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.

[David Montpetit, President and Chief Executive Officer, Western Canadian Shippers' Coalition]

Thank you.

Good afternoon, Madam Chair and members of the committee. On behalf of the Western Canadian Shippers' Coalition, WCSC, I would like to thank you for the invitation to participate in this session. My name is David Montpetit, and I'm the president and CEO of WCSC. With me today is Lucia Stuhldreier, our legal adviser.

WCSC represents companies based in western Canada that move mainly resource products through the supply chain to both domestic and international customers. Our organization focuses exclusively on issues related to transportation. Since its inception, WCSC has been actively involved in providing shipper perspective on numerous amendments to legislation. Most recently, we participated in a 2015 review of the act, led by David Emerson, as well as subsequent consultations initiated by Minister Garneau.

WCSC's goal is a competitive, economic, efficient, and safe transportation system in Canada that permits our members to compete both domestically and internationally. Our members represent a wide variety of commodities, including forest products, oil and gas, cement and aggregates, and sulphur, just to name a few. A list of current members is included in the brief if you'd like to take a look further.

One thing they have in common is that they are all users of rail transportation. Their facilities are located where the natural resources are. Their remote locations and the large volumes they ship make them completely dependent on rail to move their products to market. In the vast majority of cases, our members have access to only one rail carrier at origin. That creates a significant imbalance in the commercial relationship, even for very large shippers, which the majority of mine are. Being able to move a small portion—as indicated this morning, something like 25%—of product by another mode does not change that in any significant way.

Our members do try to negotiate commercial agreements for rail freight rates and service, and their preference is to resolve disputes commercially. However, the market in which they have to do this is not competitive. The option of taking their business to a competing railway when faced with excessive freight rates, large price increases, and non-performance or substandard performance simply does not exist. Effective shipper remedies act as a kind of backstop in commercial negotiations carried out in a non-competitive market. The fact that such remedies exist and can be used helps introduce a measure of balance to the shippers.

With respect to Bill C-49, WCSC is focusing on the following key areas: railway data reporting; railway service obligations; more accurate, timely, and effective remedies; agency powers; a mandatory review of the rail-related provisions of the act; and finally, access to competing railways.

Lucia Stuhldreier, my colleague, will walk you through the concerns and specific recommendations in this area.

[The Chair, Liberal, Judy Sgro]

Thank you all very much.

As you can see, all of the members are very interested in how we're doing with Bill C-49. They want to ensure that we've heard all the voices that are necessary and that it's reflective. Thank you all very much for coming.

We will now suspend for a short period of time.

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

Thank you very much.

I have just one last question and it's in regard to a measure that's included in Bill C-49 that hasn't been mentioned yet, except in the last panel. I recognize you've indicated that you had numerous amendments, 80, and you've boiled them down to just a few that you believe are technical amendments that would truly address the spirit of what was intended.

It's actually that the act is amended by adding the following after section 127, and I'm going to read it. It's under interswitching rate and it says:

127.1(1) The Agency shall, no later than December 1 of every year, determine the rate per car to be charged for interswitching traffic for the following calendar year.

Then it has the considerations, and it states:

(2) In determining an interswitching rate, the Agency shall take into consideration

(a) any reduction in costs that, in the opinion of the Agency, results from moving a greater number of cars or from transferring several cars at the same time; and

Here's the one that I'm really interested in:

(b) any long-term investment needed in the railways.

I'm just wondering if you could comment on that. If you have any comments, was that something you were looking at when you were looking at amendments, or how does this fit in terms of addressing competitiveness?

Also, are you very aware that this is a consideration when looking at an interswitching rate, and how will long-term investment be monitored? Do you know the answer to that?

[Wade Sobkowich]

We see the shippers entering into discussions with railways and negotiations on what a service contract would look like after Bill C-49 passes, presuming that it passes in a similar form to what it is today. We see them entering into negotiations, and then if and when those negotiations fail, the parties would each submit their best offer to an arbitrator and the arbitrator would decide.

We would be looking to the arbitrator to decide that penalties would apply to the shipper and would apply to the railway for similar functions of the same magnitude of a penalty.

For example, if the railways say they're going to.... When grain companies don't load a train of railcars within 24 hours, we pay a penalty of, say, $150 a car. If the railways say they're bringing the cars on a Tuesday and they don't come on a Tuesday, we would see a penalty of $150 a car applied. We're looking for balance in the service contract, something that clearly identifies what the railways' obligations are and what the financial consequences are to them for failure to do so, and the same thing with shippers, and that they be reciprocal. The spirit of it is that you would have penalties of the magnitude that reflect each other's obligations.

That has nothing to do with damages, I might add. We still have issues with damages. If you don't receive the train and you can't get your product to the customer and there are contract extension penalties, or maybe you've had to default on a contract, as we saw in 2013-14, those are still issues that would need to be addressed on the heels of a level-of-service complaint or through the courts. We're just talking about the speeding tickets, if you will, in the system to provide those penalties as discipline to motivate the right behaviour.

[Wade Sobkowich]

That's an excellent question and it gets to the heart of one of our four amendments, actually, which is the list of interchanges. With the introduction of Bill C-49, there will be two different sets of instructions or requirements under publishing a list of interchanges.

For long-haul interswitching, it would say the railways have to publish a list and they can remove anything from that list with 60 days' notice. Proposed subsection 136.9(2) sets out the parameters for the railways to publish a list of interchanges as well as removing them from the list. This is a new provision that goes along with long-haul interswitching. It says railways have to publish a list. They can take something off that list with 60 days' notice. We're worried that a long-haul interswitching order is going to go against them. They're not going to like it. They're going to remove an interchange.

However, we were told that there's already existing legislation that covers interchanges in the act—subsections 127(1) and (2) under “Interswitching”. It says that a party can apply to the agency for the ability to use an interchange and that the agency has the power to compel a railway to provide reasonable facilities to accommodate an interswitch at that interchange.

These are contradictory. One says one thing about interchanges and the other says something about long-haul interswitches, but a long-haul interswitch for one shipper could be an interchange for another shipper, so it doesn't make sense to have two different and potentially divergent sets of instructions on what happens with the interchanges and how they can be decommissioned by the railway.

What we are saying is that you can remove the provision in Bill C-49 on the railways' publishing a list and being able to remove it with 60 days' notice. The existing provisions that talk about the agency's powers to instruct the railways to keep or install an interchange—all this is already in the act and should apply equally to interchanges and long-haul interswitching. Does that make sense?

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

Thank you, Madam Chair.

I don't know if I will be referring to one of the 76 amendments you have submitted to us, but I would like you to provide me with some explanations.

Interswitching seems almost to be a cornerstone of Bill C-49. But while the rail companies tell us that it is absolutely not needed any more, you are telling us that it is practically vital.

According to Bill C-49, a rail company has to provide grain producers with 60 days notice before an interswitching interchange is removed. Theoretically, companies can remove themselves from an interswitching point. But last week, I read on Transport Canada's site that rail companies are still supposed to honour certain general obligations. That was all they said about it.

Do you know what those general obligations are? Should Bill C-49 be more specific about what would happen if a rail company were to issue a 60-day removal notice?

[Guy Lauzon, Conservative, Stormont—Dundas—South Glengarry, ON]

Thank you very much. I'd like to address this question to Chris. The railways are asking us to amend Bill C-49 so that facilities within 250 kilometres of the border can't access the long-haul interswitching. What would that do for your members for the value-added processors? What effect would that have on their business?

[Wade Sobkowich]

One of the main opportunities we see in Bill C-49 is the reciprocal penalties piece. We have long been after the ability to get commercial contracts with railways. Every other link in the chain has commercial contracts. We have contracts with farmers, with penalties on both sides for failure to perform. There are contracts with the vessel owners, with the end-use buyer. That's the way business is conducted.

Until now, we've been operating primarily on railway tariffs, so that's a unilateral set of rules and penalties imposed by the railways, supported by statute. Bill C-52 introduced the ability for service-level agreements, but it lacked teeth. There was no ability to include penalties for non-performance in those service-level agreements.

We think that this will go a long way, because now shippers have the ability to try to negotiate penalties. We're talking about balanced penalties here. With regard to the same types of penalties they charge us for certain things, we want to be able to charge them for failure to do certain things. If we can have that in place in something that resembles a normal service contract that you would find in a competitive marketplace, we think that will go a long way.

[Chris Vervaet]

I'll start with that.

That's a good question. Really, for Bill C-49 to work for processors in particular it's the long-haul interswitch. Out of all the grain shippers in western Canada, processors were probably the biggest utilizers of the extended interswitch.

Again, similar to my testimony, it breathed some semblance of competition into the marketplace and provided an opportunity for many of my members, not just to leverage better service but also to access markets that we previously weren't able to access, primarily into the United States. Seventy per cent of our vegetable oil and protein meal produced in western Canada ends up in the United States. To have a level of competition and access to carriers that can move our products to markets that were previously untapped has generated invaluable benefits to our member companies, but also down the value chain to our growers as well.

Access to new markets means new growth potential for our processing facilities as well. That competitive element drives business, profitability, and it drives value throughout the entire value chain.

[Vance Badawey, Liberal, Niagara Centre, ON]

I'm going to take the opportunity to ask the same question I asked the last panel. I expected the answer I received from the last panel. I'm not expecting the same answer from you folks, so I'm going to move on with the intent...as you had mentioned.

We came a week early to the Hill to get this job done, and I'm sure you're anxious to get it done as well. Our intent is to listen and learn, and with that, respond accordingly.

Bills like C-49 are expected to be an enabler for folks like yourselves to work in an environment that, quite frankly, is going to provide the stakeholder the returns they're expecting. With that said, we're trying to create a balance. That balance we're trying to create between the shippers, the providers of the service in terms of transport, was mentioned earlier. You mentioned that you want to ensure you have that value established for all Canadians, in terms of their returns.

Again, being an enabler, we're expecting our GDP to keep rising, as it has in the last few months, and to continue to rise. By utilizing the movement of product, which contributes to our overall enhancement of global economic performance, a lot of that is done by integrating our distribution logistics systems. Bill C-49 is being put forward to provide a platform for good and fair service.

My question is very simple, and I'm going to open up the floor for all three of you to dive in, as I did with the last panel. How can Bill C-49 ultimately contribute to satisfying the objectives contained within your business plans?

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

Thank you.

I would like to bring up something else with you.

Progress over 100 years has resulted in bigger harvests, but also in a greater variety of agricultural products. Should Bill C-49 contain a mechanism to specifically review schedule II on a regular basis? For example, I don't understand why soya is not in that schedule.

What is the mechanism to add a product to that schedule? Has it been explained to you at all? If not, do you have a solution to propose?

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

Yes, thank you.

So your producers are concerned about being in a situation where the measures in Bill C-30 have been abandoned and Bill C-49 will not be passed for a number of months. Yet harvest time is almost upon us.

Do your producers have serious concerns about the coming weeks and months?

[Wade Sobkowich]

I could take this one, and then maybe Norm could.

We've definitely seen an increase in harvest volumes year over year. We have an upward trend. If you take a look at the last five years, we're now talking about a crop of 65-million tonnes being an average crop. Man, if we'd gotten that number 10 years ago, we would have been busting the rafters of our elevators. We definitely have more and more grain coming off the fields during harvest time. That's attributable to changes in agronomic practices and changes in technology. Farmers are operating with better practices and that sort of thing.

If your question is what has changed to give us comfort that we won't end up with a similar situation to what we had when we started seeing some of these big crop volumes, from our perspective nothing has changed. We don't have a change in the competitive environment. When we had Bill C-30 and we had extended interswitching, we had a glimpse of a change in the competitive environment, but that has sunsetted. We don't have Bill C-49 passed yet, so really, nothing has changed in the competitive environment and nothing has changed in the legislative environment to give us comfort that if we don't get something passed here, with tools we can use like reciprocal penalties, we won't go back to the situation we had in the past.

Does that answer your question?

[Norm Hall, Vice-President, Canadian Federation of Agriculture]

Thank you, Madam Chair.

As introduced, I am Norm Hall. I'm the first vice-president of the Canadian Federation of Agriculture, but more importantly, I sit here as a farmer from western Canada, east-central Saskatchewan, Wynyard, on the largest saltwater lakes in Canada, which are rising. Thank you for the invitation to appear before this committee.

As you know, CFA has been a strong proponent of advocating for a review of the regulations and legislation that govern and manage the movement of grain for export and the review of transportation. The government's advisory council on economic growth had coined the phrase “unleashing Canadian agriculture”. An important component of unleashing agriculture is building an efficient export corridor through sound legislative and regulatory process, up-to-date infrastructure, and information systems with the full accountability of all transportation and grain-handling participants. It is very important in order for the industry to confidently develop new and larger export markets. The primary stakeholder in all of this is the producer of the product, the farmer.

In 2014-15, Canadian farmers paid $1.4 billion in freight charges to the railways under the MRE. This was not paid by shippers. Grain companies are cost plus brokers. Any charges from the railways get passed through to the producers. They pay the bill. The railways are basically cost plus facilitators. Under the MRE, they are guaranteed a 27% return. A recent study by one of our members, APAS in Saskatchewan, saw that the number was closer to 60% or 65% return to the railroads in profit. It is the farmers who take all the risk in the production stage and the farmers who pay all the costs of production, the cost of freight from farm gate to the inland terminals and transload sites, the freight to export position, and the cost of any disruptions or delays.

Canada's railways and an efficient, low-cost grain rail transportation system are critical to the country's agricultural economy and the financial health of grains and oilseed producers. To ensure that the system works overall, decision-makers must recognize that farmers pay the entire bill for transportation of export grain from farm gate to port. Western Canadian financial livelihoods are captive to the railway monopoly that is trying to maximize profits for its shareholders.

Between 35 million and 40 million tonnes annually are captive to the railway monopoly. Since transportation costs represent one of the highest input costs in grain farm operation, the importance of ensuring competitive environment through regulation and legislation can never be understated. As Emerson so aptly stated, transportation costs, for example, often represent a more significant hurdle to expanded trade than do the costs associated with international tariffs or trade barriers. This was all brought to a head with the failure of the 2013-14 crop year. Twenty million additional tonnes, as was stated by the previous presenters, could have been alleviated if they had contacted the industry and were able to plan that way instead of leasing 400 of their engines into the States and shorting themselves of power for the winter.

While Bill C-49 takes great steps in the right direction, it almost seems as if they are meant to look like improvements without involving real change, leaving railways with far too much room to not comply with the intent and ending up with far short of a competitive environment: requesting more information while restricting the agency's use of that data; institutionalizing long-term interswitching but with historical revenue-based freight rates and not actual costs; avoiding giving the agency powers to pre-empt problems and requiring formal complaints; regulating interswitch options without giving the shipper flexibility to choose interswitches that would really help the shippers and result in higher levels of competition amongst the railroads; continuing to allow the railways to randomly or arbitrarily close producer car-loading sites and interchange facilities; continuing to allow the railways to use 1990s costing data when they've implemented savings on the backs of farmers; and giving railways a full year post-implementation to comply with new information data requirements.

I also want to say that while my comments focus on general policy positions, the CFA fully supports the more detailed technical legislative amendments proposed by the Crop Logistics Working Group, which will be in a letter to your minister.

Under transparency, since 40 million tonnes of grain are annually slated to move by rail, it's absolutely imperative that the railways comply with new regulations for additional data and information to allow proactive logistics and marketing and planning by the entire industry. Real-time data is required to achieve this objective, and timelines for the release of data and information have to be short enough to allow for proactive planning. There is no justification to allow the one year after legislation to come into force before they have to comply.

The use of data information by the agency should not be restricted and should be fully utilized to facilitate and manage the flow of traffic and grain volumes to pre-empt delays, backlogs, and disruptions. For example, if information or data is used for LHI administration, it can be used in other areas and for other purposes. The agency should have the freedom to do so, not for public release, but just for their own use. Further, the agency must be given the authority to find solutions to problems proactively, without waiting for industry to file complaints. The legislation must be amended to give the CTA the added powers to correct service performance failures through their own volition.

Under reciprocal penalties, while this is a contractual agreement between grain companies and railways, I've already told you that any problems arising between these two parties eventually get charged back to the farmers. The CTA must have the mandate and the resources to monitor, regulate, and ensure compliance. Level of service and compliance mechanisms have to prevent the railways, with their monopolistic powers, from becoming nonchalant about service provided, since shippers/farmers have no other options. Producer car loading sites are a good example, and I'll talk about them soon.

The minister must monitor the railways' overall level of service and service availability, and cannot allow the railways to arbitrarily and randomly withdraw services that are required to efficiently and expeditiously transport grain to export markets that provide farmers and shippers with the opportunity to improve their competitive position in the market. Since we're going to be looking at the MRE penalties imposed as a result of this service deficiency or contract, non-compliance must not be allowed to be included in the cost calculations of the MRE.

Under the long-haul interswitch, LHI, railways are concerned about losing market share. Welcome to competition. In one voice, they want to talk about having market-driven agreements, yet as soon as that threatens their monopoly by allowing LHI and U.S. carriers to come up here, they don't want it. They want to have regulation in place.

Under the current interswitch, 30 kilometres, there are four points in western Canada that are naturally served by the two railroads. The 30-kilometre interswitch takes that up to a whole 14 out of 368. Under the 160 kilometres, that extended to 85% of all points, which allowed grain companies to use interswitch if needed, if service was poor.

That is why interswitch is there. It's because of poor service. It gives the opportunity for one company to search for another company for better service. It's supposed to be for competition.

[Chris Vervaet, Executive Director, Canadian Oilseed Processors Association]

Thank you very much.

Madame Chair and members of the committee, on behalf of the Canadian Oilseed Processors Association, or COPA, I would like to extend our thanks to the committee for the opportunity to contribute to this important study of Bill C-49.

COPA works in partnership with the Canola Council of Canada to represent the interests of oilseed processors in this country. We represent the companies that own and operate 14 processing facilities spanning every province from Alberta through to Quebec. These facilities process canola and soybeans grown by Canadian farmers into value-added products for the food processing, animal feed, and biofuels sectors. This not only creates incredible demand for oilseeds grown by Canadian grain farmers but also injects stable, high-paying jobs into the rural areas where we operate.

Our industry’s success is predicated on the ability to access foreign markets. Indeed, 85% of our processed canola products are exported to continental and offshore markets. Efficient rail logistics are paramount to getting our products to these markets in a reliable and timely fashion. To put this into perspective, about 75% of our processed products are moved by rail.

Given the importance of rail to the success of our industry, COPA has been working closely with the WGEA over the last couple of years to advocate for key policy recommendations that we believe are fundamental to creating a more competitive rail transportation environment. In our view, Bill C-49 is, on balance, a good bill. It is not a perfect bill but it contains several critical components that value-added processors feel will improve the commercial balance between shipper and railway. These include the ability to arbitrate poor performance penalties into service-level agreements, along with a dispute resolution mechanism to address disagreements in the application of a signed SLA. We also feel that data transparency and its robustness have been significantly improved in the bill, and we have seen a strengthened definition of “adequate and suitable”.

This being said, our concerns with the bill’s proposed changes to essentially convert the former extended interswitch provisions to long-haul interswitching are especially noteworthy. To be very clear, extended interswitching was an incredibly important tool for value-added processors. For the first time, interswitching breathed a semblance of real competition into rail logistics for our sector where there had never been any before, giving previously captive facilities access to a second carrier for U.S.-bound product in particular. Our industry saw a dramatic improvement in rail service to the U.S. while extended interswitching was available.

Extended interswitching was an extremely simple and effective tool. It put all interchanges into scope and involved no application or bureaucratic red tape to access. Rates were clearly published for set distances, giving shippers the certainty and predictability needed to book freight over a longer term. Moreover, it was also a highly effective negotiating tool with the local carrier, which we found to be much more service oriented and likely to enter into a conversation about better service or rates with the leverage of the extended interswitching.

By contrast, the long-haul interswitch mechanism contained in Bill C-49 presents a number of challenges and removes the key characteristics that we were leveraging in extended interswitching. Most notably, LHI proposes a multitude of complicated parameters and conditions to determine how and which interchanges are accessible for shippers. LHI also proposes setting rates based on historical comparable rates. All comparable rates, to date, have been set under monopolistic conditions. If the rates themselves are not competitive, there is no incentive for my members to apply for long-haul interswitch.

Left unaddressed, both of these provisions as currently drafted would render the LHI to be of little to no use. Therefore, we are interested in working with members of this committee to find solutions to put long-haul interswitch to work as a competitive tool for our industry, as we believe the government has intended in this bill. Similar to WGEA, we see three key areas of concern that need to be addressed to make LHI an effective tool.

You will find some of our technical amendments—again, similar to those of the WGEA—in annex A, which we circulated to the committee members prior to this meeting.

Number one in terms of our list of technical amendments is to clarify that access to the nearest interchange means an interchange that is in the reasonable direction of the traffic and its destination, whether or not a facility is dual served or if there is another interchange within 30 kilometres. Prescribing access that is simply based on shipper access to the nearest competing rail line without taking into account other considerations would limit the value of LHI. Practically speaking, when determining the nearest interchange, consideration needs to be given to whether, one, it is in the right direction of the shipment's final destination; two, it is serviced by the right rail company to move the shipment to the desired destination; and three, it is the right size with the necessary infrastructure to execute the interswitch.

The intended spirit of the LHI mechanism is to give shippers competitive options. These have to be options that we can actually use and are applied equally among shippers. Proposed paragraph 129(1)(a) of the bill stipulates that a dual-served shipper may not apply for a long-haul interswitch, for example. Excluding dual-served shippers simply on the assumption that they have competitive options is a false premise. In many instances, both rail lines do not service the traffic's final destination. As well, restricting access to long-haul interswitch places dual-served facilities at a competitive disadvantage to those who do have access to the long-haul interswitch.

Let me give you a quick example of what that means in practical terms. In annex B we have attached map 2. In Alberta, in the town of Camrose, we have a member operating a processing facility that is dual served by CN and CP. Currently under the long-haul interswitch they do not have access to apply for long-haul interswitch, even though there is an interswitch opportunity at Coutts in Alberta, at the border, where they could have access to BNSF. This not only limits their access to markets served by BNSF in the United States but also puts them at a competitive disadvantage in terms of other members or other facilities that do have access to that long-haul interswitch because they are not dual served.

Two, in terms of the key technical amendments we're looking to propose, we are also very concerned about the ability of the long-haul interswitch provision to address shipper concerns over rate-setting. In other words, the way that Bill C-49 is currently written, it places a floor on LHI rates, indicating that a rate cannot be less than the average of per-tonne kilometre revenue of comparable traffic. The bill needs language that gives the CTA the ability to consider commercially comparable competitive rates when determining the interswitching rates. Looking to historical and comparable rates as a reference to determine interswitching rates ignores the fact that these rates have been determined under monopolistic conditions. The CTA should also give regard to the actual cost to move the shipment, not what the railways have managed to charge in the past when monopolistic powers were at play. In this way, the agency can ensure that a railway gets a reasonable rate of return for conducting LHI business, on the one hand, and also guard against perpetuating excessive rates set under circumstances where competition does not exist.

The third amendment that we're looking to propose is that we are concerned about the ability of a rail company to take unilateral decisions to stop serving an interchange or tear it up altogether without any further check and balance. Again, this runs directly against the original spirit of the new LHI to give shippers more competitive options. We believe the bill requires tighter controls around decommissioning interchanges and in fact recognition of the other common carrier obligations that seem to already limit the ability for this to happen.

Finally, we just would like to add our voice to the growing number of grower groups and associations raising concern over the fact that soybeans and soy products have been excluded from the MRE. The MRE is a viable tool to protect farmers from exorbitant rate hikes. We know that the government and members of the committee share this concern for farmers, thus the decision to keep the MRE in this new iteration of the CTA. It is therefore surprising that soybeans and soy products would be excluded. As Wade mentioned, soy is now one of the major commodities grown in Manitoba and is expected to see similar growth in seeded acreage in the other two prairie provinces. With this growth in acres, there is increasing potential for value-added processing to expand into soybeans in western Canada, where there is currently no large commercial value-added processing for soy. There is no logical policy rationale to exclude soy over any other crop already under the MRE. COPA members and our farmer customers are asking that soybeans and soy products be added to schedule II.

In conclusion, oilseed processors are of the view that Bill C-49 is an important step in the right direction. Our suggested technical amendments on LHI would provide shippers an opportunity to access alternate carriers, which strengthens the overarching intent of the bill to provide a more competitive system.

Thank you.