Bill C-8 (Historical)

An Act to amend the Canada Transportation Act (railway transportation)

This enactment amends the Canada Transportation Act with respect to railway transportation.

[The Chair (Mr. Mervin Tweed (Brandon—Souris, CPC)), Conservative, Merv Tweed]

Good morning, everyone, and welcome to meeting number three of the Standing Committee on Transport, Infrastructure and Communities. Pursuant to the order of reference of Monday, October 29, 2007, we are examining Bill C-8, an Act to amend the Canada Transportation Act (railway transportation).

Joining us today, we have our guests: from the Railway Association of Canada, Mr. Cliff Mackay; from Canadian Pacific Railway, Mr. Marc Shannon; from Canadian National Railway, Mr. Jean Patenaude; and from Ottawa Central Railway, Mr. James Allen.

It's my understanding that Mr. Mackay will be presenting. We have 10 minutes. I'm not opposed to your sharing the 10 minutes, but then we'll go to a question and answer session from the committee.

Mr. Mackay.

[Avrim Lazar]

Certainly we've been very clear about what would be useful today: refundability of the SR&ED credits; extension of the two-year window for accelerated capital costs to five years; more money for research in research innovation; and all-party support for Bill C-8, which puts competition into the rail act would be very useful. Anything that can be done to improve the accessibility of technology would be very useful, and of course the communities need support in their transition.

The best thing you can do for communities is to create a business climate where people want to invest in Canada. The refundability of SR and ED, the capital cost allowance, and the money for R and D would help the most.

I want to be very clear, though, and this is something where I think there has been misunderstanding: we don't want subsidies. We don't want you to come in and save a mill that's uneconomic. What we want to do is make this a place where mills are economic.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair, and thank you, Mr. Minister, for appearing here.

Bill C-8, obviously, is really taking care of some low-hanging fruit in terms of fixing some of the chronic problems that we have right now. My concern is that, especially coming from Windsor, where I've seen the rail system not have the proper investment and also with the rules and procedures that are in place, it's lowered our productivity as a country. There's no doubt about that.

Hence, what I'm really interested in right now are assurances with regard to the study that's being proposed. I'd like to know how much money has been earmarked for that study, and whether it's going to examine productivity with, for example, comparisons to the United States system and also with Europe and maybe some other countries in Southeast Asia.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Thank you, Mr. Chair.

Mr. Minister, in your presentation, you make two important observations. In the fourth paragraph on page 2, you say, in connection with Bill C-8, that:

the 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.

This is a very important observation. But, since your government has never used any WTO provisions at all to curb unreasonable competition from foreign economies, we will be importing more. Then, clearly, the value of our dollar restricts our exports.

That brings me to your second observation. On the fourth page of page three, you say:

Transport Canada officials have heard increasing complaints over the last few years about poor railway service and high freight rates.

Tell me if my interpretation is correct. Bill C-8probably will fix the problem of freight rates that are too high. That will provide help to our exporters, who are sorely in need of it. But it will not solve the other part of the problem, the mediocre railway services. You are going to start a review 30 days after the bill is passed. But until then, what will happen if the railway companies react badly to the decision on freight rates and decide to provide even worse service to firms that challenge those rates? Will they have to wait for the end of the review that will start in 30 days and end who knows when? You are telling us that the review will start 30 days after the bill, but you do not tell us when it will end. We must be able to address that issue. It is not impossible that the mediocre service provided by our railway multinationals, who control all rail service, will become even worse for anyone challenging the rates.

What do you think, Mr. Minister?

[Lawrence Cannon, Conservative, Pontiac, QC]

Thank you, Mr. Chair.

I was saying that this is to ensure that both the matter and the offer are common. Without sufficient commonality, the group FOA would simply be a series of individual FOAs with little in common. This would be unworkable and unfair to the arbitrator.

Group FOA is a new concept, and will undoubtedly be subject to challenges as the parties seek to clarify what is meant by "a matter being common to all shippers" and "a joint offer, the terms of which apply to all of them". We will have to rely on the good judgment of the Canadian Transportation Agency and the courts. I want to emphasize, however, that this is a remedy that is aimed at helping shippers—it is quick, effective and less costly. There will be practical restrictions on what qualifies as an eligible group FOA to ensure that it be an effective and expedient remedy. However, it is not intended that shippers must be facing exactly the same circumstances in order to be eligible for group FOA.

Under the new group FOA provision, the agency must be satisfied that the members of the group have attempted to mediate the matter with the railway. This is consistent with the government's preference for encouraging commercial solutions before regulatory remedies are pursued.

Bill C-8 permits parties to a single final offer arbitration to suspend the arbitration process by mutual agreement in order to pursue mediation. This provides both parties with an alternative without jeopardizing the shipper's right to final offer arbitration. The FOA process will resume if mediation fails.

Shippers strongly support group final offer arbitration and are eager to see it implemented.

Bill C-8 ensures that the line transfer and discontinuance provisions apply to lines that are transferred to a provincial railway but revert back to the federal railway. This will ensure that interested parties, including governments, have an opportunity to acquire such lines before service is formally terminated. This provision closes a potential loophole.

A complementary provision requires CN or CPR to make payments to local municipalities if a grain-dependent branch line reverts and is subsequently closed. These payments are $10,000 per mile per year over a three-year period.

A new provision requires CN and CPR to maintain and advertise a list of sidings that grain producers use to load their own cars and to give 60 days' notice before closing such sidings.

I also want to speak briefly about the commitment to commence a review of railway service within 30 days of the bill being passed. This commitment has been a priority for shippers and has been well received by them.

The objective will be to focus on solutions to the problems that we have been hearing about for the past year or so. The review may include an assessment of the effectiveness of the level of service provisions of the Canada Transportation Act. We will be looking for innovative solutions to a challenging issue.

Shippers and railways will be consulted on the scope and terms of reference for the review. I expect Transport Canada to contact interested parties for their views later this year.

The government has taken significant steps to address shipper concerns through Bill C-8and the railway service review. Many, if not most of us, have heard serious complaints about railway performance. Shippers have been waiting for these improvements for over five years and are very supportive of Bill C-8. They want this bill passed expeditiously.

For their part, the railways may object to some of the provisions but they want regulatory stability. I believe that Bill C-8 provides this and a better balance between shippers and railways.

We have an opportunity to take corrective action. I encourage members to support Bill C-8. I hope that once the bill is passed, shippers and railways will become re-engaged in discussions on a commercial dispute resolution mechanism.

Thank you very much for your attention.

[Lawrence Cannon, Conservative, 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

[The Chair (Mr. Mervin Tweed (Brandon—Souris, CPC)), Conservative, Merv Tweed]

Good morning, everyone.

Welcome to the second meeting of the Standing Committee on Transport, Infrastructure and Communities and our consideration of Bill C-8, An Act to amend the Canada Transportation Act (railway transportation), pursuant to the order of reference of Monday, October 29, 2007.

In order to open up the meeting and allow for questions and answers, I am calling clause 1 of Bill C-8, thereby permitting members to hold general discussion and ask our witnesses questions. It's just a formality to do that.

Joining us today we have the Minister of Transport, Infrastructure and Communities, the Honourable Lawrence Cannon, who will introduce Bill C-8 and answer questions.

I welcome you and ask you to proceed.

[The Chair, Conservative, Merv Tweed]

I also know that briefings will be offered to all members on this bill, if you elect to do that.

On Tuesday we will have a subcommittee only, and then on Thursday we will start the agenda with Bill C-8, with the minister and officials.

The meeting is adjourned.

[The Chair, Conservative, Merv Tweed]

I think what I'd like to do is ask the subcommittee to meet on Tuesday, and we'll set forward the agenda with those issues. On Thursday, if the committee is agreeable, we can bring the minister and officials in to present Bill C-8. I know at the end of the last session there was some urgency to get this dealt with.

If the committee so agrees, I would try to confirm that the minister and his officials be here for Thursday. We can set the rest of the agenda on Tuesday at a subcommittee meeting, but this would get the ball started.

Monsieur Laframboise.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I'm sorry, Mr. Chair. I just wanted to let you know that the minister would also be prepared to come on Thursday to introduce Bill C-8 and to answer questions for an hour.

[The Chair, Conservative, Merv Tweed]

Very briefly, for our next meeting on Tuesday, our first official meeting, I think everyone is aware that Bill C-8, An Act to amend the Canada Transportation Act (railway transportation), has been referred to the committee. I know we had some discussion about that prior to the ending of the last session. I am advised that officials would be prepared to attend next week. That is to be verified, but if the committee wishes, I would suggest that....

Go ahead, Mr. Jean.

Canada Transportation Act

[Lawrence Cannon, Conservative, Minister of Transport]

moved for leave to introduce C-8, An Act to amend the Canada Transportation Act (railway transportation).

Mr. Speaker, pursuant to the special order made previously, I would like to inform you that this bill is in the same form as Bill C-58 was in the previous session at the time of prorogation.

(Motions deemed adopted, bill read the first time and printed)