Bill C-49 (Historical)

Transportation Modernization Act

An Act to amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts

This enactment amends the Canada Transportation Act in respect of air transportation and railway transportation.
With respect to air transportation, it amends the Canada Transportation Act to require the Canadian Transportation Agency to make regulations establishing a new air passenger rights regime and to authorize the Governor in Council to make regulations requiring air carriers and other persons providing services in relation to air transportation to report on different aspects of their performance with respect to passenger experience or quality of service. It amends the definition of Canadian in that Act in order to raise the threshold of voting interests in an air carrier that may be owned and controlled by non-Canadians while retaining its Canadian status, while also establishing specific limits related to such interests. It also amends that Act to create a new process for the review and authorization of arrangements involving two or more transportation undertakings providing air services to take into account considerations respecting competition and broader considerations respecting public interest.
With respect to railway transportation, it amends the Act to, among other things,
(a) provide that the Canadian Transportation Agency will offer information and informal dispute resolution services;
(b) expand the Governor in Council’s powers to make regulations requiring major railway companies to provide to the Minister of Transport and the Agency information relating to rates, service and performance;
(c) repeal provisions of the Act dealing with insolvent railway companies in order to allow the laws of general application respecting bankruptcy and insolvency to apply to those companies;
(d) clarify the factors that must be applied in determining whether railway companies are fulfilling their service obligations;
(e) shorten the period within which a level of service complaint is to be adjudicated by the Agency;
(f) enable shippers to obtain terms in their contracts dealing with amounts to be paid in relation to a failure to comply with conditions related to railway companies’ service obligations;
(g) require the Agency to set the interswitching rate annually;
(h) create a new remedy for shippers who have access to the lines of only one railway company at the point of origin or destination of the movement of traffic in circumstances where interswitching is not available;
(i) change the process for the transfer and discontinuance of railway lines to, among other things, require railway companies to make certain information available to the Minister and the public and establish a remedy for non-compliance with the process;
(j) change provisions respecting the maximum revenue entitlement for the movement of Western grain and require certain railway companies to provide to the Minister and the public information respecting the movement of grain; and
(k) change provisions respecting the final offer arbitration process by, among other things, increasing the maximum amount for the summary process to $2 million and by making a decision of an arbitrator applicable for a period requested by the shipper of up to two years.
It amends the CN Commercialization Act to increase the maximum proportion of voting shares of the Canadian National Railway Company that can be held by any one person to 25%.
It amends the Railway Safety Act to prohibit a railway company from operating railway equipment and a local railway company from operating railway equipment on a railway unless the equipment is fitted with the prescribed recording instruments and the company, in the prescribed manner and circumstances, records the prescribed information using those instruments, collects the information that it records and preserves the information that it collects. This enactment also specifies the circumstances in which the prescribed information that is recorded can be used and communicated by companies, the Minister of Transport and railway safety inspectors.
It amends the Canadian Transportation Accident Investigation and Safety Board Act to allow the use or communication of an on-board recording, as defined in subsection 28(1) of that Act, if that use or communication is expressly authorized under the Aeronautics Act, the National Energy Board Act, the Railway Safety Act or the Canada Shipping Act, 2001.
It amends the Canadian Air Transport Security Authority Act to authorize the Canadian Air Transport Security Authority to enter into agreements for the delivery of screening services on a cost-recovery basis.
It amends the Coasting Trade Act to enable repositioning of empty containers by ships registered in any register. These amendments are conditional on Bill C-30, introduced in the 1st session of the 42nd Parliament and entitled the Canada–European Union Comprehensive Economic and Trade Agreement Implementation Act, receiving royal assent and sections 91 to 94 of that Act coming into force.
It amends the Canada Marine Act to permit port authorities and their wholly-owned subsidiaries to receive loans and loan guarantees from the Canada Infrastructure Bank. These amendments are conditional on Bill C-44, introduced in the 1st session of the 42nd Parliament and entitled the Budget Implementation Act, 2017, No. 1, receiving royal assent.
Finally, it makes related and consequential amendments to the Bankruptcy and Insolvency Act, the Competition Act, the Companies’ Creditors Arrangement Act, the Air Canada Public Participation Act, the Budget Implementation Act, 2009 and the Fair Rail for Grain Farmers Act.

[Marc Garneau, Liberal, Notre-Dame-de-Grâce—Westmount, QC]

I'll start by thanking this committee for looking at Bill C-49 so expeditiously last fall. That was very much appreciated. Now I am hoping that this bill will get through the Senate in the most expeditious manner possible.

I would also remind my colleague that despite everything she has said about Bill C-49, she and her party actually voted against Bill C-49 when it came for third reading, which is still a surprise to me.

With respect to the movement of grain, I have been in touch with the railways. I did so at the beginning of the month. This was just after a conversation I had with the Minister of Agriculture and the Minister of Transportation from Saskatchewan, the two of them together. I'm very much aware of the situation, which I follow on a weekly basis, and now on a daily basis.

I told both CN and CP that the movement of grain was unacceptably slow in this very busy season. Notwithstanding a very difficult February because of weather, the movement of grain was not at an acceptable level. In fact, they have come back with a plan. I told them that I wanted to see a plan by March 15, which they both provided. They have significantly increased the resources, both in terms of equipment—I'm talking about hopper cars and more locomotives—and more personnel, as well as prioritizing the movement of grain.

I am now seeing an accelerated movement of grain, which, by the way is about 25% above the levels that existed in 2013-14 when we had that very bad season under the previous government. It is moving very efficiently at this point. I will make sure that it continues to move efficiently, because there is a very large backlog and I want to get western farmers' grain to market as quickly as possible.

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

Thank you very much, Madam Chair.

I would like to thank the minister for joining us today, as well as all of the departmental officials. I know you do very good work on behalf of Canadians and I appreciate your joining us today. My question, obviously, will be for the minister.

For weeks, Minister Garneau, farmers and the Province of Saskatchewan have all been asking you to support an order in council to force the railways to clear the rail backlog that has plagued Canada's rail system this winter, yet you have refused to do so.

To be clear, this is not the first time you have refused to act in the interests of our farmers and shippers. When you introduced Bill C-49, Conservative members requested that the bill be split so that the rail measures in the bill could be studied in an expeditious manner. When you refused, we then called upon you to extend Bill C-30 to ensure that there would be no legislative gap, and again you refused. Finally, when the opposition members proposed reasonable technical amendments to Bill C-49 to address the concerns raised by numerous witnesses, again the Liberal members did not support them.

My question to you, sir, is this: how much more funding would the Department of Transport have needed to request in the supplementary estimates (C) in order to draft, execute, and implement an order in council as requested by numerous farm organizations and provincial governments?

[Marc Garneau, Liberal, Minister of Transport]

Thank you, Madam Chair.

Since you have made all the introductions, I can skip over the first part of my statement.

Innovation and modernization present important challenges for the transportation sector. The funds we are seeking would help support modernization that is important to the success of our economy, and to the safety and security of Canadians. Canada must have the infrastructure and services in place to move goods and people to where they need to go, for years to come.

As was outlined in Transportation 2030, my long-term strategy for transportation in Canada, our legislation and regulations must aligned with global standards, and with rapid and complex changes taking place in the transportation sector.

Changes in the transportation sector must be implemented safely—without endangering Canadians or harming our environment—while supporting and strengthening our economy. We must be in step with the sector's fast-moving evolution, or—even better—a step or two ahead.

That means fostering research and innovation, in partnership with stakeholders, other governments, indigenous peoples, academia and others. Adapting to change is not easy, but everyone at Transport Canada, and the crown corporations in my portfolio, embraces the challenges before us.

We have taken already some important steps toward the future. This includes Bill C-49, the transportation modernization act, which is the first major step on the Transportation 2030 path.

The transportation modernization act would amend the Canada Transportation Act and other legislation governing the air, rail, and marine sectors, helping to modernize Canada's transportation system. Through the oceans protection plan, the largest-ever investment to protect Canada's coasts and waterways, we are building a world-leading marine safety system while preserving ecosystems, forging stronger partnerships with indigenous peoples, and engaging coastal communities, industry, and other stakeholders—all with a view to learning more about our oceans.

The proposed Canadian navigable waters act includes robust powers to enforce safeguards and protect the public's right to navigation. The Canadian navigable waters act would provide extra oversight where it's needed most, on navigable waters of greatest importance to Canadians and to indigenous peoples. It would provide more transparency for projects such as dams, mines, and bridges. We welcome the challenges before us and we look forward to the exciting changes the future promises.

In the supplementary estimates before you today, Transport Canada is requesting $755,900 in new funding and $122,400 in statutory forecasts for employee benefits plan costs.

However, most of that is offset by transfers to other government departments, for a small net increase of $175,700. The majority of that offset is a transfer to the Federal Bridge Corporation Limited, which is seeking an increase of $698,500 through these supplementary estimates, to conduct a feasibility and design study for the Cornwall port of entry in Cornwall, Ontario.

In the interim estimates before you today, Transport Canada is seeking $322.8 million in interim supply, to continue providing a safe and secure, efficient and environmentally responsible transportation system.

The Canadian Air Transport Security Authority is seeking $244.2 million to continue protecting the public through effective and efficient screening of air travellers and their baggage.

VIA Rail is seeking $134.5 million to continue providing safe, reliable and efficient passenger rail service.

Marine Atlantic is seeking $37.8 million to continue providing safe, environmentally responsible, and reliable ferry services.

The Federal Bridge Corporation Limited is seeking $900,000 to upgrade the roadway connecting the north and south channel Seaway International Bridges at Cornwall.

The Canadian Transportation Agency is seeking $9.4 million to continue its work as an economic regulator that administers relevant transportation legislation.

Madam Chair, Transport Canada, the crown corporations in my portfolio, and I are committed to sound fiscal management and stewardship of government resources on behalf of Canadian taxpayers. The financial resources sought through these supplementary and interim estimates would help ensure our transportation system continues to serve Canadian needs, as I mentioned earlier, to move goods and people to where they need to go safely and securely for years to come.

I'd be very happy now to answer any questions.

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

Thank you, John.

Again, as we've heard so many times, getting Bill C-49 passed with the amendments is the critical aspect of it; otherwise, we'll be coming back to deal with this again later on.

One of the things we talked about earlier was the APP and whether it should be raised from $400,000 to $800,000 and so on. All of those things don't help unless you know exactly when you want to use that tool, because if all you're doing is punting it down the road because you've lost all of the contract opportunities and your marketing....

That can work, and you can use it, but you better know that the year before, rather than trying to deal with it on an ad hoc basis.

Of course, the other aspect of it is trade, which is what we really are missing throughout. I was just in Southeast Asia a couple of weeks ago, talking on trade issues. We tried to say that we'll be able to market these products and that they should look at the great things they'll get if they have our Canadian grain or our beef and so on, but they look at it and say that right now they know they can get it from Australia, and there are no issues there. I know we're losing all of these opportunities because of the way people look at it.

That's one of the aspects that we have to recognize. The railways forecast a 2% or 3% increase and say they'll just do it as the economy looks, but as farmers we are increasing the volumes immensely because we have the skills and the tools and we are going from there. The key concern I have is how we keep this pressure on throughout the summer so that they are ready on August 1, when week one shows up, to handle the issues we always face.

[Dan Mazier]

They didn't talk about grain at all in their replies, so it was basically business as usual. This is how they were reacting to it. It was not specific to agriculture or grain, which is.... I think they missed the mark on it.

To answer your question, when we get Bill C-49 passed—not “if” we get it passed—it will enable a lot of us to do a lot more things to the railways to hold them accountable. That's why we need it passed.

[John Barlow, Conservative, Foothills, AB]

Thank you very much, Mr. Chair. I'll split some of my time with Mr. Dreeshen.

It's frustrating that we're dealing with this, and it's sad to see or hear from our producers today that they have pretty much resigned themselves to the fact that this is a lost season. It's especially frustrating when, as Mr. Fransoo said, action could have been taken weeks or months ago to address the season, regardless of what happens with Bill C-49.

This is no fault of my colleagues across the way, because we do work fairly well together. Many of the amendments that are being discussed right now that you have all talked about today were brought up at the transport committee by the Conservatives, and the Liberals voted them down at the transport committee.

We're already talking about dealing with things next year, the consequences of this year. This should never have happened if we had acted quickly on the advice from stakeholders and members who went through this before in 2013-14. I'm just shaking my head that while we're having to deal with this situation, we're already talking about how to deal with the consequences.

Mr. Mazier, you talked about CN getting through this before somehow despite massive cuts. It was because nothing was being transported in the energy sector that they managed to get through that, but it's a little different this time around. You're right that they made massive cuts to their staff and their equipment, and now they're trying to scramble to get it back.

Ian Boxall brought it up before, when he talked about how he pays $360,000 a year in freight alone. The cost to the industry of that last crisis in 2013-14 was $8 billion. Do you have any idea what this is costing you this time around, and have you recovered financially from 2013-14?

[Dan Mazier]

There is no silver bullet. It will go a long way in fixing a lot of things, modern-day things.

We've dismantled the Wheat Board. In some way they did control the flow of grain. They bought it differently, as Mr. Ritz alluded to earlier today. Things flowed differently in Canada.

We have a new market, called Japan, all of a sudden coming into the west coast. Things have changed in Canada. A modern-day Bill C-49 will bring us up to date to at least address these problems.

The problem is that part of the act needs updating. We've transformed as a country and we just haven't been able to adapt in a regulatory sense to make it happen for everybody.

[Jean-Claude Poissant, Liberal, La Prairie, QC]

We know that Bill C-49 is supposed to solve much of the problem, but do you think this bill and the amendments will meet all the needs?

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

I want to focus on the long term, but as a member of Parliament, I'm not yet convinced.... I know Bill C-49 will answer a lot of questions, but I've spoken to a lot of your members and a lot of farmers about capacity, and they're saying that they're getting a lot more efficient on the farm and can produce a lot more in the same acreage of land, so that obviously means production is going to increase.

Mr. Mazier, are you having that conversation with the rail companies about long-term capacity? What's the five-year or 10-year output? Are we ramping up capacity? Even if Bill C-49 is there, we will be back here in four years if we don't have that capacity. If we don't ramp up capacity, it will happen again.

[Daryl Fransoo]

They definitely missed the ball on forecasting this time, but there's no incentive for them to spend money on capacity like that when we can't hit their bottom line. That's what some of Bill C-49 will do. We'll be able to hit them where it hurts, and maybe they will spend more money on forecasting or maybe they won't be so long to acquire resources, because they'll know there is some loss to be had.

I definitely agree that we have to move all commodities. Our economy depends on all of them. As I said, that includes getting pipelines built. I think that will take some capacity off the rail line, which could then be used for grain.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I am shocked.

I'm angry, really angry about that, because we told them to act. We told them a lot of times, over and over. This season is failing because of the lack of action by the Liberals. I don't want ask you to be political; I can't. I'll do it.

We told them in June of last year to split the bill, to pass just some amendments that you require. The Liberals defeated all the amendments we proposed. Now you are asking them again to make these amendments to Bill C-49. I hope that this time they will accept, if we want to fix the problem for the long term. I think you should work a lot with the Liberals and try to convince them to accept those amendments, because otherwise you will have another bad season next year.

What is happening is offensive. We asked for an emergency meeting three weeks ago. You are saying we might have been able to change the course of things three weeks ago. Mr. Sekulic, you might have been spared one of the many delays you mentioned. Unfortunately, someone said it was not a rush and that we would have the meeting on March 19.

We have to send a very clear message right away. We have to stop playing games with western grain producers. We have to work to make sure the grain gets to market. It is the government's responsibility. It is our responsibility as a committee to demand that the government ensure that the farmers' grain gets moving so they can be paid. We are playing games with Canada's reputation and with the farmers' reputation.

Mr. Sekulic, how does it feel as a young farmer to see your debts mounting while you are unable to sell your crops? How do you deal with that, in your family? How do you feel?

[Dan Mazier, President, Keystone Agricultural Producers]

Thank you, Mr. Chair and members of the committee, for having me here today to speak about this important issue in the grain transportation system.

My name is Dan Mazier. I'm the President of Keystone Agriculture Producers, which is Manitoba's general farm policy organization representing over 7,000 farm families. I'm also a grains and oilseeds farmer northeast of Brandon, Manitoba.

In 2013-14, Canada suffered from a grain transportation crisis that is estimated to have cost western Canadian farmers approximately $6.5 billion. When shippers—my grain buyers—are unable to readily move their commodities to port, they will begin offering farmers lower cash bids or no cash bids for their products, so although farmers are not the actual shippers ordering the railcars, they are the ones who end up bearing the costs of the poor rail service.

The Government of Canada responded to the 2013-14 crisis in several ways, including an order in council that penalized the railways for missing grain movement targets and an accelerated schedule for the statutory review of the Canada Transportation Act. Out of that review came several recommendations that were incorporated into Bill C-49, which passed in the House of Commons and presently sits before the Senate, as you know.

In 2013-14, the magnitude of the crisis caught many in government and industry off guard. This time around, we became aware much earlier of the challenges that railways have been having in moving our grain this year, largely because we now collect information on grain car orders and deliveries. This is done by a group called the Ag Transport Coalition, which reports weekly data on the number of grain cars ordered by shippers compared to the number of cars actually delivered by each railway.

According to Ag Transport Coalition data for Manitoba, six weeks ago, at the beginning of February, CP supplied 74% of cars ordered. So far, so good.

CN delivered 14%.

Things only got worse from there. In CP's worst week in February, they only managed to deliver 17% of ordered cars. In CN's worst week, they delivered 0% of their orders. On average, combined, the railways delivered only 29% of the cars that were supplied on the want week for the month of February, which created a backlog of 28,000 cars, or approximately 35,000 trucks, leaving more than 30 ships waiting for grain off the coast at the port of Vancouver.

How do we move forward and fix this problem before permanent damage to our country's reputation as a reliable shipper of grain is done again?

A good first step is to come up with a plan to get the grain moving. As the committee knows, a co-signed letter went out to the railways from Ministers Garneau and MacAulay requesting such a plan and a report back by March 15. I also understand that CN has taken a proactive approach in communicating with shippers with how they want to move forward. It all boils down to more people, more locomotives, and more products. I would encourage this committee to monitor and support the ministers, using all the tools possible, so that we can all keep pressure on the railways to keep the backlog cleared.

The elephant in the room is that we need to have Bill C-49 strengthened and passed as quickly as possible. As you know, it is presently before the Senate. Along with other farm stakeholders, I have given presentations with amendments that we argue will create a policy environment whereby the railways are held more accountable for their service failures and the impact they have on shippers.

I would like to point out that the current design on the long-haul interswitching option in Bill C-49 is being viewed as overly restrictive in terms of which shippers are eligible to apply for it. We are recommending clarifying the existing language for interswitching to ensure that it is as effective as possible for shippers to access this program.

The most impactful amendment we are recommending is to empower the Canadian Transportation Agency to initiate investigations into service issues when it becomes aware of them and to mandate solutions when necessary. Presently, the agency's ability to act under most provisions of the Canada Transportation Act is triggered by an application or a complaint.

For instance, although the agency is allowed to act on its own motion with respect to air carrier tariffs for international services, it can only examine and potentially correct issues with domestic tariff provisions in cases where an application has been received. Similarly, under section 116 of the Canada Transportation Act, the agency's power to order measures to address rail level-of-service issues is conditional upon receipt of complaint. An extension of the agency's own-motion authority would allow for a proactive initiative of inquiries when there is evidence that a problem might exist.

This may include statistical evidence, a pattern of complaints, or consistent credible media reports regarding the transportation service providers' financial difficulties or service failings. The authority would be particularly relevant to matters affecting more than one transportation service provider or user, for which the existing complaint-based process is not particularly well suited.

This measure was one of the recommendations made by David Emerson in 2016 in the report to the Government of Canada that Ron Bonnett alluded to earlier this afternoon. We agree that these measures are necessary to help resolve service-related challenges that appear to be inherent in a monopoly marketplace such as Canada's grain transportation system.

In addition to these service-related measures, we are requesting that soybeans and related products be added to the schedule 2 list of grains that are eligible to be covered under the maximum revenue entitlement. In Manitoba, with more than two million acres planted in 2017, soybeans represent our third-largest crop by area. Currently the transportation costs for soybeans are as much as 40% higher per car than the MRE-covered grains, with no promise of getting these cars. They are charging more, but we're still not getting those cars in the first place. There is no reason that the farmers, who have innovated and adapted to changing conditions, should be denied the same protection from price exploitation by an monopoly industry that other crops receive.

To conclude my remarks, I would like to make one point very clear.

It is critical that Bill C-49 pass with these amendments before the House rises in June. This way shippers and carriers will know what their obligations are under the law. They will make the needed investments to ensure that the 2018 crop is delivered to customers on time and that we do not suffer the same economic hardships as a country that we have now suffered twice in less than half a decade. The railways must face repercussions if they fail to meet acceptable service standards. They must not be allowed to gouge captive shippers of soybeans. Their performance must continue to be carefully monitored and action must be taken when they fail.

In Canada our growing season is very short. Our seeding and harvest windows are narrow and it is difficult to predict how long they will last. To deal with this challenge, we invest more in equipment than nearly any other farmer in the world, and when the conditions are right, we work all day and all night to get the crop off the field and into the bin. I fully expect the railways to make investments necessary to get the job done, and if it requires senators and members of Parliament to work all day and night to get Bill C-49 strengthened and passed into law, then I expect that of you as well.

Canada's economic well-being is critically tied to rail transportation. Do not shy away from your responsibility to ensure that the Canada Transportation Act addresses the challenges we face and ensures that Canada's economy can grow to its full potential.

Thank you very much for your time and attention. I look forward to your questions.

[Daryl Fransoo, Director, Western Canadian Wheat Growers Association]

Thanks for that story, Warren. I've heard from farmer after farmer after farmer that we can't get our grain to the ports and we can't get paid. That's kind of the big thing.

Mr. Chair and members of the committee, on behalf of the Western Canadian Wheat Growers, thank you for holding this meeting. I'm glad this issue is getting the attention it needs, although I am saddened that we have to be holding this meeting at all.

As a grain farmer, I can state without hesitation that when our rail lines are only hauling 50% at most, a lot of people and a lot of farmers are hurting.

Unfortunately, one of the reasons these statistics have risen in the last couple of weeks is that carriers are running more trains on main lines, and many farmers and terminals on the side branch lines are still woefully short of rail stock. In addition, we are now facing spring breakup in many parts of the country, so road restrictions are coming into place. Then we have planting season. We can ill afford to have these kinds of rail backlogs in the future.

As I stated, I personally know of many grain farmers who are having the same problems as Warren. One in particular has a barley contract worth three-quarters of a million dollars that is three or four months behind. He's a good-sized farmer, but that's a lot of money to be waiting on.

When grain is sitting in a farmer's bin, of course we aren't getting paid. We can't pay our bills, and the domino effect rolls out across all the towns and across the Prairies. On top of the immediate financial problems, farmers are attempting to make decisions for the looming crop year. When cash flow has all but stopped for many farmers, the future looks bleak.

I'd like to remind the committee—and Ian did it earlier—that in 2014 this not only affected grain but also the fertilizer coming up from the Mississippi. It ultimately made it here, but it gave input companies a reason to jack the prices, and farmers had to pay for that in the end. Truthfully, it shouldn't be this way and it doesn't need to be this way.

I'm glad that CN acknowledged they had made mistakes. This is a good start, but good intentions do not resolve the problem that grain farmers are facing.

I recognize that we can't discount weather, because it is an obvious safety issue. With that said, rail has run in Canada for over a hundred years. Cold temperatures and snow in July shouldn't be a surprise, and we need better planning for that. CN and CP need to be better prepared. They need to not get rid of power and have more front-line manpower. Obviously their forecasting was poor, so I suggest maybe they spend some money on that.

Although Bill C-49 isn't a perfect bill, it does give shippers some clout and does put some of the onus back on the rail companies. We need to pass this bill, with some of the proposed amendments, sooner rather than later so that farmers have that much-needed protection.

The government has stressed this year that agriculture will play a major role in strengthening our GDP and the middle class. We grain farmers are up to the task. We are among some of the most productive grain growers on the planet. Unfortunately, with the current grain transportation problems, we won't be able to easily meet these objectives. There are tens of thousands of farmers and hundreds of thousands of middle-class people who are negatively affected by backlogs like this.

We need an efficient transportation system. We need to be able to move all commodities to market: grain, minerals, raw resources, and finished goods. We need to be able to meet our customers' expectations. We need good rail lines that meet timelines, and we need pipelines for oil. The Western Canadian Wheat Growers believe this is a non-partisan issue. Ships are waiting in Vancouver. Farmers have the grain that needs to be exported on these ships. Farmers and grain shippers want to work with you, the governments, and we want to work with the rail companies. Let's collectively solve this problem.

In closing, Mr. Chair, Bill C-49 needs to be passed as soon as possible. We need long-term solutions to the problems we are facing today, but first and foremost we have to get this bill through. Get it done before the summer comes along so that we can work with some of these clauses in there and make sure they work.

Mr. Chair, I thank the committee for meeting today. Let's make certain that we, collectively, are not just talking. We need to be doing, and starting today, we need to fix this problem for the long term.

I look forward to answering your questions.

[Warren Sekulic]

Our priority is to ensure the ultimate passage of Bill C-49 in order to help correct the imbalance between the market power of the railways and shippers, and we would strongly advocate for the deficiencies in long-haul interswitching to be addressed.

[Warren Sekulic, Director, Alberta Wheat Commission]

Mr. Chair and members of the committee, thank you for the invitation to appear today.

My name is Warren Sekulic. I'm a director with the Alberta Wheat Commission. I'm a fourth-generation farmer in northern Alberta, and we will actually celebrate 90 years next year.

I am here today because the current grain transport backlog continues to impact my operation and the operations of farmers across western Canada. In addition to sharing my specific experiences, I also offer the strong support of our 14,000 farmer members for the amendment and passage of Bill C-49, the transportation modernization act, as a means of addressing the systemic issues in our freight rail system.

My farm is located 70 kilometres north of Grande Prairie, Alberta, which is over 1,200 kilometres from the nearest port, and we are totally dependent on the one railway that services this line of four inland terminals. With our limited access to processing facilities, market alternatives, or other methods of transportation, almost 100% of the grain and the crops I grow are destined for the export markets and dependent on a single railway.

As with all businesses, planning is an essential part of my operation. Each year, much work goes into planning—planning what crops I'll plant; the amount of inputs, such as the fertilizer and seed I'll need; when those inputs will be delivered; and the timing of the contracts that I will negotiate to sell my grain. Those contracts are usually aligned with when I pay my bills.

As an example, on my farm in 2013-14, as a sound farm management practice, I had all of my forward contracts in place to sell my grain to the local terminal. I had a prudent plan to deliver my grain in a timely manner so that I could pay my land rent and input costs, such as fertilizer and seed. The rent is typically due in the fall. I even had allowed a buffer for rail delays, given that they are commonplace, especially up north.

When the railway failed to deliver in 2013-14, it put my farm business and my livelihood in jeopardy. I'm contractually obligated to pay my rent, regardless of whether or not I deliver my grain. Like most young farmers, I'm cash strapped as I build equity in my business, and because of long delays that year, I needed to secure a bridge line of financing in order to ensure that I could retain my land, pay my debts, and see my operation succeed into the next year.

I am here today, at what is one of the busiest times of the year for my operation, because as I head into the 2018 planting season, we are once again experiencing a backlog in the freight rail system which is impacting my operation and farming operations across western Canada that are reliant on the freight rail system.

When it comes to rail transportation in Canada, the agricultural sector has always operated in a monopolistic environment. Each year, our farmer members grow millions of tonnes of wheat, other grains, and oilseeds. We rely almost entirely on rail transportation to ship our products from the Prairies to port terminal facilities on the west coast and to Thunder Bay and south of the border into the U.S.

Costs associated with railway failures, such as demurrage fees and lost sales, are ultimately passed down the supply chain to me, the producer. As the price-taker, I'm dependent on the price the market dictates. I cannot adjust my price, the price of the products, so ultimately these increased costs reduce my profitability.

AWC appreciates the government's commitment to legislation that will ensure a more responsive, competitive, and accountable rail system in Canada. We believe that Bill C-49 is in fact a historic piece of legislation that paves the way for permanent, long-term solutions to the rail transportation challenges that Canadian farmers have faced for decades.

Passage of this bill is imperative, especially in light of poor rail service that shippers have been experiencing in western Canada this year, with the poorest period of car order fulfillment dropping as low as a combined 32% between CN and CP, reaching the levels experienced during during the 2013-14 crisis. In any other business, this lack of performance would be unacceptable, but in the grain sector, these service levels are all too common.

Because of this poor service level, currently I am left with a significant amount of grain on my farm, grain that was all contracted for delivery in October, November, and December. This type of backlog causes a cascading effect, not only on my operation but across the entire system. For instance, I had peas contracted for delivery in November, and when railcars didn't arrive to take my peas as scheduled, I had to bear the cost and resources of bagging my peas and leaving them on the ground in temporary storage, pending the availability of railcars to make up this shipment.

As the snow starts to melt now and the railway has still not fulfilled my delivery, I have to now use further resources to move the peas from bags to bins so that my product doesn't get damaged.

I, like most farmers, have contracts scheduled with terminals on a fairly ongoing basis, so when cars eventually do arrive for my peas contracted in November, the contracts that I have in place for March delivery of my canola get pushed into April. April contracts get pushed into May, May into June, and on and on. This is further complicated by spring conditions in which road bans are instituted, making it almost impossible to deliver my grain if delayed trains do arrive. This is not a fictitious backlog; this is reality.

As I and other farmers ramp up our operations to prepare to get our seed in the ground for this growing season, we are feeling the impacts of the current backlogs in the system. Farmers who haven't had the opportunity to deliver their grain in as long as six months are strapped for cash flow to buy inputs for this year's crop, and systemic rail failures often cause delays in receiving inputs, such as my fertilizer, which has actually been delayed since December.

In January I was in Ottawa to deliver this same message to the Standing Senate Committee on Transport and Communications. Now it's March, and while I have moved some of my grain, I am still significantly behind. From all indications, between the backlog and the spring conditions, as well as my focus on getting the crop in for next year, I will likely not deliver my grain until we're into April or May. For some of my contracts, that's almost eight months later than what the contract stipulated, which is eight months of not getting paid.

For these reasons, I am advocating for the amendment and passage of Bill C-49, the transportation modernization act, as a long-term solution to addressing the ongoing freight rail failures.

With respect to the role that reciprocal penalties play in this legislation, railways have long had a variety of measures that govern shipper efficiencies, including asset use tariffs. These tariffs are used to penalize shipper failures through monetary fines in order to gain shipper efficiencies. For example, when the railway spots my cars at a local elevator and the grain company fails to load them within 24 hours, the grain company faces an automatic monetary penalty. On the other hand, if the railway shows up two weeks late, there are limited or no penalties. Therefore, the railways are the only link in the grain logistics supply chain that are not held to account.

We were recently made aware that CN Rail has included a form of reciprocal penalties in their service level agreements. On the surface, this seems like good news, but these penalties are still extremely one-sided. As an example, they give CN the ability to spot cars at any time in a period of more than a week, while grain companies are still required to load these cars within 24 hours or face penalties. Bill C-49 provides the ability to establish service level agreements with truly reciprocal penalties.

Under Bill C-30, which expired on August 1, 2017, interswitching provisions, which allowed shippers to access any interchange within 160 kilometres, proved to be a powerful and effective competitive tool to improve competitiveness for grain shippers.