Agriculture Committee on June 22nd, 2006

[The Chair, Conservative, Gerry Ritz]

Good morning, ladies and gentlemen. We'll call this meeting to order and get rolling.

Today we're going to continue our study on the hopper car fleet and railway performance as an overview of that.

With us today, from the Department of Transport, we have Kristine Burr, assistant deputy minister, policy group; Helena Borges, director general, special projects, policy group; and John Dobson, senior policy coordinator, grain monitoring, surface transportation policy. Welcome.

From Canadian National Railways, I understand Mr. Mongeau will be just a tad late. Claude Mongeau is executive vice-president and chief financial officer, and Paul Miller is vice-president, transportation services. From Canadian Pacific Railway, we have Judy Harrower, assistant vice-president, agri-business, and Jim Buggs, general manager, car management. Welcome, folks.

We'll start with roughly a ten-minute presentation, as we generally do. We'll start with the department, if you care to, then we'll move on to questions.

[Kristine Burr, Assistant Deputy Minister, Policy Group, Department of Transport]

Thank you very much, and good morning.

Mr. Chairman, I want to thank committee members for this opportunity to address you concerning the hopper car fleet, a topic of particular importance to the Western Canadian grain industry.

First, I'll provide you with some historical context, in order to explain the role that hopper cars play in the transportation system. Then, I'll attempt to answer questions that have been raised by the parties concerned since the government's announcement on May 4, 2006.

Mr. Chair, I would like to give you a very brief overview, because I think it helps to shape what has happened over the last few years. The government acquired the grain hopper cars in the 1970s and 1980s when the Crow rates were in effect. The Crow rates were maximum rates for grain movements that dated back to 1897. The government implemented the hopper car acquisition program because the Crow rates had become such that the railways could not recover their costs. In other words, there was no incentive for the railways to invest in infrastructure or equipment for grain transportation.

This issue was addressed with the passage of the Western Grain Transportation Act in 1984, which established compensatory, cost-based freight rates. The introduction of compensatory freight rates eliminated the need for government involvement in the acquisition of grain cars. By 1996 the government moved further toward a more deregulated system by repealing the Western Grain Transportation Act and incorporating the remaining regulations governing grain transportation in what became the Canada Transportation Act. In the 1996 budget the government announced its intention to dispose of the 12,400 cars that it owned.

However, the transaction was delayed for a number of reasons, including a crisis in grain transportation in the late nineties that led to the extensive reviews of the grain handling and transportation system conducted by, first, the late Chief Justice Estey and subsequently by Mr. Arthur Kroeger, a former deputy minister of transport. As a result of these reviews, in 2000 the Parliament of Canada replaced the regulated maximum rates with a grain revenue cap through the passage of the grain reforms contained in the Canada Transportation Act.

Since 2000, Mr. Chair, the railways have had a cap on the revenue that they are allowed to earn from the transportation of western Canadian grain for export. Within that cap they have the flexibility to offer better rates for larger unit trains. This approach was intended to promote improvements in grain transportation by encouraging larger trains moving to port position and in turn improving the speed with which grain moved to market. However, it should be noted that the introduction of the revenue caps included an 18% reduction in the revenues that the railways would have otherwise earned under the former WGTA.

And as you all know, on May 4 of this year the government announced that to maximize benefits for farmers and taxpayers, it would retain ownership of the hopper cars, rather than transfer the cars to the Farmer Rail Car Coalition, or FRCC.

Within that context, I would like to address three key issues that have been brought to the attention of this committee: namely, that the railways have overcharged for maintenance, that the replacement of the fleet has not been addressed, and that there are concerns regarding the future management of the cars.

As you are aware, imbedded in the revenue cap is an amount for maintenance of the hopper car fleet. The amount is based on the costs associated with maintenance of the hopper cars contained in the last quadrennial costing review, performed under the WGTA back in 1992. Since 1992 the railways have made substantial productivity gains in most areas of their operations, including maintenance.

The work once largely performed in railway maintenance shops by large work crews is today performed by a one- or two-person crew in a mobile workshop. Consequently, a gap has developed between what was imbedded in the revenue cap and the actual cost of performing the maintenance work. Some have referred to this gap as evidence that the railways have been “overcharging” shippers for regulated grain movements. Mr. Chair, the revenue caps are monitored by the Canadian Transportation Agency to assure compliance by the railways. The agency audits the railways' revenues from regulated grain movements to determine that they are within the eligible limits. The railways' actual revenues have been within these eligible caps, except that in each of the last two years one of the railways exceeded the revenue cap by a very small amount.

In accordance with the regulations, the railways repaid the excess amounts plus a penalty to the Western Grains Research Foundation. This was all laid out during the 2000 reforms and this is an established procedure.

On May 4 of this year the government introduced Bill C-11 in the House of Commons. It proposes amendments to the Canada Transportation Act, so that the agency can more closely align the costs and the revenue caps with the actual costs of maintaining the hopper cars in revenue service. Until the bill is passed, however, it will not be possible for the revenue cap to be adjusted to better reflect the actual costs of maintenance.

Turning to the replacement of the hopper car fleet, some of the hopper cars are indeed reaching the end of their economic and useful lives. However, the cars were bought over a period of about 25 years, and the majority of cars still have many years of useful life in grain service. A small portion of the fleet will reach the end of its useful life over the next few years.

Mr. Chair, it's important to note that the railways have a statutory obligation to provide an adequate supply of cars under the level-of-service provisions of the Canada Transportation Act. As I noted earlier, the government purchased the hopper cars at a time when the railways' revenues were not compensatory, and this limited their ability to invest in the cars. As we are all well aware, today the railways are on a firmer financial footing and can fulfill this statutory obligation. The railways have already begun replacing some of their grain fleet with larger and more modern hopper cars. Since the railways are responsible for replacing the cars, they are in the best position to determine when and how the federal fleet should be replaced, based on future economic conditions.

It should also be noted that the government originally purchased around 13,100 cars. The fleet now comprises about 12,100 cars, and the cars that have been taken out of service have been replaced by the railways, not by the government. Further, the federal cars represent roughly half of the railways' grain cars. As such, shippers already rely on the railways for a significant portion of the overall grain fleet. The railways are also already making use of high-capacity cars, and it is expected that this trend will continue. With larger capacity cars, fewer cars will be needed in the future than has been the case in the past.

Over the coming months, we at Transport Canada will be negotiating new operating agreements with the railways. At the same time, Transport Canada will also negotiate a refurbishment program with them. The refurbishment work on the hopper cars will include, among other things, appropriate attention to the gates and hatches that may need repair, as well as to other items that had been negotiated with the FRCC.

Going forward, we will also be implementing monitoring systems to ensure that the refurbishment work is carried out, and that maintenance is performed to the appropriate standards, to keep the federal hopper cars in good and safe operating condition. With these measures, we are confident that grain producers will continue to benefit for many years to come from the government's decision to retain the federal fleet of hopper cars.

That concludes my remarks.

Thank you, Mr. Chairman.

[The Chair, Conservative, Gerry Ritz]

Thank you, Ms. Burr.

We'll move to CP Rail for the second presentation.

[Judy Harrower, Assistant Vice-President, Agri Business, Canadian Pacific Railway]

Thank you, Mr. Chair.

Good morning, members. On behalf of Canadian Pacific Railway I would like to thank the committee for the invitation to appear before you today to discuss the government hopper car fleet.

My name is Judy Harrower and I'm assistant vice-president of agri-business. I'm joined today by Jim Buggs, general manager of car management.

To summarize CPR's position up front, we believe the government has made a good decision in retaining ownership of the hopper car fleet. It restores some certainty to the effective and efficient operation of the grain handling and transportation system. We look forward to finalizing details with Transport Canada on the new operating agreement.

Before delving into our perspective in more detail, I'd like to first tell you a little bit about our company, as it's important context for how grain fits in. Then I'll describe how the current grain handling and transportation system works at CP.

Canadian Pacific Railway plays a major role in the movement of goods across all commodity sectors. Our franchise is national and North American. Our head office is in Calgary, Alberta. We employ approximately 16,000 people across North America, and move approximately 2.6 million carloads of goods every year.

It is an extremely important time for our railway. A solid strategy of revitalizing and expanding our infrastructure to accommodate the growth in demand for transportation of the goods we move is under way. This strategy includes substantial investment and improving the use of our assets to maximize capacity. To sum it up, we are investing in our business--rail infrastructure, locomotives, crews, and railcars--which I will speak to in a few moments.

On the infrastructure side of things, we completed the first step in a major expansion of our network. The work was completed last year, cost approximately $160 million, and involved 25 individual projects. This included extending and building sidings, laying of double sections of track, and a number of other projects.

CP is now able to handle an incremental 12% more demand, starting at Moose Jaw in Saskatchewan, through to the port of Vancouver, which is our fastest-growing corridor. This investment demonstrates our commitment to be a major player in supporting Canada's position as an exporting nation in grain and other commodities, as well as a key player in the supply chain to bring low-cost imports into Canada.

I'll speak to the year-over-year improvement in Canadian grain volume shortly, but it is critical to note that part of this improvement is directly attributable to the capacity improvements we put in place.

Several important developments gave us the confidence that the time was right to make this kind of investment. One of the most important factors was to ensure that there was a stable regulatory and policy environment. The stability factor comes into play when we talk about ownership of key assets that move in this corridor, like the covered hoppers we are discussing today. The second key factor is to have the financial ability to invest. Customers must understand their role in supporting this kind of investment to facilitate their own growth.

Now I'd like to turn to grain. Efficient, reliable, low-cost grain transportation is key if our producers are to be competitive in world markets. There are many players, from grain marketers--including the Canadian Wheat Board--to elevator operators, producers and processors that use grains and oilseeds, export terminals, consumers, and railroads.

Having personally led a number of different commodity groups at CPR, I can attest to the fact that this business is one of the most complex of all commodities we handle. Grain markets are also very diverse. We move western Canadian grain from hundreds of origins to several ports, as well as numerous domestic destinations.

MaxTrax, which is our order fulfillment system for Canadian grain, continues to allow grain customers to order multi-car blocks in advance. This has improved the fluidity of moving grain in all of our corridors, and has led to a reduction in our cycle times over the last few years.

The overall system presents its challenges, but it is working well. It is delivering grain reliably and effectively. Because of deregulation there have been some significant improvements in system performance, especially in recent years. The trend continues and improves the overall service offering to the customers.

I mentioned earlier that I would speak briefly to the volume improvements we've seen in the Canadian grain side of the business. Our volumes are up approximately 25% for the first quarter of this year versus last year. There are four key drivers of this business segment success, in our view. One is better overall coordination with all of the stakeholders in the industry. The second is improvements in car-cycle times. The third is aggressive weekly car placements at our customers' sidings, and the fourth is the capacity we invested in.

I would like to give you some specific performance numbers for reference. The cycle time in our Vancouver corridor on grain shipments improved to 17 days in the first quarter this year versus 20 days in the same period last year. This represents a 15% improvement. The cycle time in our winter rail corridor improved by 7%.

You might ask why we care about cycle time. It's because it creates more overall carrying capacity. A one-day improvement in cycle time is equivalent to approximately 400 to 500 incremental cars of grain moving in a year; for two days it's 800 to 1,000, etc.

We do recognize that agricultural producers in western Canada have experienced major challenges in recent years. The main problems have been drought, excess global capacity, some market-distorting policies like direct subsidization, fuel price increases, and escalation of other farm input costs. But these are not problems created by rail transportation. If you look at Statistics Canada's latest data on farm input costs, it shows that the most significant increases in input costs over the period from 1998 to 2005 were machinery, fertilizer, and fuel. These components alone are up 25%, 35%, and 65% respectively. In comparison, freight rates for movement of regulated grain have increased less than 10% over this period, an increase that is less than the rate of inflation for that same period.

Now I'd like to move to discussing hopper cars. CPR welcomed the government's announcement on May 4 that it would retain ownership of a hopper car fleet. This decision removes the uncertainty around the ownership of the cars and enables the implementation of initiatives focused on improvements in the overall grain-handling and transportation system.

While it's premature to engage in the details of a new operating agreement, we will approach the negotiation from the perspective of pushing the grain-handling and transportation system forward, not anchoring us in the past. An example of what we mean by this would be the overall use of the cars. A revised economic and broader permitted-use model for the federal cars would create incentives for us to potentially allocate a higher proportion of our state-of-the-art new high-capacity covered hoppers in regulated grain movements. These details need to be worked out but would provide for improvements in the grain-handling system that don't exist today.

Our primary concerns regarding leasing of the cars to the Farmer Rail Car Coalition--which concerns were also shared by other important grain industry stakeholders--were twofold. One was the insertion of a new organization into an already very complex grain-handling and transportation system; and the second was the real potential for some reduced system effectiveness and efficiency, for a number of reasons: potential for increased line-haul costs and switching costs, more complex maintenance activities, a potential perpetuation of a non-homogeneous fleet, and overall reduced railway flexibility.

At CP, we have approximately 25,000 covered hoppers in our fleet. This includes about 6,300 federal government cars, 1,000 provincial cars, and approximately 18,000 cars that we lease and own. Our objectives are to look at our fleet in its entirety and utilize the various types of hoppers in the most efficient way possible, and make improvements and additions as the marketplace and economics provide for it.

I'm very pleased to be able to state here today that we are in the process of taking delivery of 500 new high-capacity cars built by National Steel Car in Hamilton, at a cost of approximately $40 million. These cars have 16% more cubic capacity, 9% more content weight capacity, and are 9% shorter, which means 10 more cars can be added to a train set. The cars have a much more robust bottom gate, designed for today's high-speed, powerful gate-opening equipment. The gates are much larger, for faster unloading, and are much more resistant to product leakage. These will be added to our existing fleet of 8,000 high-cubic-capacity covered hoppers.

The government's decision to retain ownership of the federal government hopper fleet and negotiate a new operating agreement should provide the certainty to plan fleet improvements, including the acquisition of additional high-capacity cars. Pending the outcome of our negotiation with Transport Canada, we hope to be able to use more of these cars in the Canadian grain-handling and transportation system. We still have many details to work out with Transport Canada regarding the new operating agreement. Nevertheless, I have the confidence today to say the new agreement will provide multiple benefits to the grain system in Canada--to name a few, reliable demand-based fleet size from year to year and during peaks; an increased proportion of high-capacity cars in the fleet; a program to improve the quality of the federal government hopper cars; and most importantly, the ability to effectively move large amounts of grain to destination markets.

In closing, I would like to thank you for this opportunity and respectfully reiterate our view that we support the government's decision to retain the ownership of the fleet, while negotiating a new operating agreement with Transport Canada.

Thank you.

[The Chair, Conservative, Gerry Ritz]

Thank you, Ms. Harrower.

We've now been joined by Claude Mongeau, vice-president and chief financial officer with CN.

Gentlemen, you can begin your presentation now.

[Claude Mongeau, Executive Vice-President and Chief Financial Officer, Canadian National Railway Company]

Thank you, Mr. Chairman.

I'm very pleased to be here with my colleague Paul Miller, from operations, to give you a little bit of our perspective, but also to answer, most importantly, your questions about this important issue.

A lot has been said over the last few years on the hopper car fleet and the maintenance cost issues, and actually the two issues are very much linked.

To give you a bit of context and history as to how we are where are today, a lot of the debate and discussions have been centred on the proposal by the Farmer Rail Car Coalition to take over the ownership of the cars on a go-forward basis. We understand where the Farmer Rail Car Coalition is coming from. There is a need to address, from a policy standpoint, the need to replace that fleet over the long term. Those cars are coming to the end of their useful life, and if we want to have a world-scale grain logistics system on a go-forward basis, we will need to replace those cars in the next several years. So we understand that this is a very significant and very important issue.

The Farmer Rail Car Coalition construct or approach to this problem is also very understandable. In a sense, what they're trying to do is to come forward with a proposal that would replace the cars over time without adding costs to the farmer. If I were a farmer or a grain stakeholder, I would want to have the same basic outcome at the end of the process.

There are, however, two problems with the approach that's been proposed. One is the efficiency of the system and the other one is the maintenance cost offset, or the so-called excess maintenance cost embedded in the revenue cap.

I'll come back to the efficiency problem in a little bit more detail at the end, but the important point is the following: we believe that adding another player to an already complex system would not promote efficiency in the grain-gathering system. What we need is a system that promotes efficiency so that ultimately we have the lowest possible cost and the best service for the grain system. To add another player to switch out cars to do maintenance outside of the rail network would not be productive and would require more cars over time, so we would not really be helping the situation. We are pleased with the government's decision to retain those cars in light of this efficiency reason.

The other issue is the maintenance cost offset. To put it bluntly, the idea from the FRCC was because we needed to pay a lease payment going forward to the FRCC as a railroad, and if we did not want to increase the cost to farmers, we needed an offset. The offset has been debated around the issue of excess maintenance costs. The idea was if you increase the lease but offset it by the excess maintenance cost, you would have a situation where net the cars could be transferred without added costs to the farmers.

The problem with this is that the maintenance cost is a bit of a technical and flawed construct. We believe at CN that the government 15 years ago moved away from a cost-based system. In actual fact, we are not paid to do switching, inspection, or car maintenance as activities. What we are paid for is to move the cars to destinations in the most efficient fashion with a rate that is fair to farmers and fair to the industry participants, railroads included.

The actual fact is the rate we get paid is under a framework of a revenue cap. That revenue cap has been decided by the government, adjusted recently downward, and overall is a very fair rate for farmers. Farmers in Canada pay the lowest grain rates in the world by far. They pay about 35% less on a tonne-mile basis than what farmers in the U.S., just south of the border, are paying to move their products to destinations. There are no questions that the government, in setting the revenue cap, has done something that is very fair to the farmers.

It's also reasonably fair for the railroads. While we do make slightly less money moving grain, we do make enough money to reinvest in the plant, reinvest in assets, and continue to offer good service for farmers on a long-term basis. So we do not believe that there is a maintenance cost issue.

I'd be happy to answer the questions that you have on this particular aspect, but we do believe that the issue the FRCC is putting forward of the long-term replacement of this fleet is one that has to be looked at very seriously.

As I said, those cars are coming to the end of their useful lives. Many of them are obsolete in terms of market demand. They are too small. It's not really economical to replace those cars, and it's not going to give us the best system we can have. We need to decide how we're going to replace those cars. The government has to take a policy stand.

Many years ago the government decided we should move toward a more deregulated framework for grain within the proper safeguards of a revenue cap, one that allows the railroads to foster efficiency to go for market pricing, one designed to get the highest level of efficiency. At the end of the day, the best promise for a good system is an efficient system. We don't need a win-lose proposal. Unfortunately, if we are trying to make a case that railroads have to be paid less because of a technical debate on maintenance, it's not fair for the railroads. It would be good for the farmers, but it's a win-lose situation.

More recently, by asking the government to step in and replace those cars, we created another losing party, the taxpayer of Canada. To replace those cars over the next five to ten years would cost taxpayers in the order of $1.5 billion, if the government has to pay for those cars. It has been decided that is not the best solution. There is a better plan. We can have the best system in the world, we can achieve efficiencies, and through efficiencies we can pay for a good part of the investment required to move toward a jumbo car fleet that will be the best car fleet in the world, in the best grain system in the world, at rates that are competitive, if not far better than what exists elsewhere.

The way to go about this, Mr. Chairman, is to have a win-win-win approach. The solution is right there in front of us. If we focus on efficiency, we can gain cycle times in the use of the hopper car fleet in western Canada, and the productivity derived from faster transit time and faster cycle time will allow us to invest in a jumbo car fleet that will allow us to have better capacity to meet the needs of farmers.

If we focus on productivity and efficiency, we will have more throughput capacity for farmers and better efficiencies, so we'll have lower costs over time. If they have revenue stability in terms of the revenue cap, productivity will allow the railroads to play their part and invest in those cars at no cost to farmers. That is a far better approach, one that is win-win-win. From our perspective, that's what I would encourage the committee to focus on.

Thank you, Mr. Chairman.

[The Chair, Conservative, Gerry Ritz]

Thank you, gentlemen.

We'll move to our first round of questioning. That will be seven minutes long.

Mr. Steckle, lead off please.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Yes.

Good morning, ladies and gentlemen.

We have had you people before us on many occasions, or at least representatives from your various organizations, both from the department and from both railway companies.

I hardly know where to begin, because we've been down this set of tracks many times before.

Your latest comment was that the revenue cap was a fair deal for the farmers. Was it a fair deal for the railroads?

[Claude Mongeau]

If the question is addressed to me, it is a reasonably fair deal for the railroads. We make a little less money carrying grain than we do carrying other commodities. But overall, the revenue cap allows us to earn an appropriate return in the current environment. However, for the railroads to be able to invest on their own for the replacement of the fleet, we would need significant productivity gains to be able to do so without rate increases to the farmers.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Overcharging has been recognized. When we looked at the numbers, maintenance costs were substantially less than the actual cost. So there was a margin there. Given the government's view that the number needs to be lowered, how are you people going to be able to thrive in that environment?

[Claude Mongeau]

I actually do not agree with the notion that the railroads are receiving too much money for maintenance. I think the debate here has been constructed to achieve the goal that I described earlier of offsetting the lease payments. The reality is that we are trying to reconstruct a cost that existed in 1992. The government has moved away from that. Maintenance is about 5% of what we do in the overall activities to move grain to destinations.

To try to reconstruct the cost of 15 years ago and to compare that with a one-year spot check on the maintenance costs in years that have different volumes and different characteristics in terms of the movement of grain basically allows people to throw out numbers that can be highly misleading. I do not believe there is an excess cost, and if there is, it's a very small amount and is not relevant to the overall debate, because the government has moved away from that. They have said we are going to give railroads an overall revenue cap that is fair and 35% lower than is paid by the farmers in the U.S., and that's what we've decided.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Going forward to such time as cars need replacement, and you're talking about going to more efficient and larger units and much more quickly being able to load the loads, those cars are going to be bought by the railroad and you're going to own them. If I understand this paradigm, eventually we'll be moving into an era when the railroads once again will own all the cars, if we go down the road far enough.

I won't be around at that time--maybe you won't either--but is that where we're going? The government is getting out of the railcar business and eventually the railroads will own the cars, so will we not head ourselves into a situation where we'll get into this whole monopoly thing again, if we want to call it that? You probably wouldn't want to call it that, but when it's in the hands of two railroad companies, obviously it becomes pretty monopolistic. I'm wondering whether you see that.

And on another question, I think you mentioned the faster turnaround. What is the reason for that? I realize unloading ability at port is a big concern, sitting at port waiting for ships to be brought in, demurrage charges occurring and that kind of thing, but what is the reason for the quicker turnaround? I understand the efficiencies that can be gained by that.

[Judy Harrower]

There are a number of factors. One of them has to do with the investments that we made in our infrastructure. That's probably one of the most significant. We've extended a lot of our sidings. We've put in a lot of double track. We've improved signalling, and that allows you to actually move your goods more fluidly throughout your network.

The second, for sure, is that we focus very hard on operating a much better scheduled railway and work collectively with the stakeholders, being the customers, the producers themselves, the grain shipping companies, as well as the terminals, to ensure that fluid movement exists in a complete turnaround.

[Paul Steckle, Liberal, Huron—Bruce, ON]

And the other question, about the eventuality of the rail companies owning all the cars.

[Claude Mongeau]

We have embraced that vision. We think that would be the best possible solution. It requires collaboration, as opposed to confrontation. But if we do focus on collaboration and focus on a system throughput that achieves the highest possible level of efficiency, we get two sources of major productivity improvement.

The first source is the faster transit time. The second source is the benefit of a higher cube car. You need fewer of them to move the same amount of grain. Combined together, if there is enough productivity, we believe that with revenue stability on the revenue cap front there would be enough money there for the railroads to take on the responsibility over time to invest in the cars. What that would do, Mr. Steckle, is basically bring the situation for grain movement to what it is in every other commodity in Canada.

[Paul Steckle, Liberal, Huron—Bruce, ON]

What percentage of grain is shipped via container? Obviously, there are smaller units because of the speciality crops. How much of that do you transport , what percentage of the total cargo?

[Jim Buggs, General Manager, Car Management, Canadian Pacific Railway]

Less than 5%.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Less than 5%, okay.

[Claude Mongeau]

That is a potential growing trend. Surely, if we're focused on innovation and efficiency, we should see over time more of the grain moved in containers and more of the grain moved in high cube cars and more of the grain moved in unit trains...you know, long operation. All of that is designed to get to a situation where we have the highest possible throughput, so that farmers can get their grain to market in the best possible windows and the least possible asset so that the cost is down. At the end of the day, the only sustainable way of keeping costs down is through efficiency, innovation, and collaboration.

[Jim Buggs]

I think there's an important point here, too, that you bring up about containers. There's a lot of focus on cost, but the other side of any business equation is revenue.

For example, the containers, while they will never compete with hopper cars in terms of cost efficiency, allow people with speciality crops to market their products in markets and get added value that way. Their net return.... You know, first they're selling them, and second, they're getting an even better return on them. So I think that's what we're trying to do. We're trying to offer a variety of products to the marketplace and are letting them choose how they want to do it.

[The Chair, Conservative, Gerry Ritz]

On that point, there's also no revenue cap in place on container shipment; it's only on bulk.

[Judy Harrower]

Yes, there is.

[The Chair, Conservative, Gerry Ritz]

Oh, there is, but it depends on the commodity.

[Judy Harrower]

That's correct.

[The Chair, Conservative, Gerry Ritz]

Following up on one other point that Mr. Steckle made, how much of the efficiency--you talk about cycle times efficiency--is gained because the railways predominantly now run mainline and terminal loads only, as opposed to scattering out across the country, coming back in, reallocating the cars, and having big drop-offs, and so on? I mean, we've seen a huge change in the prairies in that regard.