Agriculture Committee on April 2nd, 2014

[Kevin Bender]

The terms “adequate” and “suitable” we just felt were far too vague. They're too open to interpretation. We're asking for those to be made more specific so that there's more definition applied to those, to make them specific to what the needs are for meeting the shippers.

[Earl Dreeshen, Conservative, Red Deer, AB]

Perhaps we could just go on to another issue that's been talked about, and that's interswitching.

Perhaps Inland Terminals could talk a little bit about how interswitching might affect your system.

[Kevin Hursh]

I think there's still a great deal of a learning curve to know how and whether interswitching will make a big difference. I think there probably would be some occasions where there's an interswitching point that will allow southern movement into the U.S. that might not have otherwise been as possible. There might be an applicability.

I did talk specifically to South West Terminal at Gull Lake about this. They noted that Moose Jaw was their interswitching point to go south, and it's 175 kilometres away rather than 160, so they wondered whether they'd be able to access it.

Another concern I have personally is that now you're trying to coordinate two railways when you have difficulty enough trying to coordinate one railway. How exactly is that going to work? Plus the interswitching charges I believe are yet to be determined, and that will play into the equation as well.

So in theory, good; in practice, it may have much more limited application.

[Earl Dreeshen, Conservative, Red Deer, AB]

Richard, perhaps you could weigh in on some of these. Again, you're the one who is with groups and organizations that have to put all these metrics together, so I'm just wondering if you could add to that.

Of course, Quorum is going to be taking a look at some of the issues there.

Could you perhaps put that together for us?

[Richard Phillips]

Yes, to make good decisions, you need good information. Pulse Canada has a contract to do a bunch of that research to determine the metrics and measure things. I think that sort of work is absolutely key, and the government has funded a project for that. That is very welcome because without that, we're all just speculating on what we're going to be.

I do know that the Americans are always watching us closely too, and they actually report far more information as to what's going on in their ports than what we do in Canada, and they're always asking why we are so secretive. So there may be a role for government to get into that overall piece that Richard Gray talked about, where there has to be a neutral place for that information to go, because individual companies will not disclose their sales on a basis like that. It would have to go through some neutral body.

Good information equals good decisions.

[The Chair, Conservative, Bev Shipley]

Thank you very much. We appreciate that.

We'll move now to Mr. Allen for five minutes.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair.

Professor Gray, you actually were looking to make another comment toward the end of my colleague Ruth Ellen's comments. At least I thought you were indicating that you were trying to make another comment, so I'm actually just going back to you.

[Richard Gray]

Okay, that's good.

I actually have to leave pretty quickly. They need the equipment for a class.

I just wanted to mention with respect to forecasting that often forecasting is a collective opinion of farmers gazing at their crops. We actually need professional agrologists who know what they are doing when it comes to estimating crops, and they need to do it systematically. I don't think what we've spent now is adequate.

That's all I was going to say. We actually need to hire perhaps agrologists to spend two days a week every second week or something like that, across different regions of the Prairies, to go out and fully inspect those crops and make some really informed decisions, rather than windshield surveys.

I have to go now. I'm sorry about that.

[The Chair, Conservative, Bev Shipley]

Thank you very much, Mr. Gray. I appreciate your time and your being a witness.

Mr. Allen.

[Malcolm Allen, NDP, Welland, ON]

Thank you. I understand students have to use the equipment.

Perhaps I'll move to Mr. Phillips. At the end of the conversation with Mr. Dreeshen you just touched on more transparency and looking at the U.S. model. I happen to have a copy of some of their latest statistics.

Anyway, as you flip through this thing...their quarterly costs of transporting soybeans from the U.S. and Brazil to Hamburg, Germany, by truck—how many trucks are moving?—barges, by ocean, total transport, farm value, landed cost, and transport percentage of loaded cost. If you excuse the reference to school-age, it looks like we're in junior kindergarten when it comes to this sort of stuff. I don't want to overplay that hand, but where do you see us in comparison to this transparency?

Clearly, if you want a logistics system to work, you actually need to know what the heck it is and what we have out there. And to be blunt, Mr. Watson and I both came out of the auto sector, and they can tell you where the part is and what truck it is and which exit on the 401 it's coming off, and it seems to us, coming out of that sector where we trace everything so tightly, that we have no idea where some of this stuff is half the time. People say, “Well, there are cars over there somewhere. I passed them when I drove in this morning. I think they're empty, but I don't really know.” Maybe they were supposed to be spotted; maybe they were not supposed to be spotted. Whose fault is that?

I keep hearing over and over again from the players that there is this lack of data. It seems to me there's a lot of data out there. Nobody coordinates it. Is that true? Or have I somehow missed something along the way?

[Richard Phillips]

I just wonder if Kevin could also comment on this as an actual shipper, and then I'll speak right after Kevin.

[Malcolm Allen, NDP, Welland, ON]

Yes, whoever wants to jump in.... Listen, this is about gleaning as much information from you as we can.

[Kevin Hursh]

The information piece has a number of components. Statistics Canada does estimates of total crop production by province with an extensive survey of producers, but I'm not sure whether I agree with Richard that the problem is they're surveying producers. They have a long lag time between when they do the survey and when that information is released, and part of the problem is that the information isn't current when it finally comes out.

There probably needs to be some education of producers that these kinds of surveys are actually useful to the entire industry, because they view them with a fair bit of skepticism. As for information, we need more of it. On what you say of information available to other nations, I believe that's correct, but I really believe that the railways don't have a really good handle within their own internal systems. We can trace a ladder and know exactly where it is in the system. They seem to have the ability to not know where entire 100-car trains are at any given point in time.

If they have better information flow and services and logistics than that, they should be proving it because there seems to be precious little evidence of it at this point. In this day and age, technology should be brought to bear and we should know where every railcar is, loaded with what, at any given time.

[Richard Phillips]

I'll just touch on that. The government did fund the study that Pulse Canada is leading, and those are the metrics: how many cars are being spotted every week, how many are being unloaded every week, how many are in transit, and where the problems are. Is it at the terminals? Is it the grain companies backing stuff up and not unloading things on a timely basis? It may not always be the railways, when we get into all of the metrics of this thing.

I think that's just starting and so, hopefully, when we come back one year from today, we will have much more transparency in the information that's been provided. That's my hope, Mr. Allen.

[The Chair, Conservative, Bev Shipley]

Thank you very much.

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

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you, Mr. Chair.

I thank the witnesses for coming today.

There have been some really interesting comments. Professor Gray touched on revenue cap and premium winter months. Mr. Phillips, you talked about that as well in your comments, levelling off the humps, in winter months in particular.

I found that quite an interesting concept. Do you have any further thoughts on how that kind of premium might work? I have some concern whether some of that would be held off in order to get some of the premium, in terms of the railways.

[Richard Phillips]

I think Kevin might want to jump in on this one as well. In the States, for example, you can trade whole trains. For example, if one of Kevin's members really needed 100 cars and he just couldn't get the cars here, he would go to another company and say, “Look, why don't I give you $3 or $4 per tonne and I'll take your train that's almost in Vancouver and just send it over to my terminal?”

You can see a lot more of that sort of stuff happening in the American system, where you can buy and sell that as more of a commodity. We don't see that in Canada. Again, we're regulated in such a way that doesn't happen. I think that's one possible suggestion of what could be done.

The other one would be that maybe there's a financial incentive where instead of the railways offering $4 per tonne for loading a unit train, they'd offer $5 per tonne if you could wait an extra three weeks when we're not as busy with our engines and crews. I think financial incentives are always a better way to go than a stick, if at all possible, to help level off the humps. There are several things that we haven't looked at, even in Canada, to help do that.

Kevin, would you add to that?

[Kevin Hursh]

I think we'd prefer a system where the economy dictated the flow of things, and the pull and push of the market forces would dictate how everything would work. Unfortunately, that's not the system we have. The railways really do not have the same competitive forces as other industries. In the U.S., they do have a bid car system. But certainly there's little appetite up here to go to a bid car system, where you bid for the extra cars you need, and then the railways would have a good reason to always be short on cars and always looking for bid cars.

I'm really pleased that no one is talking about doing away with the revenue cap so that market forces can come into play. The feeling is that if the revenue cap were removed, the cost would go up but service may not go up, and many other sectors are also complaining about railway service. That said, there are some perverse incentives within the revenue cap system where the railways, when it's more expensive to move grain, really have no incentive to go out there and put in place the extra rolling stock or the extra locomotives in cold weather.

At Richard Gray's conference, if I could speak for him, he said that we shouldn't necessarily raise the revenue cap overall or the maximum revenue entitlement—which is really what it is because it is a volume-related entitlement. Maybe they're being very well paid when we do our costing review; let's find out about that, but maybe we should provide more of that to them during cold weather, high-cost movement months, and a little less during other parts of the year so that they have the proper incentives to move the grain when it's needed.

[LaVar Payne, Conservative, Medicine Hat, AB]

Yes, I also understand that they can obviously increase their own revenue by hauling more cars, even with that revenue cap. Could you confirm that? I'm seeing nodding heads—

[Kevin Hursh]

It's volume-related and it's the extra cost of inflation.

[LaVar Payne, Conservative, Medicine Hat, AB]

Okay, that's great. I've heard you talk about corridors and so on.

Richard, you've talked about having this large group of organizations in your grain council, and you also talked about the other bulk products. It seems to me that as we're going along, we really have to look at the whole transportation system, whether for other bulk products or for grain.

Certainly as we're going through this whole thing, the port facilities seem to be a much bigger picture and we need to really look at it carefully. Could I have your comments on that?

[Richard Phillips]

I think this is really all about grain, what we're talking about, but at the end of the day it can't be all about grain because there are a lot of trains hauling other commodities. There are manufactured goods, commercial goods, the mining industry, the coal industry, the forest industry, the automobile industry. There are a lot of other people using those tracks, so if we're talking growth, if we just limit it to the grain people only that we look at five years or ten years out from today, we might be in the same situation, where there are too many cars.

There's even more demand to haul oil for example, or the potash mines doubled in Saskatchewan, and there are no cars left for grain. So we need to look at everybody together so you get the whole picture. Where does the overall capacity have to be for all of that, not just grain?

[LaVar Payne, Conservative, Medicine Hat, AB]

Right.

[The Chair, Conservative, Bev Shipley]

We're a little over so I am going to say thank you.

Thank you, Mr. Payne.

I want to say thank you to our witnesses Mr. Hursh and Mr. Bender for taking the time and holding you up a little bit off schedule on your teleconference, but also to Mr. Phillips. Thank you very much for staying around. We really do support families so we're glad that you're able to get away and keep your family happy.

Thank you very much.

We're going to take a minimum of ten minutes folks. We need that just to switch everything and then we'll be back and I'd like to start at 6:35 p.m. please.

Thank you.

The meeting is adjourned.