Agriculture Committee on June 22nd, 2006

[Paul Miller]

Very similarly, Mr. Anderson. The one thing I'd add to what Mr. Buggs said, just to add to the flexibility point, is that it could be that a grain car would get upgraded to the 286K capacity. It might be used in grain for many parts of the year and used in a potash or fertilizer type of service, for example, in other parts of the year. So that's an example of the type of flexibility that could be achieved with a broader permitted use type of structure.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Can you give me an idea of the number of hopper cars we have in the system right now? You talked about having 12,000 federal cars and a couple of thousand provincial cars, and the Wheat Board has a few. You said you had 18,000 cars. Does that include your share of the federal fleet?

[Jim Buggs]

We're running a fleet of between 25,000 and 26,000 covered hoppers. This is not just moving grain. This is moving potash, fertilizer, sand...all the different types of cars.

You want the breakdown on how they're--

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I'm just interested in the total. This is 25,000 cars in your company. What does CN have?

[Paul Miller]

For CN, the grand total is roughly 30,000 cars.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

So you're looking at about 55,000 cars now. What do you predict the required capacity will be in 10 or 15 years from now because you're going to the bigger cars, with more capacity? What numbers do you expect to be looking at in those days?

[Jim Buggs]

That's a good question. We go through fleet-sizing exercises on a continuous basis. We do a multi-year plan. We work with our commercial people in terms of what the demand is. We work with the operations people on what the cycles are going to be, and then we come up with a plan.

What we're seeing right now is largely an improvement in cycle time. Demand, especially on grain, can be highly variable. We have a tendency to think of growth all the time in a lot industries, but in grain, the volumes we're seeing now may or may not be larger or smaller than in the future.

So it's really an exercise. I think this is a key thing. You have to have this process and this flexibility to be able to address demand as it comes, whether it's up or when it's down.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I understand that, but you're talking about capacity going up 15% or 20% on these cars. Does that mean your number of cars is going to be going down? Or do you expect that you'll be hauling that much more product in those types of cars such that you're going to have the same number of cars and that much more capacity on the lines? That makes a difference to producers and how grain is moved in western Canada.

[Jim Buggs]

If demand were constant, and if we were successful in negotiating an agreement whereby we can use higher-capacity cars, there would be fewer cars needed to move the tonnage.

[Claude Mongeau]

If I can answer that....

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Hopefully with a little more detail.

[The Vice-Chair, Liberal, Paul Steckle]

We'll have Mr. Mongeau answer the question, and that will exhaust your time.

You can include your guest.

[Claude Mongeau]

As system participants, our goal should be to have the best world grain logistics system. The goal here should be to have fewer cars, of a better quality, delivering higher throughput capacity for the farmers.

At CN, we envision changes that could allow us to improve cycle times by 33% or 35%, which would dramatically reduce the number of cars that have to be replaced over time, at the benefit of farmers and all the participants.

At the end of the day, though, what we need is the right number of cars to deliver the grain to market when the market asks for it--and that's throughput capacity.

[The Vice-Chair, Liberal, Paul Steckle]

Mr. Atamanenko, if you wish to exercise your right to question, five minutes is yours. If not, we'll defer to Mr. Bagnell.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

I'll ask a couple of questions.

You mentioned that CP is planning on purchasing 500 new cars at $40 million, 16% more capacity.

At CN, you've been talking about a new approach and replacement. Do you have anything specific in mind, such as a specific number of cars and when you plan on getting them?

[Paul Miller]

Really, sir, it depends on the outcome of some of the discussions that we're having right now. As has been mentioned, our fleet plan would be based on retirement of some of the existing cars, the aluminum cars in particular; refurbishment of some of the younger steel cars; and acquisition of some new modern cars.

To answer your question more specifically, we don't have that concretely laid out and moneys approved and so on at this point, because these discussions are ongoing at this time.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Of the 12,100 cars, how many are allocated to each company? Is it roughly the same?

[Helena Borges]

It's roughly the same; it's almost fifty-fifty. I think CP may have a few more than CN, but it's roughly fifty-fifty.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

So the 500 cars you're talking about are over and above--not part of this fleet. It's part of your overall fleet.

[Jim Buggs]

We have 6,300 federal government cars.

[Helena Borges]

If you're interested, I'll describe the government fleet.

It's not just federal. When we say government, that includes Alberta, Saskatchewan, and the Wheat Board cars. There are 12,100 federal cars; Saskatchewan and Alberta each have roughly 950; the Wheat Board has 3,800.

Then the railways have their own fleet. They own or lease the cars. That fleet complements the government cars.

[Jim Buggs]

Our cars--this is just a purchase over and above what we have right now.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

What's your timeline on that?

[Jim Buggs]

They're coming off the line right now. I was down there this week; I saw the 271st to the 280th cars were on the line.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you. Those are all the questions I have.