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.

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

Thank you very much.

I heard you state earlier that interswitching is a tool that is used to adjust market failure.

The distances in Bill C-30 were put in to address what would have been some extraordinary things coming together and creating a bottleneck within the system. While you said there hasn't been a lot of uptake on the 160-kilometre distance, would it not be fair to say that it's good to keep that distance in the legislation? If we come up against another set of circumstances that would require that length of interswitching, it would be good to have it there so you wouldn't have to perhaps come together quickly and put in a piece of legislation to address that situation.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Okay.

Regarding that process, I heard you earlier say that there was significant stakeholder engagement to develop Bill C-30.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Thank you very much. I appreciate your being here.

I have three questions. I just want to go back to the Emerson report for a moment. You're well aware of the recommendation that the 160-kilometre interswitching clause of Bill C-30 be allowed to sunset...and review. It was also recommended to get rid of the maximum revenue entitlement, and to exempt non-hopper cars carrying grain from the MRE calculation in the short term. That was the recommendation, and I know everybody's aware of that.

I just want to get your comments on the recommendation, the impacts of it, and on whether we should keep the existing legislation.

[Gagan Sikand, Liberal, Mississauga—Streetsville, ON]

Good morning.

In regard to Bill C-30, the bill establishes requirements regarding the minimum amount of grain to be moved by certain rail companies. It sets maximum penalties of $100,000 a day for rail companies that do not meet these requirements. You made mention of this as well. To me, $100,000 a day seems like a large number.

Would you agree that for any company, rail or otherwise, that's actually a large number?

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

We hear quite often from shippers that—whereas they have to pay penalties if they're not ready to use the railcars, or the terminals have to pay penalties if they don't unload the railcars; up to this point anyway—the perception is that the railways get off scot-free if they don't actually perform according to what they promised to do. In your view, has Bill C-30 adequately addressed that and returned a bit of balance between rights and responsibilities of the railways?

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

Thank you very much, Mr. Chair. I join you in welcoming everybody back from a full summer I'm sure. I look forward to the work that we're going to do this fall, and also want to welcome Mr. Aubin to the committee.

I look forward to the study that we are doing on Bill C-30 and interswitching in particular. I do note that this act was introduced in the House of Commons by the Minister of Agriculture and Agri-Food. It was read for the first time in March. I think what that highlights is the relationship that we often see between different ministries—as we are the committee for transportation, communities, and infrastructure—that exists in developing legislation like this. So I'm wondering what, if any, input the agency did have in developing those sections pertaining to its authority in this legislation.

[Fred Gaspar, Chief Compliance Officer, Canadian Transportation Agency]

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

My name is Fred Gaspar and I am the chief compliance officer for the Canadian Transportation Agency and with me today is Randall Meades, who is our chief strategy officer.

We are pleased to appear before you again and to answer any questions you may have concerning your study.

I'd like to start by offering a brief reminder about our organization and its mandate. The Canadian Transportation Agency is an independent body. As a federal quasi-judicial tribunal and regulator, we have jurisdiction over a broad range of air, rail, and marine matters. The agency essentially has three core mandates. The first is to help smooth the national transportation system, keeping it running efficiently. The second is to protect the human rights of travellers with disabilities by ensuring that the transportation system is fully accessible. The third is consumer protection for air travellers.

The Canada Transportation Act is the agency's enabling statute. It outlines the extent of the agency's authority and jurisdiction as well as the agency's role in administering the act.

The agency also shares responsibility for certain provisions of the Railway Relocation and Crossing Act and the Railway Safety Act. These provisions are focused mainly on resolving disputes and cost recovery.

When it comes to rail transportation, the agency's mandate applies to railway companies under federal jurisdiction, of which there are currently 21 active railways, including class 1s and short lines. Briefly, the agency is responsible for a number of regulatory functions that range from ensuring that federal railways carry the required third party liability insurance requirements to establishing the annual maximum revenue entitlement for CN and CP in moving western grains.

The agency also plays an important role in helping to resolve rail transport disputes. In addition to our formal adjudicative function, we also have expertise in alternative dispute resolution services, including facilitation, mediation, and arbitration services. In our experience, these methods can be faster and less expensive, producing a resolution that benefits all sides.

Of relevance today, I'd like to highlight that the alternative dispute resolution process administered or provided by the agency now includes three forms of arbitration: rail level of service arbitration, rail arbitration, and final offer arbitration.

Since 2013, under the new rail level of service arbitration framework, the agency has had the authority to impose administrative monetary penalties for the contravention of any requirement imposed on a railway company, up to a maximum of $100,000 for each violation. In addition to this, the 2014 amendments gave the agency the power to order railway companies to pay compensation as part of its level of service complaint mechanism.

Although the agency has a number of rail-related responsibilities, today I'd like to focus exclusively on Bill C-30, Fair Rail for Grain Farmers Act. It was first passed on August 1, 2014 and further extended by this Parliament on June 15, 2016.

Bill C-30 was aimed at getting grain crops to market quickly and at increasing predictability and transparency in the supply chain. As you will, recall it was introduced as an urgent response to a unique set of circumstances: an unprecedented crop year and a polar vortex.

The key new provisions that were set out in that bill empowered the agency in three new ways: to specify by regulation what constitutes operational terms for the purpose of rail level of service arbitration; to provide confidential advice to the Minister of Transport in establishing minimum grain volume requirements for the movement of schedule II grains; and, to set out an interswitching rate for areas of commodities that the agency specifies.

When the Fair Rail Freight Service Act was enacted in June 2013, it introduced arbitration for rail level of service where parties are unable to negotiate the terms of a level of service agreement confidentially.

This arbitration is limited to matters within subsection 169.31(1) of the Canada Transportation Act, and specifically, “the operational terms that the railway company must comply with” for the “receiving, loading, carrying, unloading and delivering” of “traffic, including performance standards and communication protocols”, as well as any other “operational terms” that the shipper must comply with that are related to the company's own operational terms; any “incidental” service provided by the railway company; or “the question of whether the railway company may apply a charge with respect to an operational term” or for an incidental service provided by the company.

The level of service arbitration provisions do not define operational terms themselves. At the time, the agency had no power to define them by way of regulation. The Fair Rail for Grain Farmers Act further amended the CTA to provide the agency with the authority to then make regulations specifying what constitutes “operational terms”.

In order to establish the regulations, the agency consulted broadly. We conducted targeted and focused consultations both with the shippers and the railways and with other stakeholders. Now in force, those regulations bring clarity to shippers and railways as to what might be the subject of a level of service arbitration.

Today, the regulations and operational terms for arbitration on the level of service of railways support efficient arbitration within a statutory deadline of 45 to 65 calendar days, and they've reduced the need for parallel adjudication by the agency as to the eligibility of certain matters that may be submitted for arbitration.

To clarify, an operational term refers to railway and shipper obligations in receiving, loading, carrying, unloading and delivering of traffic, including performance standards and communication protocols. They are an extensive but non-exhaustive list of terms that are eligible for arbitration.

Bill C-30 also amended the act, and requires the agency, after consulting with CN and CP and the owners and/or operators of grain handling undertakings, to provide advice to the minister on the minimum amount of grain that CN and CP should be required to move during each month of the crop year, on or before July 1 of each year preceding that crop year.

Third, and probably most important to this committee, Bill C-30 introduced provisions that enable the agency to expand interswitching to 160 kilometres for Manitoba, Alberta, and Saskatchewan. Interswitching, as you will know, is an operation performed by railway companies whereby one carrier performs the pickup of cars from a customer and hands off these cars to another carrier that then performs the “line haul”, or the majority of the carriage. The interswitching arrangement is made in cases where a shipper has physical access to a single carrier but is within a defined distance to one or more competing carriers.

To ensure fair and reasonable access to the entire railway system, interswitching has been regulated in Canada since 1904 and is a commercial agreement between railway companies whereby one railway company will carry traffic for the other railway company and vice versa, to ensure that shippers captive to the rail system have access at a regulated rate. Railway companies reconcile these costs between themselves on a yearly basis. Interswitching allows shippers to negotiate, through normal commercial processes, suitable terms and conditions of carriage with competing carriers for the line haul portion of the overall car movement.

The Railway Interswitching Regulations set the rates to be charged for interswitching services provided by the terminal carrier, thereby establishing a predictable and fair pricing regime that is applied equally to all terminal carriers providing interswitching services.

Under the Canada Transportation Act, the agency may make regulations prescribing terms and conditions for the interswitching of traffic, as well as determine the rate per car to be charged for performing this operation and establish distance zones for that purpose. The interswitching provisions of the act are considered to be competitive access provisions, allowing the shipper to choose their carrier despite having physical access to only one carrier.

Please note that the agency reviews the railway interswitching costs annually and revises the rates as required or as part of the five-year statutory review of the regulations, which was last done in 2013.

The new interswitching rate regulations now establish five interswitching zones: 6.4 kilometres, 10 kilometres, 20 kilometres, 30 kilometres, and on a temporary basis for Manitoba, Saskatchewan, and Alberta 160 kilometres from an interchange. The amendment created this new interswitching zone 5 that is applicable to movements for all commodities in those prairie provinces.

The rate for zone 5 follows the pattern established in the current rates, namely that the zone rate will apply to the first 40 kilometres of track distance travelled within the zone, and then a per kilometre rate will apply for each kilometre of track travelled beyond the 40 kilometres within the distance.

After this brief overview, we would like to thank you for your attention. We will be pleased to answer all your questions.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Madam Chair, may I suggest that it would be a good idea in the fall...? You will remember my reluctance about the deadline put in that motion about Bill C-30.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

We talked about Bill C-30.

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

Madam Chair, would not taking a look at the Emerson report also inform us in regard to some of the issues in Bill C-30? I think some of the recommendations in the Emerson report would actually be part of a Bill C-30 study, or vice versa.

[The Chair, Liberal, Judy Sgro]

It is my understanding that regulations on the drones are being worked on and will be sent here. We have Bill S-2 in the Senate, which is going to be sent here. We have Bill C-30, which will pass shortly and is coming back to us. The extension there was for one year, on the presumption that we were going to be doing some work to come up with a long-term strategy.

We have a lot on our plate, but I think the Emerson report—and what Mr. Badawey is suggesting about doing a comprehensive study—has to get started. We will have to stop and start it, but it is not something that is going to be done in three months. It is going to take maybe the next six months, nine months, or a year, in order for us to do the best we can.

I think we can do a variety of things at the same time. I think we are a pretty smart bunch around this table and we can be working on this and then stop. If we have to shift to Bill C-30 or drones, we can also do that as we go forward.

Mrs. Block, go ahead.

Transport, Infrastructure and Communities

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Mr. Speaker, I know that the provisions that have been prolonged are very important to keep. One aspect that keeps coming up when I speak to farmers is the importance of data sharing and predictability, knowing when things are happening, when they are going to arrive. That is something that we had brought up and when Bill C-30 was at committee, we wanted to make sure that there was better data sharing, transparency. That is something that I think would be very important for shippers, not just agricultural products, but everyone would like to have better data sharing like we see in the U.S. If the U.S. can do it, why can we not do it here?

That is something that would help everyone. It would make sure there is more predictability and information sharing and then we could look into penalties to make sure that when delays are not respected, whether it is the railways or at grain, that there is some kind of reciprocity. That is very important too. I am really looking forward to seeing what the government comes up with and working together to make sure that we get our grain and our transportation going in Canada so that we can respect our international trade agreements.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Mr. Speaker, I thank my hon. colleague for the question.

I think many of the provisions passed in Bill C-30 are really important for the industry, as well as for ensuring the safe transportation of agricultural products and other goods. I am really pleased that the government moved a motion at the last minute to extend many of those provisions once again. I think we need to keep those provisions, including the one on interswitching, for example. All the stakeholders and farmers told us repeatedly that they were really happy with the decision regarding the extension of interswitching distances to 160 km.

Perhaps we could consider the possibility of extending that distance, since, as members know, Canada is vast and transportation is rather complex. I would also like to see what comes out of the consultations being held by the Minister of Transport, Mr. Garneau. I look forward to hearing about that and I hope to have some news when the House returns this fall. I also think the Minister of Agriculture and Agri-Food could show a little more initiative on this.

The House will recall that Bill C-30 was introduced by the former minister of Agriculture and Agri-Food. This directly affects producers and therefore we must consult these experts. I hope that the Minister of Agriculture and Agri-Food will show more leadership and, together with the Minister of Transport, will ensure that producers have fair and adequate service.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Mr. Speaker, I am pleased to speak today about the motion from the Standing Committee on Transport, Infrastructure and Communities.

We have been calling for the Liberal government to take action on the grain transportation file for a long time. The report simply requests that the changes set out in Bill C-30, which expire in August 2016, be extended for one year. I agree with that request and will support it when it comes time to vote.

Before explaining why it is important that the government extend these provisions of Bill C-30, I would like to give my colleagues in the House a little bit of background about the grain transportation crisis. About two years ago, I spoke specifically about Bill C-30 in the House.

The combination of an excellent harvest and a harsh winter uncovered major flaws in our grain transportation system that cost farmers and the Canadian economy between $7.2 billion and $8.3 billion.

Although the government at the time had known since the fall of 2013 what our farmers would be up against, Bill C-30 was its belated response to this major crisis. The opposition parties and stakeholders had to pressure the government for months before it did anything.

Unfortunately, the bill did not go far enough. What is more, it was temporary, as members can see from the provisions that expire in August.

The Premier of Saskatchewan said that the bill was flawed and disappointing. Throughout the crisis, the Conservatives acted as if the situation was out of the ordinary, even though farmers had clearly indicated that the system was broken and the duopoly of Canadian Pacific and Canadian National over the market was allowing the companies to provide inadequate service without fear of repercussions. There is still an imbalance of power between farmers and the railway companies.

In an attempt to address the many shortcomings in Bill C-30, my party proposed a number of amendments: implementing mandatory reporting of the price of grain throughout the transportation system; requiring adequate service in all corridors; ensuring that producers in all affected regions would be consulted about the regulations; requiring the government to work with the provinces to develop and implement a plan for open access running rights to ensure effective competition in the rail service; imposing a moratorium on the closure or delisting of producer car sites; increasing fines and directing those revenues to compensation programs for producers; and opposing the temporary nature of the provisions in Bill C-30, which suggested that systemic structural problems were actually temporary and exceptional.

Unfortunately, all of the amendments that the NDP presented in committee were rejected. By the end of winter 2015, the delayed delivery of more than 11,000 grain shipments prompted us to try again. Despite Bill C-30, there was another crisis.

As a result, I moved another motion in the Standing Committee on Agriculture and Agri-Food for the immediate study of problems related to the transportation of grain and agricultural products. Subsequently, my colleague from Sydney—Victoria moved a motion in the House.

His motion, which was adopted unanimously on April 22, 2015, called on the House to recognize that an increase in rail service and capacity is essential to the livelihood of Canadian agriculture and that changes to legislation are needed to address the structural gaps in our system.

When I spoke to the motion, I made sure to emphasize how important it is for the government to listen to all stakeholders. That point is important and remains valid.

The current government should improve the system. It should implement the recommendations of all stakeholders, the experts, and especially farmers.

I am pleased to see that the Minister of Transport said that he would take the Emerson report as advice only and that his government would consult stakeholders before making any decisions.

I can tell him right now that producers and shippers are not keen to abolish maximum revenue entitlement and interswitching. Stakeholders all agree, as do the parties here in the House, that these two measures should be removed.

As Dan Mazier, the president of Keystone Agricultural Producers, said:

“The report doesn't address [the lack of competition in grain transportation] at all, and this is the fundamental thing those in the grain industry believe lies at the heart of all of our problems.”

Since the beginning of the year, stakeholders have also all agreed that it is important to extend the provisions of Bill C-30, which expire on August 1. All of the groups I met with mentioned this to me. The members of the Standing Committee on Agriculture and Agri-food received many letters to this effect from such organizations as Alberta Barley, Alberta Canola, Alberta Pulse Growers, Alberta Wheat, and Grain Growers of Canada.

They wrote to us to encourage the fact that we need to act very quickly and that the pro-competitive measures introduced in Bill C-30, the Fair Rail for Grain Farmers Act, do not expire on August 1.

Among the other measures, the legislation provided for the establishment of minimum grain volume targets for railways, gave authority to the Canadian Transportation Agency to establish regulations governing rail service level arbitration, and provided for the extension of railway inter-switching distances from 30 km to 160 km, in Alberta, Saskatchewan, and Manitoba.

Parliament must pass a resolution prior to August 1, 2016 to extend these elements of railway regulation or Canadian shippers will lose these important shipper protection measures.

The report presented to the House by the Standing Committee on Transport, Infrastructure and Communities goes precisely along the same lines. That is why we support it. However, the government must adopt a long-term vision and address producers' concerns. This is important. A number of agronomists and officials at the Department of Agriculture and Agri-food have said that crop yields would only increase.

If the government does not improve our system, we will see more crops like those we saw in 2013 and more crises like the one we experienced in 2014-15. The government must show leadership and must implement long-term solutions for producers.

I sincerely hope that the Liberal Party will keep its promises on this issue and that its decisions will be consistent with what it said and did when it was in the opposition. It is one thing to get all worked up to defend producers when one is in the opposition, but it is another thing to do so when one is in government.

Since the beginning of their mandate, the Liberals have not had a great record on agriculture and agri-food, but they now have an excellent opportunity to take action and to stand up for producers. We hope that they will take this opportunity today and will take action quickly.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. Speaker, I would like to say at the outset that I am sharing my time with the member for Berthier—Maskinongé.

Before I proceed with my speech, I just want to comment on the mention made by my colleague in the Conservative Party. I have been working very closely with the NDP critic in agriculture in great frustration, with the breadth of the issues in transportation, that for this area of agriculture it makes common sense for those who are dealing, day in and day out, with agriculture issues that maybe these matters to do with the transport of our agricultural products should be going, at least in part, to the agriculture committee.

We will continue to pursue that. Lord knows and those of us who are on the transport committee know that we have a lot to deal with anyway.

I feel confident in sharing that prairie farmers will be greatly relieved that the government has at long last, and at the very last possible moment, taken action to extend the time period for the application of the emergency legislation enacted last year under the Fair Rail for Grain Farmers Act.

One important provision, as we have discussed here, of that law postponed the expiry of the extended access by farmers to interswitching from 30 to 160 kilometres until August of this year. Were this action not taken, farmers would have been greatly disadvantaged.

Greg Sears, chairman of the Alberta Canola Producers Commission supported this extension, which is also endorsed by the Agricultural Producers Association of Saskatchewan, the Canadian Canola Growers Association, the Barley Council of Canada, the Canadian Oilseed Processors Association, Cereals Canada, Prairie Oat Growers Association, Grain Growers of Canada, Pulse Canada, Western Grain Elevator Association, and the Inland Terminal Association of Canada. They all support this.

Mr. Sears said:

Extended interswitching is being used by grain shippers and is emerging as an effective tool to provide better rates and service between two Canadian Class 1 railways, as well as other North American railways. Time is of the essence to ensure this provision does not lapse before parliament adjourns for the summer.

Farmers, especially in the Prairies, need better access to interswitching to get their crops to market. This was identified as a key issue in the Emerson report, but extended rights under the Fair Rail for Grain Farmers Act are set to expire August 1 of this year. This means that many farmers could lose access to markets this season, which would lead to severe hardship.

On May 13, at the request of the Canadian grain, canola, and pulse growers, I put this exact request to the government on behalf of agricultural producers. I asked that the government commit to legally extending these rights for fair rail before the House rises in the summer. While the Prime Minister made a commitment in April of this year, it was not until today that any action occurred.

This motion will ensure extended access for at least another year. For this coming year, Canadian grains and pulses will potentially reach markets in a timely manner. This is critical to provide expanded options for producers to access markets, thereby making grain sales more competitive. However, as grain producers have advised, they require longer-term solutions than just a one-year extension.

Again, as Greg Sears has expressed:

Truth be told, all farmers would benefit from 1,000 kilometre interswitching or open running rights because there are still major farming areas not receiving any benefit from the extended interswitching, such as the Peace region of Alberta that is over 500 kilometres north of Edmonton.

As Mr. Sears reminds us, agriculture is among the most trade-dependent sectors with the majority of product exported. He reminds that rail remains the only economical option to ship those products from prairie to port.

This makes prairie producers almost entirely dependent on the railways for the long-term viability of our Canadian farms. Farmers are reminding us that Canada cannot afford a repeat of the 2013-14 shipping debacle and the damage to the Canadian agriculture industry as a reputable supplier of high-quality grains and oilseeds.

In the farmers' view, these measures are critical to correct the imbalance of market power controlled by the railways. As submitted by the Agricultural Producers Association of Saskatchewan, further measures will be needed to “address the fundamental problem of railway market power as the primary factor constraining rail service and commercial accountability in the grain transportation system.”

The president of the Canadian Federation of Agriculture, Humphrey Banack, an Alberta farmer, has said that extended access to interswitching is critical in order to hold rail companies accountable. He recommends that the extension continue, at a minimum, until after the Emerson report is considered and acted upon by the government in a process, he stresses, of direct consultation with the agricultural producers.

As my Conservative colleague has stated, what would be absolutely critical is that, as the government moves forward to review the Emerson report and all of the issues that arise out of the Fair Rail for Grain Farmers Act, the producers themselves play an active part at the table and not be peripheral. It is absolutely critical to our economy at this time, particularly in areas such as Alberta, where the economy is suffering. Agriculture has always been an important part of the revenue for my province and contributes to the wider Canadian economy. It is absolutely necessary that we get this right and that we do not let the rail companies continue to, frankly, railroad our farm producers.

I am very happy to support the motion, which I contributed to at committee. It is very important that any review of the motion be further expedited so that the farmers have some kind of clarity and are not left hanging, as they were this year, right to the bitter end.