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.

[Gordon Harrison, President, Canadian National Millers Association]

Thank you very much for the opportunity to appear. It's greatly appreciated. We are very happy to be here after requesting to be here.

The Canadian National Millers Association is Canada's national not-for-profit industry association representing the cereal grain milling industry. Our member companies operate milling establishments across Canada, and a number of them operate establishments in the United States or have affiliated companies with milling facilities in the U.S.

By virtue of where the Canadian milling industry capacity is situated and the regional markets served, the Canadian industry can quite correctly be described as a participant in a North American industry. It is a North American market for this industry, and the industry is integrated much like the rail transportation networks are throughout North America.

We are, however, an independent Canadian not-for-profit organization. We do not directly represent members of the U.S. milling industry except for those who are members in good standing of the CNMA by virtue of their operating facilities in Canada.

In light of the few minutes that are available for everyone to speak, I'd like to start by advising the committee at the outset that the CNMA supports the recommendations that are set out in the amendments to the bill as submitted and presented by the Western Grain Elevator Association. Members of the WGEA are the predominant link between grain producers and our member grain processors and others who are processors in Canada. This is the case for the majority of wheat and oats milled in western Canada.

I would like to touch upon a number of points as context for the committee's consideration of all the submissions you've heard. They are the following.

Our members are primary processors of wheat, oats, rye, and other cereal grains. By “primary processors”, we mean the step in the supply chain at which grain is transformed from a commodity that generally is not consumed to commodities that are consumed and are ingredients in food products and other products at the consumer level.

Top of mind for most people who think of foods that contain such ingredients are bread, other bakery products, pasta, breakfast cereals, and cookies, but I'd like to emphasize that you'll find wheat flour and other products of grain milling in products that are in every aisle of the grocery store, including pet foods, which contain products of grain milling. There are many products that contain or are derived from milled grain products. Those milled grain products are derived from grains across Canada, but predominantly the grains that are produced in western Canada.

There are also very few food service chains or restaurants, if any, whose menus are not largely based on foods based on cereal grains and manufactured from the products of grain milling. During the duration of these hearings, I was reflecting on this. I think Canadians will have consumed approximately 200 million meals containing bakery products, pasta, breakfast cereals, and snack foods, which in turn contain other products of grain milling.

These businesses, from the very largest to the very smallest, operate on a just-in-time delivery basis. The major manufacturing companies or the further processors of milled grain products—such as bakeries for frozen bakery products, or pasta, but principally those further processing manufacturing industries—have only a few days of ingredients in stock, and not just wheat flour and other milled grain products, but all grain products. In that sense, the supply chain beyond the milling industry operates on a just-in-time delivery basis, just like the automotive industry.

The CNMA's interest in rail transportation policy in Bill C-49 is that the cereal grain milling industry is heavily reliant on rail transportation, not only for inbound unprocessed grains but for outbound processed products. Two-thirds of Canada's wheat milling capacity is located off the Prairies, outside of Alberta, Saskatchewan, and Manitoba, and is situated in B.C., Ontario, Quebec, and Nova Scotia primarily. These mills require rail service to receive approximately three million tonnes of wheat and oats annually. This represents a very predictable demand for rail transportation: in my estimate, 34,000 cars annually for inbound grain, and perhaps another 6,000 to 10,000 cars for the movement forward of milled grain products and by-products.

This demand doesn't fluctuate significantly by crop year, is not variant on the size of the Canadian crop for any commodity. Rather, it can be easily forecast a year in advance because it's based on a domestic and a nearby export market, the United States of America.

Having noted some of the ridings held by committee members, it might interest you to know that during the dramatic shortfall in service in the 2013-14 crop year, there were mills in Mississauga, Montreal, and Halifax that actually ran out of wheat, in some cases more than once. That meant that major bakeries were within two to three days of running out of flour, and major retail grocery establishments probably within four to five days of running out of bread on shelves.

In hindsight—and that is now a long time ago and we're not here to whine about what happened back then—we came very close to having a serious interruption in our grains-based food supply. How would we have explained that to Canadians who had gone to the store and found no bread, or to fast-food restaurants which would have had nothing to put their ingredients on in those menu servings?

Other than the extended switching rights, the provisions of the Fair Rail for Grain Farmers Act did not recognize or assist the rail service requirements of Canada's milling industry. The same can be said for U.S. establishments. In fact, that intervention provided an impediment to service to our industry. As we see it, there are no provisions of the CTA that presently speak to the very predictable and forecastable service needs of the Canadian milling industry, and in most respects the same can be said about the amendments proposed by Bill C-49. The act, as it exists and even as amended, doesn't really speak directly to or recognize the needs of domestic processors.

Those processors really do not have the capacity to receive and unload grain in the way that grain elevators have on the way to export markets. Almost all mill locations are urban. They're in multi-mix environments, in some cases surrounded by residential development, commercial development, and they are equipped to handle only a few cars at a time. The largest capacity of a mill that I'm aware of, without using a transfer elevator nearby, is about 15 cars at a time.

In regard to Bill C-49, it really remains important that under the amended act the definition of “shipper”, as I understand the proposed amendments, will remain, “a person who sends or receives goods by means of a carrier or intends to do so.” That's an extremely important aspect of the legislation as it exists today, and that does ensure that processors, including millers, have access to the benefits of the same provisions of the act.

The key point I want to make is that grain rail service is not only about moving grain to port for onward movement to export markets. It's about moving grain to mills in Canada and the United States, meeting the needs of Canadian and U.S. consumers. The Transport Canada question-and-answer document that was circulated about 10 days ago speaks of global markets. I want to emphasize that North America, Canada and the U.S. combined, is a global market of 400 million people. From our investigation, the recommendations of the WGEA and those carefully considered points of the crop logistics working group will go a long way to meeting the substantial improvement that is described by the WGEA in these amendments. We are supportive of those recommendations.

I must emphasize, however, neither their submission, nor any other that I've read to date, speak to the importance of rail service to cereal grain milling establishments. There are actually many, and the Canadian population relies upon the timely operation of those facilities and the delivery of foods from those facilities.

I've provided some very brief correspondence to the Honourable Marc Garneau, to the clerk, which I gather will be subsequently distributed once it is translated.

Thank you for your attention.

[The Chair, Liberal, Judy Sgro]

We're calling the meeting back to order as we continue our study of Bill C-49. We have with us at this panel François Tougas, appearing as an individual, the Canadian National Millers Association, and the Canadian Canola Growers Association.

I welcome all of you. Thank you for coming.

Who would like to start off? Go right ahead, sir.

[Vance Badawey, Liberal, Niagara Centre, ON]

As I stated yesterday, Bill C-49 is meant to be injected into the overall transportation strategy establishing, of course, one of the five pillars that Minister Garneau has announced, which is trade corridors. The more information we can have about what your needs are to make more robust the opportunity for our participation and performance in a global economy, the better. Since, as you stated earlier, you are a part of it, we need to hear what those needs are. That way, when we are actually making the infrastructure investments, they will be made appropriately, for better value and a better return, to therefore position Canada better on the economic global stage than is the case today.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you, Madam Chair Sgro. I have a question to the shippers with respect to the discussion we've had on Bill C-49 about operational remedies, when moving containers around utilizing marine resources.

I want to touch on one thing that we haven't touched much on for the last couple of days and that may be very relevant to you. That is the capital side of shipping, and the Shipping Federation's opinion and recommendations on the overall system when it comes to both salt water and the Great Lakes.

What is your position on Canadian ports being allowed to access the Canada infrastructure bank and the financial instruments contained within the infrastructure bank to help fund expansion projects? Will this be helpful, in your opinion, in making Canadian ports more competitive?

I want to expand that question to also include not only Canadian ports that are designated as port authorities, but also the St. Lawrence Seaway itself on the Great Lakes. Is there opportunity, in your opinion, to expand on the capital side to enhance the business opportunities for yourselves, speaking on behalf of your organization, as well as for others who ply the waters of Canada and those beyond the borders of Canada?

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

Thank you very much, Madam Chair.

My next set of questions will be for the Mining Association.

Mr. Gratton, I want to ask you a question around the three-week delay in providing data. Earlier this week, we heard testimony that Canadian railways already provide more detailed information in regard to the operations happening in the United States. They provide that on a weekly basis.

I'm wondering if the present government, with Bill C-49, should have moved to more closely align the railways reporting requirements in Canada with those in the U.S.

[Karen Kancens]

This is about empty-container repositioning on a Canada-wide basis. It's not part of the CETA trade agreement.

In the context we're looking at this, with Bill C-49, I would caution perhaps that when we talk about the costs of repositioning empty containers, the costs are not only financial. Yes, you will always have an extra financial cost, especially when you're using truck or rail, but there are other costs.

Let's say you're a shipowner and you're doing a regular service from Montreal to Halifax. You have a pile of empty containers at Montreal and you have a customer in Halifax who needs 300 containers for export. Your ship is going from Montreal to Halifax in any case. It's part of your regular run. Right now you can't load those empty containers on your own ship. You have to put them on rail or you have to import them. If you're putting them on rail, you're subjecting those containers to additional moves. They're not just going from the port to the ship. They're going to the rail yard and they're being put on the railcars. There are more moves. There is more handling of the container. Yes, of course you have your additional external cost associated with the rail movement, but you also have logistical delays. Your containers are being moved at the convenience of the railway, not at the convenience of the carrier and of the exporter. You're adding elements to the chain, which are costs, yes, but there are also other elements in the form of time, in the form of additional moves.

By the way, the railways would much rather not haul empties, because they generate more revenue hauling laden containers. You're making what could and should be a very simple logistical process a lot more complicated than it needs to be, and you're adding a lot of trade-chain impediments along the way, so I would caution you to maybe not think of it only in terms of costs.

[David Graham, Liberal, Laurentides—Labelle, QC]

Thank you. Now I'm going to jump out of the water and onto the train tracks.

The mining industry is unique in that some mines don't have any rail, and there are some places that have nothing other than rail, and those rails don't connect to anything. I'm thinking of Quebec Cartier Mining or Quebec North Shore and Labrador Railway where, if you don't get there by train, you're not getting there. Then you only have one company, so there are absolutely no alternatives. How well did that work?

Most of the competition increasing things in Bill C-49 don't really apply to those areas.

[Karen Kancens, Director, Policy and Trade Affairs, Shipping Federation of Canada]

Thank you. Good morning, Madam Chair, and thanks for the opportunity to appear before the standing committee on Bill C-49, the transportation modernization act.

My name is Karen Kancens. I'm here with my colleague Sonia Simard on behalf of the Shipping Federation of Canada, which is the voice of the owners, operators, and agents of foreign-flag ships that carry Canada's imports and exports to and from world markets.

Our members represent more than 200 shipping companies whose vessels make thousands of voyages between Canadian ports and ports overseas every year, carrying hundreds of millions of tonnes of commodities, ranging from dry bulk commodities such as grain and coal, to liquid bulk such as crude oil and oil products, to containerized consumer and manufactured goods.

These ships play an essential role in the Canadian economy by facilitating the movement of Canada's international trade, and they do so safely, securely, and efficiently day in and day out. Indeed, ocean shipping is one of the world's most highly regulated industries, and foreign-flag ships are subject to a stringent regime of safety, environmental, and crewing regulations when sailing in Canadian waters, which are enforced by Canadian authorities as part of Canada's port state obligations.

Like many of our colleagues who have spoken before us, we also have a strong interest in Bill C-49's rail provisions, as we believe that the development of a more efficient rail freight system will have a positive impact on all of the elements of the logistics chain, from carriers in the rail, marine, and trucking sectors, to ports and marine terminals, to inland distribution centres and warehouses, and beyond.

That being said, we'd like to focus our comments today not on Bill C-49's rail provisions but on its maritime provisions, which we believe will also have a beneficial impact on the fluidity of the trade chain overall.

We're especially interested in clause 70 of Bill C-49, which proposes to allow all foreign-flag ships to reposition their empty containers between Canadian ports on a non-revenue basis, which is an activity that has been closed to them up until now due to the prohibitions of the Coasting Trade Act.

It's worth just backtracking a bit and noting that this isn't a new or a revolutionary concept. It's actually something that our container carrier members have been asking for and that our association has been advocating for over the last decade.

Indeed, discussions on this subject between the government and our industry had advanced to such a degree that, in 2011, Transport Canada was on the verge of introducing an amendment to the Coasting Trade Act to allow for the repositioning of empty containers by foreign-flag ships. However, those discussions were subsequently placed on hold when empty container repositioning became a negotiating item in the CETA between Canada and the European Union.

Now that those negotiations are over, Bill C-49 essentially seeks to complete the discussions that were placed on hold in 2011, when we had reached general agreement, including from some domestic ship owners, that empty container repositioning should be open to all ships regardless of flag or ownership.

Why is this issue important? It's important because a significant aspect of the container shipping industry involves moving empty containers from locations where they are not needed, or where there is a surplus, to locations where they are needed or where there is an exporter who needs empties so that he can load them with cargo for an overseas customer.

Because up until now the Coasting Trade Act has prohibited foreign-flag carriers from using their own ships to carry out this activity, they have had no choice but to employ alternative solutions such as moving the empty containers by truck or rail, or more commonly, importing them from overseas. However, none of those solutions represents the most productive use of the carrier's transportation assets, and all of them come at a price not only for the carrier but also for the exporter in the form of a less cost-efficient transportation option, as well as for the logistics chain in the form of reduced fluidity and overall efficiency.

The maritime provisions of Bill C-49 would address these issues by giving carriers the flexibility to use their transportation assets, their ships, and their empty containers in the most productive and cost-effective manner possible for the ultimate benefit of everyone in the supply chain.

Although we very strongly support Bill C-49's provisions on the repositioning of empty containers, we have a concern that the actual wording the bill uses to define the party that is eligible to reposition empty containers may be too narrowly focused and that this may make it difficult to achieve the full benefits of liberalizing this activity.

More specifically, subclause 70(1) of Bill C-49 provides that the party that may reposition its empty containers is the owner of the ship, which is defined in subsection 2(1) of the Coasting Trade Act as the party that has the “rights of the owner” with respect to both the ship's possession and its use. We see a potential problem in how this definition will be applied in cases involving vessel-sharing agreements, in which a number of container carriers enter into an agreement to share space on one another's ships and which are used extensively in the container shipping industry.

It's not clear to us at this point how the partners in such an agreement would have the rights of the owner with respect to the ship's possession other than in cases where it's their ship that's being used to reposition the empty containers. Indeed, depending on how the ships in a given vessel-sharing arrangement are allocated, a ship owner may only have the ability to reposition its empty containers on every fourth or fifth voyage, which would reduce the significant potential benefits of liberalizing this activity.

We believe that if Bill C-49's provisions on the repositioning of empty containers are to be fully and effectively implemented for the benefit of all parties, then it must be made clear that any partner in a vessel-sharing agreement may reposition its own empty containers, as well as those of the other partners in the agreement, using any of the vessels named in that agreement. Although there may be various ways of achieving this, including through additional guidance and clarification from Transport Canada, it's our view that the optimal solution is to amend subclause 70(1) of Bill C-49 to clearly indicate that the party that is eligible to reposition empty containers encompasses not only the ship owner, as defined in subsection 2(1) of the Coasting Trade Act, but all the partners who share operational control and use of that vessel as part of a larger vessel-sharing agreement.

We believe that the introduction of such an amendment represents the best means of ensuring that Bill C-49's maritime provisions are implemented in a way that reflects the realities of how the container shipping industry operates, and this for the benefit of all stakeholders, from shipping lines to Canadian importers and exporters to the supply chain overall.

We thank you for your attention and look forward to any questions you might have.

[Joel Neuheimer, Vice-President, International Trade and Transportation and Corporate Secretary, Forest Products Association of Canada]

Thank you, members of the committee, and thank you very much for having me here today on behalf of the members of the Forest Products Association of Canada.

FPAC is the voice of Canada's wood, pulp, and paper producers, a $67-billion a year industry. Our sector is one of the largest employers of indigenous peoples in Canada, including 1,400 indigenous-owned forest businesses. As the third-largest manufacturing industry, it is a cornerstone of the Canadian economy, representing 12% of Canada's manufacturing GDP. We export 33-billion dollars' worth of goods to 180 countries. We are also the second-largest user of the rail system, transporting over 31 million tonnes by rail in 2016.

As Minister Garneau said in his May 18, 2017, speech in Edmonton, “The challenge of our time is to further enhance the utility, the efficiency and the fluidity of our rail system.”

FPAC believes that the primary goal for transportation policy is a freight system that is even more competitive, efficient, and transparent, to reliably move Canada's goods to global markets. This is most likely to emerge if guided by commercial decisions and competitive markets. At the same time, there are some markets where competitive forces are limited or non-existent, and where there is a legitimate and necessary role for regulation and other government action, including a number of the types of concepts being considered in Bill C-49.

Forest industry mills are normally located in rural, remote communities, and served by one single rail carrier hundreds of kilometres away from the next competing railway. That causes an imbalance of power between these mills and the railways. Poor service costs our members in the hundreds of millions of dollars every year, including the cost of things like lost production, alternative transportation costs, additional storage, additional management and overhead costs, and long-term business impacts.

While the railways are one of our most important partners on Canada's supply chain infrastructure needs, as well as reducing GHGs, FPAC members need Bill C-49 to help balance the playing field when it comes to their business dealings with railways.

Bill C-49 needs more robust and workable measures than what are currently included. Without these changes, Canada's economy and the jobs that our member companies and other industries provide across the country will continue to be threatened. Urgent action is needed. The economies of over 600 communities across Canada depend on their local forest products mills. Making Bill C-49 work the way it is intended to will enable our members and other industries to create more middle-class jobs and help prevent economic failures in communities, such as but not limited to things like mill shutdowns resulting from poor rail service. In the case of a large pulp mill, for example, this would mean losses in the range of $1.5 million a day.

FPAC supports Bill C-49's wording on reciprocal penalties. However, to be truly effective, there are some critically important amendments that should be made, which are consistent with the minister's intent for this bill.

FPAC urges the government to make changes in five key areas. The specific wording changes and rationale behind each of these is outlined in the detailed annex that is included with my remarks this morning. I would like to focus today on a few of these important changes.

First is the improved access and timelines to agency decisions. As is, the bill will weaken the agency's ability to respond quickly to urgent rail service issues, unless it is amended so that the agency controls its own procedure. The U.S. equivalent to the Canadian Transportation Agency, the Surface Transportation Board, or STB, recently began a service-related investigation on one of the class 1 railways in the United States. The STB did not have to wait for the U.S. Secretary of Transportation to instruct them to do this. They recognized that there might be a problem and they began to investigate.

Why can't we have the same set-up here in Canada? Who wants to wait for the Minister of Justice to ask the police to investigate every time someone may not be following the law? Bill C-49 needs to be amended to make this so, to help ensure that Canada's supply chain is working well in delivering for the 600 forest communities, hundreds of other communities, and millions of workers it supports across Canada.

The second one relates to the definition of “adequate and suitable”. As currently written, the bill tells the railways that if they provide the highest level of service they can reasonably provide in the circumstances, they cannot lose a service complaint. The objective of our proposed wording change is to make the intent absolutely clear, without the need for protracted litigation about what this clause really means. The final outcome on this component of the bill must prevent current failures, such as the following that our members must live with. At a minimum, give the Canadian Transportation Agency the mandate to investigate, on its own, these types of matters.

When members ask why their traffic has been left behind or why they have not received empty cars that have been sitting at the railway's serving yard, they hear it is because priority is being given to another commodity sector.

We have members who have product to ship to current and potential customers, whose facilities are accessible by rail, but they cannot get enough railcars or are not served frequently enough and are being discouraged by the rates that are quoted. These types of service issues are not isolated, and they cost our members in the hundreds of millions of dollars annually.

Third is long-haul interswitching. The bill needs to be amended to eliminate the unnecessary prerequisites for using this remedy as well as the many exclusions. Without important amendments, long-haul interswitching will not be a usable remedy for the majority of captive forest products traffic.

Next is data disclosure. As currently worded, the interim provisions in the bill dealing with rail performance data will provide supply chain participants with data that is too aggregated and too out of date to be of any real use in their planning. The time frames for reporting and publication need to be shortened. For example, the bill says requirements will be set out in a regulation in a year. Can we not do better than that with so much at stake? Also, more granular detail needs to be published, such as, but not limited to, commodity-specific information regarding such things as grain, coal, lumber, pulp and paper; results by railcar type, on a weekly basis; and by region, for example, east and west.

Oversight of railway discontinuance processes needs to be strengthened. As currently worded, the bill will prevent the creation of viable short-lines by allowing railways to suspend service before the process is completed, thereby making it more difficult for an alternative railway to take over. Making these changes will mean Canadians in communities across the country will be served by a more reliable and competitive freight transportation system.

FPAC members take great interest in transportation issues because they account for up to one-third of their input costs. The availability of an efficient, reliable, and cost-competitive transportation system is essential for the future investment in our sector and to support the families across Canada that rely on our industry for their livelihoods.

Members of the committee, for the 230,000 Canadians across Canada directly employed by the forest sector, a more competitive freight transportation system, as outlined here, will ensure increased access to the rail system, more reliable service throughout the supply chain, more competitive rates, and a more competitive supply chain.

I will now be happy to answer any questions you have.

Thank you very much.

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

Thank you very much, Chair and members of the committee, and clerk and fellow witnesses. It's a pleasure to be here.

My name is Pierre Gratton. I'm president and CEO of the Mining Association of Canada. I'm joined by my colleague, Brad Johnston, whom I think you met yesterday. He is the general manager of logistics and planning for Teck Resources Limited and is someone who works with the railways on a daily basis.

I'll begin by saying just a few words about the mining sector, which, as you know, is an economic stalwart, contributing some $56 billion to national GDP in 2015 in what was a down market. We're major employers, with some 373,000 people working directly and another 190,000 working indirectly for our sector. We pay the highest industrial wage in the country. We're active in both urban and rural settings. Proportionally, we're the largest private sector employer of indigenous peoples and a major supporter of indigenous businesses and are thus a powerful partner in indigenous economic reconciliation.

While increased mineral prices have returned some confidence to the global mining industry, increasing domestic uncertainty and business costs are raising questions over whether Canada is well positioned to take advantage of the next upswing. We are seeing Australia, our major competitor, rebound at a far greater rate than we are currently in Canada, which is concerning.

The effectiveness and reliability of rail freight service are critical to Canada's mineral investment competitiveness throughout the ups and downs of the commodity cycle. There are significant costs associated with transporting goods to and from the mine site, and companies need to get their goods to their international customers on time. I can report that our members' customers are closely monitoring this bill and its potential impacts as a measure of Canada's reliability as a source for raw materials.

If railways are the arteries of our trading nation, then the mining industry is the lifeblood upon which they depend. We account for 20% of Canada's exports and over half of total rail freight revenue generated each year, making us the largest single customer group of Canada's railways. I would just ask you to imagine the state of Canadian rail without mining and the impacts it would have on grain, forest products, and all other rail-reliant industries in Canada.

Despite this, we are continually facing an unlevel playing field in the rail freight market, which manifests itself as significant and perennial service failures. The reason is that the Canada Transportation Act is an imperfect surrogate for competition in a monopoly marketplace. Many shippers are captive to one railway and are beholden to railway market power as a result.

It's crucial to get this bill right on this third legislative attempt in four years. We hope the committee is also encouraged by Minister Garneau's boldness in introducing an ambitious package of reforms. On this note, we are highly supportive of a number of provisions in the bill, including new reporting requirements for railways on rates, service, and performance; the addition of a definition of “adequate and suitable” rail service that confirms railways should provide shippers with the highest level of service that can reasonably be provided in the circumstances; and strengthening the prohibitions against railways shifting liability onto shippers through tariffs.

We want profitable railways, but not at the expense of national economic growth. That is why we support the objectives of Bill C-49, with minor adjustments that will ensure its intended outcomes are achieved. I will now address three areas where we think that's necessary.

The first is data transparency. Enhancing railway data transparency is not only consistent with the government's commitment to data transparency and evidence-based policy, but critical to improving the functionality of rail freight markets. Robust disclosure would inform public policy-making, improve railway-shipper relations, and avoid unnecessary and costly disputes. All parties having a clearer picture of respective capacity and limitations would better compel them to achieve the optimal workable outcome.

While Bill C-49 proposes positive measures to address service-level data deficiencies, we're concerned that, as written, certain transparency provisions will not lead to meaningful data on supply chain performance. Of specific concern is the requirement in subclause 77(2), a measure that would align the Canadian and U.S. systems.

Our concern is that the U.S. model is based on internal railway data that is only partially reported. It doesn't represent shipments accurately or completely. It was created decades ago when large-scale data storage and transmissions were not technologically possible. With the data-storage capabilities that exist today, there is no rationale for such a restriction in either the waybill system for long-haul interswitching outlined in clause 76, or for system performance outlined in clause 77.

To ensure the appropriate level of data granularity and to ensure the proposed legislation reflects Canada's unique rail freight context, MAC recommends an amendment that would require all waybills to be provided by the railways, rather than the limited reporting that is outlined in subclause 77(2). This modest enhancement is consistent with the direction of this bill, but with the added benefit of modernizing a system that was designed decades ago.

While MAC is supportive of Bill C-49 improvements to costing data collection and processing by the agency, we also raise one minor but important consideration related to final arbitration.

Currently, arbitrators request an agency costing determination only when the two parties agree to make the request. However, railways habitually decline to co-operate with shippers for this request, thus limiting the ability of the parties involved to be equally informed. We know of no legitimate rationale for a railway to decline an agency costing determination, other than to deliberately frustrate the process. To ensure that the right level of transparency and accessibility is struck so that remedies under the act are meaningful and usable, we recommend that shippers be granted the right to an agency costing determination. Often confidentiality considerations are raised, but the committee should note that in agency proceedings redacted decisions protect confidentiality. Further, FOA processes are already confidential. We are not proposing any changes to these practices.

The second issue addresses level-of-service obligations. In proposed subsection 116(1.2), this bill would require the agency to determine whether a railway company is fulfilling its obligations by taking into account the railway company's and the shipper's operational requirements and restrictions. Identical language is also proposed to govern how an arbitrator oversees level-of-service arbitrations.

Our members are concerned that the proposed language for determining whether a railway has fulfilled its service obligations does not reflect the reality of Canada's monopolistic rail freight market. The quality of service that a railway company offers is influenced by how it allocates its resources. These decisions include purchasing assets, staffing, and construction. All those restrictions are determined solely by the rail carrier. Their consideration and fulfillment of service obligations leaves the shipper structurally disadvantaged. The goal of the agency should be facilitating the correct decision based on the facts, not a balanced decision between the parties. To address this, we recommend either striking out this requirement or making the restrictions themselves subject to a separate review.

Third and last, Bill C-49 proposes a long-haul interswitching remedy that demonstrates in principle a creative approach to addressing a long-standing competitive imbalance in our rail freight market. By design, however, when the number of non-entitlement provisions are taken into account, a remedy that could hold significant promise if implemented more liberally, becomes unduly restricted to the exclusion of many. As proposed, it mirrors the current competitive line rate remedy that it proposes to replace.

However, CLR has been largely inoperative for the past three decades because class 1 railways have declined to compete for traffic and are not naturally compelled to do so by market forces. Hypothetically, even if the railways chose to compete using long-haul interswitching, Bill C-49 includes a number of provisions that would make LHI unusable or would create unnecessary barriers for many captive shippers, including a long list of excluded traffic, including by cargo type or geographical restriction. Unless these are revisited, the remedy as proposed will de facto confirm in policy and law the captivity of a host of shippers, the very same shippers it purports to assist.

To conclude, we acknowledge that this bill represents a bold and holistic attempt to addressing the anti-competitive challenges inherent in Canada's monopolistic rail freight market, and the disproportionate burden that shippers endure as a result. For this reason, its direction should be lauded.

The amendments we are seeking are modest and highly consistent with the legislative package. They continue to allow the railways to be profitable and have operational flexibility, but are material enough, and definitely important enough, to make a critical difference if not taken into account. In fact, we fear that without these amendments, this bill may leave us in the same situation that the previous bills have done in the past, not ultimately solving the issues we have been challenged with.

Thank you for your time, and I would be pleased to answer questions.

[The Chair, Liberal, Judy Sgro]

We are reconvening our meeting on the study of Bill C-49.

We have with us in our next panel the Mining Association of Canada, Teck Resources Limited, the Forest Products Association of Canada, and the Shipping Federation of Canada.

I welcome all of you and look forward to hearing your remarks.

Would the Mining Association of Canada like to open up this panel and start their 10-minute presentation? Mr. Gratton, would you please start?

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you.

Bill C-49 introduces what I call reciprocal penalties. That may be a step in the right direction.

Do those penalties seem symbolic or are they sufficiently robust to change the balance of power in contract negotiations?

[Cam Dahl]

I'm a former commissioner of the Canadian Grain Commission so I'm somewhat familiar with producer cars. Producer cars are actually a right that is enshrined in the Canada Grain Act and have existed since 1918, I think. Don't quote me on that date. The right for producers to load their own hopper cars and ship their own hopper cars has existed in Canada for a long time and still continues to exist.

The use of producer cars goes up and down over time. It depends on market conditions, and it depends on the year, but they are still utilized, and they are still an emergency valve, as it were, for producers and are not impacted by Bill C-49 at all.

[Bob Masterson]

Here are two quick responses from us. Then we'll turn it over to our colleagues.

First, what we feel is very important, and the provisions in Bill C-49 will help with this, is the data access and timeliness to support decision-making. Anecdotally, our view is that the Port of Vancouver, in particular, is getting quite congested. We think about growth plans. We think about a new $6-billion to $10-billion facility in Alberta. Then you have to start to think that the market for that is not North America; it's Asia. How's it going to get there? Anecdotally that's there, but that's why we need the data and the provisions that are here in Bill C-49 to help us understand where the pinch points are.

Second, again, we broadly applaud the work of both the former minister and the current minister. When we look at the transportation infrastructure plans that were announced earlier in the year, we see they will make important contributions to addressing many of the concerns. Anecdotally, again at least, we've been assured that there's opportunity to address short-line issues in there.

[Vance Badawey, Liberal, Niagara Centre, ON]

This is a dialogue. It's what I'm trying to get out of this in considering the recommendations we bring forward for Bill C-49. It could also affect the deliberations of the finance committee and other committees, as well as future transportation or economic strategies.

Taking it a step further, we can see that a lot of the problems exist because of the capital side of it. There's no question that they're abandoning these lines because the ballast, the rails, or the ties are deteriorating. Instead of putting the capital in, they abandon these lines altogether because they're not getting acceptable returns. Do you find there's a need, not just from the operating side but also from the capital side, to take action before these situations happen?

I say this because we have a lot of capital assets in the form of infrastructure. There is rail, water. There is the St. Lawrence Seaway, where the docks and the canals are falling apart and no capital is being put into those assets. Before it gets to the point of having to abandon these assets, what role do you see government playing to ensure that they're preserved?