Agriculture Committee on June 22nd, 2006

[Judy Harrower]

I honestly don't know the answer to that question. I will tell you that we still serve a number of branch-line locations. We still have a very complex network throughout Alberta, Saskatchewan, and Manitoba, but I cannot specifically answer the question as to the percentage, one way versus the other.

[The Chair, Conservative, Gerry Ritz]

I'll ask the other railway. I know it's a little different in the northern areas that I represent.

[Claude Mongeau]

I would say that what we need, as I mentioned earlier, is collaboration, but also accountability in the system--accountability for railroads to perform and accountability for loaders and unloaders to perform--and a focus on what takes place being done in the most efficient manner.

If we get the cycle times down, we will have to reduce significantly the time it takes at the hand-off points: at the origin, when the car is being loaded, and at the destination, when the car is being unloaded.

If we move towards a pull-based system, as opposed to pushing, the way we have been doing it for too many years, we can get to a point where cycle times, instead of being the 18 or 19 days they are today, could conceivably come down to as low as 13 or 12 days. Because they would be much faster cycles, we would need to replace many fewer cars .

[The Chair, Conservative, Gerry Ritz]

Thank you.

Madame DeBellefeuille, you have seven minutes, please.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Thank you very much for your presentation. Ms. Burr, perhaps you can answer my questions.

This is the second time we've heard from witnesses on the entire hopper car issue. What intrigues me is that, every time we talk about hopper cars, we speak in approximate terms.

You say a small number of cars are at the end of their useful life. How many cars are we talking about?

You also said that we're starting to replace cars. How many of the 2,500 cars in the fleet have been replaced? What's been planned in terms of rotation? You can no doubt give us the figures on that point.

You also said you were negotiating a refurbishment program. How many cars have been identified for refurbishment of gates and so on?

You negotiate purchases. What's the shortfall? How many hopper cars would it take to meet producers' needs?

Can you explain to me why we can't evaluate the per car maintenance cost? That question was raised at the last meeting and is a major concern for me.

Perhaps you could answer those few questions.

[Kristine Burr]

I'll start by answering your last question. The Canadian Transportation Agency determines car maintenance costs. It's the Agency that requires maintenance changes.

I'd like to clarify if I may, Madame, what I said earlier. I mentioned that there are approximately 12,100 cars right now in the federal hopper car fleet. Originally there were about 13,000 cars, and over the course of the last few years, as cars have proved to be unsafe or in really poor condition, they've been withdrawn from the fleet.

We have safety inspectors in Transport Canada who are very vigilant about what is safe to operate on the railways, and they work with the railways themselves on those issues.

We are not, at the moment, looking at replacing the cars, but we will be talking to the railways about a new operating agreement for the management of the existing 12,100 cars, and also about issues related to how those cars will be maintained in the future. That will include setting up a monitoring system to make sure that as those 12,100 cars continue to be operated by the railways, the railways are keeping them to the standard that is established throughout North America by the Association of American Railroads.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Can't you tell us how many are at the end of their lives and how many of the 12,100 will have to be refurbished?

[Kristine Burr]

We review it regularly, but I'm going to ask Madam Borges to respond more specifically.

[Helena Borges, Director General, Special Projects, Policy Group, Department of Transport]

Of the 12,100 cars, 2,000 are made of aluminum. They're already in the last phase of their lives. We're going to remove them from wheat transportation service.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Are you talking about the 2,000 cars manufactured in aluminum?

[Helena Borges]

Yes.

Roughly 2,000 of the steel cars were built before 1974. So they're old. We're assessing them and may remove them from service over the next five years.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Those 2,000 cars won't be refurbished.

[Helena Borges]

No. The ones that will be refurbished are the other ones, which were built after 1974 and are in better condition. Like the railway companies, we think it's possible to repair them a little in order to keep them in service for wheat transportation.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

So, over the next five years, 4,000 hopper cars will be withdrawn from circulation.

[Helena Borges]

Yes.

[Jim Buggs]

On this question, when you talk about the end of a hopper car's life, there are two parts to that question: the first is from a straight mechanical point of view; the other is the economic life of the car, which Mr. Mongeau was referring to.

In mechanical terms, these cars can go on for a long time. The AAR has rules. For example, cars built before 1974 have a 40-year life, after which they must be retired. The oldest cars were built in 1972 to 1974, and they would have a theoretical mechanical life of another five to seven years. The cars built after 1974 have a 50-year life, as mandated by the AAR, on a mechanical basis. The majority of them have another 15 to 17 years, other than the CN aluminum ones and some of the 2,000 cars that were built pre-1974. It's nice information to know relative to how long you can theoretically run these cars.

The big issue we're talking about is competitiveness. We're talking about choices on how we want to proceed as an industry. We're talking about the total industry, the farmers and the railways, working together towards selling products in international markets. Those are the trade-offs.

What we always get into is this. While it's clear that the new high-capacity cars are more efficient, they are also quite expensive. The cars provided by the government are older and obviously less efficient, but they're provided to the system at no charge right now. The trade-off we want to work through with Transport Canada is that those cars have a value.

As in all businesses, you cascade older equipment into less productive services. There's a high volume in grain, and it's a business that is very good for the railways. Our niche is moving high volumes from a limited number of origins to a limited number of trainload movements, opposed to single cars that you have to gather up and switch through yards, etc.

If we want to be the most efficient, we have to match the two, while capturing the value of the cars. We're going to talk to Transport Canada about broadening the permitted use of those cars so that we can capture value, not only for us but for the system, and work in that way.

The other thing you were talking about was on refurbishment. There are various things, but the biggest issue, as was identified through the QGI report, is on the gates of certain types of cars, as well as the capstans that are used to open them up.

The problem we have is that on half of our cars, first of all, the gates were designed and put on these cars long before the current methods of opening up these gates. In the old days, they used big steel bars. They now use high-powered pneumatic guns, and the gates are not designed for that. Very clearly, when you have a piece of machinery used in an application it's not designed for, continuously year after year, you're going to have some problems.

We're looking forward to negotiating with them now that we have some certainty. Replacing gates is also a costly endeavour. We need some certainty, and we need to negotiate an understanding with Transport Canada. Once we've done that, we're going to do so.

[The Chair, Conservative, Gerry Ritz]

Thank you, Madam.

Mr. Anderson, seven minutes, please.

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

Thank you, Mr. Chair.

I have a number of questions.

Mr. Mongeau, you used phrases such as “continue to offer good service”. You talked about “win, win, win”, “accountability”, and “a need to focus on efficiency”. All last winter I heard regularly from my constituents in the northern half of my riding that they were getting virtually no service and no cooperation from your railway when they were asking for car allocation. They were very frustrated.

I'm wondering if you could explain to me why in the past year you've been unable to offer an adequate level of service for the constituents in the northern half of my riding.

[Paul Miller, Vice-President, Transportation Services, Canadian National Railway Company]

Mr. Anderson, we certainly had some struggles in the first quarter of this year. We were not achieving the cycle times and the productivity that we needed to meet the full level of demand that was out there and offered to us. That's been behind us now, I believe, since about mid-March or so of this year. We've been very current on our orders and orders to demand since that time.

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

This year's crop looks like it could be quite a bit bigger than last year's. We have crop in the bin. There have been some problems getting the crop off in the past.

I'll ask CP the same question: What are you doing to ensure that this year's crop is going to be able to be moved, should it be sold?

[Paul Miller]

You've heard CP talk about investments. We also made a number of investments last year on this in our western corridor capacity. This year we're extending 27 sidings between Winnipeg and Vancouver and two more between Jasper and Prince Rupert, which is another important grain corridor for us. We're completing installation of centralized traffic control between Jasper and Prince George, again on that same corridor.

You may have read recently about locomotive acquisitions. We feel we do have more than sufficient cars available for the movement. We've hired, in round figures, 200 train crew in western Canada. We are looking at doing a much better job--and there's lots of room for improvement here--in terms of scheduled operations, particularly from some of the larger-terminal country elevators that deliver to us a high percentage of the grain that we move; containerization--

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

You've made enough improvements from October of last year to March of this year that you feel you'll be able to handle your share of the crop through this next year?

[Paul Miller]

Yes, sir.

[Judy Harrower]

From our perspective, and it's very similar to what I said in my opening comments, we have made substantial investment in the corridor. We've made very similar investments on locomotives, and we've hired a number of crews. Frankly, we have not used the capacity that we built, so we're looking forward to the demand that exists out there. We have some crews laid off right now, because we are lighter on demand than we would have otherwise hoped to be.

So from our perspective, we are geared up and ready to go.

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

Both of you talked about coming to agreement on a new operating agreement with Transport Canada. There have been huge concerns across the industry about levels of service provided, the levels of service guarantee, and that kind of thing. That's going to be part of a discussion, I imagine, over the next few months, but I'm wondering if you want to make any comments on that at this time.

Shippers have a huge concern about the level of service and what they're getting from you folks. I'm wondering if you have any comments on that.