings to defeat the confirmation, it is reported there is an endeavor on the part of the Canadian Pacific to come to an understanding with Mackenzie and Mann by which the railway controlled by this firm shall be secured in the interest of the Canadian Pacific Railway Company, which, in securing control of the same, would also secure the lines we have leased to the [p]rovince and should this deal go through we shall have parted with our lines within the [p]rovince to the Canadian Pacific and have lost thereby every all of contributive business; for the Canadian Pacific will, if it pursues the policy it has heretofore, refuse the interchange with us at the [i]nternational [b]oundary on anything but the sum of local rates, which will practically stop all business.
Failing to secure the control of the whole Mackenzie [and] Mann system of railways we may expect the Canadian Pacific to oppose, with fair prospect of success, the confirmation of the lease of our lines, in which event we shall be left in very much the same position as when these negotiations started, except that we shall have lost the good will of a great portion of the community served by our lines, through the contract we have made for the sale and retirement from the [p]rovince.
In case a serious fight is made we shall undoubtedly be called upon to assist the [g]overmment in carrying through a confirmation of the lease, but I am indisposed to spend any money or time in an effort of this nature. If I can do any good by going to Winnipeg and making a statement before the [c]ommittee, or anything of that kind, of course I shall do it if called upon; but to contract any expense with the very little profit I see in the transaction, for us, does not commend itself to my judgment.
You will recollect that I have been rather luke-warm toward this transaction from the beginning; that I am rather inclined to look with the suspicion upon any scheme so earnestly advocated by Mr. Hill as this was, and I am rather pleased to discover how disinterested he has been in his advice in urging us to part with these lines to the end that he may divert from us to the Great Northern the contributive business we have heretofore enjoyed from the Province of Manitoba.
The Railroad Gazette, February 22, 1901, p. 129
The Lease of the Northern Pacific Lines in Manitoba.
The Northern Pacific has leased its railroad in Manitoba to the [p]rovincial [g]overnment, which in turn passes them over to the Canadian Northern Railway. By the terms of the contract, dated January 15, which come to us from official sources, the Manitoba [g]overnment leases from the Northern Pacific the entire property, including terminals, rolling stock, telegraph, real estate and personal property. The lease is to run for 999 years, at $210,000 a year for the first [ten] years, $225,000 for the second [ten] years, and $270,000 for the third [ten] years, and $300,000 per year for the remaining period. There is  to buy the property at any time for $7,000,000.
The contract in its entirety is turned over by the Manitoba [g]overment to the Canadian Northern, that company agreeing to pay the annual rentals and to indemnify the [g]overnment against all loss in connection therewith. In return the Canadian Northern gives to the [g]overnment the absolute control of its freight rates within the [p]rovince, and of the through rates between Manitoba and Port Arthur, Ont., which are to be fixed by the Lieutenant Governor in Council. The railroad company further agrees to reduce its passenger rates within the province to three cents a mile, maximum.
This agreement as to freight and passenger rates is to continue until June 30, 1930, during which time the Manitoba [g]overnment has undertake to guarantee the principal and [four percent] interest on the bonds of the company’s Rainy River [B]ranch in Ontario from Port Arthur to Rainy River, at $20,000 a mile. These bonds are payable on the above date, June 30, 1930, and are not to be issued until that line is opened for traffic. The [g]overnment takes in exchange a mortgage on all the property and leases of the Canadian Northern and also on the lease and option with the Northern Pacific Company. There is a provision whereby the [g]overment extends its mortgage on the other lines built by the Canadian Northern within the province, a large portion of bonds of which were guaranteed by the previous government at $8,000 per mile. The Manitoba [g]overnment in fixing the rates on the railroad, makes itself responsible for the rentals to the Northern Pacific, as well as for the interest on the bonds. Any deficiency is to be ascertained at the end of each two-year period. The Canadian Northern further agrees to forgo its present exemption from taxation in Manitoba after 1905, and, until the maturity of the bonds to pay a sum to be fixed by the Governor in Council, not exceeding [two percent] of the gross earnings of its Manitoba lines. The [g]overnment has also the option of buying the entire line at par value in the year 1929.
The Northern Pacific lines in Manitoba, including extensions recently completed, aggregate 354.04 miles. The main line, connecting with St. Paul and Minneapolis, leaves the North Dakota line at a point just north of Pembina and runs north to Winnipeg, 65.49 miles. From Portage Junction, just south of Winnipeg, there is a branch running west 52.52 miles to Portage la Prairie. About a year ago this was extended on northwest 20.02 miles to Beaver, and last season a branch was run north from near Portage la Prairie to Delta, 15.14 miles. Another branch leaves the main line at Morris, 41 miles south of Winnipeg, and runs west 145.24 miles to Brandon. This is fed by a branch from Brandon running southwest, which was completed this last season to Hartney, 59.94 miles. A spur of 1.24 miles of the Winnipeg Transfer Railway Company makes up the total mileage of the Northern Pacific within the [p]rovince. All these lines were built under special charters, chiefly the Northern Pacific [and] Manitoba and the Portage [and] Northwestern, but all the stock and bonds are owned by the parent company, the Northern Pacific [and] Manitoba, which comprises 263.87 miles of the total, has $1,000,000 capital stock and $6,010,000 bonds.
The Canadian Northern, which is to take over these lines, is credited with the ambitious project of a through line from ocean to ocean, besides numerous important branches. Its immediate aim is to connect Port Arthur, Ont., on Lake Superior, with Prince Albert, N.W.T., about 985 miles. Its lines now are in three detached sections. About 60 miles is completed from Port Arthur toward Rainy Lake, leaving a gap of some 225 miles. From the Rainy River another completed section runs west across the northern end of Minnesota, and then northwest to Winnipeg, 152 miles. From Winnipeg the Canadian Northern has running rights to Portage la Prairie, 55 miles, over the Northern Pacific (which now becomes a leased line), and from Portage la Prairie to Gladstone, 36 miles, over the Manitoba [and] Northwestern. At Gladstone the third section begins, and has been extended northwest 278 miles to a point beyond the Manitoba boundary, and about 270 miles from Alberta. A further extension is projected from Alberta west 350 miles to Edmonton, and ultimately to a point on the Pacific. The company also owns a branch from Stanley, Ont., running southwest 67 miles along the shore of Lake Superior to Gunflint, Minn., which may be extended to Duluth. Another branch runs from Dauphin, Man., west 29 miles to Grand View and another from Sifton Junction, near Dauphin, north 21 miles to Winnipegosis.
Besides insuring the use of more than half the link between Winnipeg and Gladstone, the Northern Pacific lines will carry the company into many new points throughout Manitoba and intensify the rivalry already existing between the Canadian Northern and the Canadian Pacific. A significant feature of the new lease is that the Canadian Northern is forbidden to pool or amalgamate with the Canadian Pacific, and a further interesting feature is the radical experiment in state control of rates.
The counter proposition of the Canadian Pacific for the lease of the Northern Pacific lines in the [p]rovince was in substance as follows:
The Canadian Pacific offered to take over and operate these lines, and pay the Manitoba [g]overnment the following rentals: for the first ten years, $220,000 yearly; second ten years, $245,000, and thereafter $300,000 yearly.
To reduce the rate on salt, effective at once, to [fifteen] cents per 100 [pounds], from Fort William to Winnipeg.
To make reductions on rates for grain and flour between points in that [p]rovince to Lake Superior of 1.5 cents per 100 [pounds] each year, from September 1, 1901, to September 1, 1903, and of .005 cent per 100 [pounds] to 1906.
To reduce the rate on coal to Winnipeg to $2.50 per ton; Portage la Prairie, $3.00, and Brandon $3.35.
To give the [g]overnment control of all local rates between points in Manitoba and Lake Superior, subject only to appeal to the courts of the [p]rovince in the event of a dispute.
To build with the [g]overnment’s assistance during the year a branch line from some point near Brandon northwest through the municipality of Daly and Woodworth, a distance of 34 miles; also a branch line from Carman east for a distance of [sixteen] miles; also to extend the Snowflake [B]ranch.
In return for these concessions the Canadian Pacific asked that the present rate of taxation on the company’s earnings in the Province of Manitoba of [two percent] be reduced to [one percent].
[Auditor] to H.A. Gray, November 3, 1920, President’s File 86
I have located a construction register of the Northern Pacific [and] Manitoba Ry. Co. at Como which shows that the expenditures for the lines in Manitoba, without equipment, from January 1, 1888, to April 3, 1893, inclusive, were for the railroad $3,006,664.22 and for the terminal $686,728.01—total $3,693,392.23. This total includes the amount paid to the [p]rovincial government—$734,427.90—mentioned on page 4 of John Scott’s report on the Northern Pacific [and] Manitoba, which is Section 12 of branch line reports, Vol. XII.
In the annual report to the Minister of Railways and Canals of the Dominion of Canada for the year ended June 30, 1897, I find on page 14, schedule 7 the following:
Item 1. Cost of Land and Land Damages: $166,75.27
Item 3. Cost of Grading, Machinery, Bridging, Buildings, Etc.: $3,493,718.88
Item 4. Cost of Rolling Stock of all kinds incl. work shops: $493,637.13
This table bears the notation “Not including interest on bonds during construction, or discount, expenses and commissions on bonds.”
During the year ended June 30, 1901, the Souris River Branch was completed at a gross cost of $450,444.81 from which deduct bonus received from the [p]rovince—$108,275.25, or a net cost of $432,169.56.
In 1900 and 1901 the construction of the lines of Portage and Northwestern Ry. Co. from Portage la Prairie to Beaver and Delta, cost $373,028.19. Additions and betterments to the property of the Northern Pacific and Manitoba between 1891 and 1896 amounting to $18,923.85 were charged to Income Account, or Operating Expense.
The total of the items mentioned above is $4,888,192.88. This figure does not include Additions and Betterments to the Manitoba [l]ines from date of reorganization—September 1, 1896—to the date of the lease of the Province of Manitoba. These additions and betterments which were charged in the regular way to the account of the Northern Pacific [e]state are so intermingled with other [a]dditions and [b]etterments to the entire property of the [Northern Pacific Railway] that their segregation would be along and tedious task, but do you think it safe to assume that they would not exceed an amount sufficient to make the approximate cost of the liens under discussion $5,100,000?
The Northern Pacific Railroad acquired $5,260,000—par value—of the Northern Pacific [and] Manitoba Ry. First Mortgage Bonds and deposited them with the [t]rustees of the [c]onsolidated [m]ortgage as security for a like amount of [c]onsolidated [m]ortgage bonds. It also acquired $100,000—par value—of Northern Pacific [and] Manitoba Terminal Bonds at 75 in partial settlement for advances made to the Northern Pacific [and] Manitoba. These bonds were a treasury asset. The Northern Pacific Railroad also held $1,000,000 par value of the [c]apital [s]tock of the [Northern Pacific and Manitoba] which it acquired apparently without cost.
At the time of reorganization , the Northern Pacific retired the [c]onsolidated [m]ortgage [b]onds at 130 1/2 at cash and securities. The aggregate cash and securities issued to redeem the $5,260,000 par value of the [Northern Pacific and Manitoba’s] [f]irst [m]ortgage [b]onds deposited as collateral for a like amount of [c]onsolidated [b]onds was %6,864,300.
The [Northern Pacific and Manitoba] Terminal [b]onds outstanding is in the hands of the public at the time or reorganization aggregated $650,000—par value—which the Northern Pacific retired at par with its securities. The $100,000 [t]erminal [b]onds in the treasury of the Northern Pacific apparently passed to the reorganized company without cost as did the one million dollar stock. The net cost of the Souris River Branch, mentioned above, was $342,169.56.
The stock of the Winnipeg Transfer Limited,—$50,000 par value—was acquired by the Northern Pacific Railroad apparently without cost and passed to the Northern Pacific Railway in the 1896 reorganization in the same manner.
The stock of the Portage and Northwestern—$373,200—was received by the Northern Pacific in payment of advances made for construction amounting to $373,028,19.
The charges to the account of the Northern Pacific [e]state for the investment of the Northern Pacific Railway in the lines of Manitoba is summarized as follows:
Charged to Northern Pacific [e]state
Northern Pacific and Manitoba Railroad
General Property Bonds 100,000
General Property Bonds 650,000
Winnipeg Transfer Stock 50,000
Portage and Northwestern Stock 373,200
Stock Par - Cost
1,000,000 - 0
50,000 - 0
373,200 - 373,028.19
1,423,200 - 373,028.19
Bonds Par - Cost
5,260,00 - 6,864,300
920,000 - 342,168.56
100,000 - 0
650,000 - 650,000
6,930,000 - 7,856,469.56
In 1903 the stock and bonds mentioned in the foregoing table were exchanged for a like amount of stock of the Manitoba Ry. Co. and for $5,576,800 par value of mortgage bonds of the Manitoba Ry. Co. but no charge was made in the accounts to adjust any costs of these securities. The total par value of these stocks and bonds is $7,000,000 which was, I understand, the amount agreed upon by Mr. Mellen and the Province of Manitoba as the value of the property was transferred from account, Northern Pacific [e]state to ledger account Property Leased to Province of Manitoba.
The equipment on these lines was held in the name of the Dakota Car Company, whose capital stock of $500,000 was in the treasury of the [Northern Pacific Railroad] at the time of reorganization, having been acquired by them apparently without cost; but it is evident from the report of the Dominion Government for the year ended June 30, 1897, that the rolling stock held in the name of the Dakota Car Co. had been purchased by the [Northern Pacific and Manitoba] with funds advanced by the [Northern Pacific Railway] and is included in the $4,888,192.88 mentioned in the preceding portion of this memorandum.
John H. Poore [assistant to president], St. Paul, to Charles Donnelly, president, n.d., [ca. 1931], President’s File 86
With the completion of the Northern Pacific main line between the Great Lakes and Puget Sound in sight, the directors of the Northern Pacific Railroad Company turned their attention to the construction of branch lines to serve as feeders to the main line. The plan followed was to create separate corporation for the construction of each branch line.
One of these companies was the Duluth and Manitoba Railway Company, which was authorized to construct a line from a connection with the Northern pacific main line at Winnipeg Junction, Minnesota, to a point on the international boundary near Pembina. The construction of this line was commenced in 1886 and was completed in October, 1887. [201.3 mile—J.R. Masters] The directors had no thought that operations over this line would terminate at Pembina, but they had in mind the construction of further railroad mileage which would bring to the Northern Pacific the products of the Province of Manitoba. They therefore organized in 1887 a company known as the Northern Pacific and Manitoba Railroad Company, which was authorized to construct a line from a point on the international boundary to Winnipeg, with various other branch lines within the limits of the [p]rovince. This company was created by an act of the Legislative Assembly in the Province of Manitoba[,] September 4, 1888, and special act of Parliament of the Dominion of Canada approved April 16, 1889.
Shortly prior to this time the people of the province desiring railroad construction and not being able to secure such construction by the Canadian Pacific Railway Company, which then held a monopoly under charter from the Dominion Government for construction of railroad lines in the [p]rovince, commenced to construct a line of their own from Winnipeg to the international boundary, but were unable to complete it, party from lack of experience in railroad construction and [partly] from lack of funds. This line was known as the Red River Valley Railway.
Negotiations were therefore opened with certain officers of the Northern Pacific Railroad Company for the completion of the railroad, and as a result a contact was entered into on December 28, 1888, between Joseph Martin, Railway Commissioner for the Province of Manitoba, and the Northern Pacific and Manitoba Railroad Company, under which the [r]railroad [c]ompany undertook to compete the line, and also a branch from a point near Winnipeg to the town of Portage la Prairie, and upon such completion then undertook to pay the [p]rovince the sum of $720,000 to partially reimburse it for the moneys its had expended for construction and equipment.
The charter of the Northern Pacific and Manitoba Railroad Company, and also the contract above referred to contemplated, in addition to the construction named, a line from a point near Morris, about midway between Winnipeg and the international boundary, to the town of Brandon. Construction work on these lines was actively pushed, and by August, 1890, the Northern Pacific and Manitoba Railroad Company had completed a line from a point near Pembina to Winnipeg, with branch lines from Morris to Brandon, and from Portage Junction to Portage la Prairie, a total of 265 miles.
To provide terminal facilities in Winnipeg, a separate company, known as the Winnipeg Transfer Railway Company, was organized in August, 1887. This company acquired terminal properties and also constructed a transfer line to allow an interchange of business between the lines of the Northern Pacific and Manitoba and the Canadian Pacific.
In 1898 the Northern Pacific commenced the construction of the Souris River Branch, running from a point on the Brandon Branch of the Northern Pacific and Manitoba Railway at Departure, Manitoba, to Hartney, Manitoba, a distance of approximately 51 miles. The first 46.5 miles of this line were completed in December, 1898, and the remaining 4.5 miles in September, 1900. In 1900 and 1901 the line between Portage Junction and Portage la Prairie was extended to Beaver and Delta.
While the records of construction costs are not complete, it is probable that the total cost o the Manitoba lines was in the neighborhood of $7,000,000.
In July, 1900, Hugh J. MacDonald, Attorney General of the Province of Manitoba, wrote Ewart, Fisher and Wilson, attorneys for the Northern Pacific in Manitoba, requesting them to learn from President [Charles Sanger] Mellen whether the [r]ailway [c]ompany would consider a proposition for the province to buy or lease for a long term of years the lines of its railway system constructed within the province. At that time the Northern Pacific Railway Company owned approximately 354 miles of line within the province. While the revenue from these lines could not be considered a paying proposition, it was felt that they had established a very valuable connection for the Northern Pacific, and moreover, the people of the province had always been very friendly towards the Northern Pacific and the directors of that property were loath to give consideration to anything which would lead to a severance of those connections. They felt. however, that they could not continue to operate in the province without a consideration extension of their mileage therein, and at that time they did not feel that they could consistently authorize the construction of additional mileage. After negotiations which extended over a period of six months an agreement was reached with the [Honorable] R.P. Roblin, Premier and Railway Commissioner of the province, under which the Northern Pacific leased in perpetuity all of its lines in the province on a sliding rental scale which at the present time amounts to $275,000 per year and which, after thirty years from the date of the lease, will be increased to $300,000 per year. This lease also gives the [P]rovince of Manitoba an option to purchase the property at a price of $7,000,000. Shortly after the execution of this lease the province subleased its rights to the Canadian Northern Railway Company.
As stated above, at the time the negotiations with the government of the province looking to the sale or lease of the lines were undertaken, the Northern Pacific felt that if it was to continue to operate within the province its lines must be extended. Various steps had, prior to that time, been taken towards the securing of franchises for the construction of additional lines. After the lease was made to the province the Northern Pacific discontinued its efforts in this direction, but within a very short time after the execution of the lease the officers and directors of the Northern Pacific reached the conclusion that a mistake had been made in withdrawing from operations within the province. Steps were therefore taken to secure a charter for the construction of railroad lines within the province and on March 18, 1903, a charter in the name of the Midland Railway Company of Manitoba was granted. It was not until 1905, however, that steps were taken to provide the lines contemplated by the charter.
In the meantime, the Great Northern being desirous of obtaining a line to Winnipeg, an agreement was reached by the officers of the two companies under which it was understood that the enterprise should be a joint one. The construction of an additional line between the boundary and Winnipeg would not have been warranted and negotiations were opened with the Canadian Northern Railway Company with a view to obtaining for the Northern Pacific and the Great Northern running rights over the existing line between Pembina and Emerson on the south and Winnipeg on the north. These negotiations were very prolonged and it was not until April 30, 1912, that they were finally executed. In the meantime, the Midland Company had proceeded with the acquisition of terminal properties in Winnipeg and on May 1, 1912, the Midland Company commenced the operation of trains from the international boundary into Winnipeg.
Author: J.A. Phillips, III. Title: The Northern Pacific and Manitoba.