Agriculture Committee on March 31st, 2014

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Right. Thank you.

[The Chair, Conservative, Bev Shipley]

Thank you very much for your time.

Now we'll go to Mr. Eyking for five minutes please.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you, Ministers, for coming here today.

I guess it's too bad you have to come here today. When you look at the rail act of last year, Bill C-52, an act to amend the Canada Transportation Act (administration, air and railway transportation and arbitration), was a great opportunity and we could have had a rail act then. There were recommendations and we wouldn't have this $8 billion loss right now. That being said, we have to go forward over the next few days in our committee and roll up our sleeves to try to get some recommendations to you.

I have three questions. I'll ask the three of them and then you can figure out how you are going to answer them.

First, will your government accept the amendments that farmers are going to be bringing to the table here over the next few days? Are you open to these amendments?

My second question deals with regulations. We talk about regulations, but Bill C-30 creates more of a legal authority to produce regulations. I'm guessing that you have more draft regulations on hand. Will those regulations be given to our committee so we can look at them before we vote on the bill?

It was already mentioned about how the government will deal with the shippers and the railroads and try to lay out a precise definition of what service levels the railways are expected to deliver.

The third question is how will the performance be measured? How will damages be paid to farmers if those services have failed?

Minister Ritz, perhaps you could comment on the comments from the Minister of Agriculture for Saskatchewan who said that it is too late of course, but there's not enough teeth in there and not enough penalties or compensation in this framework to go back to farmers.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Let me start with the last point first. I've had meetings with Lyle Stewart as late as Thursday afternoon, talking about the way forward.

At the table on day two we also had potash, which is a major commodity in Saskatchewan. They're very concerned that their own provincial government is going too far in grain and it's going to affect their capacity to move.

That's why we're putting forward a balanced approach, working with the numbers the railway say they can do without disincenting, say, potash, or coal, or timber, or all of the other bulk commodities.

I would say penalties don't move grain. It will maybe get somebody's attention, but it's the regulations we put in play, it's the transparency along the full supply chain that is fully missing.

You made reference to Bill C-52. There's much more comprehensive enhancement of the full supply chain in here and it actually builds on the foundation that Bill C-52 provided.

I would say to my colleague Minister Stewart that penalties don't move grain, and by expanding this or that isn't necessarily going to do it. It's the full package we have here all dovetailed together.

When you talk about damages paid to farmers, I look at it from a different direction, Mr. Eyking. I look at it from farmers not paying the bills for things they don't control: demurrage and storage and all of these other things that pile up when they've already sold their grain. They've dumped it in the pit at the elevator. It's no longer theirs, and yet they're held hostage at this juncture by the shippers, by the railways, by the ports, by everybody all the way along. We saw it this year in a stretched basis. They were offered far less than what it was worth in the world price.

I'm more concerned about the bills the farmers are forced to pay than damages accruing and paid to farmers. That's very hard to administer. If we can put service level agreements in play that allow the shippers and the railways to work out their differences, then those costs don't continue to hemorrhage down to the farm gate. That's the point I want to make on that.

On the regulations and amendments, of course we'll look at any amendments that come forward. That's the nature of the committee hearing. You are masters of your own destiny. I know the right amendments will come forward at the end of the day from what you've heard.

It's hard to write the regulations ahead of time when you're not sure exactly what all the amendments will be. I've done a number of round tables, I'm not even sure how many now, in different areas across western Canada in the last two months. I have a pretty good idea what a lot of people are going to say. I know they're fine-tuning their asks. All of the shippers are starting to coalesce around the crop logistics working group that I put together in 2011, looking at logistics as we made changes to the single desk of the Wheat Board.

There's some fine-tuning being done in that respect, so I'm not going to predetermine what those regulations will be, or predetermine whether or not an amendment will be acceptable.

[Lisa Raitt, Conservative, Halton, ON]

What else is important to note is that we have equally announced that we are going to accelerate the Canada Transportation Act review, which is a mandatory review every 10 years. It takes place over 18 months. We're going to launch it in the summer.

The importance of that is, even before the official launch we are already looking at the rail aspects associated with it. One of them is SLAs. As the minister has pointed out, we've been conducting a number of round tables to start the conversation about these issues.

These are not issues in and of themselves. They're very complex. They have an effect on the entire chain. When you think about the CTA review, one of the things we want to have a serious conversation about is the capacity of the system itself. Also, how do we encourage and incent investment in this system to increase the capacity? If we keep enjoying the fact that we can sign more free trade agreements and move more goods to market, we want to have a system that can actually do that.

This is a very important measure, and I'm sure we'll hear about our service level agreements. I would encourage committee members to remember that it's not just one commodity that moves across this transportation system of ours. There are many commodities. We have to do it in concert with one another and we have to realize we want to encourage investment in this rail infrastructure.

[The Chair, Conservative, Bev Shipley]

Thank you, Mr. Eyking.

We'll now go to Mr. Watson, for five minutes, please.

[Jeff Watson, Conservative, Essex, ON]

Thank you to our ministers for appearing today.

With respect to the idea of penalties, I presume, Mr. Chair, not only are the complaints from shippers not something new—they've been complaining about railways since Confederation—but if the idea of penalties was so simple and so popular, it would have occurred a long time ago, presumably.

The Canada Transportation Act, for example, is not new. It certainly isn't ours either. It was brought forward under a previous government and this issue has not been addressed there. I presume that's because, while it may be popular, it's not necessarily simple. I think the approach of having this done under review is sensible.

We did take a look at this with respect to Bill C-52 at the transport committee. There were a number of issues raised at that particular time. I guess what we're driving at is the difference between penalties for failure or breach of obligations versus liquidated damages.That's where the nub of this issue broke down in the committee.

Our government, of course, with Bill C-52, put in place the administrative monetary penalties to deal with issues of breach of service. The liquidated damages in commercial contracts are actually uniformly dealt with in courts. Is that not the case? Right.

In fact, it's difficult to presume a full range of potential penalties for a full range of potential situations and then enshrine all that in a piece of legislation. I think that's the issue of what I understood in your statements earlier today. Is that a fair enough assessment?

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Well, that's the nature of a regulatory package as opposed to a legislative package, because it does allow you to make those adjustments as you need them, as you require them.

[Jeff Watson, Conservative, Essex, ON]

One of the other complexities, of course, is that something that focuses specifically on the relationship between a shipper and a railway company excludes other potential indirect supply chain impacts, the performance of terminals, for example. Is that a fair assessment as well?

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Anything that's set up in an SLA has to take into account the full supply chain. It has to be from gate to plate. You have to look at all of those, and whoever caused the problem, the slowdown, or the stoppage would have to be addressed in those SLAs. It's a very complex system. It's not something I think you can actually write legislation for. One size does not fit all. Again, it underscores the need to have regulations that are adaptable as you move forward.

[Jeff Watson, Conservative, Essex, ON]

If liquidated damages were put into the legislation, could that not also impair the ability of shippers to actually sue in court for damages or limit what they could receive in damages in court?

[Lisa Raitt, Conservative, Halton, ON]

If you're talking about liquidated...you're getting into the realm of my old profession, which was a lawyer. Let me tell you what my concern is when you get overly prescriptive, as you are talking about doing. Suddenly the two companies aren't talking about how to move the grain. They're talking about how to mitigate the legal risk between them if the relationship breaks down.

What we tried to do with the bill last year was to encourage companies to do the deal themselves because, as I can tell you coming from a labour background, the best deal you're going to get is the one you do yourself. That's what that was about: trying to bring them together.

What we're taking a look at now is more discussion around the SLAs. It's important to take a look at it because we want to ensure that if we put a process in place, it's well utilized and it makes a lot of sense and that we continue to improve and to make sure we're moving every commodity we can.

If you create an environment in which everybody defers and reverts to lawyers, you're going to end up with a system that's going to focus on the litigation side of it as opposed to the transportation side of it, and we want people to be moving goods.

[Jeff Watson, Conservative, Essex, ON]

That's an excellent point, Minister.

The planning ahead provisions and the process of bringing everyone together could actually cause railway companies, for example, if we want to single them out specifically, to invest more in rolling stock. Presumably an economy in which all sectors are booming, not just grain, which had a bumper year this year, but everybody's sector or sphere, could help the railway companies in their own long-range planning and investment. Is that a fair assessment?

[Lisa Raitt, Conservative, Halton, ON]

That's a very good assessment, and it just makes a lot of sense that you share information in a space where you're not breaching any commercial or any confidential information. They can then have better information to bring back to their boards of directors for determination of capital plans or plans going forward. Here's the point: These are not small companies. These are billion dollar companies on either side. The grain companies are billion dollar companies. The rail companies are billion dollar companies. They're very sophisticated commercial clients that we want to help facilitate and invest in our supply chain, instead of always trying to figure out who should have what advantage at what time.

That's why we have to make sure that we get the consultation right, that we do it in the context of the CTA review, and that where we can move forward, we do move forward. We want to move the grain now, and we want to facilitate the movement of all commodities in the future.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Mr. Watson, you made the point that rolling stock might be the answer. That might be a little bit simplified. At the end of the day, part of the concern I have is that the railways are fixated on a five-year average and they'll increase by 2%. That means if I'm a little elevator and I had 100 cars last year, next year I might get 102, but I'm growing, or I need 120 and I have no ability to put that on the table and say “No, I need this,” to give them a signal that their capacity needs to grow as well.

All of the resource sectors I've met with have said the very same thing. They're growing at 6% to 8% and they're held to that 2%. That does not grow the economy. That does not allow our resource sectors to even draw in investors from offshore into the country. That's part of the paradigm these new metrics will actually help us to show when, starting in August, the minister and I sit down with all of the companies, all the commodity shippers and the railways and ask them what their growth predictions are so we won't be blind-sided by these types of things coming at us.

[Jeff Watson, Conservative, Essex, ON]

That will send the right signal to the rolling stock manufacturers too.

[The Chair, Conservative, Bev Shipley]

We're running over the time.

Madam Brosseau, go ahead, please, for five minutes.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

I'd like to thank the ministers for being here.

Honestly, I think we've seen some red flags over the last few months. You know, there is a bumper crop. We've definitely asked many questions in the House of Commons about this issue. One thing we've brought up is increasing fines from $100,000 to about $250,000, a mechanism for actually compensating our farmers. We need quick and clear timelines to implement these measures and regulations and also mandatory price reporting for better transparency.

I would just like to go over what the Saskatchewan minister brought up. He actually said, “At first blush...the legislation itself is deficient. We made some substantial asks and they weren't numbers that we pulled out of the air.”

I was wondering if you could comment on how you got 11,000 cars a week when he's asked for 13,000 cars a week. Perhaps you could also comment on increasing fines to $250,000. What we have right now is up to $100,000, which is not given back to farmers as compensation.

[Lisa Raitt, Conservative, Halton, ON]

Certainly. On the subject of cars, I sat down with the CEOs of both CN and CP. We reviewed what the best record was in the movement per week in each of the corridors associated with grain. When you add up what the best was in each corridor—and they're not at the same points in time; it's the best at a certain point in time—we came to the number of 5,500 cars each, because it's pretty much fifty-fifty between the two rail companies.

To contrast that, the best in one year that has ever been done in the last decade was 9,800 cars a week. We've gone to 11,000, so we are pushing the limit on what can happen, but we have to do it because we have to be respectful of the other commodities. The number 13,000 has been sent out there. That number is not based upon railway numbers; that's based upon somebody else's metrics.

What we have to make sure is that we do not break our chain. It's important to keep the chain going for everybody, for our intermodal, for our coal, for our oil, for our potash, for everything that we need to move in this country. It's the right number. They are moving it, and that's what we wanted from the directive. That's what we want from the act. We'll continue to monitor it for next year.

As for the fines, $100,000 is the fine that's set out in the Canada Transportation Act as it is right now. I have to tell you, as a deterrent people can scoff at it and say the railway companies can afford it, and all that stuff. The railway companies have a strong incentive right now to ensure that they're moving western Canadian grain out of the country as fast as they can. It's not about monetary penalties; it is about their reputation, and it is about this country's reputation, and it's about our relationship going forward in this supply chain. They're very well aware of the pressure that's on them and they will—they will—rise to the challenge and they will move this grain.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

And they're publicly traded.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Because of this grain crisis, we've had a lot of troubles domestically, but also internationally. I think we have a black eye, and I've seen some comments that you guys have made in some articles citing the fact that it's very tough. We've actually had a vessel from Japan leave and go to the States to fill up. What in this legislation will actually ensure that this won't happen again?

There is a sunset clause after two years, and after the dismantling of the CWB, there was no afterthought logistics-wise, so here we are two years later in this big crisis, and farmers are really paying the price. I want some kind of assurance that this won't happen again. Farmers are working hard. We're going to have more and more crops, big bumper crops like we saw this year, but is it worth it when we can't transport it, when they're not getting paid? We need some kind of assurance that this will not happen again domestically, but also for our contracts, our international trade agreements, that this will not happen again.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Well, there have always been problems with logistics in Canada for decades.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Not this bad, though.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Yes, actually it has.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Has there been—