Agriculture Committee on April 13th, 2016

[The Chair, Liberal, Pat Finnigan]

Thank you, everyone, for coming in.

We're running a little late, but we'll get started immediately.

Today the first hour will be on grain transportation, especially in the western provinces. Then we'll follow up with the committee business section of the meeting.

I'd like to welcome Mr. Shawn Tupper, assistant deputy minister with policy, and Lenore Duff, director general, surface transportation policy.

Welcome everyone.

We'll give you 10 minutes for opening remarks, if you wish. Then we will have questions.

[Shawn Tupper, Assistant Deputy Minister, Policy, Department of Transport]

Thank you, Mr. Chair.

My name is Shawn Tupper. I'm the assistant deputy minister for policy at Transport Canada. I'm pleased to be here with you today. I'm accompanied by Lenore Duff, the director general for surface policy within my directorate. We are here to speak with you today about the report of the review of the Canada Transportation Act that was submitted to our minister just prior to Christmas. It's particularly related to issues around grain and the movement of grain in our system.

I'm going to start by providing you first with some background comments on the panel report and the grain related recommendations, and then we'll give you a short update on performance of the grain handling and transportation system for this crop year.

I'll run through my comments to get them on the record. I'll do it relatively rapidly so we can get to questions and answers more thoroughly.

The review itself is an arm's-length statutory review of the act that was launched in June 2014. The focus of that work, and the fact that it's statutory, allows us a unique opportunity for government to assess our national transportation system and to understand how we can best leverage our support for that system as it contributes to Canada's overall economic performance.

The review's mandate this time was to undertake a broad examination of how to ensure the transportation system continues to support Canada's economic competitiveness, our trade objectives, and prosperity. The government advanced this review by one year with a view to undertake a more comprehensive examination of the transportation system as a whole, with the priority consideration of grain transportation. You may recall we had just come through a fairly significant winter where we had a bumper crop and a cold winter. It led to something of a crisis within the system. I think that is what provoked the government of the day to move this study forward.

The report was released by Minister Garneau on February 25 of this year and was based on extensive engagements with stakeholders, including more than 354 stakeholder consultations across the land and over 200 stakeholder submissions. The minister and Transport Canada are continuing to engage stakeholders with a view to developing a long-term transportation agenda.

With respect to the transportation of grain, the CTA review presents an opportunity to examine the legislative and regulatory measures specific to the transportation of grain within the context of supporting the efficiency and competitiveness of Canada's freight rail system as a whole.

The panel report makes four recommendations that are specific to grain: modernize the maximum revenue entitlement in anticipation of its elimination within seven years, explicitly define producer car shippers as shippers so they are eligible for all shipper protection provisions enshrined in the CTA, review and set compensatory interswitching rates on an annual basis, and allow the extended 160 kilometre interswitching limits related to the Fair Rail for Grain farmers Act to sunset.

There are many other recommendations in the report that relate to rail, the freight system overall, and the governance of the Canadian Transportation Agency, which apply to all transportation, including rail. It will capture as well issues with respect to grain.

The government has not yet made any decisions on the recommendations contained in the report, including the provisions with respect to the Fair Rail for Grain Farmers Act. As the department and the minister undertake analysis, our objective will be to support an efficient and effective rail based transportation system overall.

These broader decisions will also be informed by Minister Garneau's mandate commitment related to leading with the minister. I am quoting from his mandate letter:

Lead with the support of the Minister of Agriculture and Agri-Food and in the context of responding to the review of the Canada Transportation Act, a full review of the Canada grain transportation system.

There have been significant changes since 2013 and 2014 that have produced a number of important results. The supply chain has fully recovered from the challenges produced by the record crop and severe winter in 2013-14 and is functioning well. Currently, the year-to-day grain movements are on track to match or exceed the record pace of grain movement that was achieved last year. For example, grain shipments from primary elevators to date as of the end of February 2016 were 8% higher than the previous year, and exports of grain from western Canadian ports were up nearly 6% over the same period last year. For the month of February 2016 alone, the last date for which we have complete statistics, rail and port shipments were up 12% and over 21%, respectively, compared to February 2015. This was helped by the mild winter and also reflects good operating conditions by all system participants.

Beginning with the elimination of the Canada Wheat Board in 2012, the industry is continuing to evolve. This includes significant new investments, such as the new terminal and loop track proposed for Port Metro Vancouver and new high throughput elevators being built in Alberta.

Likewise the railways have introduced new initiatives aimed at improving service. For example, CP's dedicated train program, which was launched in 2014, provides shippers with service guarantees based on shipping commitments for specified periods.

Finally the government also launched the commodity supply chain table in June 2014, to provide a forum for shippers, rails, ports, terminals, and other partners to work together on ways to improve the performance of the rail-based supply chain.

With the supply chain continuing to adjust to operating on a more fully commercial basis, we continue to see steady growth in both the production and transportation of grain.

The CTA Review report embodies both months of hard work and significant public consultations. It reinforces the critical point that transportation and logistics are fundamental to Canada's continuing performance and competitiveness.

The minister and Transport Canada are continuing to engage stakeholders in developing a long-term transportation agenda with a view to ensuring the national transportation system continues to support Canada's economic competitiveness, trade objectives, and prosperity.

With respect to the transportation of grain, the CTA review report presents an opportunity to examine ways to support the efficiency and competitiveness of Canada's freight rail system as a whole for all commodities, including grain.

That's the end of my opening comments, and we're prepared to answer away to your questions.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Tupper.

We will start the first round of questioning, and it will be six minutes per member. Mr. Warkentin, you have the floor.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

I appreciate the testimony this afternoon, and we appreciate your coming to talk about what's an important issue.

There were a number of provisions that were put forward in the Fair Rail for Farmers Act, some of which we understand will be sunsetting this summer. The provisions of that act that will be sunsetting include interswitching. What other elements of the act will be sunsetting this summer?

[Lenore Duff, Director General, Surface Transportation Policy, Department of Transport]

All of the provisions in Bill C-30 collectively will expire. The defining operational terms, the interswitching, the grain volume requirements and...I'm missing one of them.

The permanent ones are the Canada Grains Act amendments that relate to contracts, and the data requirements under the regulations, which are continuing.

I'm just missing the last one.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

There are several provisions that do sunset this summer.

[Shawn Tupper]

Apparently everything sunsets, but not those two.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

The minister has described the current review he is undertaking, and he'll be undertaking additional consultations through the summer for months, as he said. We expect that could be into the fall before we see any legislation. Have you got any sense as to when legislation with regard to the review might be coming to the House?

[Shawn Tupper]

The minister indeed wants to ensure that he gets people's feedback and reaction to what is in the report and the specific recommendations. Then his plan will be to bring forth recommendations to the government in the fall that will allow the government to then announce a way forward in terms of setting the next agenda.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

Technically is there a way that government, other than moving legislation, can extend the provisions of the Fair Rail for Grain Farmers Act to allow them to not sunset it until such time as new legislation responding to the review is complete?

[Shawn Tupper]

I can't tell you what the government's going to do.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

No, I understand that.

[Shawn Tupper]

The design of the original act allows for its extension, and the government is actively considering exactly what it will do with respect to the sunsetting provisions.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

So there is a provision that would allow for a government order to—

[Shawn Tupper]

The existing act was designed to permit that, yes.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

In terms of the interswitching provisions, we have heard from the vast majority of commodity groups that use rail to transport their commodities. They're very concerned about the sunsetting of these provisions. Do you have any research or stats relating to the use of interswitching from the time it was announced up until this point? Are there stats that the department would collect on that, or that you have available to you?

[Lenore Duff]

The department doesn't have or collect statistics on this. These are commercial arrangements between railways and shippers. We have some anecdotal evidence that we've heard from shippers about their usage, and some indication from the transportation agency about the usage of interswitching. We understand that it has been used to a limited extent.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

Do you recall that there was a legal fight—I guess there was a lawsuit—related to the interswitching provisions in the legislation, which took some time to be concluded?

Are you familiar with that lawsuit at all?

[Lenore Duff]

Do you mean related to the extension of the interswitching provisions?

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

Pardon me, no, I meant related to the original introduction of the interswitching provisions.

[Lenore Duff]

I'm not familiar with that.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

That's fine. I think there was some suggestion that this may have delayed many of the shippers from utilizing those provisions previously.

That's helpful information. In terms of the volumes, obviously one thing the government has as a result of the Fair Rail for Grain Farmers Act is the ability basically to designate an amount that the rail companies would have to transport over a period of time.

I'm hopeful that we'll have a bumper crop upon the prairies this fall. My concern is that I think many folks are very concerned about the ability of government to react, if in fact we do have a bumper crop, and to weather challenges in this coming year, if legislation isn't in place to replace the existing provision.

I guess that provision would fall under the provisions that would allow the government to extend those provisions by Governor in Council. Is that correct?

[Lenore Duff]

Yes. Just for the record, the other provision of the four is the compensation provision that's provided for in the legislation, as one of the four elements that are part of the sunsetting provisions.

[Chris Warkentin, Conservative, Grande Prairie—Mackenzie, AB]

That's right, and all of these provide an ability for the government to sign off and to make an order-in-council designation to allow those to be extended for a period of time, if it so desires.

[Lenore Duff]

That's right. They're collective: they all expire or they all are extended.