Bill C-11 (Historical)

An Act to amend the Canada Transportation Act and the Railway Safety Act and to make consequential amendments to other Acts

This enactment amends the Canada Transportation Act. Certain amendments apply to all modes of transportation, including amendments that clarify the national transportation policy and the operation of the Competition Act in the transportation sector, change the number of members of the Canadian Transportation Agency, create a mediation process for transportation matters, modify requirements regarding the provision of information to the Minister of Transport and modify and extend provisions regarding mergers and acquisitions of air transportation undertakings to all transportation undertakings.
It amends the Act with respect to the air transportation sector, in particular, in relation to complaints processes, the advertising of prices for air services and the disclosure of terms and conditions of carriage.
The enactment also makes several amendments with respect to the railway transportation sector. It creates a mechanism for dealing with complaints concerning noise and vibration resulting from the construction or operation of railways and provisions for dealing with the transfer and discontinuance of operation of railway lines. It also establishes a mechanism for resolving disputes between public passenger service providers and railway companies regarding the use of railway company equipment and facilities.
The enactment also amends the Railway Safety Act to create provisions for the appointment of police constables with respect to railway companies and procedures for dealing with complaints concerning them.
In addition, it contains transitional provisions and consequential amendments.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Chairman, I simply want us to be on the same page. I don't think there is any urgent need to debate the motion. I tend to agree with Mr. Jean, in that we have adopted a work plan and now we must deal with Bill C-11, as quickly as possible. The motion reads as follows:

That the Standing Committee on Transport, Infrastructure and Communities request the presence of senior infrastructure officials [...]

It doesn't specifically say at the next meeting or when exactly.

Getting back to my motion, I'm starting to run out of patience. I've been very nice and civil with Mr. Duchesneau, but my patience is wearing thin. I want to hear from him before we examine this matter, simply because the motion was tabled first. Therefore, I'm asking my colleagues to support me on this. I have no objections to discussing my motion after that. I might even have a small amendment to suggest later, but I have no objections at this time.

However, I do want us to have a debate. Mr. McGuinty, you mentioned earlier that according to Conservative members or to the Minister, municipalities fall under provincial jurisdiction. That is consistent with the Bloc Québécois' position. Therefore, I can't fault the Conservatives for saying that constitutionally, municipalities are a provincial responsibility and that that the provinces must be included in the discussions. I don't want us to get off track. However, I would like to know the substance of these programs.

I'd like to suggest one small amendment -- I've spoken to you about it -- a little later, but right now, we need to focus on Bill C-11 first, hear from Mr. Duchesneau and then consider the motion. I don't have a problem with that. I'm prepared to hold a special meeting, if necessary. We made a promise to the public in so far as this bill is concerned. Therefore, I want us to adopt the legislation as quickly as possible and get on with matters.

[Andy Scott, Liberal, Fredericton, NB]

I think it's incorrect to suggest that this is inconsistent with the speedy passage of Bill C-11. The only thing we're doing on Bill C-11 now is listening to witnesses. Everybody submitted names for the witness list. We're doing this in due process. I can't see any holdup.

As to as dealing with urgent matters deserving of our attention, Kevin would know as well as anybody that the sitting time of this committee is not unusually onerous. When Kevin was a member of the justice committee with me, I can remember sitting five, six sessions a week. So if we want to deal with this, we should find the time to deal with it as an important matter. I don't think it's a reasonable objection to say we can't consider it because we're too busy doing what we're doing. There's time to do this, and I think it's worth it. We should do it quickly.

The infrastructure programs, big programs, important programs to Canada—I'll acknowledge that some of these have been extended. The municipal rural infrastructure, the border and highway infrastructure, have been extended by the government. But they're making policy decisions on these programs without our having any say in the matter. These are important public policy issues. Large amounts of money are being committed and uncommitted without any parliamentary oversight at all.

So I think we have to do this. We should use time that is not currently committed to dealing with Bill C-11, so nobody can charge that this is getting in the way of Bill C-11. I think we should do it forthwith. In our absence, there are important public policy decisions being taken on significant programs.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

The first thing, as Mr. McGuinty would say, is that at this point in time it's very important. People are dying right now in rail accidents. We have some issues with security at airports. My main issue, and the government's issue, is the timing of this. We have some legislation before us. Safety is a primary purpose for which this committee has suggested we look at this as the most important issue, and security is certainly one of those issues. Mr. Laframboise has a motion that we want to support in getting that.

My concern as well is that we have, of course, citizen groups, and this Conservative government is moving forward with legislation to deal with tens of thousands of citizens' complaints on rail noise, fumes and environmental concerns, and even traffic congestion in Montreal, Quebec, Toronto, and Vancouver that affects the health, sleep, and sanity of so many Canadians. Why are these other parties blocking that legislation from happening?

I think those citizen groups are very concerned with that happening. We've heard from many citizens here who are very concerned. They can't sleep. Their health is affected. I'd like to know what the timing is.

Speaking for Mr. McGuinty, he wants to interrupt this legislation to bring this forward now. We have three to five more meetings, and I think we should get it done. If that happens, certainly we'll have no difficulty with the motion after that time, as long as Bill C-11 is dealt with first, and, I would suggest, Mr. Laframboise's motion immediately thereafter.

[Cliff Mackay]

Can I pick up on that? We have had a very aggressive emissions reduction program for over ten years. We're the only part of the transportation sector of Canada that has actually reduced its greenhouse gas emissions in the last ten years, while we've grown exponentially.

Mr. McGuinty, we have stepped out, and we're going to step out some more. We didn't wait for the government to put Bill C-11 on the table. We've been pushing noise and proximity issues for three or four years now, and we've been taking the lead on them.

[Claude Mongeau, Executive Vice-President and Chief Financial Officer, Canadian National Railway Company]

Thank you, Mr. Chairman.

I'm pleased to be here to address the committee.

I'm delighted to be here today to meet with committee members. I will be speaking in English, but I will be happy to answer your questions in either English or French following my presentation.

If I could, I'd like to say a few words about the CTA process, about the state of the rail industry, and also give you the details of the comments that we have about Bill C-11 as it stands today. I think having a sense of the process and the state of the rail industry provides good context through understanding to help you make your policy decisions in the right way.

It was about ten years ago that the current legislation of the CTA was put in place. The previous CTA act of 1996 was put forward with a view to bringing commercial forces and an agenda of change to the rail industry, and it's been quite a successful process. The previous legislation introduced, for instance, more streamlined rules for the abandonment and the transfer of lines. It created an opportunity for the mainline carriers in Canada, CN and CP, to significantly improve their cost structure, but at the same time it created a vibrant short-line industry.

There were a number of other commercial initiatives in the previous legislation that have paid dividends in terms of the improvement of the rail industry over the last ten years. At about the same time, the Government of Canada also decided to privatize CN, which was also a very bold agenda of change. That has also been a remarkable transformation, which I believe improved the rail system in Canada to a great degree.

I think the federal government and your predecessors as members of the transport committee should be proud of where we stand today in the rail industry. CN has transformed itself from a laggard railroad ten years ago to a leading railroad in the North American industry. CP Limited has created CP Rail, which is today a focused, lean railroad serving all of Canada. I invite you to look at the hard facts, because too often you're hearing your constituency talk about various specific points of concerns or issues they have with the railway, but not often enough do we hear the broad picture about where the rail industry is and the progress that's been made over the last ten years.

Today the service is better than it's ever been. If I take CN's example, for instance, our transit time and the reliability with which we achieve our transit time has improved by more than 50% over the last ten years. We went from quoting a service, for instance, from Edmonton to Chicago, which was a week to ten days; today we measure our service one trip planned at a time, and our service from Edmonton to Chicago is 102 hours, which is four days, and we achieve it more than 90% of the time.

Efficiency has improved dramatically through cost reductions, through initiatives on asset utilization. For instance, today CN has 800 fewer locomotives to carry more business than it did ten years ago. With efficiency comes the ability to lower rates and share productivity with the shippers, our customers. Rates are lower today than they were ten years ago. Grain rates, I mentioned to your colleagues in the agriculture committee, as one example, are 35% lower in Canada than they are just south of the border in the U.S.

Safety has also improved dramatically. I'm proud to say that the two Canadian railroads today are by far the safest railroads in North America. We are 40% safer than our four peers in the industry, objectively and consistently measured using the same metric. I know it's a topic of interest and I know it's an area we have to continue to make progress on, but the facts are that the two railroads in Canada are the safest in North America. Of course we're also a lot more profitable, and that's a good thing. With profit comes the ability to invest, and we are a very capital-intensive business. CN this year will invest $1.6 billion back into its plants.

So I think it's fair to say, and I'm a bit biased, we have the best rail system in the world, and we should be proud of that. It's 100% privately funded, and it's a key asset for Canada in terms of transportation for a trading nation.

In terms of the CTA review process, it brings a lot of challenges for railroads. I'll tell you, we're a very unique business. Very few businesses touch more than 200 ridings, as CN does, and we touch every one of your constituencies. We understand the challenge. We are two of us, and there are many out there that have specific issues and have a lobbying agenda. I think it's very important that you, as members of Parliament, relay those constituencies' concerns into policy, but at the same time I think as transport committee members you have to take a balanced view and you have to focus on what's right for the transportation sector.

I think the keeping of that balanced view is very important as you review some of the provisions of Bill C-11. I will tell you from the outset that we are in general agreement with the bill.

We agree, for instance, on the role of the agency for mediation, whether it's for passenger issues or for noise. We also agree on the public interest review for mergers that the minister and Parliament should have in case of transactions. We agree on provisions such as the setting of a list for urban area sidings and spurs.

We agree with the broad goals; we have issues with the devil that is in the details, and we believe that in a certain number of areas the bill goes too far and has risks you should consider very carefully.

On noise, for instance, Cliff gave you a good outline. But there are a lot of efforts. Things can improve, but it's not as though we're sitting still and trying to be good neighbours. Often the issues are land use issues. It's about having harmonious co-habitation. When the residential areas are too close to our rail lines, the proximity creates unavoidable difficulties. The reality is we have a steel rail technology that's outdoors. It's a 24-hour operation and it creates noise.

We have to find ways to address that noise, and the fact that there is a court of appeal and a recourse to the agency with powers to enforce specific mitigation is something we agree with. We would very seriously, though, caution you against changing the wording on some of the criteria.

For instance, “unreasonable noise” is the right test. The notion of having the “least noise” approach is very difficult to manage. Least noise would be a rubber railroad, or it would mean taking the yards out of town altogether.

I think you should give a chance to this new system. Nothing exists today. I think the standard is the right one and that the agency has the power and expertise to address issues going forward.

On passenger and commuter rail provisions, we have some concerns too. We agree with the notion that the passenger or commuter could have the right to go to the agency to settle issues with the railroad, but I take exception to some of the comments I read from the transcript of my colleagues from GO Transit, AMT, and West Coast Express. The impression that CN or that the railroads are gouging commuters or passengers is simply not true. The reality is that in most instances—and there are exceptions, but in most instances—we have a fair approach to those issues.

I'll give you a few examples to explain to you where we have the most difficulty. The most difficulty comes with the notion of setting the rate on the basis of the net book value of our assets.

We agree with the concept that the agency could set the rate and also agree with the concept that the agency could set the rate with a view to the public interest and that the public interest includes a notion that does not necessarily address fair market value or highest best use. But to go as far as setting the policy on net book value would be a big mistake.

I'll give you an example from Quebec of an agreement I just recently personally negotiated with the AMT. It's for the Deux Montagnes line that goes into Montreal through the Mount Royal tunnel. The value of the land on which this railroad sits, as it is assessed by municipal authorities, is $60 million across the fence.

If we were charging or if the AMT were paying the CTA cost of capital on the value that is being assessed by municipalities, the access fee would be $5 million per year. I can tell you that the AMT does not pay half of that.

If they were to pay on the basis of net book value, the amount they would pay would be near zero. It would be a fraction of what they pay today, and there's a very simple reason for that. Net book value is an historical concept. The land we own at CN for this property was purchased in 1912. CN paid, in 1912, $225,000 for the land. That's our book value. If you applied the 8% on that $225,000, you would get thousands of dollars for the use of something that municipalities value at $60 million and tax us on using as a basis that same $60 million.

I know a lot of you have experience in the world of the municipal sector. How would you like it if railroads were paying their tax bills on the basis of historical net book value? That concept would not fly a minute, because it is just not a fair concept. So I urge the committee to think about this particular aspect very carefully.

The federal Expropriation Act recognizes the concept of fair market value. The Canada Transportation Act recognizes the concept of net salvage value if a line is to be sold to a government. The notion that net book value at historical prices from the beginning of the last century would guide the rate-setting is just not the right concept. It's not a fair one and it's not one I would encourage the committee to endorse. In my view, net salvage value would not only be more consistent with the current CTA, it would also be a lot fairer and would give a lot of leeway for the agency to decide in the matter with a view to what the public interest is.

I think you should review this carefully, because the devil is in the details. I think at net book value the provisions themselves ultimately will not succeed; they would be open to challenge as unfair expropriation.

So there is a delicate balance. We agree with the concept that a commuter agency should have the right to go to the agency for recourse, but it should not be done on an artificial measure such as historical book value, because it just doesn't work.

Members of the committee, as you can see, we agree with many of the things that are in the bill. We are asking you to consider a few areas that could be improved and we urge caution and balance in your views about the state of the rail industry.

I'm open for questions with my colleague here.

[Cliff Mackay, President and Chief Executive Officer, Railway Association of Canada]

Thank you, Mr. Chair.

On behalf of the Railway Association of Canada, let me first say thank you for the opportunity to appear before you. Our association represents about 60 railways across the country, which is essentially the whole scope of railways in Canada: the class ones, the short lines, the regionals, the inter-city, VIA, the commuters--some of whom I think you saw earlier this week--and some tourism railways.

More than six years have elapsed since the Canada Transportation Act review panel rendered its report and made a number of recommendations on moving forward with the act. We see Bill C-11 as an important part of a response to that report.

We've had a number of opportunities in the past to comment on various proposals to amend the act and we hope, Mr. Chair, that we are seeing the end of a very long and complex consultation process on this matter. Our view is that while there are a number of important amendments before you, there are also major issues facing the industry and the country, and we'd like to get on and focus on some of those in the future.

In a nutshell, the Railway Association of Canada supports most of the provisions in Bill C-11. I'm going to spend my time today speaking on the noise management issues. Some of my colleagues from individual railways do have concerns about some of the other matters in the act, in particular the public passenger service provisions, but since the business interests of our members diverge on that particular matter, the Railway Association itself won't be taking a formal position on that matter.

Let me turn to noise management. The RAC believes that the bill sets out a clear authority for management of noise related to railway operations. Since a 2000 Federal Court decision that affected the ability of the CTA to exercise jurisdiction over railway noise complaints, there has been some confusion out there as to who really has the authority to regulate noise in the national railway system. We are very supportive of this bill because it clearly solves that problem. It says clearly that the federal government and more particularly the Canadian Transportation Agency have the authority to exercise noise regulation in Canada.

We think this is important because the demand for rail services is growing, and with it the complexity of our operations and our interface with communities across the country are growing. The trend toward ever-increasing imports, particularly from Asia and the Pacific, and the rapid increase in exports, both to the U.S. and offshore, are making the relationships between communities and railways more challenging every day. We think this bill helps to make that partnership better over time.

However, I must point out to you, Mr. Chairman, that the industry has not been doing nothing in the interregnum. A few years back, we signed a memorandum of understanding with the Federation of Canadian Municipalities and other stakeholders to begin a voluntary approach to better management of noise and other proximity issues.

The MOU was signed in 2003 and supported by not only the FCM but also by the Canadian Association of Municipal Administrators. The main purposes of this MOU were and still are to gain and share a common understanding of the current issues around proximity, to improve communications between the parties, to implement a flexible but formal dispute resolution process, and to develop guidelines on such issues as land use, noise levels, and other technical matters.

The RAC and the FCM encourage resolution of issues at the local level. I must say, Mr. Chair, that we're very pleased to see proposed section 95.3 of this act does so in a similar manner. We strongly believe that the best place to solve issues is at the community level, and third parties should only be intervening if in fact we can't find the solutions there.

To achieve these common objectives, I just want to give you some idea of some of the things we and the FCM have done to date. We've established steering committees and three large working groups with equal representation from the parties. We've developed a communications plan. We've developed a good-neighbour video, which is an awareness video.

We've completed and published three case studies on real issues, one here just across the river in Gatineau, that will help to explain how issues can be resolved between the parties, and we've developed a data-rich website called www.proximityissues.ca. I would encourage members or your staffs to go and have a look. There's an awful lot of information there on what's going on between communities and railways on proximity issues.

Since its inception in 2004, the website has grown progressively over the years. We've taken 22,000 visits already this year on that particular website. We've also developed a robust dispute resolution protocol, and this is published on the website, if you wish to see it.

We hope all of this material will be helpful to the Canadian Transportation Agency when it begins its job of developing the guidelines that are called for under the provisions of this act.

Let me stop there, Mr. Chairman. I've left a copy of this document, which is the latest MOU progress report, with the clerk. If you are interested, you can distribute it to committee members afterwards.

We think there are a number of key advantages to the approach we've taken in working over the last two or three years, some of which are very clear already. The agreement we have is encouraging more effective and efficient land use; it's providing long-term cost savings in the resources required to deal with proximities over time; it has reduced land use incompatibilities between railways and adjacent land use, and helped the land planning process; and it has reduced noise and vibration complaints in a number of jurisdictions across the country. A good example is Gatineau. Another is Oakville. There are a number of examples we could give you from across the country.

It is also having an ancillary benefit on public safety, because in addition to talking about proximity issues, it provides an opportunity to talk about issues such as trespass and level-crossing safety, particularly in areas adjacent to schools.

Suffice it to say that we think there have been tangible benefits, and I should say, Mr. Chairman, that we are continuing to work with the FCM and others to advance the MOU, as we go forward.

In the very near future we hope to be in a position to publish a comprehensive draft of noise emissions guidelines and a land use guideline. We're in the final stages of preparing this document. It's been the subject of an awful lot of research and technical study over the last couple of years. It is now before the MOU steering committee for their consideration. I hope we'll be able to make it available to committee and other interested parties in the very near future.

I will stop there, Mr. Chair, and thank you very much for taking the time.

Just to conclude, we are in favour of the noise provisions in Bill C-11. We believe we need this kind of regulatory framework to work within, but we would very much like to continue the kinds of approaches we've been working on with FCM and others. We believe the best solution to this is at the local level, getting the parties involved with each other.

Thank you.

[The Chair, Conservative, Merv Tweed]

Thank you and good afternoon, everyone. We are now in meeting number 21, the Standing Committee on Transport, Infrastructure and Communities, pursuant to the order of reference of Thursday, September 21, 2006, Bill C-11, an act to amend the Canada Transportation Act and the Railway Safety Act and to make consequential amendments to other acts.

Joining us today from the Railway Association of Canada we have Mr. Cliff Mackay. He's the president and chief executive officer. Also with us is Mr. Claude Mongeau, executive vice-president and chief financial officer of Canadian National Railway Company.

I know that you've received some instructions from the clerk. Mr. Mackay, if you'd like to start, you have approximately seven minutes.

[Don Bell, Liberal, North Vancouver, BC]

Yes, I made reference to that. I made reference to western Canada, and we can say “in Canada generally” after “rail safety”. The reason I wanted this is that I felt that if we had it on the record, and when it's acted on is in accordance.... I originally considered putting in “following the consideration of Bill C-11”, but I thought I would leave that up to the scheduling of the committee executive, Mr. Chairman.

To Mr. Laframboise's comment about the timing, it was that it would come at the appropriate moment, but it would be on the record and it would be there for us to act on in due time.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

There are two interesting things in Mr. Bell's motion.

It's curious, because, personally, I would have liked to know the details of the matter. I like what the minister has done — I'm saying that in a nice way — intervening under section 32 of the act. However, I would have liked to invite Transport Canada representatives to appear very briefly in order to determine what happened in this matter.

My problem is that a review application has been filed by CN. If there is a review application and the matter is before the courts or I don't know where, can we discuss it or not? There are factors that escape me. I also would have liked to see the action plan that the company submitted before we make this decision. Is it possible to see it, even though that took place in camera or in another context?

We've already decided to consider the matter of railway safety, and I'd be in favour of that. However, my problem is that Bill C-11 must be examined first. I'm going to support this question, provided we examine Bill C-11 beforehand.

In this specific matter, I'd like to know whether it's possible to have a meeting with Transport Canada and CN representatives so that they can come and explain themselves and give us details. I like the way the minister has proceeded. However, can we get these documents if the matter is before the courts? That's a problem that's preventing me from making a decision today.

So I ask Mr. Bell to wait until the next meeting, because I want more information. Is that possible or not? I'd like Mr. Jean to tell us. I would have liked to examine this matter because I find the solution an interesting one. If we can examine these ways of doing things, that will help us in our own matters.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

You're going to see very soon, sir. It's a summary of what's taken place since some of the accidents. Certainly 2005 was what you would call less than a banner year in relation to what took place with CN and just generally with railway safety.

Less than a month after the British Columbia derailment, in which two crew members, unfortunately, were killed as a result of the accident, the minister took it upon himself to issue, for the first time ever, a ministerial order, under section 32, to make CN come into compliance with some of the other.... I think there were something along the lines of 59 enforcement actions.

Of course, there has been an action plan, as Mr. Bell said, put forward, as of October 18. Indeed, you'll see, since some of the actions were taken by this government and the previous government, that industry-wide accidents are down by 14%, and derailments are down by 30%. Obviously the corrective actions did do something.

Notwithstanding all of that, Mr. Bell, with respect—and I was born in British Columbia, and it has a place in my heart and always will—we are a national committee, and we have a responsibility, I think, to all Canadians. Certainly, I think, the people in Alberta who suffered the response from Wabamun would like to be part of any kind of study. As has been said by all members here, rail safety, airline safety, and all safety issues are a number one priority of this committee and a number one priority, quite frankly, of this government.

So I think we're being a little bit premature in doing, first of all, a study just of British Columbia, and I would like to encourage all members of this committee to include all of Canada and all Canadians in any rail safety study that's done by the committee.

Quite frankly, I would invite the members to read what took place and what has happened with this government and the previous government, and then address one particular question: what else could have been done? I don't think anything further could have been done, except to stop all the railroads across Canada. And I don't think anybody wants that to happen. Certainly the minister, within 28 days of the final episode in B.C., issued a ministerial order, and as I said, that has never been done before.

I would invite the members to read this report and come back with any suggestions. But the reality is that we have a very busy agenda. The first thing after Bill C-11 is safety of the transportation sector across Canada.

Quite frankly, I don't want to just study British Columbia. All geographic areas of this country place certain challenges before us, and we have to study rail safety across the board and across Canada to do justice to all Canadians.

I would recommend, though--and I think Mr. Bell has brought up a good point--that the safety study should not just include what we were going to study, but should have a specific emphasis on employees, on people who are users of the rail line, and on the environment. So a particular emphasis on those would be appropriate--not in this particular motion, but certainly, if it be the will of the committee, we should study them at great length, as far as safety goes.

[Don Bell, Liberal, North Vancouver, BC]

Thank you.

Early on, when we talked in this committee about some of our priorities, one of those was safety--air, water, and rail safety. Going back, we did have CN here, talking about the particular increases they had had in derailments and accidents, particularly in 2005. They indicated that they had taken steps to reduce those in 2006--year to date, so far. Going back and looking at what happened with the number of derailments, particularly in British Columbia--although there were some in Alberta as well--with the change of ownership from BC Rail to CN, there were an inordinate number of derailments, in particular, and accidents in 2005 and in 2006.

One of the notable ones was where a chemical derailment occurred in the Cheakamus River in B.C. and resulted in a substantial negative environmental impact--a huge fish kill, for example, that has affected the run on that river drastically, devastatingly. Subsequently, a locomotive accident resulted in the death of two rail workers in 2006, when the locomotive left the tracks and two rail workers died.

The purpose of this motion is to suggest that we need to have an inquiry that spells this out. We heard they're down. We heard they rose, particularly in 2005. I think if we have a proper inquiry, we would have a baseline in the future to judge the actions of the railways as we go forward. I think we need to have this inquiry that would go back and spell out exactly the increase. Then if there has been a decrease, as they state, we can be aware of that and of what steps are being taken. We have a responsibility for the passengers, we have a responsibility for the public, we have a responsibility for the railway workers, and we have a responsibility for the environment. I think in line with our priority of rail safety, this would be appropriate.

I'm recognizing, in terms of timing, that at a committee meeting I wasn't able to attend, there was a suggestion, when another request for information came up--not on rail safety, but on another matter--that there was the desire for this committee to move ahead with Bill C-11 and to finish Bill C-11 before we moved on to other issues. I'm not suggesting that this jump in priority. Safety, of course, is the top priority, but I'm suggesting that if we start to put the wheels in motion or get this on track--no pun intended--that we at least will have the ball rolling and we can then move into this in a timely manner.

I was provided with some information that you're going to table, Mr. Jean. Perhaps I could make reference to it, Mr. Jean. Can I indirectly...?

[Gary McNeil]

We're looking at a 50% increase in our ridership over the next 10 years, actually. I don't want to put it in the context that if Bill C-11 doesn't get through, it's not going to happen. It's one of those things that will probably happen faster with Bill C-11, but it's going to happen anyhow. The province has recognized the fact that we have to do things on the rail side, so it's going to move ahead. It's just going to cost the taxpayers more if Bill C-11 doesn't go through, that's all.

[Doug Kelsey]

The only thing I might add with respect to Bill C-11, is that if you're talking about federal funding, currently in Vancouver most of the funding—and the relationship would come, of course, from senior levels of government—does or does not get allocated depending on the viability, in this case, of a commuter rail project. So if this were to be enacted in legislation, any contribution by the federal government would benefit, so it's not going to railway margins; it's going to minimize the capital needed and maximize the service output. That's the intent of the framework here, regardless of which level of government—provincial, municipal, federal—would benefit from a better value relationship.

[David McGuinty, Liberal, Ottawa South, ON]

Well, it is, Mr. Chairman, but I think it speaks to whether or not this bill ought to be amended in one way or another to look at this whole question of...because what's gone on here is that there's been a degree of involvement by the federal government in municipal decision-making, which may have to be protected against in Bill C-11. That's why I'm raising the question.

[Doug Kelsey, President and Chief Executive Director, West Coast Express]

Thank you for allowing us the opportunity to appear jointly before you today.

With me is Mr. Gary McNeil, executive director of GO Transit in Toronto; and Mr. Raynald Bélanger, the vice-president of commuter trains for Agence métropolitaine de transport. I am Doug Kelsey, president and chief executive officer of West Coast Express and SkyTrain in Vancouver. Together we represent Canada's three largest commuter rail operations.

To provide you with some background, our combined operations carry more than 125 million rides per year and represent more than $4 billion in combined public assets. The areas we represent serve approximately 30% of Canada's population. Canada's commuter rail authorities wish to make Canada's communities more livable.

As part of that, we believe we are an essential part of the solution to gridlock, greenhouse gases, and smog in Canada's urban centres. But to do more as governmental service providers, and to do more to help Canada meet its environmental goals, we require a long-term policy solution based on the principles of better and fairer urban corridor access and services for Canada's urban passenger rail authorities, at competitive rates, and based on reasonable contributions above the host railway's cost structure.

Our decision to make a joint submission to you today is the direct result of our shared interests, challenges, and points of view, as well as our dedication to serve the same ridership base as yours--the taxpaying public.

In our past submissions to the Canadian Transportation Act review commission and to this committee, we outlined the benefits of urban commuter rail service and voiced our concerns on a number of serious issues affecting our operations. We are very pleased to see that these concerns have been reflected in Bill C-11, particularly the ability to gain access to the lines of federally regulated railways by means of the dispute resolution mechanism under proposed section 152.1 of the bill. Second is the ability to have the agency determine the amount to be paid to the host railway for such access under proposed section 152.2 of the bill, should commercial negotiations not prevail successfully. There's also the ability of urban transit authorities such as AMT, GO, and West Coast Express to purchase a railway line or corridor offered for sale at net salvage value under proposed section 145.

Under access for commuter rail organizations, proposed section 152.1 addresses a major concern experienced by commuter rail authorities--our inability to gain access to the lines of federally regulated railways under the Canadian Transportation Act as it now stands. Shippers who may feel they have inadequate service have recourse under the servicer provisions of the Canadian Transportation Act. Commuter rail authorities do not have that same protection because we don't currently have the right to access. Under the proposed section 152.1, if the service being provided to a commuter rail operator is inadequate due to the inability to gain access to the federally regulated railways line, that operator may apply to the agency for specific relief.

It's unfortunate that the environment in which commuter rail service providers operate can be highly impacted by host railways. We can face unreasonably high rates, restrictive covenant provisions, and in some cases controls over the actual service specifications of our rail operations, while at the same time not being properly credited for the extensive taxpayer-funded capital that commuter rail operations provide to the host railways.

These significant contributions benefit both the railways' asset bases and the movement of freight traffic. This has been an ongoing concern recognized recently by the government in two bills that have unfortunately died on the order paper, Bill C-26, and Bill C-44. The concerns have a long history.

Some of you actually may recall that an attempt to provide commuter rail operators with some legislative protection failed some 20 years ago, back in 1986, when Bill C-97 also died on the order table. It is our hope that the outcome will be different this time around and that we will be provided with the protection necessary to allow for future access, for future expansion, and for the viability of commuter rail operations in the metropolitan communities and regions that we serve. Without these protections, our ability to support the livability and mobility of our national and regional goals will be severely limited.

In the past, the railways have advocated setting costs for arrangements with commuter rail operators based on “supply-demand” pricing for commercial negotiations. This approach can have an adverse effect for industry, because there's often no other competition or, in most cases, what is termed no effective competition or true comparatives for similar types of service.

Commuter rail is a unique service, with supply driven by corridor, not price. The current rate structure offered to commuter rail operators reflects a clear example of pricing in an environment of no competition. The economies, in some instances, are so unfortunately unfavourable that, despite public demand for services, expansion may be financially prohibitive where the commercial negotiating environment allows for no equality or checks and balances that ensure a level playing field for establishing rates and services.

However, proposed section 152.2 of the bill would prevent such high rates from being charged. Specifically, proposed subsection 152.2(2) lays out a number of factors that should be considered by the agency in determining a rate for the use of railways, land, equipment, facilities, or services. Of particular assistance to commuter rail operators is proposed paragraph 152.2(2)(b), which stipulates that a railway company's cost of capital is to be determined by a rate that is set by the agency and applied to the important net book value of the assets to be used by the public passenger service provider, minus any amount paid by the commuter rail operator in respect of those assets.

The net book value of the asset is the original cost of the asset to the railway, less depreciation. This method of determination of the cost of capital reflects the real cost that the railway incurred to purchase the asset that is being used by the commuter rail operator.

It is only reasonable and fair that the prices being charged for such use reflect the actual cost paid for the asset. Higher costs incurred by the railway to replace assets can be passed on to the commuter rail operators once the asset has been purchased. The cost of upgrades is also a factor for consideration by the agency in proposed paragraph 152.2(2)(c). Hence, there is no need to use another valuation method such as what is referred to as replacement value. Being charged excessive prices for access to operating services and infrastructure places an excessive cost burden on the Canadian commuter rail industry and the taxpayers we all serve. We are confident that proposed changes to the act will address many of our concerns in relation to service and pricing in the future.

In terms of rail line transfer and discontinuance, clause 39 of Bill C-11 proposes a change to section 145 of the act by including urban transit authorities in the list of entities to whom a rail line must be offered for sale at net salvage in the process to abandon a line. This change reflects the real possibility that a commuter rail service may be provided on a line that a railway company wants to abandon because the line is no longer used for freight traffic. Allowing an urban transit authority to purchase the line for net salvage value reflects the fact that commuter rail service is a beneficial public transportation service. It also reflects the reality, faced by many urban transit authorities, of tight operating budgets within which to provide the services we do provide.

In conclusion, we point out that the provisions of Bill C-11, when enacted, will not cause moneys to be spent from the federal treasury. The provisions of the bill contemplate the payment of fairer rates by commuter rail operators and reasonable contributions over the railway's costs. The only change to the system is that commuter rail authorities will have the right of access, a right that will level the playing field and create much-needed opportunities for commuter rail to benefit the livability of our urban centres, the economy and the environment, all for the greater good of the taxpayer and the numerous federal ministries that will benefit from the passage of this bill.

Mr. Chair, I thank you again for allowing us the opportunity to appear jointly before you today. This will conclude our formal remarks, and we'd be pleased to answer any questions that you may have.