Agriculture Committee on April 1st, 2014

[The Chair, Conservative, Bev Shipley]

Now Mr. Allen, please, for five minutes.

[Malcolm Allen, NDP, Welland, ON]

I want to thank the witnesses for coming on short notice, as everyone has said.

Let me address the first question to Brett.

I'm interested in talking about the importance of short-line railroad vis-à-vis whether there is a way for them at the moment, albeit it's not in this legislation, to help with this particular situation where we have this huge backlog in grain. Is there something that we perhaps haven't thought about or haven't discussed yet?

[Brett Halstead]

Well, any capacity that could help is needed and that's where we get into where we don't want geography to be just the easiest pull. Short-line rails could definitely play a part in this but it needs to be market driven. They can definitely help if it's market driven.

[Malcolm Allen, NDP, Welland, ON]

I understand it as something longer term. This legislation has to do two things in my view. One is a short-term fix of extending the order in council and the other fix is to start looking at how we head into the medium and longer term with service agreements and regulations and all those sorts of things.

Really my sense of the short liners is whether there's a way for them to help in the immediate term. I agree with you that the market forces have to do something with short liners, but is there any role they can play in this very short to medium term that would help expedite any of this, or is that just not something we should consider at this point?

[Brett Halstead]

Well, like Matt had said earlier, I don't pretend to be an expert on how a rail company should manage its business. But I think what the role of a short line is they can gather those 100 car trains and deliver them to the main line. Then the main line can do the efficient job of what they're there to do and that's to get 100 cars from one major location to another major location.

If there are holes in the act, I guess reviewing the act may help grow short lines to an even more prominent part of this solution. I don't understand everything in the act to know whether there are solutions there.

[Malcolm Allen, NDP, Welland, ON]

I'm certainly not a railroader either; model railroads don't count, I don't think. Most of us had model railroads.

Greg, I don't know if you have any thought on what role the short liners might be able to play. Is there a role for them to play in this immediate crisis we have?

[Greg Cherewyk]

I think in the short term the role they play is precisely what we just heard. They're gathering product and servicing the main line. They're working as partners with the mainline railroads, CN and CP. In an environment where we have both of those carriers focused on tight cycle times and quick turnaround of their assets, their role isn't as prominent as it could be. If we can get back to the point where the system is delivering in such a way that it meets the needs of all of its users, I think that role will be elevated for sure.

[Malcolm Allen, NDP, Welland, ON]

I think, Greg, you mentioned it more than the others, but I think the others have alluded to it as well, the idea that the two major railroads are looking at tight cycle times. They're basically looking to the closest point, the easiest point of moving it back and forth quickly. You're suggesting that it's already happening. Obviously we need to look for evidence of that. I'm sure it could be provided if you have it, and others will as well, I'm sure, if they know it and can testify to it.

Is there something that needs to be in the bill to make sure that they don't do that? This bill basically has a sunset clause of two years. At least until we get to where you folks all want to get to, which is a service level agreement that has teeth in it, that takes out the so-called what's fair and reasonable, which is that huge definition....

Is there a piece to play to ensure that we just don't get the closest point circling around, over and over again to show that the railroads are doing what they say, “Well, we're moving 11,000 cars”?

[Greg Cherewyk]

I think I'd go back to the comments I made in my opening remarks and that is that we have to go beyond simply the established car target and total tonnage target and we have to get into a little bit more level of specificity with respect to the movement along various corridors, movement of various commodities, and movement through to various destinations.

What has to happen in my mind immediately is that we need to sit down with Quorum, the grain monitor for the grain handling and transportation system, and determine what the best way forward is with respect to ensuring that level of guidance is in the order and in the measures that follow, and then have the tool in place that would help us measure whether or not the right things are happening along the right timelines.

[Malcolm Allen, NDP, Welland, ON]

If I hear you correctly, you're talking about now.

[The Chair, Conservative, Bev Shipley]

Excuse me. We're out of time.

Thank you, though, Mr. Allen.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair.

I just needed to be sure it was now.

[The Chair, Conservative, Bev Shipley]

This will be our last questioner for this round.

I'm going to Mr. Dreeshen, please, for five minutes.

[Earl Dreeshen, Conservative, Red Deer, AB]

Thanks to all of the witnesses for being here.

Mr. Cherewyk, the numbers you put forth were really eye-opening, as far as the third quarter of 2012 and the type of capacity that CN had are concerned. I'm sure they are listening. We'll get a chance, if people want to tune in from 8:30 to 9:30, to ask them about some of those points and see what actions had been taken that have caused this deterioration in their companies. I'm sure that is something that is going to be addressed.

One of the other things you just mentioned had to do with Quorum. Could you talk somewhat about that? What types of things do you think they need to look at in order to get the proper metrics to assist all parts of the system that we're dealing with now?

[Greg Cherewyk]

First of all, I won't pretend to speak for Quorum. These are the guys you want at the table with government, deciding hand in hand how we'll go about understanding whether order fulfillment is adequate for movement across all corridors of all commodities to all shippers, small, medium, and large.

As a first point, let's ensure that the conversation happens immediately, so that we can understand first, whether or not the ability to gather the data exists today, and then second, how quickly we can get going in measuring. We need that measurement happening immediately. We need guidance with respect to what our expectations are for those movements and we need to be measuring the railways' performance against that guidance immediately.

[Earl Dreeshen, Conservative, Red Deer, AB]

Pulse Canada also works with the crop logistics working group. I'm wondering whether you've had discussions with them. They're looking at the performance and the supply chain for all crops, and at innovation and capacity. Are there things that you have discussed or that there have been discussions on which we should hear about as we formulate some thinking along the lines of our legislation and subsequent regulations?

[Greg Cherewyk]

First and foremost, we've heard about the intention to expand and enhance the public performance reporting that's available under the grain monitoring program, and we're wholly supportive of that move. Again it's a matter of how quickly we can ramp up, how quickly we can ensure that those measures are in place and that the reporting is taking place. The expansion of the program and the measures they're looking at are consistent with the recommendations that came out of the crop logistics working group. We have strong support from the crop logistics working group for the expansion of that program, and now we have heard that there's a commitment to go ahead and do it.

Also, there is the work of the group that focused on service level agreements, for example. It's really the outcome and efforts of that working group that we should look to when we start getting into the expedited focus on the development of regulations related to service level provisions, to ensure that the provisions in the regulations match what it is that industry has said is needed by way of necessary elements, components, and details of service level agreements.

[Earl Dreeshen, Conservative, Red Deer, AB]

Thank you.

Mr. White, perhaps you could give us your thoughts about service level agreements with the canola industry and where you think we should be going in that regard.

[Rick White]

On the service level agreements, I'll repeat that we need reciprocal penalties built into them, because these will drive accountability between the two contracting parties. That measure will help a lot. It's accountability that is missing today. Today it is based on best efforts, and we're in this mess because best efforts doesn't work. We need better accountability to drive that accountability's reciprocal penalties within the SLAs.

If I may, I'll just touch on the information component of Quorum. Another piece of information lacking that seems to be causing some problems this year in particular is the lack of capacity planning going forward and a lack of acknowledgement by the railways, which seemed not to know that there was a massive crop out here to move until harvest was almost done. As farmers, we saw it coming off in June, July and August. We all knew it was coming, but for some reason the railways didn't understand; therefore, they didn't size to the new reality of the demand facing them.

Quorum might be able to facilitate some information gathering and capacity planning for the industry as a whole so that the railways can understand what kind of demand they're facing.

[Earl Dreeshen, Conservative, Red Deer, AB]

Do I have enough time to ask Matt that same question?

[The Chair, Conservative, Bev Shipley]

We're just about out of time. We're right on the five minutes.

[Earl Dreeshen, Conservative, Red Deer, AB]

Okay.

[The Chair, Conservative, Bev Shipley]

We also need a little time to switch.

I want to thank the witnesses for taking the time to come out and be on our panel on this important subject. Thank you and good night.

[The Chair, Conservative, Bev Shipley]

We're back.

We'll start off with the Prairie Oat Growers Association, with Mr. Enns, the president.

I appreciate your being here. We have eight minutes for your opening statement. By that time, we hope technology kicks in. We're having a little trouble in terms of the video, but we don't want to lose time.

Mr. Enns, you have eight minutes, please.

[Art Enns, President, Prairie Oat Growers Association]

Mr. Chairman, I'd like to thank the committee for inviting me here today in my roles as president of Prairie Oat Growers as well as an executive member of Grain Growers of Canada and also as a farmer.

The transportation crisis has affected all commodities and is damaging Canada's international reputation as a reliable exporter. We in the agriculture sector want to be clear that Bill C-30 is an important interim step, but must be part of long-term measures that address the needs of all shippers.

I'd also like to express appreciation for the measures proposed to get grain moving again. The order in council set minimum levels of grain movement. It has been a step in the right direction, and we welcome this legislation.

We do see some areas for improvement. We join with many organizations in seeking: a proper definition of adequate and suitable service, to clarify that it must meet shippers' needs; increased accountability by providing reciprocal penalties within service level agreements; dispute resolutions for liquidated damages as part of service level agreements; consideration of increased penalties if movement does not improve and directing that revenue to programs that support infrastructure, such as the building Canada fund; implementation of interswitching provisions at 160 kilometres and consider extending further in areas with unique needs of border points; setting minimum volumes for movement by corridor; and the input of commodity groups when setting corridor minimums...seems we are well placed to understand long-term demand and immediate production realities.

Let me illustrate the importance of corridor-specific targets with a particular situation from oats. The Canadian oat industry is heavily dependent on trade, in particular with the United States, to which 90% of our exports go. While a few have worried that grain traffic will come at the cost of other commodities, the volume targets allow grain to return to some level of normalcy.

Like other producers reliant on rail, oat farmers are suffering from the transportation crisis, but oats are in a dire situation. The first six weeks of this year saw just half of the exports that the prior year saw. So far this crop year, as of the week ending March 23, oat exports are down 101,000 tonnes from last year and 196,000 tonnes from two years ago.

In using these numbers, I'm not talking about moving the additional crop we grew this year. Oat production was up by 38%; however, this increase in production has been met with a decrease in the volume of oats moved. There has been demand by oat millers, and prices for oats have been high, so it is doubly difficult for Canadian farmers to see part of that demand filled by other countries because we can't get the oats to them.

The failures of the transportation system represent real loss for Canadian farmers. The remedies have focused on west coast ports, often to the exclusion of other corridors. This is why we need long-term forward thinking by corridor, including southern corridors, and support for alternatives to the existing system.

The impact on oat growers is enormous and is likely to echo for many years to come. It is an example of losses experienced across the grain sector.

For these reasons, we see this legislation as an important step forward and we thank all parties for their willingness to expedite this legislation. The regulatory package to follow also needs rapid attention, and we stand ready to be a constructive part of that discussion.

We also want to emphasize the need to gain certainty past 2016, when the provisions under Bill C-30 may sunset. The planning horizon for producers, shippers, and railways must be at least one year ahead.

As a result, we emphasize the need for the Canadian Transportation Agency to immediately begin the capacity planning exercise for the 2014-15 shipping season. In addition, it is very important to begin the review of the Canadian Transportation Act as soon as possible.

Long-term change is needed in this system, change that encourages an increase in capacity for all corridors. Improved agriculture production is a long-term trend.

For Canada's economy to keep growing, we need a transportation system that works for all commodities, including addressing the rural economy of the country and the historic contributions of the agriculture sector in building it. Canada's reputation as an exporter relies on this.

Thank you.