Agriculture Committee on Nov. 27th, 2018

[Joe Peschisolido, Liberal, Steveston—Richmond East, BC]

Ms. Hardy, thank you.

You mentioned that there's a new investment of 20% from the $1.6 billion. CN also talked about capital spending of $3.5 billion. I have a couple of questions on those numbers. Is the $3.5 billion new? If it isn't, what increase is there?

In your testimony, you focused on two important areas—hopper cars and folks being trained to deal with the system. Are there other areas of importance in the capital spending that you'd like to talk about?

[Michael Cory]

For us, capital spending starts with the hardening of the track, and that's an every-year endeavour, so it's basic capital. It's new rail, new ties, new ballast and making sure that the bridges and structures are all sound and safe. Every year, we spend well over a billion and a half dollars just to maintain the regularity, fluidity and safety of the plant.

Our capital investment this year has been focused on creating capacity in known pinch-point areas, what I call the breadbasket, between Winnipeg and Edmonton and between Edmonton and Prince Rupert. We've put new sidings and double track. Along with that, we've invested money in major terminals in Winnipeg and Edmonton, because those are locations that are like an ingress or egress in a highway system. That's our major highway and that's where new cars will come on and come off so we built a—

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Cory. I'm sorry to interrupt.

Thank you, Mr. Peschisolido.

Mr. Dreeshen.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Mr. Chair, and my thanks to all of our witnesses.

I had the opportunity to be out at the Paterson plant in Bowden, and I had a chance to see the loop tracks working. I know that very soon on CN, not too far from me, there will be a similar one. Farmers in central Alberta are looking forward to that. It seems to be working extremely well. The fact that you can keep the locomotives hooked on the entire time and the amazing speed at which they are able to move product is certainly helpful. I know that this investment by both the grain companies and the railways is certainly appreciated.

In our discussions today, one comment was about the delay in harvest and how people are necessarily behind. There was grain that had come off in August and September. The problem was that we didn't have the sources. The shippers didn't have all the grain that they typically would have so that they could mix and move out what they wanted, so there are certain types of commodities that had difficulty that way. It's starting to move now and there's still the issue of when the train is going to be there, and the grain companies are getting all their crews together and expecting that a train will be there. It doesn't always happen the way in which it is intended.

When we're talking about investments to make grain cars and to deal with all of that and the tracks, the first thing you need is steel. There is a serious concern with the billions of dollars being invested by both CN and CP and how much they're being caught up in trade and tariff issues.

I'm wondering if both CN and CP could give a perspective on that so that we get an idea of how it might affect each of you.

[Sean Finn]

We have not heard from the car suppliers or the rail suppliers about any supply issues. Those are large investments. When you set up a line to produce grain cars in Hamilton, actual steel cars, you'll produce the thousand cars, and ultimately, if other cars are needed for other commodities, this can become a challenge. There's a steel issue about making sure you have the capacity to build the cars in Canada. When you place an order like we have and CP has, for hopper cars, centerbeams and boxcars, you're eating up the capacity to build cars in Canada. That may be a challenge going forward.

We've not heard from wheel suppliers or rail suppliers about any issues with the supply of steel. Canadian-produced steel will be used in Canada, because if we can do it in Canada and ship the products out from here, tariffs will not apply to us. There's an attraction to do more manufacturing in Canada because of that.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Ms. Hardy, would you like to add something on the locomotive side?

[Joan Hardy]

Yes, we're very pleased that we've been able to order our cars from National Steel Car. It's great to keep the construction in Canada. It's a very efficient pipeline for getting the cars into service. Keeping it Canadian has been really good for us, and we're hoping to be able to keep much of our 5,900 car acquisition in Canada as well.

On the locomotive side, we have remanufactured 100 locomotives. As we go forward, it's going to be a watch point for us if steel suddenly starts to increase the cost of components or equipment, but for now our contracts are in place, prices are set and things are going well.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you.

The other point that was discussed earlier had to do with the loading of grain on the west coast and the concerns about rain and how it affects that. Again, it seemed to be logical. If you're dealing with the feeder holes that are there, you could certainly get the majority, or get the trains, loaded.

I understand the tarping issue, but what I don't quite understand—and I made a note earlier—is this: When looking for a solution to take care of that bottleneck, is it concern about the grain because you don't want it getting poured on, or is it concern about personnel? When the union is looking at it, obviously, its interest and concern is going to be with personnel, not with the product. That's a different issue.

What are the concerns? What are they looking at? Is there a solution, or are they simply saying, “We're not going to be out in the rain”?

[Joan Hardy]

The concern, certainly, was raised because of safety. The employees who were doing the loading felt that it was not a safe operation.

What I understand is that there is a new system that's been developed using guardrails that will go around the feeder holes, and that training is under way. Once that's in place, we understand that—and, really, it should be the grain terminals explaining this in more detail—they will be able to use the feeder hole operations.

Certainly, the reason that you can't load in the rain without some sort of protection is that there could be damage to the product, as you say. These were just the two—

[The Chair, Liberal, Pat Finnigan]

Thank you, Ms. Hardy.

Thank you, Mr. Dreeshen.

Mr. Drouin, you have six minutes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Hi.

Thanks to the witnesses for being here.

I'm having a hard time understanding the issue of rain. We haven't been shipping grain for the past year or two. We've been doing this for decades. There hasn't been any innovation to transfer from the cars to the ships in decades...?

I'll ask the question to all of you who are involved in this. Who's responsible for this? I just can't believe, for the life of me, that nobody has come up with a solution that's acceptable to the workers and acceptable, at the end of the day, to the customers—because, at the end of the day, if they don't get their grain on time, then, as Mr. Finn said, Canada looks bad. I'm wondering if they are now working on a solution.

I'll go to you, Ms. Hardy, first.

[Joan Hardy]

Let me just explain this.

The grain, when it gets to the port, comes out of the railcars and goes into the terminal elevators. The loading into the ships is really not a railroad issue. This is an issue at the terminals. I'm only explaining it because it is something that can impact the supply chains.

There was a solution to load in the rain up until this spring. I think that it was about March that the longshoremen's unions in Vancouver declared it to be an unsafe practice. The B.C. Maritime Employers Association is dealing with this, with the local ILWUs.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

It's impacting your business, as well, right? I just can't believe that nobody got together and said, “Hmm, rain is an issue. How do we fix it?”

[Michael Cory]

We have, over many years.

To Joan's point, this is something relatively new. What happens is that the elevator, itself, which has compartments that grain gets unloaded and separated into, becomes full. It gets full if you can't put it in the ship.

That's where we come in: when the cars sit.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Yes, that's right. However, with regard to getting it from the elevator to the ship, nobody has come up with an acceptable solution in decades. I can't believe that we're talking about this today.

[Michael Cory]

I think it's improved, though. Again, we're railroaders.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

I know. It's not your fault. Perhaps we should invite the ports—

[Michael Cory]

We're part of the supply chain. It's not that people haven't worked on it, haven't worked together about it and improved it. It's just that, recently, something has happened to stop it again.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Finn, you said that your business wanted more trains and hopper cars. You want to buy 1,000 hopper cars, isn't that right?

[Sean Finn]

Yes, that's right.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

You already have 11,500.

[Sean Finn]

Yes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Will these 1,000 hopper cars be in addition to the 11,500 you already have, or will they replace aging ones?

[Sean Finn]

In the next few years, three kinds of cars will be transporting wheat on the CN network. First, there is the fleet of cars owned by the Canadian government and that have been around for over 30 years. Then, we have a growing fleet of cars from shippers. Lastly, CN has its own fleet, which is made up of 1,000 cars for moving wheat. All these fleets put together enable us to serve our customers.

At CN, there is no doubt that we need a larger fleet because the crops are getting bigger and bigger. Here is what's at stake. When the loaded cars arrive in Vancouver, they are unloaded into the elevator, but the elevator isn't unloaded into the vessel. It takes more capacity on the Prairies to reload the cars. What is important in procurement is the car cycle. The faster cars that leave western Canada for Vancouver, Prince Rupert or Thunder Bay are unloaded, the faster they can return to the Prairies to be loaded a second time. So it's important to have a fleet large enough to meet greater demand.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

My next question is about predictability. We were often told that an order had been placed for seven cars, for instance, but only four cars had been delivered.

How can we work with the clientele to predict the number of cars that will be delivered?