Agriculture Committee on Sept. 17th, 2009

[Jim Smolik]

Yes.

[Randy Hoback, Conservative, Prince Albert, SK]

David, you touched a little on the fact that these sidings can be used for other things besides railcars. For example, in Tisdale, Northern Steel also uses that site for bringing steel in and out. So I'd like to inform committee members that what you're seeing here is not the full use of that site; it's just the grain side of the business.

One of the things I've often wondered about is that you'll see producer cars kind of go in waves. All of a sudden guys will be happy and do it for two or three years, then they'll back off. Is there anything you can relate on why that is? If we look at this list, some sites are very active and some sites just aren't active at all. Are there any similar characteristics? Are there barriers in place right now that we should be looking at as a committee that are preventing farmers from using these producer sites?

Jim, I'll start with you.

[Jim Smolik]

Thanks, Randy.

You're going to see a variance in producer car loadings, and a lot of it has to do with the crop year, the condition of the crop, and what the marketplace is demanding. Right now, a large percentage of the producer cars going to port are carrying Canadian Wheat Board grains. We're seeing an expansion in the pulses and the peas, so the market is demanding the use of these products, and that allows the opportunity for the producer cars to be used in that respect. So it possibly saves producers money in getting it to port. As the ebbs and flows of natural business happen, you'll see the producer cars being used, more or less.

But as I said in my report, we are seeing a continual expansion in producer cars. The short-line railways are also utilizing some of these rail lines. Some sections of the line are being bought by certain companies--you mentioned steel--and they're maybe adding grain, so farmers are making arrangements with them as well.

We can allocate cars to a producer on a short-line railway that has nothing to do with grain, but they're allowing grain cars to be pulled on that trackage as well.

[David Marit]

Thank you.

The only one I can speak to with experience, after operating a short line, is level of service. We have seen in the past in Saskatchewan that if branch lines were under CP or CN rule, regardless of which one, and a producer car loading site on one of those lines ordered cars, the class one railways would say, “We won't bring them to you because it costs us too much to get them there. We won't get them to you unless we come down that train run with 100 cars, or 50 cars”.

When they become short lines we can do it a lot cheaper, and we can do 10 cars, five cars, or 25 cars. That's about the only argument I can give as to why you would see a spike and an increase in it. We're seeing more short lines in Saskatchewan, therefore we're seeing more producer cars because of level of service. We can deliver it, and that would be the only thing.

If the federal government could address level of service and make sure it was addressed, that would be a huge plus for the farmers and the grain producers in Saskatchewan and western Canada.

[Randy Hoback, Conservative, Prince Albert, SK]

I guess, again, the level of service is something that our government has committed to, and I understand that study is going to take place pretty soon.

Mr. White, there used to be a lot of canola shipped on producer cars. Why isn't there now?

[Rick White]

There's very little canola being shipped in producer cars. I guess our growers are more or less satisfied with going through the mainline companies and doing it the traditional way, taking advantage of multi-car incentive rates, for example. When you go to 50- or 120-car spots, there are substantial trucking premiums associated with that to attract the grain. You know, a carload of canola is very expensive, and when you're shipping a producer car you're bearing the risk of that entire car on your own. It's not blended off in a train. It's not blended off in some kind of composite sample. It has to stand on its own. So there are some risks, and when the value of the commodity is as high as canola, those risks are substantial.

Probably another reason is that it's difficult to find a buyer for your canola at the other end of the pipeline. For you to get a producer car and ship canola to the west coast, for example, you have to have somebody there to take ownership of it. Now, unless you've arranged that yourself.... It's sometimes difficult for farmers to do that. So I think that's a bit of a holdup for canola growers specifically, and why they maybe shy away from producer cars.

[The Chair, Conservative, Larry Miller]

Your time has expired, Mr. Hoback.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Randy, you should recognize that's the good argument for why you need the Wheat Board--so that you can continue to ship producer cars. Whether the sites have been used or not, it's really an issue of producer rights. How do you balance that against the railways? In this town they have all the power. I said it earlier, in joking to André, but it's true. The Department of Transport might as well be called the department of railways, because all the power is on the side of the railways.

Do you want to talk about lobbying? When we were preparing for this meeting today...CN actually met 33 times with government officials, including the chair of the CTA, since January, and with Minister Baird and Minister Merrifield separately on August 31. So they're doing their work, and I certainly give Merrifield credit for calling them in. But if they decide they're going to close them anyway, is there any authority now on the books through which we can order that those producer car allocations--the sidings, as you said, David--must be maintained? If the government can't do that, then we need changes in legislation so that they can.

Can anybody answer that?

[Richard Phillips]

There is the possibility of government action, Mr. Easter, but it's a long shot. The CTA does have the power to step in where it looks like they're de-marketing a line. If they're trying to strip the sidings off to make the line valueless, then in theory the CTA could come in. But we met with them recently and asked, and they said it would be extremely unlikely that they would get involved.

[Wayne Easter, Liberal, Malpeque, PE]

We certainly have a problem here that I think we need to make some recommendations on, Mr. Chair, in terms of process, to give somebody the authority to say that this can't be allowed to happen. I think we have a little bit of time to do that.

There is a second point, although not directly related. Richard, in your presentation you made the point that if the roof leaks on the car and rain gets in, or if the grain leaks out of a hatch, it's 100% your loss?

[Richard Phillips]

Yes. If I go back and try to claim from the railways--

[Wayne Easter, Liberal, Malpeque, PE]

The railways are paid to provide railway cars that are properly maintained. We know with the costing review that the government fails to bring in, we know with the facts released for the Canadian Wheat Board, that the railways have been gouging farmers for years on those costs, and they're getting paid costs that they obviously don't deserve.

Are you telling me that the railways don't have to pay for your loss of grain if the car is not properly maintained?

[Richard Phillips]

Yes, the railway will say you shouldn't have loaded it if it wasn't in good shape. That's their defence.

[Wayne Easter, Liberal, Malpeque, PE]

They're not responsible for the car. This is just about to the point of being criminal. Mr. Chair, we should look in to that too.

The last point that I wanted to make is to the Canadian Grain Commission.

Where does your authority end in this issue, Jim? You basically spot the cars to a certain extent?

[Jim Smolik]

When a producer orders a producer car, we allocate that car to the producer. For example, if it's a movement of Canadian Wheat Board grain, he has to either contact us or go through his administrator and they will order the car from the Canadian Grain Commission. We will allocate the car to the producer, not to the railway, not to the Wheat Board.

[Wayne Easter, Liberal, Malpeque, PE]

I thought I knew that, but I wasn't sure.

Thanks.

[The Chair, Conservative, Larry Miller]

Ms. Bonsant, no questions?

Mr. Hoback, five minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

You talked about the $1,200 that they saved on board grains. Is it possible that the reason farmers are using them on board grains is because they can save $1,200 on board grains whereas they can't save $1,200 on non-board grains? I would just like to make that point, Mr. Easter.

If the board had a way of looking at how they go about allocating their basis at the grain elevators and how they pay storage, and all these other little costs that they ding farmers for, maybe we would see that cost go down and things would change. There's one thing that I found really interesting in this whole topic of short lines. I have two short lines in my riding. I have a short-line, for example, that goes out to Choiceland through Nipawin and it went from no cars, and last year it went to 400 or 500 cars of oats. I know Mr. Phillips made the comment that sometimes you need to threaten to remove it before everybody wakes up and says they're going to utilize it, and that's exactly what's happened in this case.

So I can understand why you say the process and the time is required there. So it's a consideration we should take in place.

The other thing I think we need to talk about is level of service, which you mentioned. I've been on the other end where I've loaded trucks on a Sunday night. I had five trucks on the road heading to North Battleford. I got a phone call at 8:30 that the trucks were almost there, which is a two-hour drive, and the train didn't show. So that level of service to me costs a pile of money every time that happens. Unfortunately, it seems to happen way too often, and it seems like, again, who pays for it? The farmer pays for it. I know there's the comment that Mr. Easter made about the leaking car and all that. Again, who pays for it? The farmer pays for it. It seems like every time we turn around it's either the farmer, or the grain company, but never the railways that are accountable for anything they do.

I had a scenario with a pulse processor in my riding, and it was the same thing; he loaded a car and CN made him actually dictate the route to Mexico. So it was not just, here's the train car and give it to CN and let them figure out the logistics to get it there. If he didn't figure out the route for them, he'd get penalized. So I think when we look at rail transportation and agriculture products, if there's not a reason to look at it, there are a lot of examples of why this needs to be looked at, for sure. You have a very compassionate ear right here.

[The Chair, Conservative, Larry Miller]

Have you any closing comments, gentlemen?

Mr. Marit.

[David Marit]

Thank you, Mr. Chair.

I've been talking quite a bit this afternoon. I apologize. I guess you can tell we're very passionate about our railways and keeping them, and keeping the traffic where it should be, on rail and off our roads.

We would like to leave it that.... As a short-line operator, I think there are things that the federal government could do and should do to assist rail transportation, to assist producers, not just in producer cars but in the grain industry. As was said earlier by the presenters, we feel strongly that there should be a full costing review done. The last one that was done was in 1992. It's long overdue. It's time to do that.

There are issues that I think the federal government has to look at to help in short-line rail growth, not only in western Canada but, as I heard at FCM, in all parts of this country. In Quebec and Ontario, it's happening. There have to be ways for communities, individuals, and groups to purchase those railways, and there have to be opportunities for them to access funds. There is also an issue called successor rights that goes along with these railways that has to be dealt with federally. Also, somebody has to take a very serious look at the environmental impact and the environmental footprint that is left when railways leave and put that same product on the road. Nobody has taken a serious look at that. When you start putting three Super B trains on the road versus one railcar, you're putting a huge environmental impact on this country. Somebody has to look at that environmental footprint, please.

[The Chair, Conservative, Larry Miller]

From any of the witnesses, we'd certainly welcome at any time suggestions for the committee or for the government on things we can do to help our producers around there.

There is just one question I have for clarification. We talked about the spillage out of the cars and how, if a car went from Tisdale to Vancouver and ended up empty or close to it when it got there, it was all on the producer. If they're producer-owned cars, at first glance it would seem to me, if the producers own the cars, why wouldn't they be responsible for the cars? Can you explain that? There's probably a simple answer.

[Jim Hallick, Vice President, Saskatchewan Association of Rural Municipalities]

The producers don't own the cars; they're railroad cars.

[The Chair, Conservative, Larry Miller]

So “producer cars” is a term that's a little misleading.

[Jim Hallick]

It's a term that's used when we load our cars, but they're railroad cars.

[The Chair, Conservative, Larry Miller]

Fair enough. Thank you.

Mr. Smolik.