Transport Committee on April 23rd, 2015

[The Chair, Conservative, Larry Miller]

We'll call our meeting to order. This meeting is televised. We might be a minute early, but I believe everybody is ready to go.

Minister, thank you very much for being here.

Mr. Tupper, Ms. Kinney, and Mr. Langlois, thank you as well.

I'll turn it over to you, Minister.

[Lisa Raitt, Conservative, Minister of Transport]

Thank you, Mr. Chair.

I just want to note that we're starting exactly one minute early, which is a good thing today.

Good afternoon, Mr. Chair and honourable committee members.

I am very pleased to be here with you today to talk about Bill C-52, the safe and accountable rail act, which, as you well know, is unquestionably a very important piece of legislation that aims to amend both the Canada Transportation Act and the Railway Safety Act.

I'm going to begin with the proposed amendments to the Canada Transportation Act, or CTA.

The tragic Lac-Mégantic derailment has shown us that our liability and compensation regime for rail must be strengthened. The Montreal, Maine and Atlantic Railway carried only $25 million in third party liability insurance, which we now know is not nearly enough to cover the incredible magnitude of the resulting damage to and loss of both life and property that night.

In the 2013 Speech from the Throne, our government committed to holding railways and shippers more accountable. Bill C-52 does that by ensuring that sufficient compensation will be available to pay for damages and compensate victims in the event of a railway accident.

With this bill, railways will be required to hold a mandatory level of insurance based on the type and volume of dangerous goods that they carry. These levels will range from $25 million for short lines carrying limited or no dangerous goods to $1 billion for railways carrying significant amounts of dangerous goods, namely, CN and CP.

These mandatory insurance requirements have been set based on analyses of historical accident costs, taking into account the severity of past accidents involving certain goods. These requirements make certain that a railway's insurance directly reflects the risk associated with its operations. These insurance levels were determined to be adequate to cover the cost of the vast majority of potential accidents.

While a scenario of the magnitude of Lac-Mégantic is thankfully an extremely rare occurrence, we want to be certain that all costs in such a case would be covered. That is why a supplementary shipper-financed fund was created to provide compensation above the railway's insurance for accidents involving crude oil, and any other goods added through regulation.

In the event of a rail accident involving crude oil, railways will be held automatically liable, without the need to prove fault or negligence, up to their insurance level, and that will happen immediately. There will be certain defences to this strict liability. For example, a railway would not be held liable if the accident was a result of war, hostilities, or civil insurrection such as a terrorist act, as these occurrences are outside of the railway's control. If accident costs reach beyond the railway's mandatory insurance level, the supplementary fund covers the remaining damages.

For the supplementary fund, we have included a broad definition of crude oil in recognition of the serious damage that all crude can cause if released. Even a less volatile crude can have a grave impact on the environment and result in very high remediation costs. The fund will be financed through a levy on shippers of $1.65 per tonne of crude oil transported by federally regulated railways, indexed to inflation.

The aim is to capitalize the fund to $250 million. That amount would provide substantial additional coverage for crude oil accidents above the insurance levels. Based on a reasonable projection of oil-by-rail traffic growth in the coming years, we have determined that with a $1.65 per tonne levy, we would reach that target in approximately five years. That said, however, it is important to emphasize at this point that the $250-million capitalization is a target. It is not a cap.

The bill allows the Minister of Transport to discontinue or reimpose the levy as necessary. It could be put in place indefinitely or for any specified time period. This means that the levy could continue for longer than five years should oil-by-rail traffic grow at lower than expected rates. It also means that the fund could be capitalized to a different amount should that be considered appropriate.

Just to be clear, Mr. Chair, the fund will cover all costs above the railway's insurance and will not be capped. In the unlikely event that damages from an accident surpass both the railway's insurance level and the amount in the supplementary fund, the government's consolidated revenue fund will back up the fund but then be repaid through the levy.

By creating mandatory insurance levels for railways and providing an additional pool of available funds, Bill C-52 makes certain that, in the event of a rail accident, there will be sufficient resources to cover all damages.

Following the tragic Lac-Mégantic derailment, and to address the recommendations in the Auditor General of Canada's fall 2013 report, the proposed amendments to the RSA will further strengthen the oversight of federally regulated railways and Canada's railway safety regime in certain areas.

These include the following: a new power for the minister to order a company to take corrective measures should a company's implementation of its safety management system risk compromising safety; a new authority to regulate the sharing of information, records, and documents from one party to another, other than the department, and an example here, of course, is from a railway company to a municipality; broader railway safety inspectors' powers to intervene in a more effective way with any person or entity, including companies, road authorities, and municipalities, to mitigate threats to safety; a broader power for the minister to require a railway to stop any activity that might constitute a risk to safe railway operations, or to follow any procedures or to take any corrective measures specified; and, a cost reimbursement scheme for provinces and municipalities that respond to fires believed to be caused by a railway company's operation.

Part of Transport Canada's prevention strategy has been to ensure the department has an effective oversight regime. This means both ensuring that industry is in compliance with the various regulations that govern it and responding to changes in the risk environment. Transport Canada continuously examines and monitors its resource levels to adjust and reallocate as needed to address emerging issues, trends, and higher-risk issues.

I announced, as part of the department's response to the Transportation Safety Board report on Lac-Mégantic, increased resources dedicated to the rail safety program. Rail safety had approximately 100 inspectors at the time of the Lac-Mégantic accident. As of March 2015, Transport Canada employed 122 rail safety oversight personnel.

Furthermore, I do want to assure the committee that the safety management systems are not self-regulation—far from it. Safety management systems complement a robust railway safety regulatory regime that includes requirements of the Railway Safety Act and the associated regulations, rules, and engineering standards. The new railway safety management regulations of 2015, which came into force on April 1 of this year, are more prescriptive than the 2001 regulations and really will further strengthen railway safety operations across Canada.

Mr. Chair, I would be pleased to answer any questions you may have.

This concludes my remarks.

[The Chair, Conservative, Larry Miller]

Thank you, Minister.

I don't have any questions for you, but I'm sure there are some around the table.

Mr. Mai, you have seven minutes.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

My thanks also to the minister and to our witnesses for being here today.

Madam Minister, for the disaster fund, you mentioned $250 million. Could you tell us how you arrived at that amount? Given the current situation, how long will we need to reach that amount of $250 million?

[Lisa Raitt, Conservative, Halton, ON]

Thank you, Mr. Mai.

I'm going to ask for the particulars of the specifics to be outlined by my colleague here.

What is your title, Shawn? You're the assistant deputy minister for policy?

[Shawn Tupper, Assistant Deputy Minister, Policy, Department of Transport]

That's correct.

[Lisa Raitt, Conservative, Halton, ON]

I got it right: Mr. Tupper, for policy. He's a policy wonk.

That's what Mr. McGuinty calls you. I call you my friend who will now answer the question, please.

[Shawn Tupper]

Thank you.

It's actually fairly straightforward math. We looked at the volume of crude oil that is transported in the system. We looked at what's forecasted in the future. We identified $250 million as a reasonable sum to target in terms of capitalization of the initial fund, and we did the division based on the amount of crude we expected to be shipped against how we would get to $250 million. It worked out to $1.65.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

How long will it take to reach that $250 million?

[Shawn Tupper]

We're setting a target of five years.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Five years? Okay.

What are your figures on the Lac-Mégantic disaster? We hear $400 million mentioned, if not more. The Government of Quebec has allocated a lot of money to it. Could you tell us what you feel is the total amount of the costs of the disaster at Lac-Mégantic?

[Lisa Raitt, Conservative, Halton, ON]

I think the numbers are still coming in as we continue the environmental cleanup. As you know, there's a process in place right now with respect to compensation for the victims, and that's before a specific level of court. I believe that there has been a settlement put in place.

I don't know if my officials have any further information than what I have. There are anecdotal numbers out there that are very high in terms of what it is, but remember, it's the first level of insurance starts...so in the case of CN and CP, you start at $1 billion, then it's the $250 million, and then beyond.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

There are concerns and, unless I am mistaken, the objective of the bill is to make sure that taxpayers do not have to pay for the clean-up. In the case of Lac-Mégantic, have you considered making the funds retroactive and applicable to Lac-Mégantic, so that taxpayers do not have to pay for that clean-up?

[Lisa Raitt, Conservative, Halton, ON]

Our government always said, Mr. Mai, that we would stand with the people of Lac-Mégantic and ensure that there were funds available for both the cleanup and compensation.

With respect to the development of this, the supplementary shipper fund is developed on a going-forward basis. It is not a retroactive basis.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you.

In subclause 17(1), we repeal the definition of “fatigue science”. The definition states that it “means a scientifically based, data-driven and systematic method used to measure and manage human fatigue”. According to the notes we had regarding the briefing for this bill, it was actually repealed because there was something limiting about the definition, or it was limiting during the development of the new SMS. Can you explain why was it limiting? Also, why not use science?

[Lisa Raitt, Conservative, Halton, ON]

The definition of fatigue science restricted the ability to make regulations for SMS, so the proposal was to remove it completely and instead include criteria within which SMS regulation-making authority could be used related to management of employee fatigue.

Perhaps Laureen can give you some more granularity on it.

[Laureen Kinney, Assistant Deputy Minister, Safety and Security, Department of Transport]

Yes, if I may.

Without getting into the legal details—Alain can do that if required—fundamentally, as we started to draft new and much more robust safety management system regulations, as the minister mentioned, what we found when we tried to add specific elements of a normal fatigue management system—and we can list some of those four or five elements for you, if you like—was that those elements were not allowable under the way that the definition had been written. It was a good definition of science in fatigue management, but it was actually crafted with three very short elements, and those three short elements confined our ability to do more with fatigue management. So it was fundamentally that.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thanks very much.

I will leave my time for Mr. Sullivan.

[The Chair, Conservative, Larry Miller]

You have a minute and 45 seconds.

[Mike Sullivan, NDP, York South—Weston, ON]

Thank you, Mr. Chair.

Madam Minister, you stated that Lac-Mégantic was an extremely rare event, yet since Lac-Mégantic there have been upwards of a dozen collisions in North America involving oil transported by rail. The result of the most recent event, in Gogama, Ontario, is that CN has voluntarily reduced its own speed, which is five miles an hour slower than the speed that you have suggested they should run at.

The railroads have also provided the ministry with risk assessments, which I'm sure have enlightened you in terms of this amount of money, but what do those risk assessments show? First, can we get copies of the risk assessments? CN has already said that they will.... Second, what do those risk assessments show about the risk in heavily populated urban areas such as Toronto and what the residents there are facing in terms of a heightened risk because of the 400-fold increase in transportation of crude?

[Lisa Raitt, Conservative, Halton, ON]

I'll answer first on the risk assessment, if I may, Mr. Sullivan. Basically, although CN may want to release information and has said that it would release some information, the information is not only proprietorial in terms of business but is also security information, so the department has to look at it from that perspective.

With respect to the questions around the severity of Lac-Mégantic, I said it that way because it was such a horrible loss of life as well as an environmental degradation. Although we have seen a number of derailments that have also ended with an escape of fuel and a subsequent fire and damage, they have never been to that extent....

That's exactly what we're trying to do with this kind of act: to prevent that from happening. We've been working collectively on that since I think July 2013.

[The Chair, Conservative, Larry Miller]

I'm sorry, Mr. Sullivan. Your time has expired.

Mr. McGuinty, you have seven minutes.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Chairman, it's good to see you again.

Thank you very much, Minister, for being here this afternoon.

Minister, I want to just begin by asking you this: when you prepared this bill, did you look at the cost implications of administering the measures in the bill?

[Lisa Raitt, Conservative, Halton, ON]

There was a very fulsome stakeholder outreach done on this, I would say, Mr. McGuinty.

Specifically, there are two aspects. You take a look at what the costs will be on those who will be affected, and you take a look at the costs of implementation on the department. I think you're talking about that one. Transport Canada, which held the pen on drafting and did the consultations, hasn't indicated that it needed any further resources for the implementation. Secondly, the stakeholders did give us feedback, which we incorporated before we went out to the final publication of this bill.

[David McGuinty, Liberal, Ottawa South, ON]

So in regard to the costs, for example, to establish the pooled compensation fund and administer it, are there no costs?