Agriculture Committee on May 16th, 2006

[James Bezan, Conservative, Selkirk—Interlake, MB]

Thank you, Mr. Chair.

Good morning, gentlemen.

I want to take exception to one of the comments that was made during the presentation. When you were here last time, Mr. Harrison, you told us you guys represented 90% of farmers, and I can tell you that in my riding, probably 10% of the farmers might know what the Farmer Rail Car Coalition is. The other 90% don't have a clue who you guys are and what you're about. After the decision was made by the government not to transfer the rail cars to the FRCC, I never received one negative comment. It's quite the contrary; farmers are coming up and saying we made the right decision.

I come from a western agricultural riding. I'm a farmer myself, and what you're saying doesn't jibe with what farmers are telling me out in the field.

I appreciate what you're saying about the cost of maintenance. And, yes, I believe the cap was too high and we weren't getting value for the money we were paying into the revenue cap for maintenance on the cars.

I see in the CTA letter here that they did value that cap at around $1,700 versus $1,500, yet we know that cars are in disrepair and it will take at least another $35 million to get them back to par. So how do you make $1,500 work as your maintenance level, knowing that the railroads have put in $1,700 per car, per year and they're still in disrepair?

[Sinclair Harrison]

First of all, we question whether they did put in $1,700. On page 3 of that report, the actual direct cost for parts and labour going into the car was $1,083. That's the direct cost of maintenance.

The figure on the front page--the $1,680--takes into consideration all administration costs in the railroad system--the bonus for the president and CEO, everything is in there. So we're suggesting that our administration costs are not going to be $700 per car. Our $1,500, we think, is very comparable with their numbers, even though they say they're at $1,700. But there is a lot more administration in there than we would have.

[James Bezan, Conservative, Selkirk—Interlake, MB]

You keep quoting that report, and you say you wish it was tabled. Can we get that report tabled?

We've got the letter, but you have the full report.

[Sinclair Harrison]

That's the same report.

[James Bezan, Conservative, Selkirk—Interlake, MB]

That's the whole report? Okay.

Do you have another report there, or have you only got the one?

[Sinclair Harrison]

No, I've got three reports.

[James Bezan, Conservative, Selkirk—Interlake, MB]

Have all of them been circulated to the committee?

[Sinclair Harrison]

No, these two are in the hands of Transport Canada.

This is the study of what would happen to the revenue cap if a plan like the FRCC was put forward toward the cars.

The second report, which is still confidential, is the QGI report on the inspection of the cars. This is the $35 million report, if you want to call it that. It demonstrates that there's a shortfall of $35 million of maintenance not done to the federal fleet.

[James Bezan, Conservative, Selkirk—Interlake, MB]

I think both of those reports that haven't been circulated to the committee are important for us for dealing with this issue. I'd ask that those reports be tabled, Mr. Chair.

[Sinclair Harrison]

If I could, I'll just follow up on your comment about the farmers in your constituency. I guess the fact that the announcement was silent on replacement, who is going to replace them.... Nobody knows. I think that's one thing that has to be clarified in the minds of farmers. I'm like you. We need more information on the announcement.

[The Chair, Conservative, Gerry Ritz]

Can we get those reports tabled?

[James Bezan, Conservative, Selkirk—Interlake, MB]

They're actually in the hands of Mr. Harrison. It's up to him whether he wants to share them with us or not, or whether he is able to.

[The Chair, Conservative, Gerry Ritz]

When....

[James Bezan, Conservative, Selkirk—Interlake, MB]

I'd ask Mr. Harrison to table those reports so we have a chance as a committee to view them, to make the proper decisions as we discuss this. This has been a problem in the past. When you guys came forward with your business plan, you didn't want to table that business plan, so again, members of this committee were kept in the dark and weren't aware of all the issues that you guys had been talking about.

[Sinclair Harrison]

These were developed after March 9, 2005, in negotiations with Transport Canada. We had an agreement on confidentiality. These reports were done at the request of Transport Canada. They are in Transport Canada's hands. You are in control of Transport Canada. So they're not ours to release. But I would suggest that you know where you can get them.

[The Chair, Conservative, Gerry Ritz]

You have your answer, Mr. Bezan.

Is there any other short question? Thirty seconds.

[James Bezan, Conservative, Selkirk—Interlake, MB]

When you guys are sitting around talking about the cost of maintenance and how you, the FRCC, are going to be able to keep those costs down, where is your expertise to be able to say you're going to be able to keep these costs down, versus the railroads, which have been doing it for the last 25 years?

[Sinclair Harrison]

I mentioned a company by the name of AllTranstek, out of Chicago. We searched the North American market. They manage the maintenance on 100,000 cars. They have the expertise and they have a wide range of cars. We think we have the people and the wherewithal to manage the fleet and to do it for $1,500.

Bernie.

[Bernie Churko]

I was going to add that we did search the whole North American market, Mr. Bezan, and we're confident that this is about the right number. We went to at least half a dozen. One should remember that about 60% of the cars out there are privately owned now in North America. So it's not that it's new in terms of maintenance of the fleet. We went to large owners and small owners, and we actually had about half a dozen specialists come to the office and spend weeks there and go component by component on these cars to develop our maintenance program. We're confident that the $1,500 is about right. Whether the railway number is right or not, we can't really judge, and again, we don't have access to that data.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Churko.

Mr. Boshcoff, for five minutes.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you, Mr. Chair.

I would like just a quick clarification. It seems to me that this report can go one way or the other, depending on a clarification of what you heard over the radio last week. What did you hear, and who was it? Was it the minister himself? Are we deciding this on hearsay--casual evidence--as opposed to anything that has some credibility?

[Sinclair Harrison]

We, like you, listen to the radio, but I think it has to come from the government themselves who they intend to have replace the cars. It doesn't really matter what the radio said. I think for everybody's sake, everybody around this table, the government has to come forward and say what their intention was in their announcement of May 4 for replacing the cars. And that will clarify it.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

You're convinced that a dedicated system is necessary. So is that an absolute premise that everybody should be agreeing with?

[Sinclair Harrison]

Well, it goes back to 1972. I don't like going back that far, but that was why the federal government, Saskatchewan, Alberta, and the Wheat Board started buying cars, because the railroads weren't dedicating. In a competitive market, the cars go to the highest-value product. If you've seen the grain prices lately, most products that are hauled in hopper cars are of higher value than grain. So that dictates where the cars go.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Will there always be complications with this hybrid system, where we have some owned by the government and some owned by other parties? Would a totally homogenous system be practical or achievable?