Bill C-3 (Historical)

Jeff Watson Essex, ON

Mr. Minister, thank you very much for appearing before the committee.

One of the things I heard on Bill C-3, for example, was that somehow it wasn't very conservative to curb the market activities of private business monopolies. In this case there may be the question, this being a conservative government, about how conservative it is to be involved in the free market activities of big companies such as railways.

I would submit, on the other hand, that it is very conservative to ensure broader competition rather than monopoly or oligopoly. You've stated that in some regions of Canada rail in fact operates as a monopoly.

Could we have your comments on that and on why our government is bringing this forward?

Lawrence Cannon Minister of Transport

Thank you very much, Mr. Chairman.

Before I begin my formal remarks, I would like to say that of course I'm happy to be here early in this new session, and I want to congratulate you, as well as the two vice-chairs of the committee, for your election. And to the new members and the veterans, I look forward to working with you all.

I'm pleased to appear before the SCOTIC committee today to discuss Bill C-8, which improves the shipper protection provisions of the Canada Transportation Act. These are the provisions that deal with the potential abuse of market power by the railways.

I have with me today Helena Borges, director general of surface transportation policy, and Alain Langlois,

our legal counsel.

Bill C-8 is the reinstated version of the former Bill C-58, which had been referred to this committee before the previous session of Parliament was dissolved. It is the third and final bill amending the Canada Transportation Act. These bills have all been based on extensive consultations dating back to the statutory review of the CTA that took place in 2000 and 2001.

Bill C-3, the International Bridges and Tunnels Act, received royal assent in February of 2007. As well, Bill C-11, which amended provisions related to the Canadian Transportation Agency, air travel, mergers and acquisitions, rail passenger services, railway noise and the grain revenue cap, received royal assent in June of this year.

Bill C-8, by far, is the shortest of the three bills. However, it is extremely important to rail shippers, the hundreds of companies that use railways to ship their goods. This bill is also important for the growth of international trade and the competitiveness of our economy as we experience unprecedented levels of trade with the Asia Pacific region. The bill will provide the regulatory stability that the railways have been seeking, which will, in turn, ensure that much-needed capacity investments are made on the key trade corridors. Improved capacity will help our railway industry and shippers to remain competitive with their counterparts in the United States.

I am sure that most of you have heard many complaints from shippers about railway service and rates. Shippers are looking for stronger statutory remedies to improve their leverage in negotiations with railways. I had very positive feedback from shippers on the former BillC-58. Shippers expressed strong support for it to be reinstated and passed as quickly as possible.

The railways feel that Bill C-8 reintroduces too much unnecessary regulation. I believe that it establishes a better balance between shippers and railways. Passage of the bill will put an end to the extensive debates that have taken place and will provide both sides with regulatory stability.

When I announced tabling of the former BillC-58 on May 30, 2007, I also indicated that the government would conduct a review of railway service to commence within 30 days after the bill is passed. I will speak more on this later.

These two initiatives, BillC-8plus a review of railway service, fulfill an important commitment I made to shippers: that I would address their concerns about railway service and rates.

The CTA is the legislative framework that regulates the economic activities of the railways. The act generally relies on market forces to govern the relationship between shippers and railways. However, as I noted earlier, there are a number of sections that protect shippers from the potential abuse of market power by the railways.

I want to note that the legislative and policy framework for railways in Canada has worked quite well. CP and CN are among the most efficient railways in the world. They both operate networks in the United States and compete quite successfully against their U.S. counterparts. They don't require any operating subsidies from government. Their financial success means they have the capital funds necessary to maintain and expand their infrastructure and to acquire new equipment.

While the framework has worked well, it's not perfect. Transport Canada officials have heard increasing complaints over the last few years about poor railway service and high freight rates. I have heard many similar complaints in my capacity as minister. Also, I know that many members of the previous committee heard from shippers and others, even when the former Bill C-11 was being reviewed by the committee and the House.

These complaints may stem from the strong performance of the Canadian economy and the fact that the supply of transportation services, including rail freight services, has been quite tight relative to demand throughout North America. Railways are of critical importance to many Canadian shippers in domestic, continental, and international markets, especially to shippers of bulk commodities, who often don't have any practical alternatives. Shippers need reasonable access to efficient and reliable service at fair rates.

I believe the time has come to rebalance the legislative framework in favour of shippers.

During the consultative process in the summer of 2006, I encouraged the railways to develop a commercial solution that would complement amendments to the shipper protection provisions. The railways developed a commercial dispute resolution proposal for discussion with shippers. Significant progress was made. Unfortunately, the two sides were unable to reach agreement. I still support a commercial approach, since it would be more expeditious, less costly, and less confrontational than regulatory remedies.

With your permission, I would like to briefly describe the provisions in the bill.

The existing section 27 of the act requires the agency to be satisfied that the shipper would suffer substantial commercial harm before granting a remedy. Shippers have long objected to this test. It is being dropped under BillC-8.

The bill amends the notice that a railway must give for increasing freight rates from 20 days to 30 days. This will provide more time for shippers to make the necessary adjustments to their shipping plans.

There are two new provisions that deal with shippers' concerns about railway freight rates and ancillary charges. I want to clarify the difference between these two terms, since different remedies apply to each.

I'll deal with freight rates first, since it is the easier concept to understand. Freight rates are simple rates applied to the movement of traffic from point A to point B, for example, for moving wheat from Moose Jaw to Vancouver.

When you look at the various rates and charges levied by railways, the payment for freight rates are the big-ticket item. Now, I want to point out that the intended remedy for freight rates is final offer arbitration.

Aside from the rate application applicable to the movement of traffic, railways levy various other charges. These charges can either be levied in relation to the movement of traffic or in relation to the provision of non-typical railway services provided by the railways.

Now, the best example of a charge that may be imposed by a railway in relation to the movement of traffic is demurrage, which is the amount paid when cars are not loaded or unloaded within the free time provided by the railways. Examples of charges that may be imposed in relation to non-typical railway services provided by a railway include car cleaning, weighing, or storing of the cars.

The amounts paid by shippers for the various charges imposed by a railway are less significant than that amount stemming from the applicable rate for the movement of traffic. However these charges have become an issue with shippers over the last few years. Amongst the concern frequently heard is the fact that these charges, or their associated terms and conditions, are unilaterally established by railways and are often unreasonable in light of their purpose.

With respect to these charges, a new provision is being added that will give the agency the authority, upon complaint by one or more shippers, to review such charges and associated terms and conditions that are contained in a tariff of general application. Now, the agency is also given the authority to order the railway to amend the tariff if it finds the charges or associated terms and conditions to be unreasonable.

The bill contains a number of factors to guide the agency. The agency will determine the period of time any revised tariff will be in effect, provided that such a period does not exceed one year.

Shippers were hoping that the issue of charges could be addressed through changes to the final offer arbitration (FOA) provisions. In our view, the agency review approach is more effective. It provides for a “one-stop shop“ to address complaints. The FOA approach could require a number of FOA applications to accomplish the same thing, because FOA decisions are normally limited to the applicants.

The FOA provision is one of the more popular shipper remedies. A shipper can apply to the agency for FOA if the shipper is not satisfied with the railway's freight rates for the movement of traffic or any of the associated terms and conditions. Under FOA, the railway and shipper each make their final offer, and the arbitrator selects one of them without modification. This encourages the two sides to narrow their differences.

Bill C-8 expands the availability of the FOA remedy to a group of shippers. In order to qualify for group FOA...

Editorial Note: technical difficulties

Ed Fast Abbotsford, BC

Mr. Speaker, I appreciate the opportunity to engage in the debate on Bill C-58, amendments to the Canada Transportation Act.

This is really one of a trilogy of bills. This is the third of the three bills which address various issues within transportation. The first bill, Bill C-3, actually addressed the whole issue of bridges and tunnels, making sure government was able to protect the interests of Canadians in ensuring that our bridges and tunnels on our international borders are protected and maintained properly. The second one, Bill C-11, addressed the whole issue of railway noise, making sure that we had grain caps in place, making sure that communities had a say in what happens when there are disputes with railways. This bill, Bill C-58, addresses the issue of freight across our country.

The railways are what Canada was built around. The railways were a driving force in making sure that Canada became the country it is today. Railway freight is really the object of Bill C-58.

Canadians rely on our railways for their livelihood. Our economy depends on the timely delivery of freight across our country. Not only is freight delivered to the various areas and communities of our country by rail, but our railways are also used to deliver freight to the gateways of our country, the Pacific gateway, the Atlantic gateway, even our border with the United States, a critical gateway to make sure that we protect the ongoing prosperity of our country.

This bill addresses a number of concerns that have been raised over the last five to ten years. The existing Canada Transportation Act is some 10 years old. Shippers in particular have been raising a number of issues with how our railways are administered. They have had beefs with some of the pricing of the services that are delivered. They have had beefs about how railway siding abandonment has been addressed. They have been worried about advance notice for a number of the issues that are dealt with under the Canada Transportation Act. They are also concerned about how disputes with the railway companies are addressed.

This bill is addressing the concern that shippers have with respect to the relatively tightly concentrated ownership of railways in Canada. We know from experience that in industries that have relatively few players, such as the railway industry in Canada, there is always a risk that the players within that industry will engage in predatory behaviour. I am not for a moment suggesting that is what is happening in Canada, but it is one of the concerns the shippers in Canada have raised.

The shippers want to make sure they are treated fairly. Shippers have concerns. They want to make sure they can get their products from point A to point B in a cost effective and timely manner. When there are disputes about the level of service, or a dispute over the prices charged for transporting freight from point A to point B, they want to know that there is an effective and efficient mechanism in place to achieve that.

Bill C-58 actually provides a solution. It is called final offer arbitration. Final offer arbitration already exists under the Canada Transportation Act, but it applies in limited circumstances. Unfortunately, it is an expensive process. It is one that many of the shippers, especially the small shippers, cannot afford.

Typically we would want to make sure that our shippers and railways resolve their disputes in a commercial manner, for example, by negotiating with each other. That is the ideal. If there is a beef about the pricing for getting the freight from one point to another, the shipper wants to be able to sit down with the railway and negotiate something that is fair. Sometimes negotiating does not work and the parties move on to something called mediation where a third party is brought in to review the issues, to review the pricing and perhaps the level of service.

Sometimes a mediator can come up with a solution that the other two parties are not able to arrive at on their own. If that does not work, shippers are left with a problem. They are left with arbitration. As a result of arbitration being expensive, sometimes it can cost up to half a million dollars to arbitrate a dispute. Many of the shippers cannot afford the current arbitration process.

This bill implements final offer arbitration within a broader context. Let me explain to the House how final offer arbitration works.

In those provisions, the shipper and the carrier each make their best offer. They have a dispute, they come to the table, and each comes forward with their best offer and presents that offer to the arbitrator. The shipper is not going to bring in an offer that is totally out to lunch because he or she knows that the arbitrator is not going to take that offer. The arbitrator is probably going to take the railway proposal. The railway is going to be in the same boat. It is going to bring forward an offer that is as close to where it probably should be to make sure that the other party's offer is not taken. This effectively drives the parties closer in their negotiations and closer in terms of the offers that they present.

The arbitrator can only make one choice. He chooses one offer or the other. He cannot amend the one offer or the other offer. He cannot combine them. He cannot come up with a compromise. He picks one or the other. The purpose is to make sure the parties, when they make their offers, are as close as possible. It certainly drives the parties to negotiate these disputes if there is any way of resolving them outside of the arbitration process. There is an incentive for the parties to put forward reasonable offers.

Final offer arbitration is one of the more popular remedies under the Canada Transportation Act, certainly with shippers. One of the reasons is because shippers have considerable control over the process and are not dependent on other parties. In essence, the shippers determine the rates and conditions that are contained in the final offer, so they have some control over that process. This forces the railway to respond in kind.

The decisions that the arbitrator makes are, of course, confidential. On the whole, shippers are satisfied with final offer arbitration under the Canada Transportation Act. However, they complained again because of the costs. Individual shippers really cannot avail themselves of this process because it is just too expensive. Our amendments to Bill C-58 address that problem.

Bill C-58 proposes two main amendments. First and foremost, Bill C-58 extends the final offer arbitration to a group of shippers who are disputing a railway's proposed freight rates or conditions for the movement of traffic across Canada. This allows a group of shippers to come together and share the costs of final offer arbitration. It will generally give shippers more leverage during their negotiations with the railways because now the railways know the costs of this final offer arbitration are going to be spread over a large number of shippers rather than one or two.

To be eligible for this, the shippers have to have issues in common. This ensures that they are not dealing with a scattergun approach and that the arbitrator has a specific issue to address. It would be unfair to expect an arbitrator to consider a group application that lacks sufficient commonality. This legislation clearly addresses that.

The second part of this amendment requires that the arbitrator and the agency must be satisfied that the members of this group of shippers have attempted to mediate the matter. In the ideal world, we want to make sure that the parties try to negotiate first, keep it out of a formal system, and subsequently maybe use a mediator to try to come to a common resolution. Once the Canadian Transportation Agency is satisfied that mediation has been attempted, it will then move to allow an arbitration process to take place. Shippers have strongly endorsed this concept of group final offer arbitration.

Bill C-58 also provides a provision that permits parties to a final offer arbitration to suspend the arbitration halfway through the process to try to engage in negotiation or further mediation.

Again, that makes sense because the parties know the arbitration process is going to end up with one offer or the other being chosen and it is binding on both parties. There is still an incentive for them to consider going back to negotiation and mediation to try to resolve the dispute without having the final decision made by the arbitrator.

It gives an opportunity for the shippers and the railways to take a time out and a deep breath. They can say they are getting close and resolve it among themselves rather than going to the arbitrator. All those options are available under our amendments.

These changes to the arbitration process are going to assist the shippers in getting their problems resolved with the railways. It is also a faster way of bringing resolution to these problems.

The government has heard the shippers. It believes it has addressed these concerns. I have addressed one of the concerns in Bill C-58. My colleagues are going to address a number of other amendments within Bill C-58.

I would encourage all members in the House to support this legislation because it is good for our communities. It is certainly good for the city of Abbotsford which relies heavily on the railways to get grain to the feed mills that provide feed to our poultry growers. We also have a strong manufacturing sector in Abbotsford that needs the railways to provide cost-effective pricing and timely service.

This bill will achieve all of those ends. It is a huge step forward in bringing Canada into the 21st century when it comes to transportation. I encourage members in the House to support Bill C-58.

Brian Jean Fort McMurray—Athabasca, AB

Mr. Speaker, what a pleasure to answer this question.

Yes indeed, this legislation clearly states the obligation of railways with respect to noise and vibration. The agency certainly has jurisdiction there. I would suggest the member contact it.

I would like to deal with my colleague's first comment about the Liberals putting legislation forward similar to this bill, which they did, but it took seven years and they did not get it passed.

I am proud to stand in the House today. Bill C-6, Bill C-11 and Bill C-3 were all on the order paper for seven years under the previous Liberal government and none of them passed. All three have now passed. Bill C-6 was passed by committee a couple of days ago. We are very proud of this government's initiative. In less than 18 months, three bills have been put forward that were never passed by the Liberals.

Brian Jean Fort McMurray—Athabasca, AB

Indeed, Mr. Speaker, there was a blinding light on the road to Damascus. It was more like a blinding light of Conservative government because the people spoke and they got what they wanted. They got a Conservative government that was going to take action.

Let us talk about Bill C-44, the predecessor to this bill, and I think there was another bill before that, but not another one before that one, yet it would not surprise me if there was another one before that. That bill was far too cumbersome, something that just could not work because we could not find consistency.

This is the situation. This Conservative government wanted results, so we split the existing Liberal bill into three bills. So far in eight months we have gotten two of those bills to this point. One bill passed, Bill C-3, another bill is before us today, Bill C-11, and another bill is coming forward in two weeks with some cooperation from members on the other side, as long as they can see and are not be blinded by the Conservative light. It will move forward and we will get results for Canadians.

Brian Jean Parliamentary Secretary to the Minister of Transport

Mr. Speaker, I can assure the member that we will do what is in the best interest of Canadians and Canadian taxpayers, as well as residents in the Windsor area.

The gateway is essential to Canada, and we know that it is very important. As the member mentioned, it is the busiest border crossing. It is absolutely essential to not only our trade but to our continued economic success and security.

The government is working right now with bilateral and binational partners, such as the United States federal government, the state of Michigan and the province of Ontario where it is situated, to develop a solution that ensures sufficient capacity across the Detroit River to facilitate cross-border trade and traffic, and in fact to enhance it.

As part of this work, we are conducting a comprehensive and harmonized environmental assessment, and I am sure the member would encourage that environmental assessment, to identify the locations of the bridge crossing, the inspection plazas and the access roads.

As well, we are also assessing possible models for delivery of the new crossing because we want to do what is in the best interest of Canadian taxpayers, who are ultimately our boss. Private sector participation, such as the public-private partnership, is one of the models that is being considered.

In November the Minister of Transport, Infrastructure and Communities stated at the public-private partnership conference in Toronto that the government was exploring the opportunities for using a private-public partnership for financing, building, operating and maintaining the new crossing between Windsor and Detroit. This is just one of several options, and I want to be clear with the member. We on this side of the House act in the best interest of Canadian taxpayers. No decision has been made as of it. This can deliver new infrastructure more efficiently and more expeditiously.

Although the government can borrow at a lower rate than the private sector, which is one of the considerations the member has brought forward, financing is only one of the many possible considerations that we have to look at before making this decision.

The cost of private sector borrowing would be offset by the risk that the private sector would take and by increased innovation and efficiency. I suggest the member would have to agree with what the private sector can bring to occasional projects from time to time.

We still have appropriate and effective public oversight by the federal government. More specific, Bill C-3, which was one of the initial pieces of legislation the Conservative government put forward, received royal asset on February 1. No matter what model the government picks, it will be the model for governance over our international bridges and tunnels for the best interest of Canadians. The Conservative government will also ensure that the operator puts in place mechanisms to address community concerns.

Let me assure members that the government is absolutely committed to selecting the delivery option that provides the greatest value for taxpayers while maintaining appropriate public oversight of the new crossing. It is quite frankly a balance for the best interest of Canadians.

The government will continue to work with the binational partnership, all of our partners and listen to stakeholders to explore models for delivering the new crossing that is in the best interest of Canadians. If such a model cannot meet the objectives of the Government of Canada or its United States partner, alternative delivery mechanisms will be pursued.

The Windsor-Detroit gateway is a matter of national priority and the government remains committed to ensuring that a new crossing will be in place by 2013, but we will do so in the best interest of Canadian taxpayers, the residents and all stakeholders.

The Acting Speaker Andrew Scheer

Before questions and comments, I have the honour to inform the House that a communication has been received, which is as follows:

Rideau Hall

Ottawa

February 1, 2007

Mr. Speaker:

I have the honour to inform you that the Right Honourable Michaëlle Jean, Governor General of Canada, signified royal assent by written declaration to the bill listed in the Schedule to this letter on the 1st day of February, 2007, at 11:36 a.m.

Yours sincerely,

Sheila-Marie Cook

Secretary to the Governor General

The schedule indicates the bill assented to is Bill C-3, An Act respecting international bridges and tunnels and making a consequential amendment to another Act.

Brian Masse Windsor West, ON

Mr. Speaker, the member's excellent question brings forward the point that the amendments we are dealing with are more technical in nature. They are ones to which I do not have any objection. At the same time, I know that in the Senate process there were extra questions and concerns raised. In fact there were misunderstandings about what the bill was about, whether it was ownership and a few other things.

What is important is that we are going to move further past this process. Bill C-3 is just the start of cleaning up our borders in Canada. We must understand that right now we have no regulations, control or ability to have an influence on those things. This is starting from there. We need to do the same thing with border authorities, community investment funds and also infrastructure funds for the areas around them.