Fair Rail Freight Service Act

An Act to amend the Canada Transportation Act (administration, air and railway transportation and arbitration)

This bill was last introduced in the 41st Parliament, 1st Session, which ended in September 2013.

Sponsor

Denis Lebel  Conservative

Status

This bill has received Royal Assent and is now law.

Summary

This is from the published bill. The Library of Parliament often publishes better independent summaries.

This enactment amends the Canada Transportation Act to require a railway company, on a shipper’s request, to make the shipper an offer to enter into a contract respecting the manner in which the railway company must fulfil its service obligations to the shipper. It also creates an arbitration process to establish the terms of such a contract if the shipper and the railway company are unable to agree on them. The enactment also amends provisions related to air transportation to streamline internal processes and certain administrative provisions of that Act.

Elsewhere

All sorts of information on this bill is available at LEGISinfo, an excellent resource from the Library of Parliament. You can also read the full text of the bill.

Votes

May 30, 2013 Passed That the Bill be now read a third time and do pass.
May 29, 2013 Passed That, in relation to Bill C-52, An Act to amend the Canada Transportation Act (administration, air and railway transportation and arbitration), not more than one further sitting day shall be allotted to the consideration of the third reading stage of the Bill; and that, 15 minutes before the expiry of the time provided for Government Orders on the day allotted to the consideration of the third reading stage of the said Bill, any proceedings before the House shall be interrupted, if required for the purpose of this Order, and, in turn, every question necessary for the disposal of the said stage of the Bill shall be put forthwith and successively, without further debate or amendment.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:05 a.m.
See context

Charleswood—St. James—Assiniboia Manitoba

Conservative

Steven Fletcher ConservativeMinister of State (Transport)

moved that Bill C-52, An Act to amend the Canada Transportation Act (administration, air and railway transportation and arbitration), be read the second time and referred to a committee.

Mr. Speaker, I am pleased to rise today to support Bill C-52, the fair rail freight service act. I would also like to take a moment, since it is the first time this year that I have spoken in the House, to say that I wish everyone a great 2013 and look forward to passing great legislation, such as the act I am about to speak to.

First, I congratulate the Minister of Transport, Infrastructure and Communities for his tremendous work on this important file. I would also like to thank my colleagues, the former Minister of State for Transport, the hon. member for Yellowhead; the Minister of Agriculture and Agri-Food; and the Minister of Natural Resources for their contributions and support. In addition, there were many more people who contributed to the legislation in order to make it the best legislation possible.

Our Conservative government remains focused on jobs, growth and long-term prosperity. The bill advances these priorities. It will help shippers maintain and grow their businesses, while ensuring that railways manage an efficient shipping network for everyone.

Canadian businesses count on a reliable rail transportation system.

With 70% of Canada's surface freight moving by train, railways are extremely important to the competitiveness of our economy. In 2010, Canada's major freight rail companies, Canadian National and Canadian Pacific, served approximately 5,000 shippers and transported products to more than 10,000 destinations in North America and around the world.

As my hon. colleagues know, our government launched the rail freight service review in 2008. Its objective was to address ongoing issues raised by shippers concerning the reliability and consistency of rail freight service. We appointed an independent three-member panel to conduct a comprehensive review of service issues and problems related to the rail system in Canada. The panel was asked to submit recommendations to improve the efficiency, effectiveness and reliability of rail shipping in order to support trade and economic growth. The panel held broad consultations across the country, hearing from both shippers' representatives and railways.

Their recommendations proposed the use of service agreements to increase the clarity and predictability of rail service. These agreements would clarify and clearly define the services that railways would provide and how shippers and railways interact. This proposal is based on the idea that by working together to develop these agreements, shippers and railways can improve the efficiency of the supply train rail freight system and in doing so enhance their contribution to Canada's competitiveness in the world economy.

It is worth nothing that service agreements are a commercial tool, which our government believes is the best approach to improve the relationship between railways and shippers. We base this view on the fact that shippers and railways have always worked together commercially to define their private business dealings. Sometimes, however, shippers have been unable to negotiate contracts with railways to address service issues. Many shippers would like these agreements to know what service they can expect from the railways in order to manage their businesses and plan for the future.

On March 18, 2011, our government announced that it accepted the panel's commercial approach. In fact, we went beyond the recommendations. We put in place four key measures to improve the performance of the entire rail supply chain. First, we launched a facilitation process to bring together shippers and railways to negotiate a template service agreement and develop a process to resolve commercial disputes. This process focused on improving the private commercial relationship. This six-month facilitation, which was led by Mr. Jim Dinning, took place in 2012.

Second, we committed to table legislation to give shippers the right to service agreements with railways and to establish a process for obtaining an agreement if commercial negotiations fail. The fair rail freight service act would fulfill this commitment and give shippers the certainty that they would be able to obtain service contracts from the railways.

Third, we committed to establish a body of rail shippers to address logistics and develop standards to improve competitiveness. This group, known as a commodity supply chain table, will soon be established. Finally, we determined the need for an in-depth analysis of the grain supply chain to focus on issues that affect that sector and help identify potential solutions. This study is under way and should be completed soon.

Together, these measures deliver on our Conservative government's commitment to ensure Canada has the rail system it needs, one that supports strong economic growth and long-term prosperity.

It is worth noting why the legislation is needed. Canadians and Canadian businesses depend on rail to transport products to markets, both here in Canada and around the world, and it has to be done efficiently. We drafted the fair rail freight service act by working closely with and listening to the stakeholders involved. Shippers from a wide range of commodities and manufacturing sectors have told us what is important to them and what they need. Rail companies also explained the obligations they have to serve all shippers and the constraints they may face in carrying out their business.

This consultation helped us develop reasonable and intelligent legislation that would reflect the interests of both shippers and railways to meet the needs of the Canadian economy. This consultation also helped us develop reasonable and intelligent legislative proposals that reflect the interests of all the various stakeholders throughout our economy. The fair rail freight service act would create a strong incentive for issues around rail shipping to be settled through commercial means.

By requiring railways to offer agreements to shippers that requests them, the legislation would give the shipper the legal right to ask for a service level agreement. When a shipper requests an agreement, railways would have 30 days to offer one. The agreement would cover the terms of service that the railway and the customers would follow to move the shipper's goods. It could also include communication protocols and performance indicators, such as frequency of service, transit times and the number and type of cars, as elements that the rail companies would provide for their customers. This right to a service agreement would provide an effective tool for shippers to use in their discussions with railways.

In the event that negotiations for such an agreement fail, Bill C-52 proposes a fair, speedy and inexpensive process to establish the service contract. The shipper would be able to go to the Canadian Transportation Agency to ask an arbiter to impose an agreement. To make such a request, the shipper would have to demonstrate that an effort had been made to reach an agreement commercially and that a 15-day notice had been served to the railway prior to the request for arbitration. The shipper would trigger the arbitration and frame the service issues to be addressed. The shipper and the railway would then each have the opportunity to provide submissions to the arbiter with their views in respect to the contract.

This process, however, would be an interest-based arbitration. This means the arbiter must consider the interests of both the shipper and the railway in establishing the service contract. The legislation would provide guidance to the arbiter on factors to consider when establishing a service contract, including the shipper's transportation requirements and the overall obligations of the railway to provide service to all shippers. The arbiter would have the flexibility to determine the right service contract for each individual case. Every shipper is different. There is no one-size-fits-all approach. In establishing a contract, the arbiter must consider the unique circumstances in each case. As a result, arbitration decisions would be fair and reasonable for both parties.

Finally, the fair rail freight service act would provide a strong enforcement mechanism to ensure compliance with arbitrated service contracts. It proposes the use of administrative monetary penalties to hold railways accountable for their service obligations, as defined in the arbitrated contracts. If a railway breaches its service obligations, the shipper would be able to complain to the Canadian Transportation Agency. If the agency confirms the violation, it could apply a penalty of up to $100,000 for each violation by the railway.

Taken together, these measures of the right to service agreements, an efficient and speedy process when commercial negotiations fail and strong enforcement for arbitrated agreements would provide shippers with clarity, predictability and reliability when they need to grow their businesses and plan for the future.

Our primary objective is to encourage better commercial relationships between railways and shippers. This legislation creates a very strong incentive for parties to settle agreements privately. In most cases, shippers and rail companies should be able to negotiate terms and agreements on their own. Second, over the last number of years rail companies have improved their service. Shippers themselves acknowledge that service has improved, and I would like to take a moment to congratulate the rail companies for this progress. Despite this fact, we must pass Bill C-52 to solidify and improve upon these gains to ensure that Canada's rail system is well positioned for the future. We must ensure the entire rail system in Canada will be able to support the expected increases in shipping, which is bound to occur due to our government's robust trade agenda.

As demonstrated by several new and developing free trade agreements, Canada is turning increasingly towards global trade to generate economic growth. This means we need efficient and effective transportation networks to give Canadian businesses a competitive advantage in the world markets.

Before I conclude, I would also like to note that this legislation supports our government's responsible resource development agenda. In our efforts to modernize the grain sector, as we expand Canada's international exports, we need a rail transportation system that can move our resources to global markets efficiently and reliably.This legislation will make an enormous difference for our shippers in the resource sector. It will give grain farmers more predictable service as they work to sell their grain on the international market. It will give lumber mills more reliable service as they expand sales to Asia, and it will improve service to exporters of minerals, such as potash and coal. By improving the reliability and predictability of rail service, we help to strengthen Canada. We help strengthen Canadian companies and help increase Canadian companies' overseas sales.This legislation will create jobs, make Canada more competitive in the world economy and will make Canada a more attractive place to invest.

This proposed legislation offers a strong new tool to enhance the relationship between shippers and railways. Our Conservative government is proud to be taking this strong action to enhance efficiency, effectiveness and reliability of the Canadian rail freight system. I am convinced that these proposed measures will help build an even stronger freight rail system and contribute to Canada's success in international trade.

Bill C-52 will promote growth, create jobs and build prosperity for all Canadians. I encourage all members in this House to vote in favour of this legislation and refer it to the Standing Committee on Transport, Infrastructure and Communities without delay.

I would like to thank the many stakeholders, parliamentarians, and the shippers and rail companies, for their input in this process. We have come forward with legislation that I think has very broad support and will, as I have said many times already, make our country stronger. We live in the best country in the world, at the best time in history to be alive, and now we can ship our products more easily.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:20 a.m.
See context

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Mr. Speaker, I thank my friend from across the way for his work on this bill.

The government is trying to establish some balance between the shippers and those who provide the products that drive our economy. Of all the goods that we move in this country, 70% go by rail. When looking at the details of what has been presented, the challenge for us is striking a balance when there is a problem. As the member well knows, there have been many years of problems with shippers not being able to get reliable service from the two large rail companies. One challenge is the way in which to resolve that dispute. I am curious as to the specific measures that the government has proposed to resolve disputes between the two. There is a bit of a power imbalance. When railcars do not show up as they have been promised, what recourse does the shipper actually have?

The Coalition of Rail Shippers asked for a clear conflict or dispute resolution model. I do not see anything nearly as strong as what the shippers have asked for in this legislation.

My second question is very specific with regard to penalties. Last year CN alone turned a $2.7 billion profit. The maximum fine that the government has suggested under this legislation for a rail company to break a contract, such as promising to deliver a number of cars and simply not delivering them, is $100,000. Would that be incentive enough? Is the stick strong enough to change the behaviour of some of these rail companies that simply abuse the smaller shippers particularly in the country?

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:25 a.m.
See context

Conservative

Steven Fletcher Conservative Charleswood—St. James—Assiniboia, MB

Mr. Speaker, it is correct that historically there have been challenges between railways and shippers. However, we also have to recognize that railways have improved in the last few years. This legislation is designed to ensure that shippers and railways respect each other and that we have a continuous chain of supply.

If there is a problem there is a dispute mechanism, which would not be expensive. It would be done quickly and efficiently. I spoke to that in my remarks. The $100,000 a day fine is substantial with respect to the worth of CN or CP. They would not be in business long if they were to incur $100,000 a day, or per violation, too often.

It is still a competitive marketplace, and whomever provides the best service often wins in the end. This is a carrot and a stick approach. We look forward to railways and shippers working together. We are empowering shippers to be able to deal with the railways when they do not act appropriately.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:25 a.m.
See context

Conservative

Dick Harris Conservative Cariboo—Prince George, BC

Mr. Speaker, I thank the Minister of State for Transport, the minister, the stakeholders and all of the people who were involved in putting this fair rail service agreement together.

I want to follow up on the member for Skeena—Bulkley Valley's question. The minister pretty much answered it, but I would like the Minister of State for Transport to reply.

As has been the case in the past, there have been 20 or 30 shippers who have had an issue with either CN or CP. If there were 20 at one time, it is my understanding that the fine would be $100,000 per day per complaint, which would be about $2 million a day. Could it be assumed that the shareholders of the two railways would be the most encouraging people to get that resolved sooner rather than later?

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:30 a.m.
See context

Conservative

Steven Fletcher Conservative Charleswood—St. James—Assiniboia, MB

Mr. Speaker, I thank the member for the question and for pointing out that the fine is per violation. It could add up very quickly and would damage any business. Therefore, it is not in anyone's interest, especially the railways', not to fulfill the service agreements.

I know the member comes from a resource-rich area. He may be interested to know that David Lindsay, the president and CEO of Forest Products Association of Canada, is very supportive. The wheat growers, the barley growers, the canola industry, people who use the railway for shipping, are supportive. I have dozens of quotes from stakeholders who are supportive of the legislation. The legislation will help the economies of Prince George and communities like it.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:30 a.m.
See context

NDP

Françoise Boivin NDP Gatineau, QC

Mr. Speaker, why did it take them five years to table this bill? Why did they wait, given all the work that has been done by the member for Trinity—Spadina, who introduced a private member's bill?

What was the motivating factor? Why did they take so long to partially correct the problem? Changes will need to be made. It seems to me that five years is a long time to finally table this sort of bill.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:30 a.m.
See context

Conservative

Steven Fletcher Conservative Charleswood—St. James—Assiniboia, MB

Mr. Speaker, I suppose it depends on how we judge time. There is geologic time; there is Ottawa time, and then there is real time. Given that this is a serious piece of legislation that affects the economy of the country, we do not want to rush it. We want to make sure it is balanced and that we take stakeholders into consideration. We are trying to be as fair as possible to everyone involved, so in Ottawa time the legislation has been done in the equivalent of a nanosecond in real time.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:30 a.m.
See context

Liberal

Ralph Goodale Liberal Wascana, SK

Mr. Speaker, in an earlier answer to the member for Skeena—Bulkley Valley, if I heard him correctly, the minister used a phrase to express that the transportation sector is a competitive sector, that there is competition in the transportation industry, presumably between the railways. I would ask the minister, is that not exactly the problem here, that there is no competition? The shippers are captive and it is because of that captive shipper situation that legislation like this is in fact necessary.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:30 a.m.
See context

Conservative

Steven Fletcher Conservative Charleswood—St. James—Assiniboia, MB

Mr. Speaker, the member for Wascana says there is no competition. Well, there is competition because there are at least two. It is a duopoly, for the most part. In that framework the railways have had a lot of power, absolutely, and the shippers have not had a lot of recourse. This fixes that problem and does it in a very collaborative manner. Shippers appreciate it, and if the railways do not appreciate it now, they soon will.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:30 a.m.
See context

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Mr. Speaker, I seek unanimous consent to split my time with the member for Gatineau.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:30 a.m.
See context

NDP

The Deputy Speaker NDP Joe Comartin

Does the hon. member have the unanimous consent of the House to share his time with the member for Gatineau?

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:30 a.m.
See context

Some hon. members

Agreed.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:30 a.m.
See context

NDP

The Deputy Speaker NDP Joe Comartin

It appears, objectively, that the member does have consent to share his time.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:35 a.m.
See context

NDP

Nathan Cullen NDP Skeena—Bulkley Valley, BC

Mr. Speaker, it is with some pleasure that I rise today to address Bill C-52, which is perhaps not the best named act I have ever seen.

The naming suggests that the problems shippers face across this country will now be solved. For those of us who come from the resource regions of this country, for years we have sat with shippers in forestry, farming, chemical and manufacturing industries as they have petitioned us, as members of Parliament, to do something about the situation. Recently the Coalition of Rail Shippers was asked and polled as to what its satisfaction was with the service they were receiving from the competitive duopoly, as described by the minister. Eighty per cent of those polled described serious and significant problems with their access to rail. That is not great.

While Bill C-52 is an improvement over the status quo, it has been five to six years promised and in the waiting. We see today what I can at best describe as a half measure. As the minister pointed out, as critical as rail service is to the Canadian economy, I think we could emphasize it even more. Seventy per cent of all the goods Canadians manufacture and sell in this country go by rail. An efficient economy, which we see with some of our European partners, would have an even higher percentage. It is the most efficient way to move things across borders and large tracts of land, which are two things we contend with here in Canada.

The minister described the near monopoly as a duopoly. I will take a moment on this, because I think it is important for Canadians to realize that if, for the Conservative government, the definition of a competitive marketplace is what we have in the rail shipping industry, we have a problem. Not only are there only two significant shippers available to those who are looking to move their product, but in many regions of the country there is only one. The line going to their freight yard, farm or lumber yard is controlled and wholly owned by one shipper. If one has a problem with that company, the status quo is terrible.

Members have seen it time and again. I can think of one particular mill in my riding in northwestern B.C., in Fort St. James, that has crawled through perhaps one of the toughest times the lumber market has ever seen since B.C. started shipping wood. It has managed to have a partnership with the union, get concessions on wages and have a great partnership with the community. It finally got to a viable place after years of struggle and against all odds. This is one of those communities for which it would be an understatement to say it relies on this industry.

At the end of the day it cannot get cars to move its products to market. It has product. It has someone willing to purchase that product. In between stands a rail company that does not seem to care that it made a contractual promise to deliver so many cars on such and such a date. The mill is waiting days and weeks for the cars to show up. The wood is stacked up in the yard and they cannot sell it.

The mill has turned to me as the member of Parliament. We approached the government with appeals and have said we need two things. One, we need both the carrot and the stick. We need a way for companies to deal with the shippers in a timely and cost-effective manner so that the conflict resolution model is not onerous and expensive. Again, smaller companies get penalized under this system.

CN and CP have had many years now of extraordinary profit. Since it was privatized under the Liberal government in the late 1990s, CN has gone on to see record profits and is now run primarily out of Texas. Most Canadians do not realize that, just because the cars have a Canadian flag on the side, where the cars actually go and to whom and when is not necessarily decided under Canadian interest.

This legislation would allow the government to look to a company and say that even though it received $2.5 billion profit last year, we are going to really hit it hard by charging a $100,000 fine only if we find a serious and significant problem, only if the company looking to move its product is willing to pursue this all the way through the quasi-judicial process. At the end of the day maybe it will get fined.

To CN and CP, these very large companies, it may be an easy equation to let them go through that dispute resolution, pursue it all the way through. It is more efficient and cost-saving for CN and CP to just ignore it. At the end of the day the worst case scenario is they would get a $100,000 fine.

That might just be the cost of doing business, because these companies could turn more profit in sending those cars somewhere else even though they have a signed contract.

What is frustrating for a lot of these farmers is that they have contracts and they assume that those contracts mean something and then at the end of the day they do not, because they are beholden. The power imbalance is too great.

The Minister of State for Transport is attempting to readjust the power equation a bit. He mentioned as much in his answer to one of the questions. It has to be recognized that, in that key and critical relationship between those who make the goods and those who ship the goods, there is a disparity of power. We need to rebalance the tables a bit.

Often New Democrats talk about the underdogs, or people who have lost their jobs, or people who have fallen through the social safety net that the government continues to tear up. The underdogs we are talking about here are often major manufacturing outfits in Canada, very significant large farming interests. One would think they would have a lot of sway and power with the government, but for some reason the major rail companies that exist in this country, the duopoly, seem to be able to pull the string on the government and essentially get what they want.

We waited six years. I know the minister said it was a nanosecond in Ottawa time or in geological time. I am not sure which, but five or six years is not a priority for a government. There have probably been 90 or 100 bills on crime and punishment from the current government. This is the first one on rail, and yet rail moves 70% of the product that we sell around the world. For the government to call it a priority, I would hate to see what the government thinks is not a priority because this legislation has been a while in the waiting.

Some people listening might think this is one of those rural-urban issues that only really affects those living in the resource sections of our country, those places that grow the trees and mine the rock and produce the energy and whatnot. Nothing could be more further from the fact. This is one of those issues that crosses over the interests of all Canadians, because if we are unable to move our products in a reasonable time to market either within a province, between provinces, across borders, to those international ports in Prince Rupert, Montreal, Halifax and beyond, it hurts everybody. When things are not reasonable and we cannot find a way to solve the problems of this power imbalance between these two companies centrally and all of the shippers involved, it hurts everybody. It hurts people right across the board.

The government is seeking to get a balance. While this legislation is worthy of consideration at committee, we hope and pray that the government is open and interested in amendments to achieve the balance that the minister talked about in his comments. I come from communities that rely on that line. It is our connection to the world. It is our connection to a viable and secure economic future. When that line is disrupted for whatever reason—either through contracts that are not fulfilled by the rail companies or some geological disruption, to take some of the minister's line—it is absolutely critical to us because in today's economy, as competitive as it is, getting products to market in a timely and efficient manner is absolutely essential. We are competing with the world, and we can, but we need a good infrastructure system.

We used to have governments in Canada, of either more progressive or more conservative persuasions, that believed in the necessity to have that strong infrastructure. That was a role of government to pursue and enable the growth of the country. It was a Conservative government at the beginning that initiated the dream of a rail line across this country and drove that last spike. However since those times the present version of the Conservatives believes that the role of government is slightly different.

Here obviously what government must do is play referee on what we would argue is an unbalanced playing field. To this point, looking at a $100,000 fine for companies that are turning billions in profit perhaps suggests to the companies that the incentive is not there. When cars do not show up, when cars show up damaged and not useful and late and unable to ship the product that they are contracted for, most reasonable Canadians would say there is a dispute that would have to be filed through court. If it is the only company they can ship with, then how often are these companies going to go hard at it? Therefore they come through us. They come through MPs who represent these various constituencies and implore us to do something about it.

This legislation is the government's attempt to do something about it. It has taken us a few steps. We insist that the government be open to taking us the rest of the way, so that at the end of the day we get it right this time, because we do not take on this issue very often in Parliament. Even though it may be a nanosecond for the government, this is years of frustration for industry; this is millions if not billions of dollars lost to the Canadian economy.

Fair Rail Freight Service ActGovernment Orders

February 1st, 2013 / 10:45 a.m.
See context

Charleswood—St. James—Assiniboia Manitoba

Conservative

Steven Fletcher ConservativeMinister of State (Transport)

Mr. Speaker, the member referred to an individual in his riding who has had frustration with the railways. That is fair enough.

The best thing to do then is to support this legislation, because this legislation does even out the power disparity to which he referred. It also does it in a way that will hurt. It is up to $100,000 per violation, and it can go up day by day. The process through the quasi-judicial method that we have suggested is not an expensive method. It is designed to be quick, efficient and cost-effective.

If the member is very concerned about it taking six years, may I ask if his party would delay this legislation another six years, or will the New Democrats pass it with unanimous consent?