Agriculture Committee on March 31st, 2014

[The Chair, Conservative, Bev Shipley]

Thank you very much.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Before you move on, Mr. Chair, if I may speak to Mr. Allen's point, I think the other thing that needs to be pointed out in this legislation is the regulatory framework for the Quorum group to have more oversight and week-by-week reporting, which was never done. It was usually a three-month retrospective that told you what went wrong, but it didn't really map out what to do.

Now we have the ability to report week by week on a quarter-by-quarter basis so we can actually see in a very timely way where these types of things, these roadblocks, are happening and then react to them. Again, that speaks to the regulations within the legislation as opposed to a legislative fix.

[The Chair, Conservative, Bev Shipley]

Thank you very much.

Mr. Dreeshen, please, for five minutes.

[Earl Dreeshen, Conservative, Red Deer, AB]

Thank you, Ministers, for being here today.

In the last little while, our committee certainly has talked with a lot of farm organizations, port managers, grain companies, and with the railway operators as well. We are getting the picture. With what happened back in Winnipeg three weeks ago, I think we're starting to see it now as we're driving up and down the roads and seeing the volumes of grain that are now moving.

The other thing is that we're dealing with the legislation here. That's what we're studying. We want to ensure that our economy continues to grow and that our transportation logistics are going to be growing with that as well.

Minister Ritz, you mentioned some of the concerns and issues. Some of our commodities are moving at 6% and 8% increases, yet there seems to be a standard 2% growth that the rail companies are looking at. Eventually they're going to have to start explaining why it is they aren't making the types of adjustments so that we can see a great deal of change. They'll have to discuss that.

I'd like to go back to the Canada Grain Act and the changes that are going to take place there. We have contractual obligations between farmers and grain companies. It's known that farmers haven't been able to deliver on their old contracts, some going as far back as November. At the same time, as was stated, in case people didn't understand the rationale for the changes, and the basis, companies are unwilling to take this grain that they have contracted for. They're paying some cash prices for grain at lower amounts in order to fill up some of the calls they have. I'm wondering if you could go through just what the significance will be with regard to some of the changes we're looking at as far as the Canada Grain Act is concerned.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Sure. In terms of the changes that we're proposing, right now in the contracts between the grain companies and farmers the only variance is called buyer's preference. What that means is the buyer, the grain company, can buy it at their whim, whenever they see fit and are able to move it. That's very prescriptive and has not helped our farmers. As we saw, that base has spread. I myself know farmers who still have contracts from October. There are very few of them left. They are cleaning them up, but there are some left from October.

This can't be retroactive, but moving forward we'll use the Canadian Grain Commission as the arbitrator, the adjudicator. What we're proposing is that if a grain company has listed a contract, or a broker has listed a contract with you for October and they haven't taken it by the end of November—that's a 30-day grace period—then you come to the Grain Commission and they will work on your behalf. They will assess penalties. This is the prescriptive area.

Again, we'll look at what recommendations come forward. In my mind it could be storage fees for the amount of the contract, 10,000 bushels or whatever it is. Also on the value of that contract they start paying interest at prime rate plus one, or whatever the regulations would call for. It starts to put an incentive in place to encourage them to actually honour those contracts that they have gone out there and done.

All of the grain companies assured me they weren't buying market share last year when they issued these contracts. They were sold orders. If that's the case then they could have taken them and moved them as well rather than moving the $5 wheat.

[Earl Dreeshen, Conservative, Red Deer, AB]

You started in with what Quorum was looking at and the metrics they're going to be looking at. I'm sure that for both departments this is important. I wonder if either one of you, or both of you, could explain that. Perhaps you could go through the significance of the numbers and of actually having those numbers on a week-to-week basis and being able to check, especially with different corridors and so on.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Yes, the biggest problem right off the top was Quorum never had access to the north-south corridor and they never had access to the corridor beyond Thunder Bay. There never really was any information as to what was available there for capacity or what was available there to move more product into some of the millers in the U.S.

There's also a two million to three million tonne market moving out of Chicago and around the globe that we've never really had access to. They're assessing how that could be run. That could be BNSF. It could be a number of different things. This will give Quorum access to much more technical data, much more timely data. The railways have been good at putting out a briefing book that really had nothing in it. It takes a lot of time to assess all the way through that and then find out there's really not the information you want. The new regulations will be much more prescriptive into what's acceptable, what's required, so that we can do a week-by-week analysis, corridor by corridor, so we know exactly where capacities are and where they're not, for all commodities.

[Earl Dreeshen, Conservative, Red Deer, AB]

Minister Raitt.

[Lisa Raitt, Conservative, Halton, ON]

Yes, I want to circle back. The information will be incredibly important. As we proceed we'll probably define even different information that we want to get, and we'll do that through the CTA regs.

There's one thing I do want to point out. Our two most efficient corridors in this country are the west coast and Thunder Bay. The question about defaulting to those two corridors is the fact that we want to move this grain as quickly as possible, so why wouldn't we pick our two most efficient corridors to do that?

A lot of the decision-making behind those corridors.... I would submit as well that our government is very acutely aware of the issues with respect to Thunder Bay, with the heavy ice that is there. Our coast guard is there with the U.S. coast guard making sure that we break the ice up so we can start moving the grain. We have a role to play, and we're there to play that role.

Finally, with respect to the utilization of the Vancouver corridor—Malcolm, I think you mentioned it before—there's the issue of picking up the quicker routes to get it out. People have been pointing to the fact that the port of metro Vancouver and English Bay have a number of vessels waiting for grain. Why wouldn't we send the grain to the vessels that are waiting for it? It makes absolute sense that we utilize our efficient corridors. That's what the railways are doing right now in order to meet the one million tonnes of grain a week, and that's what we want them to do.

[The Chair, Conservative, Bev Shipley]

I want to thank the ministers for taking the time to be part of these discussions as witnesses. You've been very thorough, very up front. I think all of us appreciate that very much. We will be taking a short break while we switch witnesses.

[The Chair, Conservative, Bev Shipley]

I want to welcome back the two assistant deputy ministers, Greg Meredith and Scott Streiner. From the Department of Justice, we have Demeena Kaur Seyan, Alain Langlois, and Sara Guild. They are not at the table but will be there for backup.

There will not be opening remarks as you have been at the table, so we are going to the first round of five minutes, with Mr. Allen, please.

[Malcolm Allen, NDP, Welland, ON]

Thank you to the department for hanging around.

The minister used a number in the carry-over of about 15 million tonnes. Most of the industry is telling me the minimum carry-over is 20 million tonnes, and some were expecting 25 million tonnes. Can you tell me how you came up with 15?

[Greg Meredith, Assistant Deputy Minister, Strategic Policy Branch, Department of Agriculture and Agri-Food]

I think the way the math would work is you look at what has been shipped offshore first, so we know that figure. We know roughly what's stored in port terminal. We know what's in elevators in the country. Therefore, knowing the crop, we do a little subtraction and come up with a number. Then we look at rail performance. The real variable in all of that is how rail will perform.

You were seeing higher numbers earlier in this exercise. I think the minister is counting on the railways to make good on their commitments, and that will work aggressively to keep the carry-out as low as possible, but you can't predict precisely.

[Malcolm Allen, NDP, Welland, ON]

No, one can't predict precisely considering we don't know what's in the country. We have an estimate. I have to be truthful. The grain companies, and the folks I'm talking to are the major grain companies, Cargill and Richardson, are saying 20 million tonnes at the lowest. That's their low end, and I think they would know since they contracted. They're saying they're contracting December and January for new contracts at the moment, for old grain, not new grain, not stuff that is going to go in the ground. They are saying this is the carry-out stuff they are talking about.

I hear your numbers. I hope the minister was right at 15 million tonnes. The difficulty is that it looks as if it's going to be a higher number, which then raises complications for next year's crop.

Mr. Meredith, where do you see us headed with that if the carry-out is, and I don't care if it's 15 million or 20 million tonnes; it's much higher than normal since the normal is five to seven million tonnes. What do you see as that kind of difficulty over the next year or two? I've heard folks make predictions that this is a two-year carry-out never mind what we grow this year. If we get another bumper crop, heaven knows what that means to be truthful. What's the agriculture plan around what this means for farmers in the short term, because it's a two-year term?

[Greg Meredith]

I think a couple or three points are germane, Mr. Allen.

We don't yet have a really granular visibility on a lot of the grain that is moving in and out of the country through other areas like the St. Lawrence or down south. The minister mentioned that when he talked about the enhancements to the grain monitoring program. We should have much increased visibility on where that grain is going and how much is going. That will be another set of data that will help us forecast what the carry-out will be.

You are quite right that the carry-out is going to be substantial. The minister mentioned that the average is about eight million tonnes. Last year it was only five. The average crop over the last little while is about 55 million tonnes depending on what's planted. This year we had 76 million tonnes, significantly above average.

Let's say we have an average year of 55 million tonnes and we do somewhere between 15 and 20 million tonnes in carry-out. You can see we're still going to be faced with a fairly significant amount of grain. This year has been a learning period in several ways. I think the grain companies will scale their marketing programs sufficiently so they'll be able to calibrate the rail performance better. That's our hope. They've experimented with other means of moving the grain this year and they'll probably explore that. We know that farmers are looking at more permanent storage on farm and also adopting other temporary storage practices and making sure they're moving that grain first.

These are the kinds of considerations we have over the next little while.

[Malcolm Allen, NDP, Welland, ON]

I know the Chair is going to cut me off, but let me just say this to add a layer of complexity, not that I'm trying to do that, but the reality is that I didn't make the ice.

The St. Lawrence Seaway is not open, sir. Let me just tell you that. The top hat ceremony downbound at the Welland Canal was supposed to be on Friday, which I would have attended. Obviously it's in my riding. It's not happening.

Mr. Streiner, your minister said quite clearly that they have as many icebreakers in Canada in the Lakehead that aren't moving out of there either.

I can tell you that it looks like the St. Lawrence Seaway is not going to be a place where they move things very quickly for a substantial period of time, unless that ice gets out of there. Pray for sun and warm temperatures and maybe we can melt Lake Erie because right now it's frozen solid, except for Port Dover.

[The Chair, Conservative, Bev Shipley]

Thank you very much.

We will now go to Mr. Zimmer, for five minutes, please.

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

I think my colleague, Malcolm, is done so there you go, I can talk now.

I have some questions.

In my neck of the woods in northeastern B.C., Prince George and Peace River, I have a lot of farmers and I'm hearing a lot of talk. We hear rhetoric from the other side. We hear rhetoric maybe from all sides.

Our people on the ground really want to hear what the actual number is of grain cars moving, and when that order in council took effect. Could you go through some of that basic information, talk about 500 or 1,000 per week? Can you quantify that? I know that's about 100 tonnes a car, but can you give us the baseline information again, please?

[Scott Streiner, Assistant Deputy Minister, Policy Group, Department of Transport]

The order in council took effect on March 7. It requires the railways to ramp up over a period of four weeks to one million tonnes per week. That equates to roughly 5,500 cars per railway, because as the minister has indicated, it's split half and half.

The railways have submitted their required reporting for the first week and now into the second week of their obligations and they're exceeding their ramp-up, but they still have to reach one million. That's the requirement. We will be keeping a close eye on those weekly reports to make sure they're there.

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

That brings me to the second question.

What triggers the fine of $100,000 a day? What is the mechanism that follows the data and triggers that response?

[Scott Streiner]

I assume you're asking about the existing order in council.

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

Yes.

[Scott Streiner]

For the purposes of the order in council, it's an order made under subsection 47(1) of the Canada Transportation Act, so the enforcement provisions are there in the legislation.

What would be required would be for there to be evidence of a failure to meet the requirements under the order. If that evidence was there, the minister would refer the matter for prosecution, and upon conviction the fine would be imposed by the courts.

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

How is that $100,000 quantified, then? For our farmers out on the Prairies, how is this quantified and how do they understand that? What time period does it take to go through the process fully before that fine is brought forward?

[Scott Streiner]

That would depend on the speed of the prosecution, frankly, and the speed of the court system. There are a number of legal steps that would have to be followed.

What we're talking about is a fine upon conviction, not an administrative penalty. Needless to say, prosecution and conviction take longer than an administrative penalty would.