Evidence of meeting #52 for Transport, Infrastructure and Communities in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fund.
A video is available from Parliament.
5:10 p.m.
Conservative
5:10 p.m.
Conservative
Ed Komarnicki Conservative Souris—Moose Mountain, SK
Thank you very much.
Obviously, I hear that at least CP and CN carry insurance pretty much in line with the cap amount here, and of course the new fund is there for any excess coverage. My question is probably going to relate most to the short lines, because there seems to be a greater degree of consternation about the amount of insurance there.
Mr. Beardsley, I think I heard you say that theoretically the insurance is available but it might not be “viable”. I think that's the word you used.
There is no question that short lines carrying dangerous goods—crude oil—can be involved in an accident, and I think the general public would expect that there would be some insurance coverage by short lines and, of course, a pool to draw from beyond that. As I understand it, that coverage is either $50 million or $125 million, is coming into effect a year after the act comes into being, and is then doubled in the two years.
First, from the insurance perspective, is there any reason why that amount couldn't be made available to short lines?
5:15 p.m.
Senior Vice-President, Risk Consulting, Western Canada, Aon Global Risk Consulting, Railway Association of Canada
I'll answer that.
At the end of the day, there is capacity available in the marketplace for short lines. There is capacity, but the cost would be in excess of what they're currently paying.
5:15 p.m.
Conservative
Ed Komarnicki Conservative Souris—Moose Mountain, SK
So obviously what they're currently paying may not be sufficient for coverage, but you're saying that you have the capacity to provide the insurance. If I heard you correctly earlier, you said that you might want to have some limitations within the policy to limit some of the coverage to reduce the premium, and you might look towards that. But in either case, you're able to provide the insurance.
5:15 p.m.
Senior Vice-President, Risk Consulting, Western Canada, Aon Global Risk Consulting, Railway Association of Canada
Yes, I think so.
I think the greater concern for the insurance industry is with the word “involved” and how clear that is, because as we spoke of, the insurance pays on a per accident basis. The way this could work, based on the word “involved”, is that you could have multiple railroads paying out at the same time. Although we're not certain, there is a possibility that the insurance companies could try to limit that to make sure they only have to pay out once.
5:15 p.m.
Conservative
Ed Komarnicki Conservative Souris—Moose Mountain, SK
Now, from the short-line perspective, I appreciate that not all the short lines are the same, but if you're carrying a dangerous product and you have an accident, the liability may well be the same. From your perspective as a short line, do you see the amount that initially is set in place and then doubled as being too much of a burden, too fast, or just simply as a burden you can't bear?
5:15 p.m.
President and Chief Executive Officer, Essex Terminal Railway Company, Railway Association of Canada
It's a burden we can't bear.
Again, as I said earlier, a short line is not a short line.... You can't compare the risk for my company moving a car 4 kilometres at less than 10 kilometres per hour to that of another short line that has main-line track and is operating over hundreds of miles of track at higher speeds. There's no comparison in the risk between the two operations, yet we're all painted with the same brush.
5:15 p.m.
Conservative
Ed Komarnicki Conservative Souris—Moose Mountain, SK
You're saying that you don't argue with the fact there should be insurance. You're saying there should be varying amounts depending on how much you haul or carry and the circumstances under which you carry it.
5:15 p.m.
President and Chief Executive Officer, Essex Terminal Railway Company, Railway Association of Canada
Yes.
5:15 p.m.
Conservative
Ed Komarnicki Conservative Souris—Moose Mountain, SK
What about the timing? I noticed that the amount of insurance is required to be in place within a year and then to be doubled in two years. Would an additional amount of time allowing the short lines to get into position to meet those requirements be of any benefit to your company or to other short lines?
5:15 p.m.
President and Chief Executive Officer, Essex Terminal Railway Company, Railway Association of Canada
I don't understand how you would get into position. Do we cut back on our maintenance? Do we cut back on our employees? Where do we find the money? If we don't have to find it this year, we have to find it next year or the year after. We can't pass it on to our customers, so at some point in time we're going to have to deal with the reality of the increased premiums.
5:15 p.m.
Conservative
Ed Komarnicki Conservative Souris—Moose Mountain, SK
You're speaking of your own particular corporation, but does anyone here have knowledge of other short lines that do haul a lot of crude? I know that in my riding, for example, in Souris—Moose Mountain, there is a lot of crude being hauled.
5:15 p.m.
President and Chief Executive Officer, Railway Association of Canada
I can speak to that. We do have short lines that are moving significant amounts of crude, and some of them are able to charge their customers for the additional amount of insurance. They can absorb it into the costs of their operation. In that case, the amount of insurance that is proposed in the bill is commensurate with the risk. It is possible for that railway to recoup its additional costs from its customers. This is not universally true for all the short lines.
What we're suggesting is that there needs to be flexibility in the bill so that companies like Mr. Berthiaume's could go to the agency and argue that its risk is not commensurate with the table that's suggested by the bill and that it pays an amount of insurance that is equal to the risk.
5:15 p.m.
Conservative
Ed Komarnicki Conservative Souris—Moose Mountain, SK
What percentage of short lines would you say are in the Souris—Moose Mountain category, where they haul a significant amount of crude, compared to the one that's mentioned?
5:20 p.m.
President and Chief Executive Officer, Railway Association of Canada
In the case of the one you're talking about, they are a provincially regulated short line and isn't even subject to this bill. But what we expect will happen is what happens in more than 90% of the cases of rail safety bills: they are copied by the province identically. They don't have the regulatory capacity and the legislative capacity to review, invent, and write a new bill. Instead, they copy the federal bill, so at some point all of those 40-plus short lines out there will be subject to this bill or a provincial equivalent.
5:20 p.m.
Conservative
Ed Komarnicki Conservative Souris—Moose Mountain, SK
What's the percentage between the two types of dollars?
5:20 p.m.
President and Chief Executive Officer, Railway Association of Canada
There are not two. There are going to be more than two.
5:20 p.m.
Conservative
5:20 p.m.
President and Chief Executive Officer, Railway Association of Canada
I would suggest to you that with probably 30%, 40%, or even 50% of railways, when you look at this particular regime, any reasonable person would see that the risk is not commensurate with the amount of insurance they will be forced to pay.
5:20 p.m.
Conservative
Ed Komarnicki Conservative Souris—Moose Mountain, SK
Okay. Where the risk is commensurate with the amount of insurance that it is proposed they pay, have you any knowledge in that case in terms of whether the two years, coming from the minimum to the maximum amount, is an issue or not?
5:20 p.m.
President and Chief Executive Officer, Railway Association of Canada
I'm glad you asked that question, because my view is that I don't think it's going to help much. Even though I recognize that it was there to help, I don't think it helps much, because in two years the insurance situation could change. There could be an accident involving a short line, and that could be a provincial short line, by the way, but the insurance market could change as a result of that, because there would be a change in the perceived risk by the insurance industry. All of a sudden the cost of that same amount of insurance is higher next year than it is this year, so it's a difficult thing.
What I guess I'm signalling is that there is a real need for the bill to have a mechanism so that somebody can decide what makes sense. That's what we'd be asking for.
5:20 p.m.
Conservative
5:20 p.m.
President and Chief Executive Officer, Railway Association of Canada
I think it's a reasonable request.
5:20 p.m.
Conservative
The Chair Conservative Larry Miller
Thank you. We are out of time. We have to clear the room and go into camera.
I want to thank all of you for coming here. I appreciate it very much.
Thanks again.
We will suspend for a couple of minutes while we secure the room.
[Proceedings continue in camera]