Bill C-30 (Historical)

Fair Rail for Grain Farmers Act

An Act to amend the Canada Grain Act and the Canada Transportation Act and to provide for other measures

This enactment amends the Canada Grain Act to permit the regulation of contracts relating to grain and the arbitration of disputes respecting the provisions of those contracts. It also amends the Canada Transportation Act with respect to railway transportation in order to, among other things,
(a) require the Canadian National Railway Company and the Canadian Pacific Railway Company to move the minimum amount of grain specified in the Canada Transportation Act or by order of the Governor in Council; and
(b) facilitate the movement of grain by rail.

[Jeff Watson, Conservative, Essex, ON]

Right.

That being said, you've raised some other issues that wouldn't be contingent per se on the Canada Transportation Act review. Those, I think, form some important advice to this committee in this process right now with Bill C-30.

[Jeff Watson, Conservative, Essex, ON]

Before I get to any questions, it's probably appropriate to take a step back for a second.

The government's approach with respect to what is happening in the west first of all was an immediate solution to ramp up the cars available, if you will. That was the order in council.

Bill C-30 is not a long-term structural change. It's intended to address near-term issues in a more comprehensive way than the order in council allows us to do. Through that we're proposing, among many things, a flexible regulatory approach to some of the service level issues that have been raised, as opposed to putting in force a legislated framework, and trying to be prescriptive about it in that approach for a short duration.

The third aspect is that we are proposing to accelerate the review of the Canada Transportation Act. It's important because of some of the bigger structural questions. Earlier we heard from witnesses about the establishment of a transportation authority and some other things like that. These are major structural things and we don't necessarily know what the interrelationships will be. I don't even know if they'll exceed the scope of the bill as it currently exists. But some of these issues related to major structural changes to the legislative framework of the Canada Transportation Act are probably dealt with better in that earlier review, so we can take a look at that.

I think Bill C-30 has to be looked at with a view of not trying to solve all the issues, if you will, in a structural fashion. That being said, it doesn't mean there aren't opportunities. There'll be consultation, obviously, on the regulations. I think we've heard a number of witnesses who think that will achieve at least some of the important objectives related to operational terms of service level agreements.

Is that a fair understanding of that approach in that regard? Do we understand that we're not trying to solve all of the issues, if you will, structurally with this particular bill? Are you comfortable with that approach, knowing that the bigger questions will be dealt with in an accelerated fashion?

[Garnet Etsell]

Let me address the domestic grain issue because that really comes from ANAC, the Animal Nutrition Association of Canada. If we do not get some kind of prioritization in Bill C-30, we will be unable to get enough grain in the valley to feed our animals. If that day comes where the bins are empty, we are going to be faced with a decision. The decision is going to be to cull animals.

Just from an animal welfare point of view, you cannot send a half-grown chicken to market. There's only one thing to do and that's to destroy it. That is what we're faced with.

[Niki Ashton, NDP, Churchill, MB]

Thank you very much for sharing that.

I'm wondering in terms of the other recommendations you made, if you could share what kind of feedback you've had from others on the ground that you work with, not just through your organization, but perhaps other organizations. Do people agree with the kinds of recommendations you're putting forward? Should this committee be aiming to improve Bill C-30 by adding these recommendations, based on the views of many people out there?

[Niki Ashton, NDP, Churchill, MB]

Thank you for the clarification, but that's not necessary. Mr. Zimmer, I understand very well what happens in this Parliament.

All this to say that where I come from, producers and people in communities across Manitoba are very concerned about the backlog and the lack of federal leadership on this front. To hear from people on the ground is the most important.... We've heard a lot certainly from industry and from representative organizations, but the fact of the matter is that the frustration is being felt first-hand by people on the ground.

In light of this discussion, I realize that the Canadian Federation of Agriculture has also put forward recommendations on the way in which Bill C-30 could be improved, certainly recommendations that we believe need to be looked at very carefully. I'm especially interested in recommendation number seven, where you're calling for transparency in the grain logistics system. You talk about how the U.S. has a model that supports producers by offering greater transparency. What we're hearing, and we heard it in the previous panels as well, is the need for federal leadership, the need for coordination, and the need to have information that is housed and offered by government, and obviously in the interests of producers.

I'm wondering if you could speak to the importance of that kind of coordination and federal leadership when it comes to transparency.

[Bob Zimmer, Conservative, Prince George—Peace River, BC]

Thank you for coming to the committee tonight.

I'll start with Roger.

From some of your comments, I think we think completely alike. You said you want a market-driven solution to the problem. You said that it's an overall infrastructure shortage that is the issue; yet within a few minutes you said that as an organization you don't have an answer as to what a solution would be for this infrastructure problem.

Here we are. We're asking for a solution to the infrastructure shortages and an answer as to how we can fix this thing. We're looking at Bill C-30. Yes, it's more short-term as a solution, but long term.... So we come back and ask you what your solution is. Your answer is that you don't even really get along yourselves to provide us with such a solution.

I guess that's where we're stuck. If you want a market-driven solution, then you need to give us a market-driven solution. If you want our solution, we'll give it to you, but.... Do you know what I'm saying?

We want you to give us that solution.

I'll go to Humphrey and Garnet. I would say to Garnet, too, that a bit of the overlooked problem here is that we talk about exports, but we haven't been talking a whole lot about domestic supply and the shortages there. I'm from B.C. I lived in the Lower Mainland when I went to school. I lived in Abbotsford and your area, so I know how turkey farms operate. You need a lot of feed for those turkeys.

I mean real turkeys, not—

[Roger Larson, President, Canadian Fertilizer Institute]

Or less than eight minutes, I hope.

Mr. Chairman, thank you very much for your introduction and your invitation to appear before the Standing Committee on Agriculture and Agri-Food on this important issue, Bill C-30. Good evening, members of the committee, and thank you for staying so late.

My name is Roger Larson. I'm president of the Canadian Fertilizer Institute. CFI represents the manufacturers of nitrogen, phosphate, potash, and sulphur fertilizers, as well as the major wholesale and retail distribution companies in Canada. Our members produce over 25 million tonnes of fertilizers annually, over 75% of which is exported to more than 60 countries around the world. Canada accounts for about a third of world potash production and 45% of world potash trade. Canadian farmers purchase $3.5 billion of fertilizer annually.

The Canadian fertilizer industry understands the urgent demands for prompt action to alleviate the current backlog of grain through Bill C-30. However, our position has been that government-mandated allocation is not an effective solution. Without an expansion of rail capacity it is a zero-sum game. Our industry supports commercial solutions through clear service level agreements negotiated between the railways and their customers.

In addition, there are three other critical points that I would like to make.

Policy commitments announced in conjunction with the tabling of Bill C-30, with the additional enhancements, could be a robust solution to the current challenges which exist for all rail shippers.

We do not believe that this winter's backlog of grain and other rail shipments, including fertilizers, is a blip. Canada's commodity transportation system is hitting the limits of its capacity, both domestically and for exports. Only a strategic partnership of governments, railways, and shippers can ensure that Canada's place as an export powerhouse will be realized.

Regarding Bill C-30, our industry understands that the government is moving to rapidly pass this legislation; however, there are important issues which need to be addressed before this bill becomes law.

First, expanding interswitching distance beyond 160 kilometres would allow our members' fertilizer facilities to have access to multiple railway companies, improving service and competitiveness.

Second, enhance service level agreements or SLA policy commitments to include the following provisions: the collection, reporting and measurement of performance metrics; the performance standards applicable to the railways' obligations; the charges, penalties or fees that a railway should pay upon a breach of its service contract; and a mechanism for the resolution of disputes under SLA.

I want to emphasize that this winter's backlog of grain and other rail shipments is part of a trend. Canada's commodity transportation system is hitting the limits of capacity domestically and for exports. The crisis in rail shipments is not just a perfect storm of bad weather, record grain harvest, and lack of customer focus by the railways; rather, it is a wake-up call for everyone in the transportation and logistics community.

The frustration of shippers who simply cannot get their goods to markets has been boiling for years. This is not, and should not become, a power struggle with the railways. It's about farmers, miners, and manufacturers who are losing money because of inadequate rail service.

With the Canadian government looking to aggressively grow Canada's trade with key markets, the clock is ticking on the readiness of the Canadian logistics and supply chain to accommodate a huge surge in traffic.

We need to act now to optimize our existing framework so that we can achieve this economic opportunity. Addressing one sector's concerns without considering the broader supply chain will result in a patchwork of policies that do not solve any fundamental issues. Shippers, railways, and the government need to take a holistic look at the challenges facing Canada's transportation system and develop sustainable commercial solutions that are good for all sectors, the railways, and the Canadian economy.

In closing, I'd like to thank the members of the committee for this opportunity to present our views. A good dialogue between government and the private sector is important as industrial policies are contemplated, ensuring a good understanding of the opportunities and challenges that businesses face, as well as opening the door for partnerships that strengthen Canada's economic competitiveness.

We welcome the opportunity to continue this dialogue. I am pleased to answer any of your questions.

Thank you.

[Robert Ballantyne]

The 100-plus members of the association spend approximately $6 billion annually on transportation services by all modes. We advocate for our member companies' interests with regard to air freight, trucking, marine, and rail. FMA will only comment on the sections of Bill C-30 that would amend the Canada Transportation Act, and also on the government's related announcements that relate to the transportation elements in Bill C-30.

I will attempt to provide some context on how we arrived at this point with regard to rail service, provide some comments on Bill C-30, and more importantly, look at what needs to be done to ensure that the rail system and other parts of the supply chain system have the capacity to meet the future needs of rail shippers.

During the run-up to Bill Bill C-8 which amended the Canada Transportation Act in 2008, there were widespread complaints about rail service from across the country. When Bill C-8 was passed in June 2008, the government agreed to undertake an independent review of rail service. The review panel published their final report on January 2011.

One of the panel's consultants, NRG Research Group, found in its independent survey of 262 shippers that only 17% of their respondents rated their satisfaction at a six or seven on a scale of one to seven, where seven was the most satisfied. NRG also reported that 62% of shippers reported they had suffered financial consequences as a result of poor service performance. The rail freight service review panel recognized the fundamental problem, and said in its final report, “This railway market power results in an imbalance in the commercial relationships between the railways and other stakeholders.” Canadian railway law has acknowledged for over a century that rail freight is not a normally functioning competitive market.

Part of the government's response to the rail freight service review was to introduce Bill C-52, the Fair Rail Freight Service Act, which became law in June 2013. Bill C-52 breaks new ground by providing for the first time in Canadian law the right of all rail shippers to a service level agreement, and if it can't be negotiated directly with the railway, it can be achieved through arbitration. The shipper community, through the Coalition of Rail Shippers—and there are a number of our associations, some of which you've already heard from, that are members of Coalition of Rail Shippers—identified several areas where Bill C-52 could be strengthened in a way that would minimize uncertainty and give better guidance to our arbitrators. Also, some of the most significant recommendations of the rail service panel did not find their way into Bill C-52, particularly the review panel's list of elements that should be included in service level agreements at the option of the shipper.

The Coalition of Rail Shippers' proposed amendments to Bill C-52 were designed to strengthen it and make it more likely to effectively rebalance the commercial relationship and meet the government's stated objectives for the bill. The government declined to accept any of the six recommendations proposed by the Coalition of Rail Shippers. Consequently, to my knowledge at least, there have been no shipper attempts to achieve a service level agreement using the provisions of Bill C-52.

Bill C-30 provides another opportunity to revisit the shortcomings of the Fair Rail Freight Service Act. Clause 7 of Bill C-30, for example, provides the authority for the agency to extend interswitching limits “for the regions or goods that it specifies”. This amendment to the interswitching regulations will allow the agency to give effect to the government's policy announcement to extend the maximum interswitching on the prairie provinces from 30 kilometres to 160 kilometres. The interswitching regulations have been useful to shippers over many decades and are an effective surrogate for real competition. Given the current backlog of grain, this temporary provision may give grain shippers more flexibility in arranging service, and it will be available to all shippers who may have facilities located within the 160-kilometre zones that will be established.

Once a more general review of the Canada Transportation Act is undertaken, the maximum interswitching limit across the entire country should be investigated to determine if the current 30-kilometre limit should be extended.

The other significant provision of Bill C-30 that's relevant to all shippers is clause 8, which authorizes the agency to “make regulations specifying what constitutes operational terms” to be included in a service level agreement through arbitration. While it's unclear how the agency and the government will use this provision, it could be a vehicle for achieving some of the shipper amendments that were rejected during the Bill C-52 debates. FMA will certainly engage with the agency as these regulations evolve.

I'm not going to comment on the provisions related to potential fines for the railways for missing targets, or the provision that allows the Governor in Council to set targets in the next two crop years. It is acknowledged that the current backlog of grain is an unusual situation, and clearly the government felt compelled to intervene at an unprecedented level of detail.

As you've heard and you probably will continue to hear, there is concern among some of the shipper community that singling out one industry group in such a manner could cause service problems for other shippers. FMA includes among its members grain companies but also many shippers in many other industries. We've informed our membership that the targets set in the order in council and in Bill C-30 originated with CN and CPR, and we have to start from the premise that the railways would have offered those targets only if they felt they could maintain the current level of service for their other shippers.

Intervention such as that in Bill C-30 needs to be applied very carefully and only under the most extraordinary circumstances.

With regard to the future, a welcome announcement in Bill C-30 is that the statutory review of the Canada Transportation Act will be moved to an earlier date rather than its mandatory latest start date of June 2015.

Two basic issues that the statutory review should address are: one, the need to provide appropriate rail capacity for the needs of Canadian industry over the coming decades, and Mark Hemmes made some comments about the growth that is expected to take place in at least some of the agricultural commodities; two, the need to improve the relationship and trust between the railways and significantly large segments of their customers.

With regard to capacity, this will require significant investment by the railway companies, by other supply chain partners as Peter mentioned in his remarks, and possibly by several levels of government. The statutory review will provide an opportunity for an in-depth analysis of the capacity needs going forward and the role the various stakeholders should play. How this is addressed will have a significant impact on the national economy and our global competitiveness.

Last, with regard to shipper-railway relationships, it will be difficult to overcome the distrust, and to some extent, the acrimony that currently exists. In this connection, there have been informal discussions under the academic umbrella of Carleton University School of Public Policy and Administration. They run a process called critical conversation, which involves direct and confidential discussions within an academic environment among stakeholders to start a dialogue to overcome distrust. While arrangements have not yet been confirmed for critical conversations involving the railways and shippers, the planning discussions with the various stakeholders continue.

Rail service is vital to the Canadian economy, and the members of the Freight Management Association are ready to work in a constructive way with the government and the railways to improve Canadian supply chains for the benefit of the railways, their customers, and the Canadian economy.

Thank you.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you to the witnesses for coming tonight to discuss this really important issue.

We had this outstanding crop across the Prairies, far more than was forecast by anybody, and obviously, with that difficulty, it was certainly trying to get that to market.

I just want to make a comment here with regard to the GTA. I understand that it was cut in the 1995 budget, which was under the previous Liberal government.

Mr. Otto, you said that Bill C-30 was a good first step. I wonder if you want to expand your thoughts on that particular piece.

[Pierre Gratton, President and Chief Executive Officer, Mining Association of Canada]

Thank you, Mr. Chair, members of the committee, clerk, and fellow attendees. I appreciate this opportunity. I didn't think I'd have an opportunity to speak to the agriculture committee in this role of mine.

The Canadian mining industry is a major economic driver contributing over $52 billion to gross domestic product in 2012, employing some 400,000 people, and accounting for $92 billion, or over 20% of the value, of Canada's total exports.

As a consequence of this international reach, mining is one of the largest users of Canada's transportation sector. We represent the single largest industrial customer group of Canadian railways, and consistently account for over half of the total rail freight revenue and the largest share of total volume carried.

Having recently polled our membership, I can report that poor rail service has been causing a range of challenges for miners since the fall of 2013, including unacceptable ratios, with some 50% to 60% of cars ordered versus cars delivered, resulting in some instances in the downscaling of production and operations. Just today I learned that CP Rail verbally communicated that it will no longer transport uranium, a decision contrary to the common carrier obligation that could adversely affect investment in Canada's world-class uranium resources and undermine all of the excellent work and leadership that the government has undertaken to secure access to Asian markets for uranium.

There is a cost to the Canadian economy resulting from poor rail service. Railways do not produce the goods for exports that allow trade to grow, our economy to expand, and employment to increase. Rather, they are an essential conduit for Canadian industry to receive crucial inputs and get its goods to market. Without a healthy and reliable railway network, Canada's reputation and success as a trading nation are seriously hampered.

With respect to this bill, MAC is sympathetic to the grain growers' difficult circumstances and to the government's motivation in assisting them. We also appreciate the sincere effort at reform. However, we are concerned about the unintended consequences that will befall other Canadian sectors reliant on rail service, including mining, as a result of the measures contained in Bill C-30.

Specifically, we have three areas of concern.

The first area of concern is the grain volume commitments. Enacting grain sector specific volume commitments will exacerbate existing rail capacity constraints to the detriment of all the other shipping sectors, including ours. Mining companies are also concerned that enacting grain sector specific volume commitments will undermine the legal remedies available to shippers in the Canada Transportation Act. How can mining companies forced to operate outside the provisions of Bill C-30 upon enactment make a service case against a railway that is legally obligated, through pain of penalty, to serve grain companies? A railway's unwillingness to break the law requiring it to move grain is a defence against the legal remedies available to other rail customers seeking to address their service challenges.

Our second area of concern is the limited extension of interswitching provisions to the Prairies. We are concerned the new interswitching provisions will result in the railways being forced to do more short-hauls, which are operationally more expensive than longer ones. A consequence of this is a reduction in rail freight revenue due to the interswitching rate being federally regulated, which will leave the railways to make up for lost revenue by either reducing service to better optimize their assets and/or increasing rates for shippers who are captive, or have uncompetitive options. While MAC is not opposed to interswitching regulations in principle, we would encourage appropriate consultation on their potential positive and negative impacts on the effectiveness of Canada's rail network as a whole before implementing them.

Our third area of concern has to do with regulating improvements to the service level agreement mechanism. Bill C-30 proposes amendments that would give the Canadian Transportation Agency the authority to regulate prescribed elements in arbitrated service level agreements, the details of which would be determined through a consultation process. While this measure may seem promising, we do not believe it will be effective. The service level agreement provisions in the act mandate that an arbitrator take a rail company's service obligations to other shippers into account before rendering a decision. If Bill C-30 passes, an arbitrator will be bound to consider the railway's legal obligation to transport grain against the elements of service that a non-grain shipper is seeking, superseding any regulation designed to enhance a non-grain shipper's position in an arbitrated service level agreement.

In summary, we do not think the legislation will address the challenges faced by all shippers, and it could make the situation worse for some. I am also very concerned by an approach to rail reform that attempts to address rail issues piecemeal, one commodity at a time.

We support a collaborative approach to addressing rail service challenges in Canada and strongly advise against government or Parliament picking winners and losers. Exacerbating the rail service challenges that miners already experience is not the right way to go. As I mentioned earlier, we are responsible for over 50% of rail revenues. If those decline because mines aren't able to operate, the costs of the overall transportation system will go up for everyone.

We need to take a step back and look at the whole supply chain and the kind of transportation Canada needs to succeed as an export-driven country rich in natural resources. We need solutions that are based on commercial market-based principles. A long-standing MAC recommendation to ameliorate the commercial balance between railways and their customers, for example, would be to insert a new stand-alone section in the act that would define “adequate and suitable accommodation” and “service obligations”. This would not regulate the railways; it would merely define an existing measure available to shippers to pursue in their contract negotiations with the railways.

Second, we need policies informed by accurate data. The president and CEO of CN appeared before this committee last night and emphasized in his presentation the need for better alignment across the supply chain and accountability for performance. MAC supports the spirit of these remarks and recommends that the government require railways to provide both regular monthly public rail performance data on a sector basis and confidential company-specific performance data upon request.

Such a measure as is already being undertaken in the grain sector will provide all parties with the tools to quantitatively understand the nature of rail service challenges and causally identify why service failures occur and where the capacity choke points are forming, and based on such analysis, determine what can be done to fix the problems.

Increased transparency should improve the relationship between railways and shippers, as both parties, in possession of the same facts, will be more motivated to find solutions that are mutually beneficial and that provide the government with better information to guide its own actions.

While MAC remains sympathetic to the agriculture sector's difficult circumstances and acknowledges that the government's motivation is to try to ameliorate the situation, we would be remiss if we did not raise concern about the unintended consequences that will befall other Canadian sectors that rely on rail service, including mining, if the measures currently contained in Bill C-30 become law.

Thank you.

[Brian Otto, Director, Western Barley Growers Association]

Thank you, Mr. Chairman.

Good evening to everybody. I appreciate your taking the time to listen to us this evening. I know it's been a long day, so I'll try to be as brief as I can.

Thank you for inviting me here today to discuss the rail transportation issues on behalf of the Barley Council of Canada and the Western Barley Growers Association.

My name is Brian Otto. I'm the chairman of the Barley Council of Canada. I have sat on numerous boards, I have been a director with Alberta Barley, the Western Grains Research Foundation, and I am the past president of the Western Barley Growers Association. I have a mixed farming operation at Warner, Alberta, which is just north of the Montana-Alberta border. I am chairman of the Barley Council of Canada, which represents farmers from across Canada, as well as the entire supply chain for barley from the malting and brewing industry to the livestock industry.

At the Barley Council of Canada we believe the government's initiative to address the rail transportation issues is a good first step in addressing a larger problem within the system. This problem is that the rail system is simply not working efficiently for Canadian shippers. While we respect the work that's being done to make railway work, at the end of the day it's the smaller businesses, such as malt companies, that will buy smaller volumes of barley that aren't able to do business effectively under the current conditions. These businesses provide a diversity to our economy that brings significant value to all Canadians.

Our transportation issues at home are affecting our international reputation. In the coming months we need to take the united approach being suggested by the government to ensure that all commodities are represented. Canada is pro-trade. We are on the verge of signing two major international trade agreements, but we have to prove that we are reliable trading partners.

We are not here today to pit farmers against anyone. Farming is an economic driver, and we simply want to help drive the economy forward. The stakes could not be higher. The barley industry is ready for growth and prosperity. We formed a national organization across the supply chain. We brought partners together. We have buy-in from our value chain. We have the supply and the quality, but there are hurdles restricting our ability to conduct good business. Hurdles such as market access issues, falling behind our competitors on trade agreements, lack of transportation efficiencies and logistics are holding us back from maximizing our potential.

We want the grain industry to have fair and equal access under a transparent system and we want our industry to grow in conjunction with other commodities. In particular, we recognize the challenges faced by our colleagues in the forestry, potash, mining, coal, and other sectors. This is why we want a solution for transportation in Canada that's focused on a collaborative effort involving everyone in the value chain. We believe it is in Canada's national economic security interest that a competitive rail system is developed for all commodities. We also believe that the work we do for agriculture now is just as important as the ongoing debates over oil pipelines and other economic priorities.

The good news is that we never hear any complaints when we have full grain trains. But we do know that we need a more transparent system, and that we need better communication throughout the system for it to operate efficiently. Canada's national economic security depends on our ability to respond to a growing demand for our quality products. Canada's international reputation was built over time and has required significant investment from a cross-sector of stakeholders. There is mounting evidence that Canada's reputation as a reliable shipper is in jeopardy as many of our customers have started to source product from our competitors.

At least one General Mills facility in the United States is turning to Scandinavia as a result of the challenge they experienced accessing oats from our traditional suppliers in Saskatchewan and Manitoba. Japanese buyers who have purchased Canadian wheat for years are now turning to the United States after one of our ships sat waiting in Port Metro Vancouver for three weeks.

In addition to these issues, I'd like to focus a little bit more on what's happening to our small businesses that are affected by the rail transportation issues. Encouraging east-west access means more grain is moving along the major routes at the expense of the smaller shippers, like our malt companies that move product north and south.

Remembering the importance of our largest trading partner to the south is paramount as transportation corridors are being affected by the new legislation. It's important to encourage all shipping to all ports, not just Vancouver, Prince Rupert, and Thunder Bay. Our transportation difficulties could be more manageable when we involve our shipping partners to the south.

Some of our niche shippers, malt barley shippers in particular, aren't able to get any cars to ship south. This affects our ability to do business and impacts our reputation as a country with our international customers. It's not the way to do business.

Following the example of the Barley Council of Canada, we believe everyone needs to be at the table to fix transportation in Canada, the entire value chain. By working together, I believe we can fix the problem, and by taking the time to fix the system now, we are better able to ensure our national economic security for the future for our children and grandchildren.

The Barley Council of Canada supports the proposed changes in Bill C-30 and looks forward to a more secure future for our value chain. We see the government's recent efforts as a good first step, while looking forward to a time when the system will function better for all in the future.

Thank you.

[Ian McCreary, Farmer, As an Individual]

Mr. Chairman, honourable committee members, thank you for the opportunity to appear to discuss this critical issue facing the grain and oilseed industry in western Canada.

I've been involved in transportation issues throughout my adult life, and I thank the committee for providing me this opportunity to provide my perspective on a path toward the solution to this complex problem. I'd like to offer my assessment of the problem, suggest what is needed to find a solution, and identify the strength and weaknesses of this bill in moving us towards a solution.

First, the problem. Western Canada is a landlocked region that is further from tidewater than any other major exporting region. The transportation corridors to market are constrained. Further, the two main export channels are very different in total costs. The cost of movement from my delivery point in central Saskatchewan to the west coast is approximately $72 a tonne, while the cost of moving east is around $100 per tonne. Thus, in periods of relatively inexpensive ocean freight rates such as we have right now, it's less expensive to move grain to all offshore destinations from my farm through the west coast. However, the west coast can only handle approximately 21 million tonnes of grain per year. Western Canada regularly produces 35 million tonnes of exportable supply, and this year has produced more than 50 million tonnes of exportable supply. The result is that the price spread between what the price farmers are paid for the grain and west coast prices has risen dramatically.

Currently, farm prices for wheat have fallen to $170 per tonne, below west coast export values. Only $70 of this can be accounted for in the cost of movement and handling, so farmers are paying grain companies an extra $100 a tonne for the privilege of selling our grain. This extra cost to farmers has been there since mid-October, and if production stays at average to above average levels, this new grain robbery as it is being seen on the Prairies, will be there for the foreseeable future. Alternatively stated, current international prices are very strong, and western Canadian farmers are the only ones not to gain from this strong market.

The current problem has no solution under the current regulatory framework. Shippers are the only ones with standing with the agency. Shippers are the grain companies, which are making record profits from the current basis; thus a solution through the agency is unlikely.

To solve this transportation and marketing juggernaut requires action at a number of levels.

First, the industry needs a body that guarantees an aggregate level of service for grains and oilseed exports.

Second, there needs to be a way of apportioning the constrained capacity among competing users. Remember, every merchant will make the most money by shipping west, yet only 40% can go west.

Third, improvements are required in transparency, both in prices and in grain flow. Improved information improves the market function, and we can go some distance simply by getting better information out in public.

Fourth, the revenue cap needs review, but must be maintained. Producer cars and single-point shippers need to be protected.

Fifth, the competitive position of farmers depends on the existence of independents and alternate channels. The current regulatory framework puts both of those marketing channels at risk.

Sixth, we require improved rail competition. Done properly, this has the potential to improve service, increase capacity, and reduce rail costs.

Finally and perhaps more importantly, we need a long-term plan to develop an increase in capacity in both export corridors with a focus on fixing some of the issues at the west coast.

Moving specifically to the current bill, Bill C-30 provides one tool to deal with aggregate levels of service, and does wave a flag at rail competition through potential changes to interswitching. Both of these are positive; however, this bill will not solve the problem. The problem has many components, and the bill deals only with rail.

I would like to suggest additional pieces that I feel need to be part of a long-term solution for the western grain industry.

I'd like to start by suggesting reinventing the GTA or a GTA-like organization. In 1979, the then Conservative government pulled the responsibility for aggregate service levels from the Canadian Wheat Board and established the Grain Transportation Authority. This group was responsible for aggregate service, apportioning cars, long-term planning, and information flows. This worked well until it was ended in the 1995 federal budget.

The CTA level of service claims subsequently placed the Canadian Wheat Board back into the position of responsibility for aggregate service. When the government chose to end the Canadian Wheat Board, none of the transportation services were understood or replaced. The result is the current mess. Now is the time to re-establish the office of the Grain Transportation Authority to provide aggregate service, car apportioning, and the desperately needed long-term planning for the growth of our industry.

In addition, I think the long-term planning.... If we do move in the direction of establishing a body such as the agency, many of the functions can be dealt with directly through there, specifically the price transparency and the transparency on movement and flows. Some work has been done by the minister with the changes in the mandate of Quorum, which again is positive, but the price transparency component is a potential addition that could be done through the Canadian Grain Commission with additional amendments to the Canada Grain Act.

The rail competition on the interswitching side is unlikely to be aggressive enough to do what's required on the additional capacity and the long-term effects on prices.

Mr. Chairman, it's my hope that we can all pause and look to a solution that has the potential to be longer term. It is my view that if we have an average to above average crop, the bill that is before us will not change adequately to adjust basis levels in the foreseeable future. I think we still have more work to do, and I hope everyone can work together to find the solutions required.

Thank you, Mr. Chairman.

[The Chair, Conservative, Bev Shipley]

I call the meeting to order.

I apologize. We are running a little late. We had about an hour of votes and bells that interrupted our schedule a bit. I want to thank the staff for getting us back on track.

With that, we'll begin our next panel in terms of the study on Bill C-30.

I want to welcome from the Western Barley Growers Association, Brian Otto, director, and Caitlan Schnitzler, public relations coordinator.

From the Mining Association of Canada, we welcome Pierre Gratton, president and chief executive officer, and Brendan Marshall, director of economic affairs.

By video conference from Moose Jaw, Saskatchewan, we welcome Mr. Ian McCreary, as an individual.

I think I will start with you, Mr. McCreary, just in case something happens; you're participating at a distance, via video conference.

Please begin, Mr. McCreary. You have eight minutes.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you very much, Chair.

And thank you to our witnesses for changing their schedules in order to accommodate these meetings.

I guess I'll echo a comment I made yesterday.

What I'm hearing generally from witnesses is that they support this legislation, Bill C-30, and what it sets out to accomplish. What I'm also hearing is that there is anticipation, hopeful anticipation, for a review of the act itself and of it being accelerated because there are a number of other issues that need to be tackled when that review actually happens.

I believe that's what I'm hearing from most of our witnesses, though I am also hearing about the idea of corridors, which has come up again. I want to echo a point I made last night, and that is that government legislative intervention in a matter like this is done on an urgent basis and we have to find that balance, right? That balance between setting targets that are achievable and that are measurable without getting into the details, because I think what Mr. Phillips said is absolutely right.... The further down you go, the more complicated it gets—it does not get clearer—and the unhappier people are.

I do want to pick up on a comment by Mr. Phillips about teamwork because I think that is the solution in a very great sense. What I'm hearing from witnesses is that they're anticipating that they will get almost no service while another grain commodity will get almost all the service, and then what will they do? But each commodity is saying the same thing, when in fact the reality is somewhere in between. Yes, grain will move. A lot of grain will move at 1 million metric tonnes a week, but we also have to allow the players and the system to work cooperatively to be able to respond to priorities. I did want to pick up on that because I thought that was a really key point, whereby the stakeholders work together to also manage the system because there is a sense of teamwork to it.

So let me just ask that question about corridors. I'm trying to remember exactly who mentioned it.

Were you in dead earnest when you wanted the government to legislate corridors and cars or tonnage per corridor, or were you just worried that your commodity might be underserved by having a global target of 1 million metric tonnes?

Kevin, was that you who brought that up?

[Kevin Bender, Director, Alberta Wheat Commission]

Thank you, Mr. Chairman.

I'd like to thank the committee for inviting me to present on behalf of the Alberta Wheat Commission and the wheat farmers this commission represents.

Also here with me today are Jeff Jackson and Erin Gowriluk. Jeff is our marketing manager and interim operations manager, and Erin is our policy analyst.

I am also a director on the Cereals Canada board and at the Western Canadian Wheat Growers Association. As you can see, I like wheat.

I'm a director on this commission. I farm in the area around Bentley, Alberta, in west-central Alberta.

This year's transportation backlog has affected all commodities and has threatened Canada's brand and reputation as a consistent and reliable supplier. Bill C-30 is an important first step on the path to the long-term solutions required to build a sustainable and reliable rail transportation system in Canada.

We thank you for your actions so far and for this opportunity to speak to the regulations that will be developed as a result of the proposed legislation.

We join our shipping partners in seeking a more specific definition of “adequate and suitable” so that railway service obligations meet the transportation needs of the shipper within the context of the Canada Transportation Act. Adjustments are required to remove the ambiguity of these terms, and the definition should be adjusted to ensure that the transportation needs of the shipper are met.

Bill C-30 will build on the temporary provisions put in place as part of the order in council announced on March 7. One of these provisions is that if the railways are failing to perform, the Government of Canada may impose minimum volume requirements and fines of $100,000 per day for failure to meet these obligations. However, this is just a prerequisite to move prairie grain and does not specify where that grain needs to go. More recently, we witnessed the rail companies’ refusal to provide service for shipments destined for the U.S., in order to move more grain to west coast port terminals.

In addition to international markets, the western Canadian wheat producers also rely on the domestic feed industry. The Animal Nutrition Association of Canada has expressed concerns over the shortage of railcars allocated to the movement of western grain to the B.C. Lower Mainland. All corridors are important, and a lost customer in the U.S. is just as costly as a lost customer in Asia, so in addition to the overall shipping requirement as specified in Bill C-30, there need to be corridor-specific guidelines as well. The input of the supply chain should be considered when setting corridor minimums.

Further to this point, we ask that the government consider increasing the daily penalties if movement does not improve and direct that revenue to programs that support shipping infrastructure, such as the Building Canada fund.

We also seek increased accountability through the inclusion of reciprocal penalties as a mandatory component of service level agreements. Currently, there are no service level agreements in place. The key reason for this is the railways’ refusal to include penalties if they fail to deliver on their contractual obligations. Without these penalties in place, there is no reason for a shipper to attempt to conclude a service level agreement. Railway tariffs impose set penalties on shippers if they fail to meet their contractual obligations; for example, loading and unloading cars within a specific timeframe. The regulatory package that follows Bill C-30 must ensure that penalties are also in place for railway non-performance.

For these reasons, we see this bill as an important step forward and we thank all parties for their willingness to expedite this legislation. The regulatory package that follows also needs rapid attention and we stand ready to be a constructive part of that discussion.

We emphasize the need for the Canadian Transportation Agency to immediately begin the capacity planning exercise for the 2014–15 shipping season and include shippers, carriers, and commodity groups in this process. In addition, it is very important to begin the review of the Canada Transportation Act as soon as possible. Long-term change is needed in this system that encourages an increase in capacity for all corridors.

Bill C-30 would require the Canadian Transportation Agency to become directly involved in grain logistics capacity planning. A key element of this role will be the dissemination of information on the supply of, and demand for, transportation services.

The Alberta Wheat Commission supports this new role for the agency. We emphasize the need for the Canadian Transportation Agency to immediately begin a capacity planning exercise for the 2014–15 shipping season. This planning process must include shippers, carriers, and commodity groups. We note that sales are being made into this time period and it is critical that shippers have an understanding of the capacity that might be available.

The Alberta Wheat Commission also wants to emphasize the need to gain certainty past 2016 when the provisions under Bill C-30 may sunset. This planning horizon for producers and shippers extends beyond a few months, and all participants in the value chain need to know what regulatory environment they will be functioning in at least a year in advance, if not more.

We commend the government for their recent efforts to grow the international marketplace for Canadian agriculture, more recently in the development of free trade agreements with the European Union and South Korea. Western Canadian producers are poised to meet the growing demands for their products, but we require an efficient transportation system to ensure that we can fulfill the demand and grow the Canadian economy. Canada's reputation as a consistent and reliable supplier of quality products requires an efficient and effective rail system that's committed to on-time deliveries to our valued customers across this country and around the world.

Canada is a country built on railways. In 1867 Canada was united by the promise of a transcontinental railway. Our growing infrastructure needs can be attributed to the growing demand for our quality products. Our international reputation was built over time and has required significant investment from a variety of stakeholders. We need to work together to protect that investment and respond to the growing demand for Canadian products.

Thank you.