Transport Committee on Oct. 30th, 2023

[The Chair, Liberal, Peter Schiefke]

I call this meeting to order.

Welcome to meeting number 85 of the House of Commons Standing Committee on Transport, Infrastructure and Communities.

Pursuant to the order of reference of Tuesday, September 26, 2023, the committee is meeting to discuss Bill C‑33, an act to amend the Customs Act, the Railway Safety Act, the Transportation of Dangerous Goods Act, 1992, the Marine Transportation Security Act, the Canada Transportation Act and the Canada Marine Act and to make a consequential amendment to another act.

Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders. Therefore, members are attending in person in the room and remotely using the Zoom application.

I wish to inform the committee that all witnesses appearing virtually have been tested for sound quality for the benefit of our interpreters, and all of them have passed the test.

Colleagues, appearing before us today from 3:30 to 4:30 for the first half of our committee meeting, we have, from the Canadian National Railway Company, Mr. Eric Harvey, senior counsel.

Welcome.

We also have, from Canadian Pacific Kansas City, Mr. Nathan Cato, assistant vice-president, government affairs.

Welcome to you as well, sir.

Finally, we have, from the Railway Association of Canada, Mr. Marc Brazeau, president and chief executive officer.

Welcome.

We will begin with opening remarks.

For that, I will turn the floor over to you, Mr. Harvey. You have five minutes, sir.

[Eric Harvey, Senior Counsel, Regulatory, Canadian National Railway Company]

Thank you, Mr. Chair.

CN, the Canadian National Railway Company, would like to thank the committee for its invitation to appear today in connection with Bill C‑33, which amends various legislative provisions, including the Railway Safety Act and the Canada Marine Act.

As the operator of a railway which links the Atlantic Ocean to the Pacific Ocean within Canada, and to the Gulf of Mexico in the United States, we are pleased to be able to provide our comments on this bill.

Generally speaking, we encourage the government to show restraint and to intervene in the transportation sector only where a rigorous analysis has shown that there is a problem that business interests can't resolve, and only when absolutely necessary to deal with that specific problem. It should also factor in the impact that one or more interventions may have on the whole supply chain. Every legislative intervention needs to look at the major investments required to maintain safe and effective railway services that meet the legislative requirements for the services we need to provide to all our customers.

With respect to the amendments to the Railway Safety Act, we understand the government's desire to provide a better framework for railway safety. I would underscore the fact that Canadian railways have for many years, of their own volition, established protocols to prevent the types of events covered by the bill and to respond to such events. We therefore view this proposal favourably.

I would nevertheless like once again to repeat the suggestion that the words “security” and “safety” be redefined separately rather than combined in a single concept, as Bill C‑33 proposes. This failure to make a distinction could lead to unnecessary debates over the scope of implementation or monitoring measures.

We have also taken note of Transport Canada's intention to add prohibitions with respect to the alteration, damage and description of railway facilities, in addition to dangerous behaviour at such facilities. These would constitute additional legal grounds enabling us to respond where necessary.

The Canada Marine Act requires ports under its jurisdiction to manage their affairs on a commercial basis to maximize the efficiency of their operations and support the Canadian economy. We understand that Bill C‑33 will not change this guiding principle, and we appreciate that this is the case.

There is no doubt that Canadian ports are critical infrastructure for our national supply chain. Their efficiency defines the throughput of that supply chain and goes directly to the bottom line of the Canadian economy. From our perspective, Canadian ports have delivered in a manner consistent with their mandate under the current structure.

We support the provisions of the bill that will declare port terminals to be to the general advantage of Canada. This will provide greater certainty with respect to federal jurisdiction over these entities so that data can be collected and used to increase port efficiencies. To maximize the existing available capacity, better coordination between port terminal operators, port users, railways and other supply chain participants through the exchange of real time information is needed. This provision is a step in the right direction.

Even though Bill C‑33 does not deal with this question directly, we would like to comment on an important point for which there is a broad consensus: the need for investments in the Canadian supply chain.

A recent report assessed that Canada needs, in the next 50 years, investments of $4.4 trillion in marine and transportation infrastructure to meet growth in population and in GDP. This conclusion is consistent with the consensus that there is an opportunity for all participants in the supply chain and various levels of government to work together towards a collective goal. We have made suggestions to the government to put this option in motion, starting with fiscal measures that would encourage investments by all participants in the supply chain. We reiterate this imperative today. We believe that this measure would encourage grain terminals in Vancouver, for example, to prioritize infrastructure that enables the loading of grain ships in the rain, an operation currently not efficiently possible at our country's busiest port but available just south of the border, which limits the capacity of the Canadian grain supply chain.

We'd like to thank you, and we are grateful for the opportunity we have been given to discuss any questions you may have with members of the committee.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Harvey.

Mr. Cato, I'll turn the floor over to you. You have five minutes for your opening remarks.

[Nathan Cato, Assistant Vice-President, Government Affairs, Canada, Canadian Pacific Kansas City]

Thank you, Mr. Chair.

And thank you to the committee for the invitation to appear today regarding Bill C‑33.

I'm the Assistant Vice-President, Government Affairs, Canada, Canadian Pacific Kansas City.

On April 14, 2023, Canadian Pacific and Kansas City Southern combined to create the first and only class 1 railway network uniting North America by seamlessly connecting Canada, the United States and Mexico. The combined CPKC network allows us to offer safer, more reliable and additional competitive options for shippers, particularly now with unrivalled access to North American ports.

I will start with safety, because at CPKC everything starts with safety, every day.

Railway safety is foundational to everything we do.

In 2022, our legacy Canadian Pacific network once again led the North American rail industry in safety, achieving the lowest train accident frequency among all class 1 railroads for the 17th consecutive year, and our safety performance continues to improve.

Our 2022 train accident frequency is CP’s lowest on record. We are also achieving a stronger safety performance relative to our industry peers. In 2013—ten years ago—our legacy CP network had a train accident frequency rate that was approximately 29% below the class 1 industry average across North America. In 2022, our legacy CP network was 69% below the class 1 industry average.

In 2022, CP also achieved a 40% improvement for personal injury safety performance since 2016.

These safety results are driven by strong investment in people, processes and technology. In fact, our capital investment over the past decade, after inflation adjustment, is approximately 50% higher than it was in the decade previously.

CPKC supports the railway industry’s position that Parliament should amend Bill C-33 to include separate definitions for “safety” and “security” in the Railway Safety Act. As drafted, Bill C-33 would insert into the RSA a definition of “safety” that includes the concept of “security.” “Safety” and “security” are distinct concepts.

Security programs are designed to prevent intentional acts by individuals seeking to do harm or damage. By necessity, measures implemented to address security risks are different than those for safety, and information about them is significantly more restricted to maintain their effectiveness.

Including separate and distinct definitions for these two concepts in the RSA would be more clear, precise and accurate.

With respect to the amendments to the Canada Marine Act, we urge Parliament to amend Bill C-33 to require logistics and supply chain expertise for appointments to the boards of directors for Canada's port authorities.

Canada’s ports need to be more accountable to port users, including terminal operators, railways and vessel lines. If maximizing throughput is the goal for Canada’s supply chains, which it ought to be, then ports must be governed by boards that have deep experience and expertise with complex supply chain logistics.

The current governance structure has permitted ports to be governed by boards of directors that often lack expertise in port management, freight transportation, and business.

The lack of expertise often results in decisions that undermine the optimal efficient management of freight through Canada’s ports, which are critical elements of our supply chain infrastructure.

An example is the inefficient use of port lands, which constrains the ability of ports to accommodate growing volumes of freight. Canada’s supply chains need world-class ports. To achieve that goal, it is imperative that our ports operate in a way that optimizes and synchronizes maximum efficiency and throughput.

Improving port performance ought to be an urgent priority. The Port of Vancouver was recently ranked number 347 out of 348 on the World Bank and S&P Global's market intelligence container port performance index.

Bill C-33 as drafted is a missed opportunity to make meaningful improvements to port governance in Canada. Canada has world-class logistics and supply chain expertise. It's regrettable that this legislation does not embrace that expertise by confirming its importance through governance reform.

This is not a new concept for transportation in Canada. For example, many of Canada's airport authorities have bylaws that prescribe qualifications for appointments to their boards. Similarly, Nav Canada's bylaws prescribe specific requirements that users be appointed to a minimum number of board positions.

Parliament should seize the opportunity before it to improve the performance efficiency, reliability and throughput of Canada's ports by insisting that they be governed by boards of directors with deep supply chain expertise.

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Cato.

Mr. Brazeau, you now have the floor for five minutes.

[Marc Brazeau, President and Chief Executive Officer, Railway Association of Canada]

Thank you, Mr. Chair, and members of the committee.

Safety is job one for every railway and every railroader. Canadian railways are the safest in North America, among the safest in the world and are consistently getting safer.

In 2022, the average Canadian class 1 train accident rate was approximately 40% lower than the average U.S. class 1 accident rate. Over the past decade, the Canadian class 1 rate has improved by over 20%.

The Canadian rail sector's dangerous goods accident rate improved by 49.1%. While freight volumes increased over 10 years, the number of accidents has decreased. Rail is the safest way to transport goods over land.

Between 2009 and 2018, road accidents involving dangerous goods were 17 times more frequent than rail, and releases were 14 times more frequent in trucking.

Canada's railways provide the highest safety performance in North America, industry-leading environmental innovation and strong service, and they do it at virtually the lowest cost anywhere in the world.

Canada's rail freight rates are the lowest, on average, among major market economies: 11% lower than the U.S., and in some cases less than half of the average rate of European freight railways. Canadian railways are providing exceptional value to Canadian importers and exporters.

Railways are reliable links in complex supply chains. For example, the transit time for containerized consumer goods transported from Shanghai to Ontario and Quebec increased by 13.8 days or 52% during the pandemic, from 2019 to 2022. Of this increase, 99% happened before the container had been loaded onto a railcar. Meanwhile, the transit time for Saskatchewan grain to reach Asian markets in 2022 was one day shorter than in 2019. Canada's railways were the biggest contributors to this reduction, despite the challenges of a global pandemic and public health restrictions.

Canadian railways are environmentally friendly and becoming increasingly so. They use three to four times less fuel than trucks. A single locomotive can transport a tonne of merchandise over more than 220 kilometres on a single litre of fuel.

Over 34,000 women and men work 24 hours a day across Canada to safely and sustainably ship Canadian products to world markets, and people to their destinations.

On top of railways' commitments to safety, the rail sector is one of—if not the most—the most highly regulated in Canada. Any claim of railway self-regulation is simply and objectively false. Railways are regulated by the Canada Transportation Act, the Railway Safety Act and the Transportation of Dangerous Goods Act, among many others.

Railways comply with thousands of safety laws, regulations, rules and requirements. Under the Railway Safety Act alone, there are 22 sets of detailed prescriptive regulations that govern railway operations. One example is the safety management system regulations, or SMS.

SMS is a regulated system of safety processes developed in consultation with labour representatives. SMS processes permeate every level of a railway company, every position and every function across the network. SMS regulations are an important additional layer of rail safety.

Transport Canada routinely conducts comprehensive audits of these systems to verify compliance and evaluate their effectiveness.

This culture of continuous improvement has helped to produce undeniable safety enhancements. Canada's railways have invested more than $20 billion over the past decades into the 43,000-kilometre Canadian rail network. These investments include innovative safety-enhancing technologies like wayside detectors, track geometrics and machine visioning. Railways use sensors and algorithms to predict and prevent equipment failure.

Technology investments go hand in hand with training, awareness programs and robust regulatory oversight. Through the TRANSCAER program, the RAC and its members have provided world-class training at no cost to our community partners across Canada. We have trained over 28,000 first responders since 2000.

Safety is a shared responsibility.

Operation Lifesaver, funded by RAC and Transport Canada, works to reduce crossing and trespassing incidents and save lives.

The proximity initiative, with its guidelines developed in partnership with the Federation of Canadian Municipalities, helps to increase safety and avoid unnecessary conflicts arising from railway-community proximity.

Safety is a journey. It is not a destination. Railways will continue to put safety first, 24-7, 365 days a year.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Brazeau.

We'll begin our lines of questioning with Mr. Strahl.

Mr. Strahl, I'll turn the floor over to you. You have six minutes, please.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Thanks very much, Mr. Chair.

[Technical difficulty—Editor]

I wanted to—

[The Chair, Liberal, Peter Schiefke]

Unfortunately, Mr. Strahl, I hate to cut you off, sir, but the sound really isn't coming through very well.

Could I ask that you perhaps turn your video feed off so that you're using less of your bandwidth and hopefully we'll get some better sound out of that?

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Sure.

Why don't you go to Mr. Muys.

[The Chair, Liberal, Peter Schiefke]

Okay. I will do that, Mr. Strahl. I will start your time over.

Mr. Muys, you have six minutes and it starts now.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Thank you, Mr. Chair, and to the witnesses who are here today for your testimony.

We hadn't heard the perspective of the railways yet for our study of this bill, so it's been helpful.

Let me start with you, Mr. Cato, because you talked about the port boards' governance. That's something we've asked the ports and the associated ports about when they were here. I'm interested to hear your perspective as a user of the ports.

You talked about how Bill C-33 is really a missed opportunity in your viewpoint when the minister is appointing the chair and when there's as much prescription as to what that board needs to look like. This is what we heard from the port authorities as well, that it's an impediment.

Perhaps you could elaborate a bit more on that.

[Nathan Cato]

I think the ranking of the Port of Vancouver just back in June as being second last in the world should be a wake-up call for Canada. There were all sorts of reports of disruptions throughout global supply chains through the pandemic. It's clear that Canadian supply chains need our ports to be world-class and operating at optimal efficiencies so that our supply chains can get Canada's goods and resources to the world and we can get essential goods to communities across the country.

The only way that's going to happen when we talk about port governance—which is what Parliament is seized with really through this bill—is ensuring that there's a very high level of expertise and experience on the boards of directors. The role of a board is to hold management accountable for results. You need to come at those questions of holding management accountable from a perspective of expertise, of really understanding what.... It's not just supply chain expertise; it's also just expertise in the business world. We need our ports to be operating at optimal efficiency on a commercial basis.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Thank you.

We had heard a different figure earlier about Port of Vancouver being 368th out of the 370. But the same point has been made that you've made, that our gateway to Asia is at the bottom in the world.

Was CP part of the National Supply Chain Task Force?

[Nathan Cato]

We met with the task force once or twice in this last summer, in the summer of 2022. We were consulted on certain aspects of what the task force was looking at. There were many aspects that we were not consulted on. There were many subjects raised in the task force report that were never discussed with us or other railways.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Because Bill C-33 is purported to be a response to supply chain issues, which you've raised in your opening testimony as well as in the previous question, are there things that you found lacking from CP's interaction with the National Supply Chain Task Force or even the supply chain task force report from your read of it in Bill C-33?

What's missing?

[Nathan Cato]

I think it's also important to go back several years prior to the supply chain task force report. There was the ports modernization review launched by Minister Garneau more than five years ago. As I understand it, this legislation is in part an output of that process. There was also the Railway Safety Act review that was done in 2017, I believe. This is in part the government's response to that statutory review as well. I think this legislation represents a number of review processes, to be fair.

From our perspective, what's needed to improve supply chain efficiency in Canada, to improve the performance of supply chains in Canada, is a regulatory framework that incentivizes investment. One of the things we saw that came out of the supply chain task force report was a recommendation on extended interswitching, for example. That policy, which Parliament put into place just at the end of June and which went into effect a few weeks ago, is the exact opposite of what we need to improve investment in supply chain infrastructure in Canada.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Does Bill C-33 fall short of achieving that necessary objective after all these years of reviews? Some of these reviews began seven years ago.

[Nathan Cato]

There are some positive elements of the bill, to be sure, but I think overall we struggle to see how it's really going to make a material improvement to supply chain performance.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Okay, so there's no material improvement to supply chain performance.

Let me ask about cost analysis.

We were surprised by the Transport Canada officials who were before the committee at our first meeting studying this legislation. When we asked whether a cost analysis had been done for the all of the proposed change, like the committees and the regulations that have been added to ports, the answer was that no cost analysis had been done. We did hear from one of the port authorities that it could be $200,000 or two employees on an annual basis from their perspective.

Have you done a cost analysis from a railway perspective of how the changes in Bill C-33 would impact you?

I'll probably ask the same question of Mr. Harvey as well.

[The Chair, Liberal, Peter Schiefke]

Unfortunately, we only have 20 seconds, please.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Okay, be quick.

[Nathan Cato]

I would say that the regulatory changes that will impact railways are not going to have a material cost impact for us, but I think those questions about the administrative burden for port authorities would be best addressed by them.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Muys.

Thank you, Mr. Cato.

Ms. Koutrakis, the floor is yours for six minutes.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you very much, Mr. Chair.

I'd like to welcome our friends. It's a pleasure to see you here once again.

The Office of the Auditor General of Canada in 2021 released a report and noted that Transport Canada had increased the number of risk-based inspections, but “did not assess the effectiveness of the railways' safety management systems”. Mr. Brazeau touched upon that a little bit in his testimony when he spoke about the SMS regulations.

I'm just wondering if I could hear from each of you your own perspectives. To what extent, if any, does Bill C-33 propose to address the effectiveness of railway safety management systems in identifying hazards and mitigating risks?