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.

On the agenda

MPs speaking

Also speaking

Greg Cherewyk  Chief Operating Officer, Pulse Canada
Brett Halstead  President, Canadian Canola Growers Association
Rick White  Chief Executive Officer, Canadian Canola Growers Association
Matt Sawyer  Chair, Alberta Barley Commission
Art Enns  President, Prairie Oat Growers Association
Wade Sobkowich  Executive Director, Western Grain Elevator Association
Cam Dahl  President, Cereals Canada
Claude Mongeau  President and Chief Executive Officer, Canadian National Railway Company
Keith E. Creel  President and Chief Operating Officer, Canadian Pacific Railway

8:10 p.m.

Conservative

The Chair Conservative Bev Shipley

Mr. Sobkowich.

8:10 p.m.

Executive Director, Western Grain Elevator Association

Wade Sobkowich

Yes, I agree with Mr. Enns.

I'll start with the planning in the fall and explain how that transpired, and then maybe bring that back to a discussion on the basis levels. What happened is that the grain companies started noticing that the crop was going to be very large, and they communicated this with the railway companies through meetings and presentations. It started in the month of September. They notified them that the crop was going to be over 70 million tonnes. The railways responded by saying that they would supply between 5,000 and 5,500 railcars per week each.

The grain companies were selling to a number in that neighbourhood, between 5,000 and 5,500 railcars per week. We need to sell basis rail capacity in a situation like that, so they did. Unfortunately, we didn't get those railcars in the numbers that were promised by the railways. They provided something more in the neighbourhood of between 3,000 and 4,000 railcars per week, actual spots per week. That resulted in contracts with farmers that we couldn't execute on because we were full to the rafters with grain in the country elevator system. It resulted in vessels waiting for product that we couldn't get there, and it resulted ultimately in contract extension penalties and defaults, which is very costly items for the grain industry.

Bringing this back to the basis, the basis has been set these days by grain companies at a level that sends the signal that we don't have room to bring that grain in so please don't sell it to us. The prices are horrible. We still need to bring in grain from months ago that we've contracted with the farmer on for previous sales.

It's not as simple as being able to do a straight subtraction between the export price and current basis levels because companies are barely buying any grain at the existing basis levels. They're bringing in grain at previously contracted prices, and they're trying to hold out street price grain and current deliveries so they can make good on past deliveries. Those are variables that need to get factored in.

In addition to that, as I mentioned, there are the contract—

8:10 p.m.

Conservative

The Chair Conservative Bev Shipley

Keep it very short. We're well over our time.

8:10 p.m.

Executive Director, Western Grain Elevator Association

Wade Sobkowich

Okay. I think I answered his question.

8:10 p.m.

Conservative

The Chair Conservative Bev Shipley

Thank you very much, and thank you, Mr. Goodale.

We'll now go to the Conservatives, Mr. Lemieux, for five minutes, please.

8:10 p.m.

Conservative

Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON

To answer what Mr. Goodale was asking and echo some of the comments I've heard tonight from you and previous witnesses, basically, direct government intervention is always a last resort. Even when direct government intervention is used, it has to be used carefully and used prudently.

Minister Raitt was here just yesterday. I think she put it well when she spoke about ideally wanting stakeholders working together with industry solutions focused on service, on corporate responsibility and credibility, those types of positive factors, I'll call them, that lead to positive solutions. You don't necessarily want key stakeholders looking over their shoulders and making decisions based on penalties, on liquidated damages, the sort of circle-the-wagon approach, not based on positive service delivery, but on minimizing damage. I think that answers some of the testimony I've heard from you and from others, and certainly from Minister Raitt the other day.

I certainly do appreciate the comments that all of you have made. Cam, as you were making your comments in front of committee, what I heard you saying, and what I heard our earlier witnesses saying, is that you support this legislation, particularly the key elements of it and what it sets out to achieve. I think you appreciate that we're moving quickly, which is why we're here tonight and we'll be here twice tomorrow, in the afternoon and at night. I think you appreciate that consultation and the regulations to follow could be very productive. I think what I hear you saying, too, is that you appreciate the fact that the review of the CTA being accelerated is also beneficial. That's certainly what I've been hearing.

I will ask a specific question.

Art, you were saying that for your commodity, sale to the U.S. is important. I want to ask about the interswitching being opened up to 160 kilometres. When I look at the map that I have in front of me, I see that a number of the intersect points overlap with the U.S. border. To me, with the new interswitching requirements laid out in the legislation with the intersect on the United States, my thinking would be that if CN and CP aren't able to move your product south, certainly resources in the south could move north to pick up your product.

I wonder whether you could comment on that.

8:15 p.m.

President, Prairie Oat Growers Association

Art Enns

It will be a huge benefit to our crop oats, especially given that because a lot of the stuff is grown along that border corridor we will need some time to clear up the backlog, so that everybody catches up before we see the competition out there. But give it some time. We will.

To us, it's a huge win, especially for our oat industry, because right now we're not seeing the present railways showing any interest at all in running stuff across the lines. Our only answer is having a railway coming in from the U.S. to help us out with our oat industry, because 90% of our product goes out there. The mills are crying for it. They're going to Europe to get their oats, and we're 600 miles from the mills and we can't get it there. It just seems like a totally dysfunctional system. It doesn't make sense to an ordinary farmer.

8:15 p.m.

Conservative

Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON

Right.

Let me just ask witnesses on the other side or who are coming in by video conference, would you have any comments on the interswitching and how it might be particularly useful to your commodities?

8:15 p.m.

President, Cereals Canada

Cam Dahl

I think it is a very useful or potentially useful tool, but again, it does get down to some of things that need to be in that regulatory package. I would agree with you that we want to create a regulatory environment where penalties and special orders from the government are not necessary, but there are some elements in that regulatory package that need to be there, including the reciprocal penalties. Those are necessary in order to create that regulatory environment that will allow the needs of shippers and producers to be met.

Specifically to your question on interswitching, there may need to be some agency oversight of that to ensure that the efforts just simply aren't frustrated.

8:15 p.m.

Conservative

Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON

Do you mean in terms of providing locomotives?

8:15 p.m.

President, Cereals Canada

Cam Dahl

Well, and just making the process and getting an agreement so difficult to go through that it doesn't happen....

Before we leave interswitching, I think Wade made a very important point, and I want to emphasize it. Years down the road or in six months down the road when we're evaluating the value of this measure, the fact that it is there may prompt changes in railway behaviour. Think of it as a speed limit. The effectiveness of a speed limit is not measured by how many tickets you hand out, but by how many people are abiding by the goals of the legislation.

8:20 p.m.

Conservative

Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON

Good point.

8:20 p.m.

Conservative

The Chair Conservative Bev Shipley

That's a very good point.

With that, we'll move to Mr. Allen, please, for five minutes.

8:20 p.m.

NDP

Malcolm Allen NDP Welland, ON

The dilemma with changing behaviour is that people need to know there's a consequence, so that they actually want to change their behaviours initially, not that I disagree with you, Cam, on the issue of how you can't write a ticket for every single car that goes by. It doesn't work that way.

Let me draw back into what Wade has been quoted as saying, related to some of this today, and ask you the question if it's about tying it to this piece of legislation minus.... You had six suggestions. Let me go through these. They talk about how, on this element, the questions are how to ensure grain shippers receive railcars, one, at the right level, two, at a consistent rate, three, apportioned appropriately among the corridors, four, spotted at the inland terminals where shippers require service, and five, at increased volumes when required to account for peak shipping periods. Suggestion number six is about beyond 2016, in talking about this as a sunset provision.

Let me leave the last one out, because if the CTA gets done and the rail service review gets done prior to that, that takes care of beyond 2016, if that becomes a piece that gets worked out and that folks are happy with. That remains to be seen, of course.

Not knowing what the regulations will be either, in the sense that we're still waiting for those as well, is there anything in those first five suggestions, Wade, that you want to see in Bill C-30 now?

There are two timelines here; well, maybe there are even three, if you want. There's the immediate of this crop year, which is sort of the end of July; it's kind of over, and that's why that provision, even with this legislation, ends July 31. Then, of course, there's the medium term until we get into the review process, even though we want to see it expedited. You've lived through that once before. It takes a bit of time to do that. Even if we rush it, it'll still take some time. Then, of course, the long term is what's on the other side of that.

Can I get your comment on those pieces?

8:20 p.m.

Executive Director, Western Grain Elevator Association

Wade Sobkowich

Sure. At a high level, there are two elements that we need to make, that we're striving to achieve. One is to get as large a service pie as possible apportioned appropriately among the corridors. The second element is to hold the railways accountable to providing that larger pie.

If there were one amendment that we would ask for in Bill C-30, it would be to provide clarity, that when the volume thresholds are set, they are to be set on a corridor-specific basis. That is extremely important to us so that we can serve all the markets we sell to and get the highest value for that grain.

8:20 p.m.

NDP

Malcolm Allen NDP Welland, ON

I actually thought you were referring to the corridors, so I appreciate that clarification and the help in that direction.

I actually want to see some of that stuff come through the St. Lawrence Seaway, since I live on the Welland Canal. I'd like to see you get to Thunder Bay and get some out through the.... Well, when we get the ice out; we have to get the ice out first, I always think.

Let me pull back a bit. When you talk about those particular issues of the corridors, the overall picture of part of the railway's contention—we will be meeting with them in another few minutes—is that regardless of what they do, and they're talking about the west coast specifically, it gets jammed up; that as shippers, you actually aren't coordinated enough among yourselves, if I can use that loose term, that you'll just jam up the end result, which just means they'll bring back empty cars but there's nothing that can be done because we're jammed up at the other side.

From your perspective, how do you respond to that allegation?

8:20 p.m.

Executive Director, Western Grain Elevator Association

Wade Sobkowich

Yes, that's a very good question. Thanks for asking it.

We do not have any concern with our ability to unload railcars in each of the corridors. There's no issue as long as the railways provide the cars, the 5,500 cars or whatever amount is set. As long as they provide them in each of the corridors, then there's no issue with handling it. It's only if they decide not to ship to the United States and not to ship to eastern Canada, and providing all of those cars through one port or two ports, that it stands to reason we're going to struggle in unloading. But as long as they're apportioned appropriately, we have no issue handling that volume at our terminals. In fact our terminals are at about half capacity right now on the west coast, and they're unloading railcars just fine.

8:20 p.m.

President, Cereals Canada

Cam Dahl

Perhaps I could add a quick point to that.

I've heard the comment that while the unloading needs to occur 24 hours a day, seven days a week, I have heard it expressed by my shipper members, the one-third that are the shipper members, that if that is necessary to do, that commitment will be made. The concern is that if a tranche of hopper cars shows up at the terminal on Friday and they work 24 hours a day all the weekend, then they don't want to be out of cars Monday, Tuesday, and Wednesday. That needs to be a smooth flow. If that smooth flow is there, then that commitment to staff to have that capacity there is also there on the terminal's part.

8:25 p.m.

Conservative

The Chair Conservative Bev Shipley

Thank you very much.

We'll go to our last member, Mr. Watson from the Conservative Party, for five minutes, please.

April 1st, 2014 / 8:25 p.m.

Conservative

Jeff Watson Conservative Essex, ON

I want to focus my time on clarifying a few items.

I know that Mr. Goodale on the other side of the table raised the question of whether you'd like the draft regulations to be tabled in advance of the bill passing. First of all, that would render the prospect of consultation with stakeholders meaningless, but apart from that, regulations usually flow once a bill is actually adopted. So I don't see how that's possible.

To our witnesses who are here today, I'm hearing some conflicting messages. At times I'm hearing some support for a regulatory approach. At other times I'm hearing support of, for example, the Coalition of Rail Shippers' approach, which is a legislative approach. I just need to be clear here, because the two are not fully compatible, if you will.

Are you looking for prescriptive legislative response in changes to Bill C-30, or are you content that some of these issues will be done under the regulatory approach after that?

I'd like each of our stakeholders to answer that briefly, and then I'd like to move on to another question.

8:25 p.m.

Conservative

The Chair Conservative Bev Shipley

We'll start with Mr. Enns, please.

8:25 p.m.

President, Prairie Oat Growers Association

Art Enns

This is a topic that I'd like to defer to Wade and Cam. They're the experts on this. We feel we need to take a closer look to see what the regulations will be to be able to comment on it.

I know they have some input on this, so I'll pass it on to them.

8:25 p.m.

President, Cereals Canada

Cam Dahl

I would just like to reiterate the comment about the extraordinary level of unity within the shipping community on this issue. I think it would be good to focus on that level of unity. Most of my shipper members are actually members of the railcar coalition.

Specifically to your question, I think Bill C-30 may enable the changes we need if that regulatory package meets the criteria that have been outlined today. I think the legislation you have before you now can be successful, but it does require the right regulatory package.

8:25 p.m.

Executive Director, Western Grain Elevator Association

Wade Sobkowich

I want to make the point that we're talking about providing a more specific definition in the regulatory process to the word “operational”. If the committee believes that you can define “operational” in a way that includes penalties and potentially liquidated damages, then great. We can address it through the regulatory process. If not, then we have to go to those legislative amendments the Coalition of Rail Shippers was asking for with Bill C-52, which was to allow, first of all, to amend the legislation to be clear. We're not only dealing with operational terms, we're also dealing with other things to make sure penalties and liquidated damages are included.

8:25 p.m.

Conservative

Jeff Watson Conservative Essex, ON

Of course, as a member of the transport committee, I remember your interventions there. I'm now the parliamentary secretary for transport, so I'm able to sit in on this one.

I want to go to the question of liquidated damages. I have to tell you, I'm conflicted. I'm sympathetic when I hear the plight of producers in western Canada—believe me—of the difficulties of facing regional monopolies or duopolies in terms of your carriage, and the problems that may pose to you. But on the other hand, I come from the auto industry. If I'm a small tier-three supplier producing tooling for somebody who does auto parts for a major OEM and a truck fails to deliver my product and I lose a contract, I believe I'm in need or deserving of compensation. I don't get to go to an arbitrator. I don't get to go to some government agency, and I certainly don't have a statute to point to that gives me liquidated damages in the event of a breach of contract.

Why should we be doing this for you and not for others? If it is for you, how do we say no to everyone else who would obviously want a very similar regime? Hey, why go to court, right?