Agriculture Committee on Feb. 12th, 2014

[David Miller]

Absolutely.

It's fine to say that we've had cold weather before, but the reality is that this really has been...you could say this is a one-in-a-hundred-years crop and a one-in-a-hundred-years winter. Hopefully these crops are going to continue. Hopefully these winters are not going to continue. You could look at it in those terms. This crop is that large, and this winter has been that difficult.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

We've had several witnesses come to committee, and they've talked a lot about penalties. We know that farmers are being hit hard. Internationally too with our trading partners, we've gotten a black eye because we haven't been able to fulfill some agreements.

I have a son, and we have rules. He has chores to do, and when he doesn't do his chores, I'm doing the dishwasher, I'm making his bed, there are consequences. I know you're not going to want to talk too much about penalties, but that has been brought up a lot by almost everybody we've spoken to. I wonder if you could comment on the Fair Rail Freight Service Act, and maybe penalties and giving more teeth to that act.

We've had a lot of witnesses offer amendments, because it is a bill that was put through the House, and I know that our party had submitted quite a few amendments to it that weren't accepted—that's nothing new. But I wonder if you can comment on the Fair Rail Freight Service Act and also maybe just the fact that we've had witnesses talk about penalties for grain being delivered later than it was supposed to be.

[Robert Taylor]

In terms of the Fair Rail Freight Service Act, I think there are a couple of very important elements of that bill that were recognized in its drafting.

One is that service shouldn't be imposed to the benefit of one shipper to the detriment of another. The arbitrator has to consider the network impact, because we run a bus route not a taxi service. That's how we attain 4.1¢ a tonne-mile. We move a tonne of material one mile on average on the railway for 4.1¢. This has been recognized. Without that network provision in that piece of legislation you could have an arbitrator imposing a service to the benefit of shipper A to the detriment of shipper B when the two are side-by-side. We think that's the right approach, and that's one of the amendments being pushed that would be very detrimental.

[The Chair, Conservative, Bev Shipley]

Thank you very much.

We'll now go to Mr. Hoback for five minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, gentlemen, and thanks for coming in front of the committee.

I agree with Ms. Brosseau, it's nice to have you here to talk about some of the challenges you faced in December and January.

The reality is that those challenges are things that you faced in previous years, and will face in years to come. There are also some new realities that are starting to show up in western Canada. You see potash mines coming in to factor. You see more crude oil coming in, and you know that's going to increase because if we don't see a pipeline, it's going to be moved by rail. So when I hear the arguments that you don't need more locomotives, I disagree with you.

Capacity is the issue here. Even when it's cold, sure, you shorten the trains, I understand that. I used to drive Super Bs on my farm, so I understand how air brakes work. But what you can do is put more smaller trains on, so you need more locomotives to handle that capacity. The reality is that you went and laid off—and I'm going from the notes from the Alberta Federation of Agriculture—4,500 employees and reduced your service by 400 locomotives and 2,700 railcars. Yet, you say you have enough to handle going forward.

I don't see how you can do that or say that when BHP Billiton is coming on, when I see the other potash mine in southern Saskatchewan coming into play. We're going to start growing more corn, which is four times the volume of wheat. All this stuff is going to have to move by rail, so where is your vision? Then I get really excited when you say that you have the capacity today. You've never had the capacity. When I was farming from 2000 to 2004, we always had issues with the trains not showing up on time. Then you'd blame the Wheat Board or somebody else, but the reality is that you never had the capacity then.

I look at this now, and I go back to my farmers, and it's costing them money. We've seen the basis in wheat widen from $25 to $80. Why don't you pay that basis widening, because it's your fault that it's widening?

You talk about the increase in volume. I can give you that. But you know what, you haven't kept up from year to date of what you should be moving. The increase in volume would tack onto the end. So when you're saying in August you had a slow season and you were parking cars, that's when that increase in volume would have kicked in, but it's not. When you say you've moved more grain, maybe you have moved more grain, but have you delivered more? That's the question I ask because I was in Vancouver at the international trade committee, and I saw the ships sitting out in the harbour. They're there. When I talk to my farmers who have oats, for example, they have their little inland elevator filled, they have cars still sitting on their spur, and they're waiting for you guys to move them. Meanwhile, Scandinavia is shipping oats from northern Europe into our markets in the U.S.

So explain it to me. Who should be accountable? Who should be financially accountable for this? I think it's you, but do you disagree?

[David Miller]

In terms of growing capacity, as I said, we've added locomotives from last year and we just ordered a bunch more locomotives.

[An hon. member]

So you're looking at your growth and you're taking it seriously.

[David Miller]

We absolutely are taking it seriously.

[Randy Hoback, Conservative, Prince Albert, SK]

Let's go to CP, then. You went and did the opposite. Maybe that's efficient. Maybe you're running efficiency at the low cycle, but when you get any type of a bump, you can't handle it.

[Michael Murphy]

I'll have to disagree with you because we had record levels of demand placed on us in the fall, between September and November, and we did handle it. That same fleet is still there. We're challenged now because of this extreme, and I think I say—

[Randy Hoback, Conservative, Prince Albert, SK]

I'm going to stop you there. You handled it for a couple of months and then coal came in, potash came in. Everything else comes in there, and you can't handle it all. You can juggle it for a month or two, but you can't juggle it for a long period of time.

[Michael Murphy]

We handled it right through the period September through November, so it was three months' demand that we were faced with. We also were faced with declining potash volumes during that same period, so—

[Randy Hoback, Conservative, Prince Albert, SK]

So you can handle more grain.

[Michael Murphy]

And we did. Exactly.

[Randy Hoback, Conservative, Prince Albert, SK]

But now you have grain, you have potash. I talked to the potash guys and they're upset now too because they're not getting their product delivered. I have a lumber mill up at Hudson Bay that's going to go down to three days a week. I have a steel mill in Regina. All this stuff is starting to trickle back, not only in the grain sector but in other areas, because you're not taking seriously the growth that's going on in western Canada. You're actually going to do severe damage to the western Canadian economy unless you smarten up.

[Michael Murphy]

I'll look at it completely differently and disagree with you—

[Randy Hoback, Conservative, Prince Albert, SK]

You look at it from your shareholders' perspective. I respect that. But look at it from the customers...and what's going on in western Canada. You haven't done that. If I asked you today, how are you going to move the volume that you've lost before road bans hit...and flooding in Red River Valley, how are you going to do it? You don't have the capacity. Are you going to move stuff up from the U.S.?

How many cars that belong to the Canadian government are actually down in the U.S. right now moving grain in the U.S.?

[David Miller]

We've moved cars up from the U.S. We're not moving cars to the U.S. We've moved cars in the other direction to handle the crop. A lot of this is very competitive business. The potash business is an extremely competitive business. The fact that it's backed up is the reality that we've been facing in the last couple of months, but believe me we're not going to skimp on assets and lose that market share. There's too much in it for us.

[Randy Hoback, Conservative, Prince Albert, SK]

But you've got the ability to handle the—

[The Chair, Conservative, Bev Shipley]

Mr. Hoback, we're out of time.

Now I'm going to go to Mr. Zimmer for five minutes, please.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Thank you for appearing before committee today. I know they're hot seats, but we need you here.

To follow up on what my colleague Mr. Hoback is saying, I have an article here from The Globe and Mail that was written in November:

CN spokesman Mark Hallman said the backlog of grain at the elevators is a supply chain issue that has nothing to do with the amount of oil being shipped by rail, and more railcars is not the answer. “Throwing more hopper cars into the supply chain is not going to work. It’s like morning rush hour on the freeway. You put too many cars on the road, the road gets plugged and everything else slows to a crawl,” he said.

That was before the cold snap, so it kind of goes to what Mr. Hoback is saying that there was a shortage before the cold snap. What's your answer to that, please, both from CN's perspective and CP's?

[David Miller]

As I said, we were moving record volumes in the fall. We felt we had our car fleet sized to what the ports could handle. When we saw in the fall that, in fact, it appeared the ports could handle a bit more than we thought they could, that's why we decided to add the cars.

What was said in terms of adding cars to a congested system, that's the reality we deal with. If the ports are congested, adding more cars is the worst thing you can do.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

I thought we just heard that it wasn't congested and that capacity was available.

[David Miller]

No, I'm just explaining the statement that was made there. If the ports were congested, adding cars is the worst thing you can do. When we saw that the ports actually could handle a bit more than they had before and that we thought they could, then we made the decision to add cars.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

So would you say the CN spokesman, Mark Hallman—and I don't know who he is other than he's a spokesman—made a correct statement in what he said there? Because, basically, what I'm concerned about is that this is only as big as a set of rails. If what he said is correct, then we need to do something else. We need more lines; we need something else.

By saying that we don't need to—and that's what we're hearing from both of you—increase line capacity, then we're still not going to be fixing the problem. This problem is going to happen over and over.

As some of my colleagues have said here before, we're in Canada and cold weather typically follows along with the name Canada. It should be nothing new to us. So what happens if this is a prolonged stint of cold weather? Are we going to have the same issues this time next year and the next year following, and following?

Before you answer that, I still don't think we got an answer to the CP question. We had the statement from the Alberta Federation of Agriculture that said: In fact, CP has reduced engines and railcars by 43% and 35% respectively, taking 400 locomotives and 2,700 railcars out of service at a time when we need to move the biggest grain crop in history to port. Further, CP has reduced staff by 4,500 employees.

Is that true?