Evidence of meeting #21 for Agriculture and Agri-Food in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was capacity.
A recording is available from Parliament.
9:15 p.m.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Mr. Creel, I think, wanted to make a quick comment.
9:15 p.m.
Conservative
9:15 p.m.
President and Chief Operating Officer, Canadian Pacific Railway
Let me start by saying it's unfortunate that perception exists among the farmers in Canada. I was not in New York. I did not hear Mr. Harrison's comments. It would be inappropriate for me to comment. But I can tell you the reality of what happens day to day at our railway.
In our company there's only one larger advocate than me for grain and moving grain, and that's Mr. Harrison. The fact is that at CP, even during this winter, we're moving more grain than we've ever moved. It is the only commodity. If you look at our numbers for February and March, we've experienced double-digit growth year over year. It's the only commodity. The balance of our customers in this marketplace would love to have enjoyed the kind of growth and the kind of capacity that's been created for grain. The facts are and the reality is that from the top of the house to the bottom of the house, grain is getting the priority that it needs to the best of our ability given supply chain constraints that we have in moving it.
Thank you, sir.
9:15 p.m.
Conservative
The Chair Conservative Bev Shipley
Thank you very much, Mr. Creel.
Now I'll go to Mr. Watson, for five minutes.
9:15 p.m.
Conservative
Jeff Watson Conservative Essex, ON
Thank you, Mr. Chair. I hope that answer being added to Mr. Goodale's monologue doesn't cut into my time.
I want to start with the presentation by Mr. Mongeau at CN. I'm looking at page 5, which refers to “Plenty of Railway Capacity Initially Left Unused”. I understand how a railway company would plan based on what it would move in an average year. But based on a late planting season, which you and others would have known about, was it realistic to expect that capacity to have been used up on August 1, as your presentation shows? You're showing quite a gap on August 1. Was it realistic, knowing that there was a late planting season and that you probably weren't going to have average capacity in August?
9:15 p.m.
President and Chief Executive Officer, Canadian National Railway Company
I would say it's as realistic as wishing winter away. It takes hindsight, and it was growing in the backyard of all the grain players who are today accusing us of failing the country. All I'm saying is if we're so bad, what were you doing in August? There was nine million tonnes of carry-over stock. When it became obvious that we had the potential for a huge crop, we should have started to move traffic to create storage capacity. In normal years, it doesn't happen that way. In an exceptional year, it would have been very, very helpful. I wouldn't be pointing that out if they weren't trying to say that we failed the country because of a very difficult winter.
9:15 p.m.
Conservative
Jeff Watson Conservative Essex, ON
Are you saying to the committee today that neither the order in council nor Bill C-30 are necessary measures? Is that your position?
9:15 p.m.
President and Chief Executive Officer, Canadian National Railway Company
I think the order in council is helpful to rally all the players, and we are going to meet that order in council and then some. It's a “blunt instrument”, but I can understand the crisis out there, and we're prepared to live with it and move the traffic according to it.
I do have grave concerns about the interswitching provisions, which I thought were brought into the equation without much due process, and I have—let's put it this way—a lot of concerns about the undermining of supply chain collaboration, which comes with the piling on, as if railroads were the only key player. You're asking the grain elevator company to comment on railroad performance. Who's asking grain elevator companies why they were placing so many orders? How are they managing their business, and in which corridors? It's only the railroads that are on trial.
9:20 p.m.
Conservative
Jeff Watson Conservative Essex, ON
Without the order in council, without Bill C-30 with the two-year time limitation on it, if you will, the estimated carry-out could be in the range of either 17 to 27 million tonnes, the lower end with the requirements in place. If we weren't to proceed with Bill C-30, then how can you convince this committee? What would your plan be to deal with the carry-out, considering that next year it could be 63 million? You've got a carry-out that's quite large. What is your plan? If it wasn't a mandatory requirement, what's your plan of convincing us?
I'd like Mr. Creel to answer the same question, by the way.
April 1st, 2014 / 9:20 p.m.
President and Chief Executive Officer, Canadian National Railway Company
Our plan is to move 5,500 cars as soon as possible. We've been saying that for two months, well before the order in council came in. We believe that with 5,500 cars at CN, which means something like 10,500 or 11,000 for the industry, we would most likely exceed the capability of the grain elevator company to unload and load those cars.
9:20 p.m.
Conservative
Jeff Watson Conservative Essex, ON
How long are you prepared to do it at that level? Until the carry-out is gone, or what?
9:20 p.m.
President and Chief Executive Officer, Canadian National Railway Company
We are, for sure. Until winter takes a little bite of our performance next year, we've provided our plans. As soon as the weather breaks, 5,500. We're well on our way to doing that, and we'll keep it that way as long as they can load and unload them.
I think that what we're going to find—this committee should watch this—in the next couple of weeks is that the maximum this supply chain is able to do, rail and grain elevators, is something in the range of 10,500 cars. That would be my bet.
9:20 p.m.
Conservative
Jeff Watson Conservative Essex, ON
I heard you say that earlier. I'd like Mr. Creel to answer the question.
9:20 p.m.
President and Chief Operating Officer, Canadian Pacific Railway
I would say this: From my view at CP, it was not necessary. We're effectively moving under the order in council the same amount of grain that we were moving without it back in September, October and November, until this weather started. With that said, if it is necessary, and it's deemed that it was obviously and it was issued, I'd say that it's incomplete.
If we really want to optimize how much grain is moved in this country and deal with record crops, record levels, we need to complete the supply chain. We need to be compelled to bring all the players to the table so that we can collaboratively work together to identify all the gaps in capacity, with the same commitment, with the same skin in the game—for a lack of a better term—so that we can optimize the growing supply chain, not minimize it by going after just the railways.
9:20 p.m.
Conservative
The Chair Conservative Bev Shipley
Thank you very much, Mr. Watson. Now we'll go to Madam Brosseau of the NDP, for five minutes, please.
9:20 p.m.
NDP
Ruth Ellen Brosseau NDP Berthier—Maskinongé, QC
I would like to thank our witnesses for their testimony today.
I would like to touch on something that Monsieur Mongeau said in a comment to my colleague Mr. Allen. I think you said that there had not been enough talks, I guess, between the government and the rail companies before this heavy-handed legislation came down. Did I get that right? Is there enough communication between the federal government and the rail companies?
9:20 p.m.
President and Chief Executive Officer, Canadian National Railway Company
I would say that we're finding out about the government's intentions in the news. Like most other stakeholders, we've been asked for our position, but there's not been an opportunity to sit down and discuss, for instance, with the grain elevators and the rail industry, whether it should be 10,000, 11,000, or 12,000. Those conversations have never taken place, and we will have to prove the hard way where throughout the supply chain capability is.
9:20 p.m.
NDP
Ruth Ellen Brosseau NDP Berthier—Maskinongé, QC
For any relationship to work properly, there has to be communication. Without that it just doesn't work; there's a complete breakdown. I think that's why we're here. We're trying to flesh out how we got here, establish what the problems are, and fix them.
In a statement by CN on March 31, you were quoted as saying, “One of the biggest root causes of the challenge we face is a lack of coordination across the supply chain and growing pains from new grain marketing strategies following the change in role of the Canadian Wheat Board.” I'm wondering if you could comment on the role of the Canadian Wheat Board when it did deal with logistics issues, where we are today, and on how we could flesh out a better working relationship.
As you said, Mr. Creel, it's important. With this order in council you basically are doing what you're supposed to be doing, but it's incomplete because not all the players in the supply chain are at the table.
I think it was also mentioned that this is a team sport in terms of the supply chain. I'm wondering if I could have your comments on how we all need to work together, and even if there are amendments to make this piece of legislation better, on how the government should maybe be a little bit more of a team player.
9:25 p.m.
President and Chief Operating Officer, Canadian Pacific Railway
The only way to effectively make this work and make it complete is to compel all those players—the elevators in the country, the port terminal operators, the grain companies—to come to the table so that we can sit down together and identify capacity opportunities.
That has not been done. We have not been able to get the grain companies to the table to collaborate and to make the same kind of commitments. We get the rhetoric that if the grain is there, they'll work 24 hours a day, seven days a week. Well, the grain has been there in spades for the past three weeks, and as I've said, only one of the five terminals has worked 24 hours a day, seven days a week. They are just not matching the rhetoric with fact and with the same commitment that the railways are.
We're prepared to do that. We just need all the players to come to the table, and the legislation does not compel all the players to come to the table.
9:25 p.m.
NDP
9:25 p.m.
President and Chief Operating Officer, Canadian Pacific Railway
It should not have to be done through regulation. We've made a call and we've made ourselves available to do this many times. There just has not been the commitment or the desire to make it happen.
9:25 p.m.
President and Chief Executive Officer, Canadian National Railway Company
Let me give you one example.
You heard Mr. Sobkowich, for instance, say that we should have liquidated damage to pay for the ship demurrage. Well, if the grain elevator company ordered too many ships, more ships than they are able to unload, who should pay the liquidated damage?
Finding out the true capacity is not an exact science. It requires a lot of collaboration. When you have rhetoric, finger pointing, piling on the railroads, you get quotas and you get regulation.
At the moment, only one party is being subjected to this trial, and the reality is that it's a team sport. The railroads are not very far from the capacity that the grain elevators are able to handle. We were far from it in the winter; make no mistake. As I've said, for CN it's been about 10,000 cars, or one million tonnes, less than what a normal winter would be. But we were close to the maximum capacity of the grain elevators in the fall, and we are close to it now; you watch.
9:25 p.m.
NDP
Ruth Ellen Brosseau NDP Berthier—Maskinongé, QC
We could all agree that this has not been a good year, but moving forward, how will we regain our reputation? I think we have a black eye domestically and also internationally. How are we going to ensure that this does not happen again, that we're actually talking and making the system work together?
