Agriculture Committee on Oct. 22nd, 2009

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you very much, Mr. Chairman.

I have to say that this is not the first time I've dealt with the railways on some of these issues. I did that on the transport committee. I'm happy to see the change in safety attitude that has now come upon CN, because I have to tell you we just about had to subpoena CN and CP to show up to talk about the safety and the number of derailments we were having two years ago.

Getting CN to come to our committee meeting wasn't that easy. I can't imagine what it's like for local mayors and reeves to get CN representatives to come out. Actually I can, because I've talked to several of them who have been very frustrated with the fact that you make this process of keeping your rail lines intact and your loading sites intact sound so easy. I have farmers struggling to try to deal with CN and offering to pay for these sites. They can't even get through your level of bureaucracy to talk to anybody who's willing to make a decision on these things.

One of the things that the member from Peace River and I undertook to do is to go around and talk to community representatives from some of these places that you are proposing to shut down. When you take a look at them, the biggest complaint in their community is the level of service and the level of maintenance on these sites that are currently existing.

I can't believe that you're telling me that in Westlock, Alberta you're spending $12,000 a month to service that site, because you certainly don't ever cut the grass at that site, and it's pretty tough to walk the line, from what I've seen. It's pretty hard for farmers to want to use these sites when you see the conditions that oftentimes they are left in.

I do want to get to some more productive questions, though. You talk about the fact that very few producer cars are being loaded through these sites, yet it is nearly impossible from what I understand--and correct me if I am wrong on this--for a producer, as Mr. Goff has said, to load non-board product with you. At the end of the day, the non-board product, at least in my part of the Prairies, has been an increasing amount of what is being produced.

So you have a product that really should be an opportunity for you to have more service, more cars going through, which would mean more profit for you, and somehow these farmers are coming to me and saying that they just can't get non-board grains onto producer cars.

[Jean-Jacques Ruest]

As it relates to board or non-board grains, we would fill both orders whether it's barley or wheat, whether it's board grain or non-board grain. We provide the equipment for the grain that needs to be shipped.

What grain would be loaded in producer cars is really more of a matter of the grain company and the producer as to what they are selling and which site they are using, but we certainly do transportation for all of these different commodities.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

The other issue that I did take a little umbrage at is when you told my colleague that the level of service provided by CN is irrelevant to the issue of producer car loading sites. I think it is actually very relevant to the fact, because most of these guys can't afford the costs and penalties if your car happens to actually show up on time and they're late. On the other hand, they also can't afford to be paying people to wait there, sometimes for a day or two days, for your car to show up. The level of service that we have experienced in our area of the Prairies has been atrocious. This is something that is being fleshed out right now through the level of service review.

But I can tell you through my review of the shippers' bill of rights we implemented two years ago that it was very disheartening to talk to a lot of these guys who are trying to make a living. The costs are always pushed back down on top of them. As Mr. Valeriote said, this is one of the few issues about which the Wheat Board can come in front of our committee and we don't have any questions for them on this side, because the level of service is very germane to the topic.

Keeping these sites open is not just a matter of running a gas station, a coffee shop, or a doughnut shop. This is not only a part of our national heritage; this is a part of a national transportation system that has been privatized, and you have people on this side of the aisle who firmly believe in that kind of thing doubting whether the right thing was done when it came to our railways.

At the end of the day, there are many questions I'd like to see some answers for. I'd like to see some clarification as to the actual costs that you guys are incurring. I would actually like to see it on all the sites that you are proposing to close, because, looking at this list, I highly doubt that you're spending $12,000 a year on some of these sites.

One of the other questions I have for you is the issue of the 29 stations. Do you have a map or something so we can see the 29 stations that are producing this 80%? What I understand from the argument is that this is where you are eventually trying to get to: running only those 29 most profitable stations. Otherwise, why can't you use the same argument to shut down all the rest of them?

[Jean-Jacques Ruest]

No, it is not our intent to distill down to 29 stations. I don't have a map of the 29 stations, but I think the Wheat Board has the same statistics on where these cars have been loaded, the 8,200 on CN.

We don't have any intention at all of getting out of the producer car loading business. This business has been growing. It's been growing, with ebbs and flows. Lately it has been growing more than in the past, and I would imagine that the trend may increase in the future. But the fact is that it's also been growing in a few sites. Producers, by choice, probably according to transportation costs or whatever other choice they make, are using a certain number of sites that may be well equipped and are close enough. By choice, they use these sites. Others don't get used.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Well, I can tell you that if you get your way, northeastern Alberta won't be a growing spot for you, because you will have shut down pretty much every single site in northeastern and north-central Alberta.

[The Chair, Conservative, Larry Miller]

Your time has expired, Mr. Storseth. Thank you.

Mr. Bellavance, for five minutes.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

I would like to go back to CN.

So 13 stations could remain open. Has a final decision been made?

[Sean Finn]

We will publish the notice on November 1 so that all of the 53 stations are on the same schedule. That said, you have to understand that, as of today, 40 of the 53 stations can no longer remain open because cars can no longer be ordered. But the switches are still there and will be there on December 31. They will probably be there on January 15, and very likely will be there for the winter. Here is the issue: we want people who have not used these 53 stations for two or three years to sit down with us and tell us whether they are interested in having the 13 remain open and the 40 others put back on the list. We want to hear business plans that would allow us to supply the location with cars for one or two years.

I want to be very clear: as it stands today, cars can no longer be ordered, but the infrastructure, switches and tracks are still there. We will not stop before December 31. If, over the course of the next few weeks, even up to December 15, somebody can show us a business plan to load 22 cars next year, we will sit down in good faith and negotiate an agreement to get those 22 cars loaded.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

I assume that any decision you make is based on an exhaustive study of all of your sites. At some stage, you made a decision and decide to close 53 of them. You only have to give 60 days' notice and to inform Transport Canada of your decision. The department does not even have to support your decision. I get the impression that it was afterwards, when there was pressure, not just from users, but from politicians, that you decided to say that you are open to negotiating and studying business plans. I get the impression that this is happening only because you heard alarm bells ringing.

[Sean Finn]

Mr. Bellavance, we...

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Do you have a definite plan for the future? We are discussing 53 stations today, but are there others that you plan to close?

[Sean Finn]

The 53 sites in question are stations that are not being used. Forty-two had not been used for more than two years, and 39 had not been used for three years. This is not a spur-of-the-moment decision. One of the criteria is site use. Do people order cars for these stations?

Once more, I would repeat, and, as a Quebecker, you will surely appreciate this... I am sure you are aware that a train was derailed last year in Montmagny due to a switch. The switch had been maintained, but it had unfortunately broken. If there is no service and no cars ordered, it is important for us to know if a switch has to be maintained. That is our way of managing risk. I want to be very clear: for all 53 sites, we did the work and we published the notice in the newspapers, but we also talked to the communities. We told them that the sites were not being used, and asked them if they knew anybody who wanted to load cars there. The answer was no. We decided to wait 60 to 90 days in case people showed an interest.

Once again, if, tomorrow morning, somebody wants to negotiate with us in good faith about these sites, we will sit down with them and we will not remove the switches on January 1 if negotiations are under way. We continually look at our sites to ensure that they are both viable and safe. Railway workers know that it is risky to keep a switch that has not been used for two years on a main line. We have to manage this risk so that cars do not derail. You have to understand that if a switch is not used for two years and a 100-car freight train derails, it could cost millions of dollars. And the dangers for the environment and the surrounding communities are no laughing matter.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

What I am wondering, and what I am going to ask you, is the following: if you have a definite usage plan for the car loading stations, why were the communities not consulted before the decision was made, instead of seemingly allowing it to take them by surprise?

That is what the witnesses have told us in their testimony. People have told us that they are being “railroaded“; they are told that you are done, you have shut up shop and they can no longer use these stations. That is why they are lobbying to change the situation. As their service provider, can you explain why you do not have longer discussions with communities and users?

[Sean Finn]

I repeat that we are not reacting to political pressure. We provided the notice, we spoke to the communities, and after 45 or 60 days, nobody had contacted us to say that there was a problem or to express their dissent.

We could debate whether the notice is an effective tool or not. The people who issued the notice work for me at CN. I was told that they contacted the communities, but perhaps we could have done better. One can always do better, and so I will commit today to ensuring better communication with communities.

That being said, no cars had been loaded at the station for two years. We contacted the mayor to tell him that we wanted to close it, and he asked us what we wanted him to do. We explained that if we found somebody who wanted to load cars, we could keep the station open. But the mayor said that he did not know of anybody and could not help us.

Look, if Mr. Goff is saying that there are people willing to negotiate, I can assure you that I will follow up on this to find out who they are. We will sit down with them. Our business is transporting freight, not closing stations, but we need freight to transport. Without it, we still have to maintain our stations, and, at that point, we run into issues of risk management and rail safety.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Mr. Goff, could...

[The Chair, Conservative, Larry Miller]

Thank you.

You're out of time, Mr. Bellavance.

Mr. Richards, for five minutes.

[Blake Richards, Conservative, Wild Rose, AB]

Thank you, Mr. Chairman.

I appreciate all of you being here today.

I want to start with a few comments on the Wheat Board's comments today, because I found them quite interesting. It certainly isn't that I don't appreciate their support on this particular issue. However, I was a little surprised to hear these types of comments from the Wheat Board: comments on putting money in farmers' pockets by introducing an important element of competition; comments about transparency and being transparent; comments about the availability of options and the access to options; and most significantly, there was a comment that “many producers feel that the ability to ship their own grain by producer car is an important tool in their grain marketing toolbox”.

Given the Wheat Board's track record as far as allowing farmers to sell their own grain is concerned, I find those comments actually quite hypocritical. When I hear about things like transparency, giving access to options, introducing competition, and giving farmers the ability to make their own choices, I would certainly want to say to the Wheat Board that I think what's good for the goose is good for the gander, and the Wheat Board should keep that in mind.

However, we do have an issue here today that we agree on and I certainly appreciate your support on that. I want to highlight a couple of the very strong points that you've raised. I'd like to address those towards our folks from the railway. I'd like to hear your comments and your feedback on these particular points.

There are points I want to centre on in the Wheat Board's comments.

Number one is talking about the delisting of sites and how that would be done without any assurance that the freight rates, which would reflect the lower cost structure the railways hope to enjoy, would be passed along. So they are being delisted without any assurance that this would be passed along.

Also, a study done in 2007 by rail expert John Edsforth found that railways were overcharging producers for grain transportation to the tune of $100 million annually. I want to hear your comments and feedback on that particular statement.

[Jean-Jacques Ruest]

On the pricing, we do all the pricing annually under the grain cap. That's what we follow. Every year we do the pricing under the formula. The formula has actually been revisited twice in the last 30 months. With a price decrease this year, the rates are, on average, about 7% lower than the year before. Also, when we went through the discussion and debate about the maintenance of the hopper cars, there was also a 7% reduction at that time, which, in the case of CN, was about $30 million.

The pricing of all moving of grain freight is regulated and it falls under the revenue cap. We file a report every year on all the movement we do--the tonnage, the mileage--and if we exceed the cap by some amount, we pay the penalty.

[Blake Richards, Conservative, Wild Rose, AB]

I'd also like a comment about the concern with the delisting. You're saying there are cost-saving measures for you. Are those cost savings going to be passed on?

[Jean-Jacques Ruest]

The revenue cap is not a cost formula; it's a revenue formula. As we had pleaded in our case when the hopper car maintenance case was made, in our view grain is moving at a very reasonable freight rate in Canada right now.

These freight rates, following the two recent price reductions, make this business the least profitable of all our business. These rates, in relation to their costs, are very competitive, to the point that we want to be sure that freight rates for grain remain sustainable so we can reinvest. We want to keep that in mind.

[Blake Richards, Conservative, Wild Rose, AB]

Let me switch gears a bit--

[Jean-Jacques Ruest]

The freight rates are not based on cost; they are based on the revenue cap. The revenue cap is a combination of mileage and tonnage. The revenue cap has been reduced twice already. That business is the least profitable business for the railroad right now in Canada.

[Blake Richards, Conservative, Wild Rose, AB]

Let me switch gears a bit. I want to talk a little about consultation. Certainly I think all of us in this room can appreciate the need for consultation. Certainly there was a point made by the Wheat Board, which I also fully support here, and that is in relation to notification. I know that many producers want that option. They want the option in order to be able choose how they ship and they want the option to be able to choose how they sell.

In this particular instance, we're talking about the shipping and certainly about how producers are not being afforded the same kind of consultation that there is surrounding urban rail sidings, where there is a requirement for a twelve-month notification period prior to the elimination of a siding in an urban area. I wanted to hear some comments on that and whether you would agree with that kind of change. I'd certainly like to see far more consultation with producers when changes like this are made. They may not necessarily be using the service at all times, but they certainly need that option. To be consulted about that before something like this is decided is very important.

[Sean Finn]

We can always do a better job in consulting. I'll be very sure about that. For example, there are 13 sites that remain to be listed. We decided we're not going to publish it in some weekly paper. It's going to be in one of the national papers, so it won't be once a week that it will be seen. So that's one issue.

I can say to you today that I was personally involved in ensuring, post the announcement, that there would be consultation. I and my colleagues still push today to make sure that we know what we're going on. I'm not going to comment on the delay. That's the question of the law as it is drafted today. We don't limit ourselves to putting a notice in the paper and hoping that nobody will call us. We did go out and attempt to get people's attention. Did we do a great job? We probably didn't. Can we do better? Absolutely. Will we? Yes, I commit to do so today.

You talk about branch lines that haven't been used for two or three years. And the 60 days...I appreciate in some parts of the season it's a bad time for western Canadian farmers. We will ensure again that as we get these notices coming forward we will reach out to the communities. If we have to, we'll have meetings in the community to talk to people and say, “What is going on? What do you want to do here?” Ultimately, we're looking at two things. The first one is ensuring that the branch lines are used. The second one, I repeat, is a question of risk mitigation, risk management to ensure that if a switch is there and it hasn't been used for two years, that it is being maintained. We don't want to have a very unfortunate incident because of the fact that a switch has been there, it hasn't been used, and we haven't done anything about it.

[The Chair, Conservative, Larry Miller]

Thank you very much to our witnesses.