Thank you, Mr. Chair, members of the committee, clerk, and fellow attendees. I appreciate this opportunity. I didn't think I'd have an opportunity to speak to the agriculture committee in this role of mine.
The Canadian mining industry is a major economic driver contributing over $52 billion to gross domestic product in 2012, employing some 400,000 people, and accounting for $92 billion, or over 20% of the value, of Canada's total exports.
As a consequence of this international reach, mining is one of the largest users of Canada's transportation sector. We represent the single largest industrial customer group of Canadian railways, and consistently account for over half of the total rail freight revenue and the largest share of total volume carried.
Having recently polled our membership, I can report that poor rail service has been causing a range of challenges for miners since the fall of 2013, including unacceptable ratios, with some 50% to 60% of cars ordered versus cars delivered, resulting in some instances in the downscaling of production and operations. Just today I learned that CP Rail verbally communicated that it will no longer transport uranium, a decision contrary to the common carrier obligation that could adversely affect investment in Canada's world-class uranium resources and undermine all of the excellent work and leadership that the government has undertaken to secure access to Asian markets for uranium.
There is a cost to the Canadian economy resulting from poor rail service. Railways do not produce the goods for exports that allow trade to grow, our economy to expand, and employment to increase. Rather, they are an essential conduit for Canadian industry to receive crucial inputs and get its goods to market. Without a healthy and reliable railway network, Canada's reputation and success as a trading nation are seriously hampered.
With respect to this bill, MAC is sympathetic to the grain growers' difficult circumstances and to the government's motivation in assisting them. We also appreciate the sincere effort at reform. However, we are concerned about the unintended consequences that will befall other Canadian sectors reliant on rail service, including mining, as a result of the measures contained in Bill C-30.
Specifically, we have three areas of concern.
The first area of concern is the grain volume commitments. Enacting grain sector specific volume commitments will exacerbate existing rail capacity constraints to the detriment of all the other shipping sectors, including ours. Mining companies are also concerned that enacting grain sector specific volume commitments will undermine the legal remedies available to shippers in the Canada Transportation Act. How can mining companies forced to operate outside the provisions of Bill C-30 upon enactment make a service case against a railway that is legally obligated, through pain of penalty, to serve grain companies? A railway's unwillingness to break the law requiring it to move grain is a defence against the legal remedies available to other rail customers seeking to address their service challenges.
Our second area of concern is the limited extension of interswitching provisions to the Prairies. We are concerned the new interswitching provisions will result in the railways being forced to do more short-hauls, which are operationally more expensive than longer ones. A consequence of this is a reduction in rail freight revenue due to the interswitching rate being federally regulated, which will leave the railways to make up for lost revenue by either reducing service to better optimize their assets and/or increasing rates for shippers who are captive, or have uncompetitive options. While MAC is not opposed to interswitching regulations in principle, we would encourage appropriate consultation on their potential positive and negative impacts on the effectiveness of Canada's rail network as a whole before implementing them.
Our third area of concern has to do with regulating improvements to the service level agreement mechanism. Bill C-30 proposes amendments that would give the Canadian Transportation Agency the authority to regulate prescribed elements in arbitrated service level agreements, the details of which would be determined through a consultation process. While this measure may seem promising, we do not believe it will be effective. The service level agreement provisions in the act mandate that an arbitrator take a rail company's service obligations to other shippers into account before rendering a decision. If Bill C-30 passes, an arbitrator will be bound to consider the railway's legal obligation to transport grain against the elements of service that a non-grain shipper is seeking, superseding any regulation designed to enhance a non-grain shipper's position in an arbitrated service level agreement.
In summary, we do not think the legislation will address the challenges faced by all shippers, and it could make the situation worse for some. I am also very concerned by an approach to rail reform that attempts to address rail issues piecemeal, one commodity at a time.
We support a collaborative approach to addressing rail service challenges in Canada and strongly advise against government or Parliament picking winners and losers. Exacerbating the rail service challenges that miners already experience is not the right way to go. As I mentioned earlier, we are responsible for over 50% of rail revenues. If those decline because mines aren't able to operate, the costs of the overall transportation system will go up for everyone.
We need to take a step back and look at the whole supply chain and the kind of transportation Canada needs to succeed as an export-driven country rich in natural resources. We need solutions that are based on commercial market-based principles. A long-standing MAC recommendation to ameliorate the commercial balance between railways and their customers, for example, would be to insert a new stand-alone section in the act that would define “adequate and suitable accommodation” and “service obligations”. This would not regulate the railways; it would merely define an existing measure available to shippers to pursue in their contract negotiations with the railways.
Second, we need policies informed by accurate data. The president and CEO of CN appeared before this committee last night and emphasized in his presentation the need for better alignment across the supply chain and accountability for performance. MAC supports the spirit of these remarks and recommends that the government require railways to provide both regular monthly public rail performance data on a sector basis and confidential company-specific performance data upon request.
Such a measure as is already being undertaken in the grain sector will provide all parties with the tools to quantitatively understand the nature of rail service challenges and causally identify why service failures occur and where the capacity choke points are forming, and based on such analysis, determine what can be done to fix the problems.
Increased transparency should improve the relationship between railways and shippers, as both parties, in possession of the same facts, will be more motivated to find solutions that are mutually beneficial and that provide the government with better information to guide its own actions.
While MAC remains sympathetic to the agriculture sector's difficult circumstances and acknowledges that the government's motivation is to try to ameliorate the situation, we would be remiss if we did not raise concern about the unintended consequences that will befall other Canadian sectors that rely on rail service, including mining, if the measures currently contained in Bill C-30 become law.
Thank you.