Agriculture Committee on Nov. 21st, 2006

[Peter Marshall]

The answer to that is yes.

A lot of planning goes on in the industry relative to any crop year. At the end of the day, a lot of it boils down to where the sales are being made and where the markets are. Historically the markets are off the west coast, and some are through Thunder Bay and Churchill. When Churchill and Thunder Bay close up for the winter, there's still an outlet in the east, which is what we call winter rail that goes to Quebec City.

In some respects, we're at the end of the chain in terms of the decision on where the sales are being made. We're then asked to provide the transportation services to move the grain to those particular markets.

Have we done a lot of analysis about the environmental impacts and the future of Thunder Bay? I would say it's been very limited, because the marketplace says where the sales are made, and that's where the transportation services have to move the product to.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Boshcoff. Your time has expired, I'm sorry to say.

Monsieur Roy, for seven minutes, please.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chairman.

My question is for Mr. Sobkowich and Mr. Meijer.

I am not aware of the changes that you have requested to the legislation. Could you summarize what those changes would be as well as the consensus that you have achieved? I was not here in May and it is essential that we understand each other. I don't know what you're talking about when you talk about amending the legislation.

You've also said that the railway doesn't meet its commitments in 60% to 70% of cases. Could you explain what you mean by that? Is this related to delays, to a lack of railcars or to something else? That's what I want to know.

[Wade Sobkowich]

If I may, I'll answer your last question first. I think it's important that people understand what goes into building a train. It takes a lot of resources to load a 100-car unit train. When the companies have a train scheduled to arrive, to be spotted at their elevator on a particular day, what they'll often do is dedicate all their resources to loading that train. It means they'll shut down any farmer deliveries coming into that elevator for that particular day.

They wait for the train. The 60% and 70% spotting performance I talked about earlier and that Mr. Meijer mentioned is the percentage of time you can expect that train to arrive on that day. You have a 60% chance, since the beginning of the crop year, that the train is going to arrive on the day CN said it was going to arrive. If it doesn't arrive, you have staff.... I don't know whether I need to get into all the details. Maybe you had the Canadian Grain Commission there for previously inspected cars; you have staff; if it is a weekend, you're paying staff time and a half; plus you've shut down any deliveries into that elevator for the day.

Then if the railway contacts you and says it can't make it on Monday and is coming on Tuesday, now you've shut down deliveries into that elevator for two days, and if it doesn't come that day, then you will have shut down deliveries for three days.

We talk about efficient utilization of railway assets. That's good, and it's what we need to strive for, but we also need to be mindful of the efficient utilization of grain elevator assets and resources.

I noticed that in his opening comments Mr. Marshall talked about CN's spotting 90% to the week that they say, and they do. They have 4,450 cars that they'll spot in a given week, and in that week they'll spot 4,000 of those cars, which is 90%. It sounds good, but from our perspective it's not good enough to know the cars are going to come sometime that week. We need to know the cars are coming on the day, and that's where we get to the 60% number.

I don't know whether that answers your last question. Does it answer it? Could you repeat the first question again?

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

I would like you to summarize what amendments to the legislation you would like to see.

[Wade Sobkowich]

I can provide the committee with a full list after the meeting, if you'd like, but what I could do is go over the ones that were more notable for the grain industry. All of them are important, but I highlighted some of them just for the purposes of letting you know.

Basically it was the ability for parties to file final offer arbitration as a group. A group of shippers could get together and say they're getting poor service in Vancouver and would like to file arbitration on it. That was one component.

Another component was to be able to arbitrate ancillary charges—not only whether the demurrage tariff, for example, was applied the way it was written, but whether the tariff in fact is reasonable. We'd like that ability.

Basically all of the changes have to do with providing balanced accountability and providing for correcting service problems after they occur. To our way of thinking, if the service is good, they never get used. Does that make sense?

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Very well.

[Robert Meijer]

I'd like to go back a little bit on the car spotting. If I look at a couple of our operations out in the field, just to put this into context and to pick up on what Wade was saying, there's a demand out there, according to industry, by customers who, thankfully, are demanding Canadian grains and oilseeds and special crops on a daily basis. As companies, no doubt we're very competitive in trying to capture those opportunities and meet the market needs of the end-use consumer.

We are informed by our carriers that they understand what the demand is, but here is what we're going to get. Reluctantly, we have to accept that. In a competitive world, there are formulas. I'm not going to claim to be an expert on this, but there's an allocation process that has set out a certain number of cars for a given day. As Wade was saying, on a Thursday or Friday we've asked for, say, a 100-car unit to show up at our door. We get our employees in place. Sometimes we have to hire extra staff, and sometimes we have to ask people to work on a Saturday or Sunday. To some of us it might not seem like a lot, because I'm sure all of us have to do that every now and then, but for some of these employees, working on a Saturday or a Sunday to load a car, when those cars don't show up, or shows up on a Sunday late, two days after the fact.... Then you have 24 hours to load that car. In the context of, say, a 100-car unit--Wade, correct me if I'm wrong--that's about 14 minutes per car.

Safety is of utmost priority to us, but I can tell you that as employees sit around on a Saturday or a Friday night waiting for cars to show up, they do get a little frustrated. They get a little angry at management, but we tell them to wait. Then the cars finally show up, and then we say, oh, by the way, you have about 14 minutes per car to meet the obligation; otherwise, we lose our incentive or get penalized. Then we bust our butts to do that--sorry to be so blunt--and then sometimes the cars don't get picked up after the 24-hour period is done.

That's the point we find ourselves at. In answer to the question of the committee member about the delays or lack of cars, politely, I would almost say we should ask the carriers why there are delays or why there is a lack of cars, because I can tell you that out in the field we have an elevator and we're waiting. We've requested; we know what we've been allocated, and we know what we've been told is supposed to show up on a given day, and that's all the control we have. We're supposed to do our job when those cars show up, and when we don't, we're penalized.

That's about as blunt as I can get.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Roy.

Mr. Anderson, go ahead for seven minutes, please.

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

There are a number of directions I'd like to go in here, but I want to get the railways' response to what was just said, because you're talking about 24 hours to load cars, 14 minutes to load them. You've got a week to spot them and you're using your own staff to provide service within a week. It takes nine days--if you split the 18 days in half--to get them to port. If there are charges to the shippers if they do not comply, do you think it's fair that you face the same penalties and have the same incentives for performance as well?

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

Sir, everything that Mr. Sobkowich and Mr. Meijer mentioned we do discuss with them and with the grain companies directly. There's no question that we understand very well the importance of spotting to the day. We know that being able to move the total volume is one measure, but being able to be there to spot to the day that we've advertised and advised the companies is important to us as well. We definitely are not satisfied with a 60% or 70% rating, and we're working with the customers to improve that.

There are reasons we don't get there. There are CN reasons. Peter mentioned some of the reasons a moment ago. We've all heard and read about the rains and so on in the Vancouver corridor, so those will affect the spotting plan for that region in the next week. There are other reasons that we don't get the unloads at the terminals that we're expecting.

In answer to your question about penalties and two-way accountability, we took a step in that direction with this current crop year. I believe Peter mentioned our GX 100 program, which puts accountabilities on us for timely arrival of the train, both on the empty side and on the loaded side. There are financial penalties if we don't achieve that. The penalties that Rob and Wade talked about apply on the customer side of that. So we've moved in that direction, and we're prepared to do more in that direction.

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

Well, I'm glad to hear you're not satisfied, because every year we come back here, and it seems that one or other of the carriers is a problem in my part of the world. A few years ago it was CP. I'm actually getting compliments for CP, particularly from the short-line railway that exists in my part of the world, but I have not gotten those compliments on your railway over the last year.

We sat here last spring. The officials who were here assured me you would be able to handle the crop this fall. The first thing this fall, I got a massive number of calls into my office about the fact that you folks were not moving grain. The farmers could not get it out of the elevators and off their farms. I'm just wondering why there seems to be this ongoing problem.

The second part of it is that you talked about your GX 100 program. I'm not familiar with it, but I'm wondering whether the shippers see it as an adequate remedy to the problems they're faced with.

[Peter Marshall]

I'd like to respond. Monsieur Roy had some good questions about the whys of delays, and Mr. Anderson as well.

There are long supply chains between the country and the port, whether it be Prince Rupert or Vancouver or Thunder Bay, and every part of that chain has to be working very smoothly.

One example would be seven-day-a-week, 24-hour operations. When cars are loaded in the country and moved to the port and moved back to the country for reloading, if there are impediments along the way to moving the car, it's going to extend the cycle time. If we get to a port that is only working Friday and then Monday, or maybe with one shift on the weekend, the car's going to sit there longer than it needs to. If we move the car into an elevator on a Friday and they don't work the weekend, then it sits for two days.

We are working to change some of these mechanisms that all of us here on the panel have talked about, and we have some programs out there and some new ideas that we are working on. They take time to implement.

But it's akin, in some cases, to trying to thread the needle. Our operations are 24 hours a day, so we're moving trains and moving cars, but a lot of the country, and the ports to some extent, are not working 24 hours a day. That doesn't mean they have to work 24 hours a day, but to get from where we are today to a future is going to require, in my estimation, some more commercial relationships.

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

Can I get a response? My time is short, so I'd like a response to the other part of the question.

[Wade Sobkowich]

Yes. To speak on the GX 100s, first of all, those are pretty good. We're seeing those products performing better than the rest of the allocation. But what we're not seeing is the average going up. So while GX 100s are getting better, the rest of the allocation must be getting worse.

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

Does that only apply to 100-car train lots, then, or what are the parameters on GX 100? For anybody who's shipping less than that, nothing has changed?

[Paul Miller]

There are other programs in place for 25- and 50-car shippers, but the GX 100 program in particular, Mr. Anderson, applies to 100-car trains.

[Wade Sobkowich]

We're not sure, but we think that because the average isn't moving.... We're still at 60%; the car cycle times haven't really improved. We would have expected car cycle times to improve really considerably over the last 15 years since the grain industry rationalized, but they haven't. Because car cycle times haven't improved, we suspect that what we're seeing is the GX 100s doing better at the expense of the rest of the allocation.

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

You mentioned that two of the important things on the level of service question were that you want the ability for parties to file for final offer arbitration as a group and then to arbitrate ancillary charges. Are those the two most important things, in your mind?

[Wade Sobkowich]

It's difficult to rank them, but I would say they're up there for the grain industry, for sure.

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

I want to ask the railways. Are you prepared to accept those two points?

[Peter Marshall]

We're always interested, and we've talked about this for long periods of time.

I would dispute the fact that car cycles have not improved in 15 years. I think that's an overstatement. We can demonstrate that this year car cycles have improved significantly. But again, it's a chain, and we are trying to provide products to take advantage of and work with the grain companies, who have rationalized their own networks and have built 100-car loaders. We all have to work together on this.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Anderson.

I'd like to follow up on Mr. Anderson's questioning. With the GX 100, are there certain commodities that are covered and others that aren't? Or is it all commodities—anything that'll go on 100-car spots?

[Peter Marshall]

It's a 100-car train, regardless of the grain commodity that goes into it and whether it's board grain or non-board grain. It's on the size of the train as opposed to the type of commodity.

[The Chair, Conservative, Gerry Ritz]

Okay. Are there other commodities included in it, such as potash and so on?