Evidence of meeting #11 for Agriculture and Agri-Food in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was grain.
9:50 a.m.
Assistant Vice-President, Agri Business, Canadian Pacific Railway
Mr. Anderson, from our perspective we take every single service issue very seriously and address it directly with our customers. We've put in place the capacity, whether it be crews, locomotives, or infrastructure, to meet the service demands of the customers out there, and we have substantially improved our on-time service offering to all of our customers.
We take it very seriously, frankly.
9:50 a.m.
General Manager, Car Management, Canadian Pacific Railway
It's only June, but we're watching it very closely and sizing the fleet. As of right now, we're seeing very good movement for this time of year. It's much higher than it would be normally. We're running a fleet right now of about 12,600 hoppers in Canadian grain. I was just down in Hamilton at National Steel Car earlier this week, where we have 500 brand-new high-capacity cars coming off the line. Number 271 was being built when I was there this week, and they'll all be here for the fall.
We look forward to it. It's business, and we want to do a good job. It's important to us.
9:50 a.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
There's been some talk--and FRCC and others have addressed this--about upgrading the federal hopper car fleet, bringing them up one weight level or whatever. Did you upgrade your own cars from the lower weight? Was it 268 to 286, or 263 to 286? Were those the numbers?
9:55 a.m.
General Manager, Car Management, Canadian Pacific Railway
Right. That will be part of the discussion with Transport Canada. It's a key issue. The current cars are only 4,550 cubic feet in capacity, so relative to the cubic density of Canadian grain, you are going to cube out before you weigh out, before you can get to 286 with the current cars. This is what we want to talk about, and this is what I was alluding to before--
9:55 a.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
I have just a point of clarification on that. Saskatchewan Grain Car Corporation has upgraded their cars. When I talked to the people involved in that upgrade, there was no concern about the fact that they were going to go over volume before they went over weight. Are you saying there is an issue with that?
9:55 a.m.
Assistant Vice-President, Agri Business, Canadian Pacific Railway
It depends on the commodity.
9:55 a.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
Well, yes, of course, but generally they didn't have any concern with most of the products that are being carried on there. Are you saying that they fill up with grain before they go over 286? Isn't grain--
9:55 a.m.
General Manager, Car Management, Canadian Pacific Railway
It's 286, right? What they are looking at is longer-term use of their cars. Their cars still have another 15 to 17 years of life.
9:55 a.m.
Conservative
9:55 a.m.
General Manager, Car Management, Canadian Pacific Railway
We have upgraded quite a number of our cars because we use our cars in other applications that have a higher cubic density--for example, potash,.
9:55 a.m.
Conservative
9:55 a.m.
Vice-President, Transportation Services, Canadian National Railway Company
Yes, we've upgraded a number of lower cubic capacity type cars, basically for potash-type service.
9:55 a.m.
Executive Vice-President and Chief Financial Officer, Canadian National Railway Company
This being said, Mr. Anderson, it also covers the point Ms. DeBellefeuille made, which was that at the end of the day we are going to have some very important decisions to make. Some of the cars that we have in the government fleet today are low-cubic-capacity cars, which are not the best designed cars for the long term. Whether that is because they max out on cubic before they weigh out or whether it's because they are 30 years old, the reality is, at CN, for instance, that of the entire government fleet only about 3,000 have a life that we could extend long into the future.
9:55 a.m.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
The number I've heard is 6,000 altogether, or around that number. Is that what you're saying?
9:55 a.m.
Executive Vice-President and Chief Financial Officer, Canadian National Railway Company
Probably. I don't know about the CP exactly, but that would be a fair assessment overall.
9:55 a.m.
Liberal
The Vice-Chair Liberal Paul Steckle
Mr. Anderson, you have exhausted your time.
We will move to Mr. Atamanenko, for seven minutes.
June 22nd, 2006 / 9:55 a.m.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
Thank you very much for being here.
I will start with the issue we've been hammering on for the last while, and before I move on to specifics, I'll just take it from my notes here: In 2004 the FRCC presented documents to the standing committee showing that maintenance costs charged by Bombardier or Illinois Southern Rail could be about $1,200 to $1,500. A recent leaked confidential memo that we've all seen from the CTA also indicates that maintenance costs could be about $1,900 a year, and yet the revenue cap was $4,329.
You talked about this, Monsieur Mongeau. Have the farmers in fact been paying too much over the last while for maintenance costs?
I ask everybody to address this question, please.
9:55 a.m.
Executive Vice-President and Chief Financial Officer, Canadian National Railway Company
I can answer that.
Around or slightly in excess of $2,000 per car is not a bad number over a longer period, without refurbishment. That is running repairs.
Maintenance cost, as an economic activity, depends a lot on the usage of the cars, the volume, and the distance that's being travelled.
The $4,300-per-car number that has been used by FRCC is based on an estimate of what the car cost would have been in 1992. Mr. Atamanenko, 1992 was a 35-million-tonne crop year. That is the highest that we can find on record. If we adjusted the revenue cap in that year to make it equal, we would have had, instead of the $700-million revenue cap for railroads in 2004, a $1.1-billion revenue cap calculated by the government.
The reality is that you have adjust the maintenance cost to the actual volume and the distance being travelled. The CTA, when they did that estimate and debated it publicly, came down to $3,600 as an estimate that would be volume-adjusted. We don't actually agree with this number either, but the reality is we're not talking about $1,600 versus $4,300; we're talking about something much smaller than that, perhaps a lot less than half of that--but we're in a highly technical debate trying to reconstruct costs that 15 years ago would have been 5% of the overall cost structure of a railroad.
The reality is we've moved away from that. Today, we are getting a revenue. That revenue is 35% less than what U.S. railroads receive for the same basic activity just a hundred miles south of the border. The revenue is fair to the farmers, and it's just fair to the railroad.
It is highly misleading to single out the maintenance cost, which is 6% or 7% of the overall cost, and to construct 15-year mathematics to try to get to a number, and it is not very relevant to the long-term issue of what we do to make sure there is enough revenue for the railroads to invest in the cars for the long term and avoid taxpayers' having to spend $1.5 billion to replace the cars.
10 a.m.
Assistant Deputy Minister, Policy Group, Department of Transport
I'll mention something I had mentioned in my earlier comments. It is that each year the agency reviewed the whole situation, including the costs, and did an audit on what the railways had done under the revenue cap for each of them. There is a provision in there to roll back when there's any excess above the established revenue cap, so working under the model in place in the legislation right now, we're confident there was a way of catching any excess.
As you're aware, if Bill C-11 goes through, we will have more flexibility to deal with any perceived excess that might be in place right now.
10 a.m.
Assistant Vice-President, Agri Business, Canadian Pacific Railway
From our perspective, there's not a whole lot more we can add that would deepen this conversation. We also have issues with the methodology and some of the comparisons made in the preliminary staff report. We are confident there will be a lot of discussion around the numbers as they get updated and as we get into all the issues and opportunities in front of us as they pertain to refurbishment, new cars, etc.
10 a.m.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
I'm going to just ask another question. This is maybe a very naive question.
We're talking about costs. What is the cost to the farmer in all of this? What does the farmer pay right now to transport his or her grain? We're talking about so much per hopper car per year. Okay, I'm a farmer. I have to transport my grain. What do I pay?
10 a.m.
Executive Vice-President and Chief Financial Officer, Canadian National Railway Company
It depends a whole lot on how the grain is moved. If it's moved in highly efficient service--longer trains, very efficient unloading--the rate per tonne-mile will be less than if it's moved in a single-car, producer-car environment. Overall, the government has decided that the railroads have the right to put the price in line with what it takes to drive the most efficiency in the system, but overall we shall make sure that the aggregate revenues that the railroads derive do not exceed the revenue cap.
The sum of every move, at the end of the day, is a function of specific pricing for specific moves. The total on the revenue cap is, as I said, very competitive on a world-scale basis, and far inferior to what farmers are paying just south of the border.
10 a.m.
NDP
Alex Atamanenko NDP British Columbia Southern Interior, BC
So what's the difference for a tonne of wheat, for example, transported to Prince Rupert or Vancouver? What's the farmer paying here, as opposed to the price in North Dakota?