Agriculture Committee on March 31st, 2014

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

The first years that I farmed in the 1970s, we had piles of grain that we couldn't move. A lot of it spoiled and never did move. So this not the first time, but we do have an opportunity here to get this right. We have an opportunity with all of the commodity groups, all of the shippers out there saying that there are concerns in capacity and so forth.

You talked about the two-year review; yes, that's because this is emergency legislation and that is the procedure, the protocol. It can be renewed by a vote in Parliament, or it can also coincide with the results of the CTA review, to a larger piece of legislation and regulation, and actually be very timely in that it all comes together within that same two-year timeframe. We have an opportunity here to go out and prove to our buyers around the world that we are a country of repute, that we can actually get our commodities to them in a timely way.

We saw an excess number of boats sitting in harbour this year. There was one vessel that left from Japan that was here to pick up some grain, but they were speculating on it. They weren't necessarily contracted at that particular point, which is both good news and bad news. We just could not fill them, which is unfortunate because Japan is a very premium customer for us. I will be in Japan early in April to reinforce the fact that they should come with their chequebooks; we have the product and we have the capacity to get it to them.

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

Why did it take so long?

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

I'll speak to that too.

We had a very late harvest. Actually, even in my area it really wasn't known on the ground until we were into the early days of November what the quality and quantity was going to be. It was a very late harvest; we were fortunate nothing got frozen. Nobody had any idea of the capacity and the quality and quantity that would be out there.

Having said that, the railways did move more off the combine than I've ever seen moved before. That's called cash flow. That's a good thing. That's called surge capacity. What we need is that surge capacity. We need overall capacity throughout the year, but we need that surge capacity at harvest time for cash flow. We need it before the road bans go on right now in the spring. We also need it at the end of the crop year.

Those are some of the plans that Minister Raitt and I will be working out with all of the commodity shippers. They all have surge capacity that they require at certain times, and we want to make sure that we can address all of them.

[The Chair, Conservative, Bev Shipley]

Thank you very much.

We'll move now to Mr. Payne, for five minutes, please.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you, Ministers, for coming today. It's obviously a really important issue that we're working on here.

I'm from Medicine Hat, and we're captive to the CPR, and have been captive for as long as I can recall. I worked for an international petrochemical company, and I can tell you that regularly, there were difficulties with the CPR. They wouldn't move the product; they wouldn't get the cars on time, demurrage, and so on. I know you've heard all of that. There's also a huge fertilizer plant in my riding. Those are some of the issues that go beyond grain.

One of the things I wanted to talk about is the interswitching. I can recall when it went to 30 kilometres, and now the proposal is to go to 160 kilometres. I'm looking at a map, and it includes Medicine Hat. Ministers, I'm so delighted that this is going to happen; however, I would like to get a little information on what that means in terms of other railways, in particular the Burlington Northern,which is close by my riding. Will they be able to come up? Will they be able to bring cars up to help move the grain and other products?

Either or both ministers, please comment.

[Lisa Raitt, Conservative, Halton, ON]

There are 18 interswitching points in the three prairie provinces.

What we have said in this legislation is that currently, if you're within a 30-kilometre radius of one of these interswitching points, you can have the carrier that is your carrier, the one that you're captive to, bring you, at a regulated rate under the Canadian Transportation Agency, to that interswitching point, where someone else can pick you up and take you on the long haul. We've expanded that radius from 30 kilometres to 160 kilometres. As Minister Ritz points out, on the grain side it's going to.... He'll tell you what the statistics are in terms of your choice.

It always starts with the same thing. You have to do a deal with the shipper to take you to your end destination or your terminus point. This allows you to choose how to get to that interswitching point. It allows you to choose who takes you from that interswitching point. The carrier that you have will take you there at a regulated rate. Basically, that's the theory behind going from 30 kilometres to 160 kilometres.

It was developed at a time when we wanted to discourage railways running together so closely, especially in urban areas. That's why 100 years ago we came up with the interswitching concept. It was kept in the last Canadian transportation review, and indeed we're looking at it again this time.

I don't know whether or not the people who ship in your area, Mr. Payne, are going to utilize this ability to contract with another carrier at the interswitch point, but we have made it possible for them to do so if they're in that radius.

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

What it actually reflects, Mr. Payne, is the new reality. Over the past two decades rail lines have rationalized, and so have grain companies. We're basically running on main lines, and then there are huge terminals, elevators, as opposed to the over 2,000 that there were in 1987, when they went to 30 kilometres.

This will make a difference, as I said in my opening remarks, of moving from 14 elevators that have access to interswitching now to over 150—tenfold or elevenfold. That gives them that competitive potential.

[LaVar Payne, Conservative, Medicine Hat, AB]

Certainly, from the map it looks very positive.

Obviously, the other railway, BN in particular, would have to deal with CP in this particular case.

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

They run together in the U.S., so there's no reason to believe they wouldn't do a partnership again.

When I was attending the round table in Calgary, I left the airport and was heading downtown where the meeting was. I saw a train with a long line of grain cars, oil cars, and a couple of commodity cars. There was a CP engine and a BNSF engine on it. They're already working together in that partnership.

[LaVar Payne, Conservative, Medicine Hat, AB]

Could they be using BNSF's grain cars to come up on this interswitching, to load cars to ship south or wherever?

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

Yes.

You see a mixture of cars now, U.S. cars, Canadian cars. In a mile-long train, you'll see a multitude of different cars.

[LaVar Payne, Conservative, Medicine Hat, AB]

Yes, I've actually seen some of those cars, but I just wanted to make sure that with this legislation this would be able to happen. I think this is extremely positive in terms of being able to help get our grain, as well as the other products, to market. As you said earlier, this is not rocket science. There are companies right across the country, whether it's coal, or forest, or petrochemicals, that are expanding. We need the railways to wake up and get with it.

Do I have any time left, Mr. Chair?

[The Chair, Conservative, Bev Shipley]

You don't. You're right on time.

I'll go to Mr. Malcolm, or Mr. Allen, I should say, for five minutes.

[Malcolm Allen, NDP, Welland, ON]

It's okay, Mr. Chair. It's my mother's fault.

[Some hon. members]

Oh, oh!

[Malcolm Allen, NDP, Welland, ON]

They give you two first names, and it's just the way it is. It's the old adage in the ag committee, as long as they don't call you late for dinner, everything's well and good.

There are all kinds of documentation. Minister Raitt, I was interested in hearing you reflect upon your previous career and the whole idea of how you bring parties to the table and try to get them to come to a deal. Of course, in my previous career, I would be on the other side of the table trying to get the deal. The problem is, when you come to the table, you have to come at least as close as possible to being equals, so that one can actually have the leverage to get a deal. If you're powerless, you don't get a deal unless there's generosity on the other side to give you something, rather than trying to get something in a bargaining fashion.

Part of the problem in this, it seems to me, is there are two railroaders in this country ostensibly. Yes, there are short-lines and there are some others. I have a couple in my neck of the woods. There are some others, but ostensibly there are two main lines across this country, especially in the Prairies: one in the south, and one in the north. Some folks call it a duopoly, and some call it a monopoly, depending on whether you're in the south or the north. In some parts of the south in this country, in the Prairies, you just see it as a straight-out monopoly.

To use one of the pieces that I've been looking at, and as folks look at this act, the objective in the old board game Monopoly is to get all four railroads, and you do well if you own them all and somebody else lands on them. In this case, we only have half that number. Clearly what happens is they set the tempo in a lot of different ways. The question becomes one of how we balance that with the shippers, which you say are billion-dollar companies, and railroads are billion-dollar companies, but farmers aren't billionaires. How do we balance that piece? Shippers are saying they're powerless to deal with the railroads. That's what they're telling us. That's what they said last year when they came here and tried to get a service level agreement. They said they felt powerless because the railroads basically said no, they're not doing it. You don't have a choice to go to somebody else.

How do farmers work into this equation? As Minister Ritz said, how do we get things to them, since they really are the ones who are left holding the short end of the stick when it comes to the two of them, as all these costs flow back at them?

Let me mention something, and then I'll get you to comment. This is a Portland thing because it's easier to get statistics from the States, but here it's hard. Basically the average bid in Saskatchewan, on March 24, which was last week, was $5.54 a bushel, and in Portland it was $11.19. The basis was greater than what the farmer got, which was $5.66, and that was to Portland. The biggest problem we have is getting the port of Vancouver's price and the inland price. That transparency isn't there.

How do we get a level playing field? How do we get transparency in the system for Canadian farmers so they really know what the heck is going on out there?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Allen, it's pretty funny. When we were on the other side on back-to-work legislation, you didn't like it very much when we tried to tell the arbitrator what terms he had to consider in making up deals, but here on the other side, the more terms we give to the arbitrator, the happier people seem to be in terms of this issue.

That's a serious question and it deserves a serious answer, and it's this. The transportation of grain by rail certainly is a large cost to the producer, to the farmer, and that's something that's passed on from the shipper. That's why we still have a regulated rate, in a sense, for the shipment of grain. The railways cannot exceed a maximum revenue in terms of the shipment of grain.

When they do exceed it above a cap that is set by the Canadian Transportation Agency, the money is put into a fund that goes into research. That's how that system and that process are set up.

What the government is saying is that we understand this is a very large part of the cost associated with getting your grain to market, and we all accept and recognize that this is an important piece of rail transportation, so that's why we have a maximum revenue. We can have a lot of discussions about whether that makes sense, but those are discussions for the CTA, because this really is a complex issue.

From my perspective, as you move forward in talking about how to ensure a balance in the system, the more reliable and efficient our transportation, the quicker we can get that grain out of country elevators. That's where farmers deliver. That's where they have to deposit. The problem this year, as you know, is that the elevators were full because they weren't moving down the chain.

We focus on making sure that the system can move, that you unload in the terminal at the end of your destination, and that completely along the way you have every step of the process working together. We believe that the legislation helps to do that in a number of ways and that at the end of the day it will be beneficial for the farmer. The sooner we can move along and the more investment we have in the chain, the better efficiency we will have. The relationship with shippers and rail and the farmers is incredibly important.

We agree with you on one point: it's not the farmer or the producer who should be paying the price when we have big companies involved in moving the grain. As you know, shippers are trying to make their dollars, and when they have very little capacity, they have the ability to buy the grain at a very low price because of market demand.

As one final point, I would say, and I think it's important to create this baseline, that a Liberal government deregulated CN, and it's probably one of the best things they ever did, because it—

[Wayne Easter, Liberal, Malpeque, PE]

Yahoo.

[Voices]

Oh, oh!

[Lisa Raitt, Conservative, Halton, ON]

I know, Wayne. I'm giving you some props. I hope you stick by it and that you don't try to overregulate—

[The Chair, Conservative, Bev Shipley]

I should have cut her off, because we're over time.

[Lisa Raitt, Conservative, Halton, ON]

—because you guys are sounding kind of wonky right now.

[Voices]

Oh, oh!

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

Right on. Talk to Ralph.

[Lisa Raitt, Conservative, Halton, ON]

I may start quoting back at you what your former minister of transport said when he started this process at CN. But it has been a very good investment. It has been good for this country. They have done much better operationally than what had been done in the past. It was the right path to take. I stand by our private system of railways. The market has to drive this process.