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.

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

Thank you.

I guess one of the things that we should find out is just where the regs are, as far as Bill C-49 is concerned. That's always an issue. In order for this to work well, we have to make sure that we recognize that's part of the system as well, the process of making sure those regs are done.

Just quickly perhaps, David, could you talk about the corridors? Where I am, I know that when CN and CP want to ship a lot of grain, they'll take it all out of our spot, which is great, but there are a lot of places in Saskatchewan and northern Alberta that have problems.

[Steve Pratte]

I'll speak quickly to your question. We all know this, but we just need to remain cognizant that we're still in the early shadows and aftermath of Bill C-49. It only received royal assent on May 23. August 1 is the start of the grain year that all of the planning and reporting goes into. We're still just several months out from that, so I think we need to give that a little bit of time to see the true effects of some of those commercial tools, as the shippers and railways try to either negotiate under that new framework or use some of the mechanisms that are at the shippers' disposal.

As far as the grain transportation system goes, and not to belabour the point, I think we're at a new equilibrium, if you will, on the communications side of things. Part of that is dictated by Bill C-49, and part of that is just all parties getting their acts together and increasing communication over what we've seen in the last several years.

Again, we need to let some time elapse, so that we can give more of a critical analysis of what we've been able to do as an end-to-end supply chain.

[David Bishop]

At the moment, to my knowledge, nobody has applied for interswitching. The railways could answer that better than I could.

As long as shipping is good, I don't think you'll see it used. I think if there comes a time when there is a delay for some reason, especially in the southern Prairies, the interswitching will likely be used. That's one of the things we're waiting to see with Bill C-49—all this stuff that's been implemented.

I appreciate the Senate amendments. They were really needed and I congratulate you guys on getting that all done.

Everything is going pretty well right now. In my mind, we'll see how good the bill really is when we have something go wrong

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

Mr. Bishop, when Jeff Nielsen was here in March, he had been in the room listening to CN and CP Rail's plans at the time. I had asked him at the time if he felt very optimistic. In summary, he basically said no, and then underlined that Bill C-49 was really needed.

We did make an attempt to get the railway provisions of that bill sped through as quickly as possible. That being said, it's all done and dusted now.

With respect to the interswitching provisions, have you noticed any improvements or is it too early to tell?

[Steve Pratte]

That is one of the positive silver linings of 2013-14 and the Bill C-30, the Bill C-49. I think the kind of communication and information sharing is on a new level, a new playing field, but certainly there's always room for incremental improvement.

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

Thanks, Mr. Bishop and Mr. Pratte, for appearing today. I'm already noticing a bit of a contrast from testimony we heard in March. It seems to be a little bit more hopeful and optimistic, with the caveat that we still have the majority of winter coming our way.

Mr. Pratte, in your opening remarks you noted that the reporting that is now mandated under Bill C-49 could use further refinement.

Mr. Bishop, you also mentioned that you needed to see more details from railways on their planned minimums. Are these two related in terms of the more data you'd like to see?

[David Bishop]

I'm encouraged by the wording in the bill and that, but our worry is what will happen when this actually, one day, does happen. Hopefully it never will, but if it does happen, we're wondering how this is going to work through the bill. How does it apply and who does it? There are a lot of questions on my mind as a producer on how Bill C-49 is going to work when something does go sideways.

[Steve Pratte]

I will take that one first.

On reciprocal penalties, I think there are two things to think about. For instance, the railways will say that a very high percentage of the current traffic falls under reciprocal penalties. They are talking about a per car debit/credit.

I'm not speaking for the grain companies, obviously, but I think their conception is bigger. We're not concerned about $200 per car here and there. We're talking about the value of that being $1 million. Let's have something with a bit more skin in the game and on the table.

To my understanding, under the amended process for the arbitrated SLAs under Bill C-49, encouraging.... I'm not aware—that would be commercially confidential—if anyone has stepped up to try to use that new tool in the tool box, but certainly as a concept with a legal backing, it is something I know that the shippers of grain are happy about and pleased with. Again, you might need to talk to them about more of the detailed nuances of it and whether they have started to use it.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, and it is giving Tuesday. I have to think of how I can reciprocate.

Bill C-49 introduced the idea of reciprocal penalties so that when there's a surge of demand and the grain elevators aren't able to access cars, there are penalties. It seems to me that would be a flag where, if there was a reciprocal penalty demanded, there would be a root-cause investigation to see why we had to go through this.

Has your association discussed, I guess, the opportunity or challenge those reciprocal penalties provide when we see a surge in demand?

[David Bishop, Executive Committee Member, Board of Directors, Grain Growers of Canada]

Good morning, and thank you for inviting me to present on this important issue. I'm glad to be here representing the Grain Growers of Canada, 65,000 grain farmers from coast to coast.

My name is David Bishop, and my wife, Mary, and I farm in Barons, Alberta. We produce cereals, oilseeds and pulses on 3,500 acres, including 640 acres of irrigation. My family's farming history in Canada dates back to 1910, and I began farming with Mary's parents in 1986. Currently, I'm also vice-chair of Alberta Barley, and I am past-president of the Alberta Seed Processors. I am proud of my involvement in commodity organizations and feel it is important for farmers to come to Ottawa to speak to you directly on these issues.

I would like to start by thanking this committee for the work you have done and continue to do on transportation. Transportation is an important issue for farmers across the country, and your past hearings, including the special hearing you held in March, helped to shed light on the challenges we have faced and has helped ensure the right solutions are put in place.

As this committee is aware, prairie grain farmers are almost entirely dependent on the rail transportation system to get our products to market in a timely manner. The unfortunate reality is that poor railway performance has prevented that from happening on almost regular five-year intervals. It is my hope that actions over the last year will help break the vicious cycle that has left farmers in a critical situation where we can't move our grain. As you know, when we can't move our grain, we don't get paid.

While my grain is moving well right now, the delayed harvest means that this year has not been without challenges. I experienced a five-week delay and a reduction in grain quality due to the bad harvest conditions and will now be counting on reliable grain service to move what I did get off.

The passage of Bill C-49 is a significant achievement for the rail shipping industry in Canada. It brings in measures long called for and rebalances the competitive environment. I appreciated the comments from CN and CP in the first hour of this meeting and would like to recognize that both railways have been reaching out to engage our group, the Grain Growers of Canada, and other groups to build strong relationships. Such outreach gave me hope for the future, and I look forward to continuing this relationship.

We've also been pleased to welcome investments in the new infrastructure, including the ordering of new hopper cars by both CN and CP. These critical investments are a clear indication that the bill has provided security of return on investment that the industry needs. Infrastructure has been degrading for many years, and it will take a significant injection of funds to ensure that the rail system can meet the needs of the industry as we continue to grow and meet the government's export goals. We hope to see many such announcements in the future.

I would like to take a minute to address the reports that have been released by the two railways. The new grain report and winter report are steps in the right direction. It is promising that they have been accompanied by an increase in engagement between the government, railways and the grain value chain. However, improvements are needed to get to the point where grain farmers can be confident that Bill C-49 will deliver transparency and collaboration that works.

A significant challenge with the plans that have been released is that the railways only commit to targets or maximum movement levels. They provide no indication of a minimum amount, and as such the railways could move substantially less grain and still declare it a success. Grain farmers need the railways to provide details on their planned minimums, and that information needs to be provided by corridor.

As I said earlier, grain farmers welcome the important investments being made by railways in new high-capacity hopper cars. However, the plans released by the railways continue to provide movement targets in line with historical averages. Given the continued growth that is expected in the grain sector, the reports provide little evidence of how the railways plan on meeting that increased demand. It is also worth noting that while the reports released to date speak to the apparent uncertainty in the supply chain, what is certain is that grain farmers need grain shippers and railways to move as much grain as possible between October and March when demand for Canadian grain is at its highest. This is essential for supporting a profitable farm gate.

What has become increasingly clear over the last five years is that we need ongoing oversight and engagement from this committee, the government and the Canadian Transportation Agency to hold all members of the supply chain to account to get the rail freight service that grain farmers need. It remains crucial that the government continues to closely monitor performance by the railways and is prepared to enforce the new regulations as necessary.

We are a mere 15 weeks into the new crop year, and we're just now moving into the critical time where performance typically will start to degrade, if it is going to. Around this time last year my industry was trying to raise alarm bells for what was to become a severe grain shipping backlog. These alarms fell on deaf ears, and these things are too important to be left to chance.

As all farmers say, winter happens every year. Time will tell if the plans the railways put forward will be up to the challenge of keeping grain moving across the Prairies and out to port. From what I hear, grain is moving pretty well and that is great news, but it needs to be sustainable.

Thank you for this. I look forward to your questions.

[Steve Pratte, Policy Manager, Canadian Canola Growers Association]

Good morning, Chair, and members of the committee. I'm Steve Pratte, Policy Manager at the Canadian Canola Growers Association.

Thank you for inviting the CCGA here this morning to discuss our perspective on grain movement this year. The Canadian Canola Growers Association is a national association governed by a board of farmer directors. It represents Canada's 43,000 canola farmers from Ontario west to British Columbia. As members well know, grain farmers critically rely on transportation to move our products to continental customers and to terminal position for export to our global customers.

In terms of canola, Canadian farmers grow a truly global crop. We are the world's largest exporter of this highly valued oilseed, and in any given year, over 90% of Canadian canola, in the form of raw seed or the processed products of canola oil or meal, is ultimately destined for export markets in more than 50 countries. In 2007 this amounted to $11.4 billion in sales.

Turning specifically to the movement of grain in this 2018-19 crop year, we have been very pleased with the recent aggregate performance of the grain supply chain. As we heard this morning, by various measures railway performance in the grain sector has been very strong, not only in total volume moved in the first 16 weeks of the crop year but also in terms of the various week-to-week performance metrics such as railway hopper cars supplied against shipper demand.

With any complex system, aggregate performance can mask specific issues, which in the grain supply chain often occur within the first and last miles of the movement and are very often specific to location or facility. Despite farmers' overcoming a challenging and late grain harvest in many areas of western Canada, the total system's performance has supported the relatively free flow of farmer grain deliveries into the country elevator and domestic processing streams, and the export of products continentally and abroad.

This is a good-news story—on balance. The grain supply chain to date has been relatively fluid. The performance of the railways in their service to our shippers, being the critical link between the elevator and terminal, is to be noted and given credit.

That stated, in western Canada we are now entering the annual period of lowering temperatures that will bring sustained system operational challenges and complexities, particularly, as we heard again this morning, for the railways. We encourage all supply chain partners to continue to work together to mitigate supply chain risks and swiftly deal with emergent issues.

To that end, it is worth making very brief mention of some of the early effects of recent changes to the legislative framework governing rail transportation in Canada that directly and indirectly impact winter railway operations.

Firstly, Bill C-49, the Transportation Modernization Act, contained a new feature aimed at enhancing annual communication and coordination of grain stakeholders: the annual publication of the August 1 grain report and the October 1 winter contingency report. The railways were given latitude in the preparation of these reports, and they did interact with grain shippers and stakeholders in the development of their inaugural publications. The grain sector is of the opinion that these reports are a good first step and that they could use some further refinement in the future.

Through this process and other corporate actions undertaken by the companies, the railways have certainly introduced a greater degree of communication and information sharing with the broader grain sector than existed even five years ago. I'll tip my hat to them for that.

In any year there will no doubt be specific or localized issues that arise, such as major line interruptions, and sometimes these will produce knock-on effects impacting a larger geographical region and extending deeper into the supply chain, essentially creating backlogs. Thankfully, this has not occurred to date, and hopefully it won't this year.

The real effect of these backlogs is that they negatively impact the farmers' ability to satisfy existing contract obligations with their grain buyers or their ability to sell into buoyant markets to receive payment to support their businesses, and ultimately, their families. In short, as members on this committee would know, if there's no grain delivery, there's no farmer payment.

If and when disruptions do occur, hopefully the suite of measures communicated to government and stakeholders in the railway winter contingency plan will suffice to bring a return to normal operations in quick order.

Secondly, Bill C-49 appears to have effectively dealt with the policy issue of the aging grain hopper car fleet. By amending several details in the calculation of the maximum revenue entitlement formula, the bill has had the intended effect of unleashing investment by both railways in the new generation of hopper cars, with announcements emerging from both companies immediately following the bill's receiving royal assent.

It should be noted, though, that farmers are ultimately paying for this railway investment through the structure of the maximum revenue entitlement, but it is a critical investment required to modernize the rolling stock. As the railways begin taking ownership in the coming months and continued fleet renewal occurs over the next several years, this is expected to produce significant increases in the efficiency of our grain supply chain when coupled with shortening cycle times and new train configurations, essentially allowing the system to move more with less.

Although the impact on this winter's movement may be negligible, moving forward, this will have a welcome and positive effect as the cars have a 50-year service life, and this will literally have positive impacts for more than a generation.

Finally, Canada has an aggressive trade agenda supported by recent trade agreements, and the agricultural sector plays a major role. Canada's canola sector and broader agri-food sector are focused on sustained, long-term growth, and this has been identified as a near-term driver of the Canadian economy.

The recent report of the economic strategy table challenged the agri-food sector with an ambitious target of $85 billion in annual exports by 2025. The service provided by our two major railways will play a major part of supporting the sector's realization of this goal, as will the port of Vancouver.

CCGA encourages members to consider the critical infrastructure issues in the port of Vancouver and what the role of government, be it policy, programs or investment, could be. It is time to ensure that long-term capacity is in place to sustain this national economic activity, and this may require some bold approaches to the regulatory and investment environment. In particular, the critical last mile of the grain supply chain into the port of Vancouver should be assessed and addressed.

In closing, this year we are heading into the winter optimistic but realistic about the railways ability to sustain their service to the grain sector and, more broadly, all commodity shippers.

Thank you for the opportunity to be here this morning.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, and thanks to both companies for coming in to give us an update.

As you know, at the beginning of last year, we had an emergency meeting to talk about the dire situation we were facing. It looks like we've had some progress. I know we've had some progress legislatively through Bill C-49.

Part of Bill C-49 talked about data sharing and transparency between the networks. How is that going between CN and CP, in terms of transparency of capacity, data sharing between the rail lines, and interchanging opportunities because of that?

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

Thank you very much, Mr. Chair.

Mr. Finn and Mr. Cory, thank you very much for coming and being with us today.

Good morning, Ms. Hardy.

Since last year, a lot of work has been done by both companies. You didn't wait for Bill C-49 to pass to adopt measures and try to correct a situation that was of great concern to farmers and grain producers.

You have already admitted that there are significant challenges this year due to the late grain harvest. What makes a railway company give priority to one customer over another? That's the question I get asked the most. You said there was an increase in demand in all sectors. What guides a railway company in its decision to move grain or oil?

Mr. Finn can answer first, then Ms. Hardy.

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

If you had looked in detail at the measures in Bill C-49, which we're very proud of, you would have seen that there were several measures to increase competition. Competition, I think you would agree, has the potential to lower costs. One of the significant measures that we took was to increase foreign ownership in Canadian airlines from the 25% limit that used to exist to 49%. This allows for more foreign investment, up to 49%, in Canadian airlines, and this can generate new, ultra-low-cost carriers, which can help competition, lower prices and offer new destinations.

That's one part of it that we announced in Bill C-49. We also had some other measures dealing with joint ventures.

We think that we're doing good things to increase competition.

[Sean Finn, Executive Vice President Corporate Services and Chief Legal Officer, Canadian National Railway Company]

Thank you, Mr. Chair.

I would like to thank you very much for giving me the opportunity to testify before the committee this morning.

There have been several positive developments in the past nine months, since we last appeared before you in March. We value the fact that you have invited us to present to you the implementation of our western Canadian grain plan for the 2018-19 crop year.

Let me say at the outset that we believe the current crop year to be pivotal. The issue is clear. We must overcome the challenges the grain-handling system faced in the previous crop year. To meet the needs of western producers and all our customers, CN is in the midst of an unparalleled $3.5-billion capital investment in our infrastructure and human capital. That is up $700 million from last year and represents 25% of our gross revenues. For every dollar we earn, 25¢ goes back into the properties to improve our capability of delivering our customers' goods over a long period of time.

On July 31, we tabled, pursuant to Bill C-49, a copy of the grain plan—you have a copy in your material—that sets out how CN intends to move the grain crop through the grain year 2018-19. Pursuant to Bill C-49, on October 1 we filed a winter plan that sets out in detail how the railway will move the grain crop with other commodities through the more challenging winter period.

As part of Bill C-49, we were able to consult our stakeholders in detail. We didn't just prepare a plan for grain transportation and a winter operating plan. We took the time to meet with our customers, shippers and the entire western Canadian agricultural community. The idea was to consult them before tabling the plan on July 31. We were very pleased with this opportunity to table the plan, but more importantly to consult with stakeholders in the agriculture industry and western Canadian grain producers.

On that note, it's my great pleasure to introduce my colleague Mike Cory, EVP, chief operating officer, to update you on the movement of grain this year.

Mike.