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.

[Mark Dyck, Senior Director of Logistics, G3 Canada Limited]

Thank you very much for the invitation to be here today to speak about the grain backlog. My name is Mark Dyck. I am the senior director of logistics for G3 Canada Limited.

G3 Canada Limited was formed through the combination of the former CWB and Bunge Canada's grain assets, funded by two strategic shareholders, Bunge and SALIC, with the long-term vision of establishing a state-of-the-art grain handling company in Canada and a new competitor for Canadian grain farmers.

The G3 transportation model was developed well in advance of the formation of G3 in 2015. G3's strategy was formed on the heels of the bumper crop in 2013-14, when the Canadian grain handling system's fundamental weaknesses were highlighted through shipping and rail backlogs. The government of the time intervened with Bill C-30 to further regulate the Canadian grain handling system with minimum volume requirements to address the short-term issue.

There were some unintended consequences. Service levels did increase; however, they may have at any rate, as that coincided with warmer weather and the reopening of the port of Thunder Bay. We believe the regulation never solved the fundamental problems in the industry.

Western Canada is blessed with an abundance of natural resources. The markets for those resources rely largely on Pacific export corridors, and grain must compete with other commodities for a scarce resource: rail capacity. G3 is making investments to address some of these issues to ensure grain handling remains competitive with other industries in Canada.

We believe the fundamental issues are as follows.

Insufficient improvements have been made in the grain industry to invest in efficiency improvements. The last major port terminal construction was in the early 1980s. Much of the port terminal infrastructure dates to the mid-1950s or earlier, when the industry was still moving grain in boxcars. They have been upgraded since, but not to the same standard as for other resources, such as coal and potash.

Inland primary elevators are of a newer vintage, with most dating from the mid-1990s to the early 2000s, but many small shippers still exist. The logistical technology that is incorporated at these elevators has failed to keep pace with other industries and is relying on ladder tracks and breaking trains apart. This slows the loading process for grain, which is exacerbated in the cold Canadian winters when it is difficult to air up the train when it is being reassembled.

The supply of grain does not enter the grain handling system in a steady state. Market conditions are such that demand for rail capacity is generally higher in the fall and winter months. The surge capacity required to effectively conduct these exports, particularly off the west coast, does not exist today. Terminals are generally operating at or near capacity, and this problem will continue to grow as the production level in Canada continues to increase.

Early this crop year we saw that farmers were tight holders of grain during what has historically been a very busy season immediately following harvest. The volumes started to shake loose at the same time that western Canada entered winter. The railroads did not have the capacity to service such a spike, following a slower than expected delivery in the early fall period.

If these are the fundamental issues, what are the solutions?

First, it's important to recognize that the situation is not as dire as it was in 2013-14. Production in western Canada in 2017 was 70.9 million metric tons, down about 1% from last year but about 3% above the five-year average. According to Quorum Corporation, the federally appointed grain monitor, total metric tons unloaded at the Vancouver, Prince Rupert, and Thunder Bay ports, which is where the vast majority of western Canadian grain is shipped, is 6% behind last year but on par with the five-year average.

In comparison to 2013-14, Quorum shows that the railways moved 25% more grain hopper cars—that's about 40,000 cars—to Vancouver, Prince Rupert, and Thunder Bay in 2017-18 versus 2013-14. That is from August through January. The February date is not yet available. While rail performance has not met industry's expectations this year, the situation is not as bad as it was in 2013-14. That said, the long-term issues need to be addressed with long-term solutions.

G3's long-term strategy was born out of discussions with industry experts, the railroads, and farmers alike. G3 is investing significant money in a new type of grain handling system featuring loop tracks, a feature not uncommon in the coal and potash industries. We load grain faster and more efficiently than ever before. In addition, we are constructing a new state-of-the-art grain terminal in Vancouver, with loop tracks that will be able to accommodate three fully loaded grain trains intact on the property. G3 is making investments that industry has not experienced in decades, investments that will create surge export capacity, rail efficiency, and velocity.

In periods when demand spikes and conditions become challenging, companies such as G3 will still be able to function at levels not seen anywhere else in the industry. We are able to load a full, 134-car unit train even in extreme cold weather by keeping the trains intact, with the railway locomotives on the train. When locomotive power is not left on the train, the railroads are forced to shorten train lengths to ensure they can properly air out the train for their braking systems. Our model creates a win for us as the grain handler, as well as for the railroads and for farmers.

G3's position is that its investments in efficiency will allow Canadian farmers to effectively reach world markets, allow railroads to function, and allow those grain handlers willing to make the investments to thrive in the long term. Competing exporters around the world—in the U.S., Latin America, the Black Sea, and Australia—have been investing in efficiency for decades. It is time that Canada does the same. We are leading by example in this regard.

The railroads have the responsibility to provide sufficient rail service to the grain handling system. Overall, we are supportive of Bill C-49, which introduces reciprocal penalties, as each party in the supply chain needs to be held accountable. We believe this will provide the motivation required for the railways to be adequately resourced to handle surges in rail demand and winter operating conditions. Further, Bill C-49 introduces the incentive for railways to invest in newer hopper cars, allowing for more grain to move on the same unit train. New, shorter cars will bring additional efficiency to the supply chain and allow companies such as G3 to load 150 cars on our loop tracks, where today we can only load 134. In addition, each car will be able to load about 2.5% more product. This represents a total increase of 16% for each train that arrives at one of our elevators. We would like to see Bill C-49 pass as soon as possible.

We are also supportive of the national trade corridor fund and hope to see some of this fund applied to projects that will further increase railway efficiency, specifically around the port of Vancouver.

In conclusion, I would like to thank you for the opportunity to share G3's unique perspective on the issues and potential solutions pertaining to grain handling in Canada.

Thank you.

[Ron Bonnett, President, Canadian Federation of Agriculture]

Thank you, Mr. Chair and the committee, for inviting me to talk about rail transportation and how Bill C-49 can help to prevent the same chaotic situation from happening again.

Right now demurrage costs for vessels waiting at port are escalating, farmers are experiencing significant disruption in their cash flow, and international markets are yet again facing volatile delivery dates. You'll hear more about this in later presentations.

We are here today because a mere four years after an unprecedented breakdown in rail transportation amounting to billions of dollars of losses to the Canadian agricultural economy, we are on the verge of exactly the same disaster. The Canadian Transportation Agency, the CTA, held a review, and three years ago the agricultural industry submitted 10 recommendations to this review that if implemented in their entirety would most certainly have helped prevent this near repeat of the 2013-14 disaster.

Incidentally, recommendation 1, which was to give the CTA own-motion authority, which I will address in more detail shortly, would have prevented the current disastrous scenario, because everyone, including the CTA, was aware of a pending crisis as early as last October. The railways were either unaware or didn't care, knowing that the grain would wait. For the short term, and to solve the current crisis, we ask the minister to look at all options available. If that means mandating volume, we simply ask that it be done strategically to ensure that all geographic areas and commodities are equally well serviced.

Second, FCC and several banks have already announced various mitigation programs. The CFA would support Rick's comments about the advance payments program to address any cash flow issues farmers may be experiencing, and would support the expansion and higher levels as recommended.

For the long term, the needs have changed. At first it was thought that just an immediate implementation of Bill C-49 would serve us well and perhaps even prevent a repeat of 2013-14, and there was an urgent push to pass legislation quickly, even at the expense of several important amendments. Not everyone believes that this is the key thing right now. We have to ensure that Bill C-49 has the tools to prevent the current crisis from happening again. As it is currently written, it does not, as confirmed by many industry players, including CN, which at the CFA annual meeting said that the passage of Bill C-49 would not have avoided the current crisis. They went on to say that only end-to-end data collection, analysis, and fact-based decision-making could solve the problem. This sounds like a ringing endorsement to give CTA own-motion authority, since for the data to have any value, someone must have the authority to investigate and mandate solutions before a problem has started.

Honourable members, the Canadian Federation of Agriculture recommends the following with some urgency.

First, Bill C-49 should be amended to give the CTA investigative authority and the authority to act on its findings by mandating solutions. This would be, for example, investigative authority to be able to request information and data relevant and robust enough to provide a clear picture of transportation logistics, and own-motion authority to proactively mandate solutions. The second is to expedite passage of the bill after the inclusion of industry-submitted amendments.

Allow me to quote the Canada Transportation Act review. It recommended “amending the Canada Transportation Act to confer upon the Agency investigative powers, and the authority to act on the Agency’s own motion and on an ex parte basis, as well as to address issues on a systemic basis and to issue general orders.” The agency itself has requested own-motion powers in its most recent annual report, highlighting it as a major weakness in its ability to discharge regulatory responsibility. Shippers from across all sectors broadly support that request. This amendment will ensure that the regulator has the authority to proactively monitor the system, identify and investigate problems before they become a crisis, and take necessary action.

Own-motion authorities are not exceptional powers in Canadian economic regulation. Other expert quasi-judicial tribunals and regulators often have broader own-motion authorities. The agency's predecessor, the National Transportation Agency, had broad powers to address problems without a formal complaint. The National Energy Board and the Canadian Radio-television and Telecommunications Commission also have the power to act without complaint to address issues within their jurisdiction.

To reiterate, an extension of the agency's own-motion authority would allow for proactive solutions and inquiries when there are reasonable grounds for believing a problem might exist. Such grounds could include statistical evidence, a pattern of complaints, or consistent and credible media reports regarding a transportation service provider's financial difficulties or service failings.

We further support amendments suggested by various industry players, including the long-haul interswitch provision, and the inclusion of pulse crops in the MRE, which would help make our own grain transportation network more competitive and more capable of serving our growing international markets.

The CFA dismisses the argument that amendments will delay the passage of the bill. Members know that this does not have to be the case. Amendments suggested to date have been made by knowledgeable industry players striving to build an effective competitive transportation network and to provide the confidence we need as we continue to grow our international markets.

In conclusion, the excuses of winter weather and unexpected yields don't pass the smell test. The real reason, cutting costs to increase shareholder value rather than focusing on customer service, is much clearer. Information that included higher-than-expected yields, inventory, and grain movement requirements compared to previous years was well known by industry players as early as last October. The fact is that we can no longer depend on railways to get it right without significant regulatory and legislative guidance and authority.

[Rick White]

Lastly, looking forward, Canada must continue to find ways to address the fundamental problem of railway market power and the resulting lack of competitive forces in the rail freight marketplace.

Bill C-49 appears to make progress towards this goal in several areas and does reflect a consideration of what the Canadian rail shippers and the grain industry have been telling successive governments for years about the core of the imbalanced relationship. Bill C-49 is designed to balance two competing interests, that of the shipper and that of the rail service provider. The true measure of success will likely take years to fully gauge. The reliability of our transportation system affects buyer confidence in the global Canadian brand. We know that, because we directly hear about it.

The CCG encourages the Senate and government to work together to ensure Bill C-49 passes and becomes law as soon as possible. This is the long-term fix to the problems we have today. We need it passed, and we need it passed before this session is over.

Thank you.

[Rick White, Chief Executive Officer, Canadian Canola Growers Association]

Thank you and good afternoon, Mr. Chair and members of this committee. My name is Rick White. I'm the CEO of the Canadian Canola Growers Association. Thank you for inviting me here today to contribute to your committee's investigation into the current grain transportation backlog.

The Canadian Canola Growers Association is a national association governed by a board of farmer–directors that represents the voice of Canada's 43,000 canola farmers from Ontario west to British Columbia. In crop year 2017-18, Canadian farmers harvested an estimated 21.3 million tonnes of canola, and that is an all-time record.

Canada is the world's largest exporter of this highly valued oil seed, and we grow a truly global crop. In any given year, over 90% of Canadian canola, in the form of the raw seed or the processed products of canola oil or canola meal, is ultimately destined for export markets in more than 50 countries around the world.

Canola farmers critically rely on rail transportation to move our products to customers and keep those products price competitive within the global oilseed market. We have no alternative. The competitiveness and reliability of the canola industry, which currently contributes over $26 billion annually to the Canadian economy, is highly dependent on the supply chain providing timely, efficient, and reliable service.

Last year, Canada's railways transported over 50.7 million tonnes of grain originating in western Canada. It is a complex system, but we need to make it work to the benefit of all parties and the broader national economy as a whole. Farmers occupy a unique position in the grain supply chain, and this is what fundamentally differentiates this supply chain from that of other commodities. Farmers are not the legal shippers, but we bear the cost of transport, as it is reflected in the price we are offered for our products from the buyers of our grains and oilseeds, who are the shippers.

Simply put, farmers do not book the train or boat, but they ultimately pay for it. Transportation and logistics costs, whatever they may be at a point in time, are passed back and paid for by the farmer. Transportation of grain is one of several commercial elements that directly affect the price offered to farmers across western Canada. When issues arise in the supply chain, the price farmers receive for their grain can drop, even at times when commodity prices may be high in the global marketplace.

Another transportation-related issue for farmers is that until their grain is delivered to the buyer, they are not paid. Cash flow depends on grain delivery, regardless of the terms or dates that may be specified on a contract.

When transportation issues disrupt the typical commercial flow out of a bulk elevator or process facility, it affects the ability of the buyer to accept the contracted grain in the agreed-upon window, as there may be no physical space available. When this becomes highly unpredictable or there is a sustained lack of rail service, weeks or months in length, the reverberations extend back directly to the farm gate. It also extends forward to final purchasers in export markets, as grains do not arrive when planned, damaging the reputation of Canada as a solid and dependable source.

This is a primary reason that western Canadian farmers have such an interest in transportation: it directly affects personal farmer income.

Beyond that, farmers critically rely on the service of Canada's railways to move grain to export position. The last several years of reasonably good overall total movement and relative fluidity of the supply chain should not lessen our focus on seeking to improve and do better, as a sector and a nation, as fundamental issues continue to exist.

The current transportation predicament can essentially be grouped into three related but separate issues. The first is that the current rail service issues have created a backlog of grain. The second is the need for immediate government action, and third is the linkage to Bill C-49.

Starting with rail service, one of Canada's class I railways has incurred what we can politely characterize as a system-wide sustained operational failure on its network. As it has conceded, this was largely a problem of its own internal business forecasting and planning, which then was exacerbated by the effects of annual winter operations and various other disruptions.

The other has had better performance overall this year, but at times still at unacceptable levels. The dismal service level sends signals to elevators to not accept grain and in turn to producers to not ship grain. Producers who need to pay bills and purchase inputs for seeding cannot do so, at no fault of their own, and there are no options. Poor rail service causes disruptions in the market for producers, for shippers, and for our export customers. The level of service seen over the past period has been simply unacceptable.

In terms of the second issue, the role for government starts with a recognition that Canada is served by two major railways that operate in essentially monopoly positions. There are no alternatives to move our large volumes of grain. Governments need to play a role in balancing the power of these railways. We were pleased that Minister MacAulay and Minister Garneau have directly communicated with the railways and demanded an action plan, but this should not be needed. Rail should move regularly and predictably on a permanent basis. Bill C-49 can help in that regard.

For farmers impacted by the poor rail service, cash flow can be a problem. A proactive policy measure available to government could be to increase the maximum limit available under the well-established federal advance payments program. The increase would expand farmers' access to competitive financing while the backlog clears the system, maintain flexibility in grain marketing and farm management, and be at no cost and low risk to the government.

The program maximum is currently set at $400,000. Aside from the transportation challenges being discussed today, a compelling business case for an increase already exists. Since the limit was last set in 2006, farm size and demographics have evolved, farm expenses have grown, inflation has increased, and the grain marketing environment has become more volatile. A limit increase would work to ensure that the program remains relevant and continues to help farmers finance their operating requirements, especially in times like these. Increasing the limit would provide an additional tool for farmers to manage cash flow and finalize 2018 production plans, with spring seeding close on the horizon.

The railways have committed to take steps to improve service, with action plans already set in motion to obtain resourcing. With winter almost over, we expect to begin seeing service improvements in the coming weeks, but an increase to the limit under the APP could offer a tool to help farmers who have been directly affected by the current backlog.

[Jeffrey Ellis]

In the regulated grain space, already an area where there is regulation, we're prevented from recouping our investment in grain cars. In economics, it's a free rider problem. We can't recoup our direct investment. That's what we want to have corrected by Bill C-49 on the discrete issue of investing in hopper cars.

That said, since 2012 we've invested close to $7 billion generally in our infrastructure and other items that James referred to around investment in people and the network. Those investments are ongoing. I think Canada benefits from the fact that the rail industry, rather than relying on taxes, makes this significant commercial investment annually in the network.

[Sean Finn]

We're not waiting for Bill C-49 to pass. We're going to invest $250 million in the network, following our announcement two weeks ago of $3.2 billion for the year. We're not waiting for Bill C-49 to pass.

Bill C-49 comes out of a consultation by the minister and David Emerson over an almost two-year period about how the environment is working today. Clearly, we came out publicly saying we don't like to have regulation and we don't think regulation moves more product, but we're saying that there are provisions in Bill C-49 that, for example, will increase the amount of information to be exchanged with the business supply chain, allowing Transport Canada, us, and our customers to have contingency plans to face issues that come up.

Bill C-49 is a balanced bill. We don't like all of it, and that's normal, but there are provisions. My good friend Claude Mongeau has said to you that regulation is not bad, but ultimately you want commercial relations between the railways and the grain companies and between the railways and the farmers to dictate in an open market how we make sure that we serve our customers. Ultimately, we'll serve the customers because it's in our best interest to do so, and as I said to you before, Canada's reputation depends on it.

However, I think there are provisions in Bill C-49 that allow our customers to take measures to make us more accountable, which is not a bad thing. We're not looking for regulations for the whole industry, but there are areas where we think we can improve the exchange of information between the railways and our customers.

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

Thank you, Mr. Chair.

A few years ago I was at the Chateau Laurier listening to your former former CEO, Claude Mongeau, advocating for fewer regulations. Now, if I'm hearing correctly, we want more regulations. We want Bill C-49 passed in order for us to invest.

What is the uncertainty in Bill C-49 and why do you believe it may not pass? Why are you waiting until it does pass to make those investments?

[Eva Nassif, Liberal, Vimy, QC]

My next question is for the officials from CN and CP.

What are you doing to get the Senate to pass Bill C-49 as quickly as possible?

[Sean Finn]

Obviously passing Bill C-49 through the House of Commons would possibly be a good step in the right direction, first of all.

Second, I think that part of that bill will require that the railways exchange information. We realize today that this impacts not just farmers and the farming community but also Canada's reputation abroad. In the end, we have to realize that when we do this, we don't just impact our local customers but our reputation around the world, and it's important that the railways and the supply chain realize that customers around the world have choices. Canada is a great place to enter North America and to have access to two great railways, but if we can't deliver the goods, we have an issue going forward. I think there was an acknowledgement on the part of the CN board of directors, which made a very decisive step two weeks ago in changing the leadership and then within two days coming out and saying, “We realize that it's part of our DNA to move Canada's goods to the market.” This is as much as saying, “We have a role to play to ensure Canada's reputation abroad is what it should be.”

You can't just have talk. You have to make sure you deliver.

My answer to your question is that you have a commitment on the part of CN to ensure that's always in the back of our minds. All 22,000 railroaders at CN realize it's not just about serving customers; it's about serving all of Canada.

[Sean Finn]

If I may, we have taken very concrete steps since 2014. As an example, CN's annual capital investment last year was $2.7 billion. This year it will be $3.2 billion, an increase of $500 million. We set a big number for capital. It's a great network that we're investing in, but clearly it's where you invest the capital that makes a difference for resilience and fluidity, so under the leadership of Mike Cory and Jean-Jacques, we've looked at our capital constraints and where the bottlenecks are that we can address very quickly.

You're going to see, as of this spring, reactions being made. It is true that it's somewhat reactive from what happened this fall, but the big difference this fall was this unforeseen surge in traffic that we had to address as we went along here as winter hit. It's important to realize that this year, the $3.2 billion is way more than 20% of our gross revenues, which is probably a rule of thumb for some of the railways in North America. We're investing more capital to ensure that we can address the bottleneck issues. We're hiring employees at a rate we haven't seen for many years. We are hiring for what should be many years to come.

I think the big difference compared with 2014 is that in 2014 we had an increase in volumes and all of a sudden a dip. Obviously, we didn't react quickly enough. I think this time the railroaders in the room have probably learned a lesson that we have to reinvest early on and see the trends coming earlier. Part of Bill C-49 will be this exchange of information between us, Transport Canada, and our customers to try to get a better feel for logistics planning. If we do have an increase in volume, how do we address it?

I think the best answer to your question is that the railways must invest in the network at a point to avoid the bottlenecks so we can face the surge in traffic as it comes along.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I represent a riding on the coast of British Columbia, and this issue is going all the way to the coast. All around my riding in the Gulf Islands, we have tankers at anchorages that are very rarely used. If you look at English Bay in Vancouver, you see it's chockablock full, so this issue is going all the way down to the west coast.

You've been saying that if Bill C-49 is passed, you pledge to do better and you're investing in this. It seems to be very reactive to the situation at hand. I'm wondering if we'll be in this situation in another four years and we'll have to ask you to come again before the committee.

Yes, you know that at -25° you have to reduce your speeds and decrease the length of the train, but anyone who lives in Canada in the winter knows that we have this weather on a regular basis. You know the long-term trends of what our country is hoping to do, which is that we're hoping to increase our exports, but we're still operating in that same environment. I want to be assured that we won't revisit this situation in another four years. I hope that instead of being reactive to the situation at hand, you'll be very much proactive so that in 2023 we don't have to repeat this same exercise.

[Sean Finn]

If I may, obviously with Bill C-49 being in the Senate, CN's position is very clear: pass it as soon as possible. The benefits are probably twofold.

First of all, it will provide additional tools to our customers to hold the railways more accountable, which is not a bad thing in and of itself. I think we're all here today because we recognize that we have to be a lot more accountable to both Parliament and our customers.

Second, when talking about investment, there's no doubt that this will allow us to better prepare, to Mr. Barlow's question. A lot of provisions in Bill C-49 require that we provide additional information, but Transport Canada can help us, obviously, to better forecast and better plan our demands—not alone, but with them.

I think the investments are required. Therefore, as we better understand the weaknesses in the supply chain, we as a railway can help invest in the parts we have to invest in and, more importantly, realize that we're only as strong as our weakest link. Obviously, there are weak links in the supply chain. We can't just hide behind them. We must address them together for the benefit of farmers and Canadian markets.

[Jeffrey Ellis]

Certainly.

Again, we don't think of Bill C-49 as a perfect bill. We think it's a compromise, and an appropriate one.

From our perspective, we are eager to go forward and make a capital investment in hopper cars, which is going to increase capacity in the network for grain for the foreseeable future. We stand ready to deploy anywhere from $1.3 billion to $1.5 billion over 2018, as soon as we can get the certainty we need that the bifurcation that is presently within Bill C-49 will come into play.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses today. This is a serious problem that we know you're working on collaboratively with the government. We've seen evidence of the actions that you've committed to taking and that you are taking. Moving forward, hopefully we'll see Bill C-49 get through the Senate so that we can make further gains in investments.

Starting with CP and Mr. Ellis, could you describe what the delay in Bill C-49 means to your capital investment programs?

[James Clements, Vice-President, Strategic Planning and Transportation Services, Canadian Pacific Railway]

Thanks, Jeff.

Honourable members, we are pleased to report that our rail network performance is improving. The grain supply chain is on the road to recovery

Our operations team has been focused on moving grain and working extremely hard to rebound from the weather challenges in February. The data and evidence provide encouraging signs that a recovery has taken hold.

Week 32—March 4 through March10—saw grain shipments increase by 22% compared to the previous week, totalling 484,000 metric tons of grain. This is the highest weekly volume we have moved since mid-December.

Our daily network throughput has increased by 8% compared to last week, and is up by more than 16% overall since mid-February. We placed 10% more empty railcars in the country in week 32 compared to the week prior, a further sign of incremental gains being achieved. I am happy to report that we are up another 5% in week 33. Our network velocity is also improving, with train speeds up approximately 13% this past week versus mid-February.

As weather conditions moderate, we expect the positive trend to continue through March, with a further lift as the port of Thunder Bay reopens. Until Thunder Bay is available, we expect heavy demand for railcars out of Manitoba to ship all the way into the Vancouver corridor.

CP continues to add both crews and locomotives to support a strong recovery. We are adding more than 700 new employees, who are currently in various stages of training, and we are adding 100 locomotives, which will start being integrated into the fleet through the summer.

We have also deployed a “SWAT team” of retirees and CP managers to provide additional crew capacity, which is helping ensure the system recovers as quickly as possible.

As we move into spring, we are taking strong precautionary measures to avoid operational constraints caused by adverse environmental conditions, such as the heavy snowfall melting and the resulting runoff, as well as avalanches.

CP's avalanche monitoring and control program continues to work closely with all stakeholders through B.C.'s mountainous transportation corridor, including Parks Canada and the B.C. highways ministry, to constantly monitor present and forecasted weather conditions that could adversely affect the corridor.

We have also commenced our spring thaw surveillance program, which has strong protocols in place to monitor conditions and respond effectively in the event of high water conditions across our network. Early indications across most of CP's network east of the Rockies are pointing to an average to below average threat for spring flooding. Although we remain optimistic the snow will melt slowly, all precautions are being taken with respect to potential avalanche and spring flooding disruptions.

We continue working closely with our customers to deliver on the commitments of CP's grain products and services to meet their needs. Beyond these measures, we have earmarked between $1.35 and $1.5 billion for capital improvements this year to help strengthen the capacity and fluidity of the supply chain.

Capacity-enhancing infrastructure investments are critical to realizing long-term gains to the overall performance of the grain supply chain. This is particularly true in regard to the market's preference for Vancouver as the primary and growing outlet for grain. CP is hopeful the Government of Canada will prioritize investments under the national trade corridors fund for projects that will enhance supply chain capacity in this corridor.

In closing, as we have said previously, CP strongly encourages the swift passage of Bill C-49 by the Senate. Although imperfect, this legislation will provide additional certainty for the grain supply chain, particularly with respect to the potential new hopper car investments.

Again, thank you for the opportunity to be here today. We would reiterate that in spite of the difficult operating conditions this winter, CP is committed to improvement and is still moving more grain than we did last year, and we are well positioned to have a strong year overall.

Thank you.