With reference to the conversation I held with you on the 12th
instant, I have the honor to submit the following observations; and to request that you will bring them under Lord Greys notice, at your Earliest Convenience.

The Government of the United States of America has entered into a
contract with a commerical house in New York, by which the latter
undertakes to convey the Mails, for a period of ten years, by means of
Steam Vessels, between Panama and the Columbia River, and the
intermediate ports of Pt St Blas, Mazetalan, Acapulco, San
Francisco, Monterey, &c. There are three steamers of 1000 tons each now
building at New York for the purpose, and it is said they are to be
completed in December next. In order to perform this contract a supply
of 20,000 tons of Coal will be required, yearly. The New York company
offer to contract with an English House for this supply of coal to be
sent from England.
The Pacific Steam Navigation Company have two Steamers continually running from Valparaiso to Panama; touching at all intermediate ports.
It is said this Company is willing to contract for a supply of 2000 Tons
of Coal annually, to be landed at Panama. Moreover, the supply of coal
required by her Majesties Steamers in the Pacific Ocean, will it is
probable, continually increase.
It is obvious that all this coal could be supplied at a far
lower cost from Vancouvers Island than from England.
For a statement of the nature and Capabilities of the coal in
Vancouvers Island, I beg to refer you to a dispatch from Rear Adml
Sir G. Seymour, Enclosing a letter from Commander Gordon, of HMS.
Cormorant, dated sometime in Feby 1847. which is in the Admiralty.
It is now proposed to form a Company to work the Coal in
Vancouvers Island.
It is necessary however, in the first place to know upon
what terms her Majesties Government will grant the right of working the
coal.
In the second place; it will be obvious to Lord Grey, that an
undertaking Such as that contemplated will involve the necessity of
transporting a large population of English to Vancouvers Island. The
number of Seamen alone will be considerable, and the population
necessary to produce food for their subsistence must also be numerous:
besides it is probable that any depot for shipping in this situation
would attract considerable numbers of whale ships to the Island. It is
plain, then, that, in the event of the proposed Company being formed,
Vancouvers Island will become the resort of a consi=derableconsiderable number of Her
Majesties subjects; and that it will be essential to the comfort and
convenience of the population, and to the Security of the speculation,
that a Government should be established on the Island contemporaneously with the first formation of the Colony. It will therefore be very
desirable to know Lord Greys views on this point.
Lastly, apart from the profit to be gained by working the
coal, of which, from the Statements here given, there seems to be a
reasonable prospect, Lord Grey is aware that there are various reasons
why a colony in that Part of British America is desirable. I shall not
trouble you with any remarks on this head, as I have fully stated the
case in a letter to Mr Hawes dated 11. June 1847. It is a matter for
his Lordships consideration whether the establishment of a colony could not be most readily effected through the agency of such a company as
that now proposed &. whether (referring to my letter of 11. June) it would
not be wise to grant the whole Island to such a company binding them by
their charter to effect the colonization in a certain Manner
I am not able at present to state who will be the principal parties
in forming this company. When the time shall arise I hope such names
will appear as shall place the scheme above the risk of failure.
The possibility of forming a company at all will, however, depend
on the view Lord Grey may take of the above questions