Evidence of meeting #60 for Transport, Infrastructure and Communities in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was grain.
A recording is available from Parliament.
4:40 p.m.
Executive Vice-President, Forest Products Association of Canada
Well, I'm glad you've taken it as an optimistic view, but our perspective—sorry I've lost the thought.
Repeat the question. Sorry.
4:40 p.m.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
You said ideally that you'd never have to use this legislation and that you see it as a backstop.
4:40 p.m.
Executive Vice-President, Forest Products Association of Canada
Yes, it's a backstop.
The fundamental point is that the forest industry believes in commercial relations but we do not experience them on a day-to-day basis with the railways, as the situation is today. We're hopeful that the legislation moves us forward. We're prioritizing three asks of you today that take it that much further forward in terms of our having a tool in our toolbox.
4:40 p.m.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
Okay.
My next question is directed to Mr. Phillips. As a shipper in my prior life—I will admit that it was not with rail—I did a lot of shipping with trucking companies across North America. I'm empathetic to some of the concerns that you, and in fact all of the parties, bring forward in this matter. But from what I've heard of the testimony today, I also have to be quite honest. There seems to be this sense that if the railways were a much more competitive industry, if there were 10 railways in Canada, all of these issues you've talked about wouldn't exist. I don't know whether you've ever dealt with trucking companies across North America. Do you really truly believe that having 10 railway companies across Canada and the resulting competition would solve all these issues that you've brought forward today?
February 26th, 2013 / 4:40 p.m.
Executive Director, Grain Growers of Canada
I don't think we're asking for 10 companies.
4:40 p.m.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
No, I'm not specifying the number; I'm just referring to the competitive basis of that.
4:40 p.m.
Executive Director, Grain Growers of Canada
I think what we're looking at here is the level of service and timeliness of service to meet our sales commitments. That's what we're really talking about.
I would say that in the trucking business if you're not getting that timely service from company A, because there are more than one of them you would go to company B. That's not always the same option here because of the distance. The rail lines are apart in the prairies, for example.
An anecdote for you is that we've worked hard to secure market access and negotiate trade agreements with all of these countries. When Pulse Canada was down in Colombia and we'd just signed a deal there, we were looking forward to increased exports to Colombia, and the Colombians said they weren't sure they'd actually buy anything more from us because they couldn't get reliable enough delivery of product on time.
4:40 p.m.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
You were talking about some of the times when you get market pricing that just comes across and you still need to get your stuff to the market in a certain timeframe. I've run into the exact same thing in my business. I've had clients say that they needed to get something to California by such and such a date. It didn't matter what trucking company I was dealing with, they couldn't get it there in the timeframe I needed.
Those are some of the realities that we also have to be cognizant about in this. That's my point here. Does competition change and affect everything? Just because there are 10 railways, can they deliver exactly what you need every time in the timeframe you need it? Do you really believe that would be the case?
4:40 p.m.
Executive Director, Grain Growers of Canada
In fairness to the grain industry, most of the tenders that go out and that we can bid on are several months in advance. We're not trying to deliver grain to Turkey in 10 days from today. I would argue that these are time periods during which we have ample time to meet our commitments.
4:40 p.m.
Executive Vice-President, Forest Products Association of Canada
If I could intervene, any form of improvement from added competition will be highly applauded by the shipper community. We need more competition. We don't think it's going to correct the problem 100%, but it will move us forward. You asked about the quality of the service we're facing, and in my spastic moment, I lost that point.
Honourable member, is it reasonable for forest product companies today to get only half the number of cars they're ordering? We have members across this country who are only getting 50% of the rail car supply they need to move their product. I just don't believe that's fair.
4:40 p.m.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
Don't get me wrong, because I understand that both sides of this have to be brought forward.
One of Mr. Sobkowich's statements from back in December was this:
We are optimistic that this legislation will allow for meaningful commercial negotiations with the railways by providing an arbitration process and legislated penalties. The arbitration process appears to be a binding, cost-effective process that occurs under a reasonable timeline.
That was his stance on December 11. I seem to be hearing quite a different point of view today.
4:45 p.m.
Representative, Coalition of Rail Shippers, and Executive Director, Western Grain Elevator Association
I can address that.
That press release was issued on the day the bill was released. When we went through the arbitration process on that day, we were under the impression that we'd be able to take penalties and liquidated damages to the arbitrator. Since then, we've found out that's not the case.
4:45 p.m.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
So you've had a change of perspective on that.
Basically what I wanted get at is the fact that this legislation has to strike a balance with the needs of the shippers. As I said, I've done a lot of shipping in my lifetime, so I'm very cognizant of the need to get things in a timely manner, and how frustrating it is when it doesn't happen, and the challenges you face going forward.
I also want to put into context the fact that competition doesn't necessarily negate every negative factor you have in shipping. I've had many occasions where on a Friday a truck didn't show up that I needed to be move my product to the States that afternoon. It coming on Monday didn't do me any good; I missed my delivery and I probably lost a client from it. Those things happen in the trucking industry, where you have a lot of competition. I've had firms that have served me well for five or six years, and then dropped the ball three or four months in a row—continuously.
The reason I brought that up is that we're looking at what a reasonable expectation ought to be of a competitive environment that everybody should be able to accept, whether a shipper or the railways. That's the balance we're trying to find in Bill C-52. To some degree, we've found a good balance. We'll look closely at what you brought forward as your amendments, but it's important to acknowledge that.
Mr. May, you said that you found three months to negotiate a contract to be extremely long. In my business, I would be extremely happy with that. Mr. Foran can probably speak to that, because he's probably been involved with a lot of contracts. That three months is a pretty quick turnaround for a service contract. These things can take a lot longer than that in the normal commercial environment.
Would you not agree?
4:45 p.m.
Chair, Western Canadian Shippers' Coalition
Yes, but it wasn't to negotiate a contract. It was to negotiate a remedy with the arbitrator ruling on which service level agreement would in fact prevail.
I want to address something else you said. I agree with you on competition, but I'm not sure that we're clear on the level of service that's being provided. I'd like to correct one thing, and you can ask others here about that. Since the government committed to the legislation, we've heard that service has improved. I can tell you that it hasn't. I can tell you that as recently as two weeks ago we had mills just about shut down because they couldn't get boxcars in western Canada, and not just one. Whether that's coincidental with a broader understanding of Bill C-52 and perhaps the fact that it is balanced versus a shipper bill that would have levelled the playing field—and that's our language—I don't know.
I can tell you that the operating model that our merchandise members are used to is their asking for 40 cars, being told that they could get 30, and then receiving 20. I agree with you that competition isn't going to solve everything. It's not going to make it a perfect world; it can't, and we don't expect that. But, Lord, we expect an improvement. It may be worse than you folks realize it is.
4:45 p.m.
Conservative
4:45 p.m.
NDP
Robert Aubin NDP Trois-Rivières, QC
Thank you, Mr. Chair.
Thank you to our witnesses for joining us this afternoon. I would, however, like to say that I'd prefer to have fewer witnesses at our next meetings. That way, we would have more time to benefit from each witness's expertise. I would greatly appreciate that.
Since I have just five minutes, my questions will be for the Forest Products Association of Canada representatives. Hopefully, I will be able to get a better sense of the problems that shippers in my riding face.
If Bill C-52 were to come into force in the near future, what would it mean for you? Clearly, you couldn't take advantage of the measures set out in the bill with respect to existing contracts.
Does that mean that, for your association, the measures would apply in a year or two?
When the minister appeared before the committee, he told us that the reason current contracts did not qualify was to respect the confidentiality of businesses in relation to railway companies.
Do you share that opinion, or on the contrary, do you think it would be possible to apply the rules set out under Bill C-52 to current contracts?
4:50 p.m.
Executive Vice-President, Forest Products Association of Canada
Ideally, it would be nice not to have that hurdle in the front of this bill. It's great that you're raising that question.
It was on our long list of asks. It didn't make it on our short list. Getting it into this bill is one of the most important questions that I think needs to be looked at. There's a lot of burden up front, and preliminary proceedings would be quite significant. This is a core question.
I've already made the comment as well about some of the arguments that would go forward to say whether a company does actually have a contract. In this environment that we've been living in we have seen a significant dilution to what I would call a contract amongst our membership. I can't speak for the other members of this panel, but significantly in the forest industry, there's been a dilution away from what we hope the bill is referring to, which is more of a true contract between two parties.
While I have the floor on that point, I would also like to add the challenge that this bill creates for us and the dichotomy that we're struggling with. On the one hand, we want to prioritize commercial relations, but on the other hand, the introduction of this point around third parties seems to remove the boundaries of the negotiation of the commercial arrangement. I'm very confused about that. I would really like to understand why, when we are intending to support commercial relations, we introduce this concept of third parties that have nothing whatsoever to do with the commercial relationship between me as a shipper, or Brian as a shipper, and the railway.
4:50 p.m.
NDP
Robert Aubin NDP Trois-Rivières, QC
Thank you. My sense is that I have barely a minute left.
You make three main recommendations in the document you gave us.
Should we rank them by priority, or should we look at them as being concurrent, meaning you can't have one without the others?
4:50 p.m.
Executive Vice-President, Forest Products Association of Canada
Yes, we have actually submitted them in order of our priorities. First is removing the word “operation”; second is the third party; and third is securing or locking down what the elements of a service agreement are. Those three are all interlinked, but that is the prioritization we place on them.
4:50 p.m.
NDP
Robert Aubin NDP Trois-Rivières, QC
In a press release, you gave the bill a passing grade. I have repeatedly heard people from various organizations call it a step in the right direction. But we all know a step is not enough. If the goal is to walk, we need more than a step.
If we were able to include the three priorities you identified as valid amendments to Bill C-52, do you think it could walk on its own, so to speak?
4:50 p.m.
Executive Vice-President, Forest Products Association of Canada
Absolutely.
4:50 p.m.
Conservative
The Chair Conservative Larry Miller
You have about 20 or 30 seconds left, if anybody wants to add something.
We'll now move on to Mr. Poilievre for five minutes.
4:50 p.m.
Conservative
Pierre Poilievre Conservative Nepean—Carleton, ON
The bill includes an administrative monetary penalty of up to $100,000 for each confirmed breach by a railway of its arbitrated service agreement obligation. That is actually four times higher than the highest administrative penalty currently available in the act.
Do you not agree that this will have some deterrent effect on non-compliance?
4:50 p.m.
Executive Director, Pulse Canada
I think what we should consider is the fact that while we haven't seen the form that it'll take, and we understand that regulations are being drafted and will be put in place later this year, it might have an impact on what you would consider to be chronic failures.
What's difficult to understand is that hundreds of shippers across this country every day have ordered equipment and received an allocation for that equipment that may or may not meet their order. They then wait for the equipment to show up on the day it was committed to show up—and it may not show up on that day, or the amount that they had ordered or were committed to be given does not show up. Then once they've loaded and released those cars, perhaps the transit times exceed what's been agreed upon as a reasonable range. When you consider all of those factors occurring for hundreds of shippers every day and the number of breaches that would occur within those contexts, it's difficult to understand how the application of AMPs would be the most cost effective and efficient process to follow. To have each one of those hundreds of shippers appeal to the agency to have an enforcement officer come and determine whether a breach has occurred on the spotting performance or on the allocation—
4:55 p.m.
Conservative