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.

Transportation Modernization Act

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Madam Speaker, I am pleased to take part today in the debate for Bill C-49, the transportation modernization act. This Liberal omnibus bill would substantially amend 13 different acts and have a profound effect on three major modes of transportation: rail, air, and water.

These are big changes, and it does not look as if the Liberals would be changing the rules for the better. Bill C-49 is the first legislative response to the 2016 Canada Transportation Act review. While we welcome the commitment to a modernized and safer transportation strategy, we are concerned that the proposed changes would have costly unintended consequences.

While I would like to discuss all the complicated sets of changes from Bill C-49, such an undertaking would be impossible, given the time constraints of this debate. Today, I would like to particularly talk about the changes to rail transportation and what this means for our Canadian farmers and producers.

Our biggest concern on the changes to rail transportation has to do with the changes to the long-haul interswitching that this bill would make, in replacing the provisions introduced by the previous Conservative government with Bill C-30. Bill C- 30, or the Fair Rail for Grain Farmers Act, extended interswitching distances to 160 kilometres. Those provisions expired on August 1.

While new interswitching provisions were anticipated, this bill is far from meeting its objective of improving shipper and producer options with the new 1,200-kilometre interswitching tool. The system introduced through Bill C-30 was popular with shippers. It provided the certainty of a regulated rate up to 160 kilometres, and it is key that they dealt with the regulated rate for that full 160 kilometres.

With Bill C-49, the Liberals are putting forward a new long-haul interswitching tool on hauls of up to 1,200 kilometres, or up to 50% of the length of the entire haul. Shippers would be charged the regulated interswitching rate for the first 30 kilometres of the haul, and then the rate determined by the Canada Transportation Agency, which is determined on a case-by-case basis based on similar pricing hauls. That goes for the remainder of the distance to the interswitch point.

Shippers would only be able to interswitch at the first available interswitch point. The nearest interswitching location for many shippers and producers in northern Alberta and British Colombia would be in the Kamloops–Vancouver corridor, and the other exclusionary zone is from Quebec City to Windsor. lnterswitching is not allowed beyond 30 kilometres in these areas. For captive shippers, the new interswitching provisions would do nothing to encourage more competitive rates or improve competition.

This is a serious problem. It is important to remember that railways in Canada operate in a near monopoly situation. Captive shippers and producers have no choice but to use one company, to which they are effectively held hostage. This situation could put shippers and producers at a real disadvantage.

While there are provisions in Bill C-49 that would allow shippers to request a contract from a railway with reciprocal penalties, the penalty needs to be designed to acknowledge that the railways have much greater economic power than the shippers. We can also see that Bill C-49 is intended to encourage the efficient movement of shippers' traffic while creating a system that is fairly balanced between the shipper and the railway, but this original intention is eclipsed by the many uncertainties of Bill C-49, which are also present on this issue. To achieve the intended outcome, the government must improve and clarify its provisions for both issues of interswitching and penalties.

Bill C-49 also proposes changing the 30-kilometre interswitching rate so that the interswitching rate over 30 kilometres would be decided by the CTA on an ad hoc basis, as I mentioned earlier. This 30-kilometre interswitching rate would be set each year. It purports to take into account the railway's infrastructure needs across the entire network, which could increase the rate paid by shippers.

The rate-setting regime this bill introduces needs to be designed to ensure shippers always have access to competitive rates. As it stands, the rate would be derived from comparable traffic that is subject to captivity. This system needs to concentrate on a concrete review mechanism to ensure it is actually working for shippers.

However, the Liberals cannot just design this system and leave it to simply administer itself. It is not a budget. Without a sunset clause or predesigned review dates in two to three years, there are absolutely no guarantees for shippers and producers that they will benefit from it.

To remain competitive, shippers and producers rely on clear provisions to ensure efficient access to competing railways. The Liberals are failing to provide clarity and assurances for our Canadian shippers.

In addition, the new long-haul interswitching rates would be more difficult for shippers to use and will not serve as a useful tool in negotiations with the railroads. The proposed slew of changes to the long-haul interswitching rate present very vague outcomes. The sheer number of the regulatory changes and the administrative cost will put Canadian carriers at a disadvantage, especially against U.S. carriers.

Some argue that implementing these changes will increase U.S. railroad access to Canadian traffic at regulated rates without reciprocity. The government has expressed a desire to increase agricultural exports exponentially in the coming years, but has come up short with policies that would help achieve this. If we want to help the agricultural sector increase production and expand its global market share, we need to do more to increase its competitiveness in the global market, not restrict it. One of the ways to do that is to make sure they have efficient and reliable ways of moving their products.

Transportation needs to work much better and the bill must strive to improve rail transportation, because increasing the amount of produce that our amazing farmers produce will be useless if getting it to market becomes a substantial business cost for our producers. Canadians need and expect great rail service. We need an efficient system that ensures the cars show up and grain gets shipped on time.

An article in the Manitoba Cooperative states:

Western Canada’s bigger-than-expected crop is moving to export slower than at last crop year’s record pace, and while grain companies aren’t panicking, Keystone Agricultural Producers’ (KAP) president Dan Mazier says it’s costing farmers....

For most of the current crop year, which began Aug. 1, Mazier said CN Rail hasn’t delivered as many cars as it did a year ago, based on data published by the Ag Transport Coalition (ATC). It reports weekly on the number of cars most grain companies order and the number the railways deliver.

I have the Ag Transport Coalition numbers here for week 12 from October 15 to 21, showing that CN supplied 51% of the hopper cars that were ordered for shippers for that week, which resulted in an unfilled shipper demand of 2,614 hopper cars; and CP supplied 94% of the hopper cars ordered by shippers for grain in week 12, resulting in unfulfilled shipper demand of 281 hopper cars, with nearly 3,000 in total not making it in week 12.

In addition to that, speaking of competitiveness, we are also aware of the ongoing NAFTA negotiations. It is therefore remarkable that the government would allow the new 1,200 kilometre interswitching distance to increase U.S. rail access to Canada at regulated rates, allowing the U.S. to access this Canadian traffic without reciprocity. It seems like weak negotiating on the part of the government to give up this leverage before the NAFTA negotiations are concluded. It is another head scratching idea by the Liberal government to propose such changes even as NAFTA is being renegotiated. No wonder people think that the Prime Minister is napping on NAFTA, because Canadian competitiveness seems to be at the bottom of his priority list. Policies like this directly hurt our competitiveness and are yet another hurdle for producers and shippers to clear.

As it stands, there is simply too much uncertainty about the impact of the newly redesigned interswitching provisions. They need to be reviewable and timely.

Unfortunately, all of this uncertainty and unintended consequences stem from the Liberals' inability to actually consult and listen to industry experts and Canadians. The Liberals are quick to spend taxpayer money to travel around the country to consult and take selfies with Canadians, but when it comes down to it, the Liberals only listen to themselves.

Members from this side of the House have spoken to many stakeholders and experts. Many of these experts believe that what the Liberals are proposing is a convoluted remedy with unknown consequences.

[Cathay Wagantall, Conservative, Yorkton—Melville, SK]

Madam Speaker, actually, many shippers feel that the new approach to long-haul interswitching to be created by Bill C-49 will merely be a renamed version of the current and hardly used competitive line rates. There must be reasons that system is hardly used. This new long-haul interswitching rate would be more difficult for shippers to use and would also not serve as a useful tool in negotiations with the railroads, which Bill C-30 did. That bill was greatly appreciated by our farmers, to the point where they said to the government that they did not want to see it changed. They wanted to see that good policy continue.

There is another issue with this long-haul interswitching remedy. It will increase U.S. railroad access to Canadian traffic at regulated rates without reciprocity. When NAFTA is being renegotiated, it is unwise for Canada to be making this concession before those negotiations have gotten to where they need to be on this issue.

[Cathay Wagantall, Conservative, Yorkton—Melville, SK]

Mr. Speaker, in the fall of 2016 of the Liberal mandate, the Standing Committee on Transport, Infrastructure and Communities undertook a study of Bill C-30 and held a number of meetings on the merits of these measures and whether they should be allowed to sunset. The vast majority of the testimony heard was supportive of maintaining the 160-kilometre regulated interswitching limit. That is why the committee's first recommendation was the following:

That the Canadian Transportation Agency retain the flexibility provided under the Canada Transportation Act by the Fair Rail For Grain Farmers Act to set interswitching distances up to 160 km, in order to maintain a more competitive operating environment for rail shippers with direct access to only one railway company.

The current government ignored the committee's main recommendation. Basically, what the government is proposing with this new legislation is to replace 160-kilometre extended interswitching with the creation of a new long-haul interswitching on hauls of up to 1200 kilometres or up to 50% of the length of the entire haul. Shippers would be charged the regulated interswitching rate for the first 30 kilometres of the haul and then a rate determined by the Canada Transportation Agency, which would be determined on a case-by-case basis based on the price of a similar haul for the remainder of the distance to the interswitch point. Shippers would only be able to interswitch at the first available interswitch point within the zone. What the government has done is effectively taken a little-used existing remedy called a competitive line rate and renamed it long-haul interswitching.

When Bill C-30 was first introduced, there was universal support among shippers for the extended interswitching. The recommendation from stakeholders was to retain the interswitching distances up to 160 kilometres in order to maintain a more competitive operating environment for rail shippers with direct access to only one rail company. Again, the Liberals went through the motions of appearing to consult, and once again deaf ears prevailed.

To make up lost time and opportunity, the transport committee began special hearings on Bill C-49 in the week prior to the House's return from its summer recess. A total of 44 hours of testimony from dozens of stakeholders and expert witnesses was heard in each of the sectors touched by Bill C-49. Also on record are briefs and letters consisting of thousands of pages of data with more than 100 suggested technical amendments from those whose lives and livelihoods would be affected by this bill. From these incredible witnesses, there was unanimous agreement that Bill C-49 was a good start and that, if their suggested amendments were made, the bill would actually accomplish its stated objectives.

After only giving two weeks to review this mountain of information, the Liberal members of the transport committee defeated more than two dozen reasonable technical amendments. Again, these amendments were suggested by a wide range of stakeholders and experts and were written to make the act a workable solution for all involved.

Once again, the Liberals have a skewed definition of consultation—in other words, they pretend to listen and then blah blah blah—and prove again that it is only a buzzword that they used to get elected. With the introduction of long-haul interswitching, the Liberals sought to create their own solution to a problem that had already been addressed with a reasonable Conservative solution. In the Fair Rail for Grain Farmers Act, the previous Conservative government created a regime of extended interswitching that worked so well in the prairie provinces that shippers of all kinds from across Canada requested that it be extended to the entire country. Instead, the Liberals are committed to their complicated, inefficient long-haul interswitching regime that has such poor conception and so many exceptions that it would be basically useless to many shippers.

For example, a minor technical amendment proposed by both Conservative and NDP members of the committee would have changed the wording of the provision to allow the first interchange point to be in the reasonable direction of the shippers' destination. Under the legislation as it is, shippers may have to send their products potentially hundreds of kilometres in the wrong direction to reach the nearest interchange point, increasing their costs.

What happened to this very reasonable amendment? The Liberals defeated it. They ignored the advice and recommendations of even the the most competent, experienced, and concerned Canadians in regard to extended shipping lines.

Canadians have been ignored by this Liberal government. The laudable and credible efforts of Canadians to contribute in meaningful ways to improving the weaknesses of the Liberal legislation have again fallen on the deaf ears of the government.

[Cathay Wagantall, Conservative, Yorkton—Melville, SK]

Mr. Speaker, I am pleased to rise today and speak to Bill C-49, the transportation modernization act. This bill would amend a number of different bills, I believe 13 in fact, with many significant changes being more than just technical in nature. My focus will be on the issues around grain transportation as this portion of the bill is of great concern to those who farm in my riding of Yorkton—Melville and ship their products from Saskatchewan to multiple destinations by rail.

I look at this omnibus bill and wonder what the rationale was for creating such complex legislation. It could have been more effective on many levels to split Bill C-49 into rail shipping, rail safety, air, and marine to target consultation to expedite the best legislation for each. My colleague, representing Carlton Trail—Eagle Creek and the transport shadow minister, put forward such a motion in response to the Liberal member for Niagara Centre, who raised the idea of expediting the passage of this bill in order to provide grain farmers a greater amount of certainty as they negotiate contracts for future shipping seasons. It is telling that the member did not have the support of his Liberal transport minister or his colleagues, as the Liberal vote was unanimously against splitting the bill.

The Minister of Transport's silence and inaction on critical and time-sensitive transport issues over the past two years, especially on rail transport, has fuelled uncertainty with both shippers and the railroads as they negotiate shipping rates for the coming season. The previous Conservative government introduced Bill C-30, which gave the Canadian Transport Agency the power to allow shippers access to regulated interswitching up to 160 kilometres, mandated that CN and CP both haul at least 500 tonnes of grain per week, and introduced a new definition for adequate and suitable service levels. With this extension, the number of primary grain elevators with access to more than one railroad with the extended interswitching limits increased from 48 to 261. These measures were met with universal support from the shipping community because, even if shippers did not use interswitching, they could use it as a tool to increase their negotiating position with the railways, as the shippers knew exactly how much the interswitch portion of the haul would cost them. At the same time, the former Conservative government had announced that the Canada Transport Act statutory review would be expedited. It began a year early in order to provide long-term solutions to the grain backlog of the 2013-14 shipping season and other problems in the transport sector within Canada.

[Sean Fraser, Liberal, Central Nova, NS]

Mr. Speaker, it is my pleasure to rise and offer some comment on Bill C-49, an act to amend the Canada Transportation Act.

I had the pleasure of sitting through an inordinate amount of witness testimony as we went through this important bill, which really is the first step in implementing the minister's transportation 2030 strategy to make transportation more efficient in Canada.

I will start by offering a few comments on the importance of transportation to our country.

In the 21st century, we know that Canada is a trading nation. We know that in order to maximize our economic output, we depend heavily on global markets. When we are trying to maximize the economy in Canada, it does not take long to realize, with our skilled workforce and natural resources, that we have the capacity to produce more than we have the ability to consume domestically. As such, getting our goods to the world market is of extraordinary importance if we are going to succeed and thrive in a 21st century global economy. This is where Bill C-49 comes in. We recognize that to get our products to market in a timely way, we depend on the efficiency of the transportation system. We know that customers around the world are waiting anxiously for their products, and if they cannot find a reliable supplier, then they are going to go elsewhere.

The Canadian transportation system has a number of different important links along the way, and Bill C-49 addresses a few of them. Specifically, it deals with certain measures in the rail sector, air sector, and the marine sector, which has been the subject of little debate thus far, but it really does enhance efficiency of getting products to market or improve the experience of Canadian or international travel for Canadian travellers.

I will start first with the rail transportation in Bill C-49.

The importance of the rail sector in Canada cannot be overstated. Of course, before Confederation, north-south trade was of extraordinary importance, but as I mentioned at the outset of my remarks, getting products to global markets is becoming increasingly important. Of course, the rail corridor from east to west is of extraordinary importance as well.

The key part of the measures dealing with rail transport really has to do with the concept of long-haul interswitching. When I looked at the rules we had embedded in law before Bill C-49, they were not sufficient to deal with getting products from different industries and different regions to market in Canada. What we did have, and we heard this in a number of questions from members opposite, was Bill C-30, which dealt with the transportation of western Canadian grain to market.

Bill C-30 came in 2013, when there was a unique set of circumstances. We dealt with one of the worst winters in modern memory, and at the same time dealt with an unimaginable grain overproduction at the time, which really put our producers and shippers in a bind. If something were not done to get the product to market in a timely way, the economic output would have been significantly lessened. To the credit of the government at the time, it took some action to deal with that and implemented a system that simulated competition where there was none.

In Canada, it does not take long to realize that when we are dealing with rail transport, we are dealing with many captive shippers. There is essentially a duopoly in Canada with two major class I railways. However, for many shippers, there is only one option. If one is living in the northern prairie provinces, one does not always have access to competition, which can drive rates up. Therefore, measures in the previous legislation stated that within 160 kilometres of an interchange point, one would be allowed to essentially treat the monopoly holder as though it were competing, and one could create a bargaining circumstance around the table when there was none. It was not used all that frequently, but we did hear testimony from witnesses that it had made a difference at the time.

However, there is a key problem with that short-term fix, which was needed at the time. It did not consider that the Canadian economy depends on more than western Canadian grain. Bill C-30 did some good things for that industry in that region, but it did nothing for forestry or mining, and it did nothing for provinces such as Ontario and Quebec. Of course, the province I am from, Nova Scotia, does not necessarily have the same problem, with not having the class I railways present.

My point is that long-haul interswitching has come in to solve this problem because it provides opportunities for captive shippers who might not be within 160 kilometres of an interchange who might be in the industry of producing natural resources outside of grain in western Canada. This would provide an opportunity to simulate a competition around the table for so many different producers and this is a very important thing.

In addition to this significant change in the way that products can be transported on Canadian railways, we see a number of measures that were implemented in Bill C-49 to recognize that shippers sometimes have a tough time getting their products to market. We see reciprocal penalties. Previously, there was no remedy necessarily for a shipper whose service obligations were not being met by the railway. In this instance, we can imagine the brand recognition that it does and the cost of having goods waiting to get to market and having no way to transport them. Now the penalty is cut both ways and it encourages everyone to meet his or her obligations to ensure that goods get to market.

We also see a definition of adequate and suitable service. We are seeing enhanced data disclosure. We are seeing that the maximum revenue entitlement has been retained. We are seeing efficiencies embedded into the arbitration process, which creates the equivalent of a small claims process for disputes of less than $2 million. We are seeing agency authority to regulate service-level agreements going forward.

Quite a big focus of our testimony over the course of our committee study on this issue went to the rail sector. However, I do not want to ignore the other important sectors that really do make a difference in the communities that I represent as well.

When we look at marine transport, some of the nonsensical features that we had embedded into Canadian law previously included that international shippers did not have the ability to move empty containers within the Canadian ports system. This might put people who are shipping from Europe to a port in Montreal, for example, in a place where they are not able to take that container from Montreal and move it to the port of Halifax to help local exporters in the province I represent get their products to Europe. When we put it to them to say, “Is this a big Canadian industry right now? Are we going to be interfering with local jobs?”, we heard that in fact this is not being done right now. However, to protect the economic interests of Canadian workers, Bill C-49 would only allow this kind of practice to go forward on a non-revenue basis. Essentially, if I am a European shipper, for example, and I want to move my own empty containers between Canadian ports to make the transportation system for Canadian exporters more efficient, I would be able to do that under Bill C-49.

Of course, one of the key parts of Bill C-49 was the air passenger bill of rights. There are a number of substantive rights that were built into the framework, although a lot more of the details and specifics are going to be embedded in regulation that follows. One of the reasons that this has gotten a bit of uptake in the media is that so many of us, when we see those viral videos of passengers being hauled off planes, become frustrated because we have experienced the ordinary frustrations of air travel ourselves. I have personally experienced having my luggage be damaged and come off one size-16 shoe at a time on the carousel. We know what it is like to see that someone is going to be charged more to sit next to his or her infant. When people are travelling with a musical instrument, if it is not handled properly there can be severe damage and that damages some musicians' livelihoods. A number of these problems are being addressed in Bill C-49 and we are going to require that airlines make it known to the public how they can seek recourse when an airline falls below the standard expected for travellers who paid for quality service on their flight.

In addition, there is a key part of air travel that I wanted to hit on as well. We have changed the foreign ownership limits from 25% to 49%. This is going to encourage more investment by international companies in the Canadian air sector and potentially drive the cost of air travel down. We have already seen two discount airlines, when they qualified for this kind of an exemption under the previous rules, announce that they were going to be making investments in Canada to service secondary markets and offer cheaper service.

To wrap up in the little time that I have left, Bill C-49 is the foundation of the minister's strategy to enhance the efficiency of the Canadian transportation sector. It would see products move in different industries in different regions of our country to get to global markets more effectively. It would protect the rights of passengers who are travelling in the air sector. It would, important from my perspective, make shipping a more efficient part of the international transportation system. It would help exporters in places like Nova Scotia get their goods to market in a cost-effective and efficient way. This is a good bill and I hope the entire House supports it.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Mr. Speaker, the ideology of the long haul is one thing, and I would not be against that, but the number of exclusions in this bill are such that no one can take advantage of them. It used to be, under a previous bill of the Conservative government, that the concerns of western grain farmers were addressed; I believe it was Bill C-30 at the time. That was allowed to sunset by the current government. Then, inadequate measures are put in this bill that are vague and, as I said, include so many exclusions that people cannot take advantage of them. The execution was not acceptable.

[Sean Fraser, Liberal, Central Nova, NS]

Mr. Speaker, one of the themes I keep trying to hit on, being from the eastern part of our country, is that Bill C-49 has changed the rules around transportation on freight rail in a fairly dramatic way. Under a different iteration of legislation that dealt with the transportation on freight, Bill C-30 previously, it dealt only with the ability for shippers of western Canadian grain to move product up to 160 kilometres That was in response to some unique circumstances that arose in 2013. One of the things we see in Bill C-49, by contrast, is a shift towards long-haul interswitching. This would see the ability of shippers in different industries in different parts of the country take advantage of a new regime that stimulates competition around the negotiating table and gives a remedy to captive shippers to make sure they can get a market price.

Does the hon. member support the expansion toward long-haul interswitching, which serves different provinces and different industries, including Ontario?

Motions in amendment

[Sean Fraser, Liberal, Central Nova, NS]

Mr. Speaker, I have had the pleasure of sitting on the committee during the hearings on Bill C-49 and enjoyed the company of the hon. member for Bow River.

I took some of the member's comments to suggest that perhaps the bill would not go far enough to protect the interests of shippers. I cannot help but point out that the bill includes a number of pro-shipper measures, such as reciprocal penalties, adequacy of service, protecting the maximum revenue entitlement, enhancing data disclosure, improving the arbitration process, and a number of other things.

The member raised the measures included in Bill C-30, suggesting that they were preferred, according to the witnesses he heard. When I listened to the witnesses over the course of the entire study, many of them suggested that having remedies only for one industry and only for one region of the country was not the best approach and that the long-haul interswitching would open up a more efficient transportation system across sectors and across geography. Does the member support measures that would extend this improved service to new parts of the country and to different sectors?

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Madam Chair, I would just put forward that Bill C-30 was introduced in 2013-14 to address some very unusual circumstances, and here we are in 2017, three years later, saying we have all the information we need to conclude that while the extended interswitching was great for the circumstance for which it was created, we need to allow that measure to sunset and move on to another remedy.

I would respectfully disagree that three years doesn't give one enough time to review a piece of legislation to see if a certain remedy is working. That's apparently what happened with extended interswitching here, so I would welcome somebody perhaps lengthening that time, but I think with long-haul interswitching, it would be a really good idea to review that legislation to see if it is in fact accomplishing the purpose for which it has been created.

[Sean Fraser, Liberal, Central Nova, NS]

As a general comment, I think this amendment is, as you described, to say that some people like the extended interswitching and that in your view it's superior to the proposed long-haul interswitching.

To follow up on the comments made by our officials here, I think that Bill C-30 was the right thing to do. It was actually very smart at the time to help move product that was stranded, and I would have supported it at the time.

We've now had the benefit to consult across Canada. I keep thinking to myself that the starting point is not the draft legislation we all started with. Right now, there's not a system in place. I see long-haul interswitching as part of a pretty intricate balance that extends the ability of producers and shippers to move goods in different geographies, in different commodities.

When I look at some of the protections that are available here to shippers, I view this as a very positive bill from a shipper's perspective. I'm looking at data disclosure, retaining the maximum revenue entitlement, reciprocal penalties, adequate and suitable service.

I understand that there are some shippers in the grain industry in a limited geography who are familiar with a certain system, but I want to have my voice on the record as saying, given the starting point that we have right now, this is a pretty intricate balance that I think is really going to help shippers in different commodities, in different geographies, get their goods to market. I can't in good faith support an amendment that's going to essentially dismantle the long-haul interswitching system that is really the focus of a major portion of this bill.

[Ryan Greer]

Part of the challenge with LHI, as I think you heard from both the railways and the shippers, is that there's still a lack of understanding about exactly how it would function and what the outcomes would be. The railways will hope that it doesn't lead to a larger loss of business. Some of the shippers have suggested that the old interswitching provisions weren't used nearly often enough but were an important negotiating pressure point for them. It's unclear how LHI might itself include into it. Reading the bill as it is, I think LHI is probably an improvement from the old Bill C-30 in that it's seen as a matter of last resort, but again, we'll have to wait and see until it's in action.

Again, to us the biggest concern is that the exemptions stay in place. Without them, it would really be a free-for-all on major Canadian lines.

[Sean Fraser, Liberal, Central Nova, NS]

I'm just curious, then, if we compare it not with the status quo but before Bill C-30 sunsetted, and if we look at the extended interswitching as a comparison, from your perspective, what's the relative loss of business that you would see under a new regime with the excluded corridors? This is as compared with the extended interswitching regime.

[Cam Dahl]

Yes. The protections that the grain industry had under the Fair Rail for Grain Farmers Act were valuable tools. From my perspective it wasn't just the message that was sent to Canada, but the message sent to our customers. I visit many of our customers internationally, and one of the first questions I am always asked, whether I'm in Bangladesh or in Japan or in Nigeria, is a question about Canadian logistics. I cannot stress enough the harm to our reputation that was caused by that 2013 and 2014 failure. We cannot afford another one.

As Jeff said, we have a large crop to move, despite the drought conditions we have in the Prairies, and we need to have tools in place that will help ensure that if problems begin to develop, they don't turn into the large, systematic failure that we had in the past.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

I want to address the sense of urgency that I am picking up on from our witnesses today. The question that comes to me as a result of that urgency is this.

We had the Fair Rail for Grain Farmers Act sunset in the middle of this past summer. You are, then, in fact without any remedy when it comes to interswitching, except for the 30-kilometre right. Is that what's precipitating the urgency to get this law passed, so that you are negotiating contracts with certainty and with terms that you can actually go to the railways with?

[Cam Dahl]

Certainly.

On behalf of Cereals Canada, I want to thank the committee for the invitation to appear before you today. It's not usual for a committee to be holding hearings like these when Parliament is not sitting, and it's definitely not usual for a committee to be holding marathon sessions such as you have been holding. We recognize this and thank you for the high priority you are placing on this legislation. It is absolutely critical for Canada's agriculture sector.

As I mentioned, Cereals Canada is a national value chain organization. Our membership comprises three pillars: farmers, shippers, and processors in crop development and seed companies. Our board has representation from all three of these groups. All parts of the value chain look for transportation reform as a key requirement for the success of our sector.

Canada exports more than 20 million tonnes of cereal grains every year, worth about $10 billion. Virtually all of this grain moves to export position by rail. The profitability of every part of the Canadian agriculture value chain depends on the critical rail link to our markets.

Agriculture has a strong growth potential. The Barton report indicated that Canada has the potential to become the world's second-largest agriculture and agri-food exporter in just a few short years. The report set a target of $75 billion in exports in 2025. This is up from $55 billion in 2015. Modernized transportation legislation is critical if Canada is to meet this growing demand and maintain our reputation as a reliable supplier.

Agriculture is not just about exports. The industry employs Canadians. One in eight jobs in Canada depends on agriculture. Our ability to meet these growth targets and our ability to increase the number of Canadians employed by the sector depend upon moving production to market in a timely manner. I want to stress this next point: “timely manner” must be defined by the international marketplace. We will not achieve these goals if transportation providers limit our ability to satisfy world demand.

These are the implications of Bill C-49, which is before you today. The first message I want to deliver on Bill C-49 is to quickly return this bill to the House for third reading. The bill will help introduce better commercial accountability into the grain transportation system, it will help improve grain-movement planning, and it will improve transparency and reporting.

I do not want to leave the impression that the grain sector has received all that it requested in this bill. There are provisions that the industry had requested: continuation of the extended interswitching provisions from the Fair Rail for Grain Farmers Act is an example of provisions that have not been brought into the legislation. However, no piece of legislation is perfect, and we believe that the bill should proceed. Cereals Canada has some suggestions for technical amendments to Bill C-49, which are outlined in detail at the end of the written brief you have received.

I want to touch briefly on why we're here and why we have the need for legislation.

Flaws in the grain handling and transportation system were highlighted in 2013 and 2014 when the system suffered a significant breakdown. The systemic failure impacted the entire value chain and damaged Canada's brand and reputation as a reliable supplier of agriculture products. This resulted in lost sales and it resulted in decreases in price. The crisis cost farmers, grain-handling firms, exporters, Canadian value-added processing, and ultimately the Canadian economy.

This was not the first time the transportation system failed one of Canada's largest sectors. This is clearly demonstrated by the multiple past reviews and commissions, such as the studies conducted by the late Justice Estey and by Arthur Kroeger and the report from the senior executive officers, and the list goes on. It is a long list of reports on grain transportation. History shows that if the underlying structural issues are not addressed, transportation failures will recur. Canadian agriculture and the Canadian economy cannot afford to let this happen again.

Railway monopolistic power is a key reason the grain transportation environment does not function to maximize the profitability of the entire value chain. Virtually all shippers are served by one carrier and are subject to monopolistic pricing and service strategies. Therefore, the government has a critical role to play in establishing a regulatory structure that strikes a measured and appropriate competitive balance.

I stress the word competitive. System reform will be successful only if the legislated and regulatory structure for grain transportation is adjusted so that it mimics the conditions of a competitive environment.

It is worth noting that the record size of the 2013 crop, over 70 million tonnes in western Canada, is often cited by the critics of reform as the cause of the breakdown in 2013 and 2014. However, this level of production is not an anomaly. Rather, it is the new normal. Grain production in Canada continues to grow, as does world demand.

This year, 2017, I'm sure many of you have heard—and Ms. Block is in the affected part of the province—there was a drought in many parts of Saskatchewan, yet western Canada is still going to produce one of the largest crops we have ever seen. We expect it to be between 63 million and 65 million tonnes. We have to be able to meet growing demand with growing supply.

I'm not going to go into the details of our amendments; you have them. But in summary, Bill C-49 will move us towards a more accountable and reliable grain-handling and transportation system. This is good news for everybody involved, including our customers.

The grain, oilseed, and special crops industries have been united in their call for measures that will help ensure accountability in the performance of the railways. Bill C-49 will help correct the imbalance in market power between the railways and captive shippers.

The legislation includes the following key positive elements: tools that will allow shippers to hold railways financially accountable for their service performance; improved processes for the Canadian Transportation Agency if issues do arise; clarification of the railway responsibility in the Canada Transportation Act by better defining “adequate and suitable” service; and increased requirements for reporting and railway contingency planning.

If passed, Bill C-49 will help balance railway market power and will help mimic what would happen if we had open competition. This is good economic and public policy.

While the most important part of the railway legislation is the increase in railway accountability, all of these provisions are important. Improving CTA processes is important to ensure that problems are caught and addressed before they snowball into major failures. Together with clarification of the meaning of “adequate and suitable”, this will help ensure that the Canadian transportation system meets the expectations of our customers both within Canada and internationally.

No piece of legislation is perfect, and Bill C-49 is no exception. Cereals Canada has presented a number of technical amendments. The adoption of these amendments should not significantly delay the passage of the bill, and the adoption of these amendments will significantly improve the transparency of the legislation. These are the first four amendments in our brief. They will also help align North American regulations between Canada and the U.S.

The amendments will also help to improve operational planning, as stated in the fifth amendment in our brief. It will also help give improved access to competitive tools to help improve the imbalance in market power. These are the last three amendments.

I welcome any of your questions on my verbal remarks or on the more detailed brief that has been circulated.