Agriculture Committee on April 13th, 2016

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

Interswitching has been very important. I've even spoken to some farmers who have talked about making it even more than 160km, because what they produce on their farms is amazing grain that is world-class, and we have all these trade agreements whereby farmers from across the country are able to export, but if they aren't able to export, they're not making any money. It's not grain that's going to be transformed or have value added or be used here; it's strictly for export. The interswitching is very important.

Can you maybe explain what interswitching is to the members, because I know it's new for some of the members on committee. I'm wondering whether you have heard the same thing as I have, about how important interswitching is important for many farmers close to the border.

[Shawn Tupper]

I can confirm absolutely that we've heard from many different parties about the importance of interswitching to them. We've heard varying references about how far we should extend the interswitching rules.

Clearly that is going to be an issue. I think one of the things we want to accomplish in the coming months is to get a good understanding of how much and how it has been used so we really do understand how it gets leveraged.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

We don't have the data on that, right? The government isn't collecting data on that.

[Shawn Tupper]

I think that is part of why we want to make sure we properly engage so we do get information, so that it's more than just anecdotal information. I think we want to learn from people specifically how they are using it so that it better informs the decision-making moving forward.

In terms of how interswitching works, I'm going to refer to my expert here.

[Lenore Duff]

Interswitching adds into the system the ability for captive shippers to have access to another railway. There are designated interchange points at which the first railway would bring the goods to the interchange point at a regulated rate—now that's out to 160 kilometres—and hand it off to the other railway with which the shipper has contracted.

It really is a provision that allows for access to an additional railway. It's used in making that switch and is also a provision in the legislation allowing those who are using the transportation system to negotiate with that possibility in play.

[Ruth Ellen Brosseau, NDP, Berthier—Maskinongé, QC]

I have a question on penalties. When shippers are late, they could be penalized, but railways aren't penalized when they are not getting the grain or the cars on time. Is that right?

Shippers are being penalized, but the big companies aren't penalized when they are days, or weeks, or even months late.

[Lenore Duff]

Those are commercial arrangements. There are no penalties in the legislation that apply to either party. Those are commercial relationships between railways and shippers.

Under Bill C-30, the Fair Rail for Grain Farmer's Act—that's the one I missed when I said there were four provisions—the compensation provision that was added allows for shippers to claim out-of-pocket expenses in the instance of a railway service failure. That provision was added to the legislation.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mrs. Duff. The time is up.

We will now move to Monsieur Drouin.

You have six minutes.

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

Thank you, Mr. Chair, and thank you to the witnesses for being here.

I have also met with a number of stakeholders who are concerned about some of the clauses in Bill C-30 sunsetting.

One of the issues I always think about is the need for more predictability. We're consulting right now in Canada about whether or not we will ratify the TPP. I always think, and I have heard from stakeholders, that there needs to be more predictability in the system.

How do we provide more predictability in the system, and how does the report's recommendations impact that?

[Shawn Tupper]

I think one of the key elements in the report overall is its fairly good focus on the need for proper data. I've been in my job for a year, and I think that is an area where we are trying to focus in the department to improve our capacity to understand what's going on in the system, what are the congestion points, and what fluidity can we find in that system.

Frankly, I think one of the major learnings coming out of the grain crisis was that we were caught short. We didn't have the data we needed. I think the report quite rightly identifies the need to pay attention to building that dataset so we can do better forecasting and understand the kinds of pressures that are in the system and, hopefully, that will give us more predictability.

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

One point Mr. Warkentin raised was the stats on interswitching.

Was there a reason why the government didn't mandate such reporting, or could they mandate the industry to report statistics with regard to interswitching? Right now everything we have is anecdotal from stakeholders. Is that right?

[Shawn Tupper]

Yes.

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

Could the department mandate industry to report on interswitching so we can make a better informed decision, or...?

[Shawn Tupper]

I wasn't here at the time. I'm not sure whether or why there was a decision to include or not to include that.

[Lenore Duff]

I was here at the time. There are transportation information regulations, and there were enhancements made to those at the time the bill went through.

There has never been any requirements for reporting on interswitching. These relationships between railways are seen as commercial ones. Some of them are under the legislative provisions, and some of them are voluntary. For example, CN and CP interswitch with one another outside of the requirements of the regulations.

What they did was extend from 30 kilometres to 160 kilometres. They didn't make any other changes in terms of looking for data. It wasn't part of that legislation.

[Shawn Tupper]

If I could just say very quickly, one of the activities we are pursuing in the commodity supply chain table is bringing the parties together and encouraging dialogue. It's the convening power of the federal government to bring parties together so we can create some of these conversations and better understand those interactions. I think we have some capacity, through that table, to get a much better understanding of how the system is working and what the interactions are between the parties.

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

I'm glad to hear that, because one thing that keeps me up at night is to ensure that for our products from farm to customer, we provide predictability in the whole supply chain. From speaking with many stakeholders, there don't seem to me to be many conversations, but if we're facilitating them, I hope that at the end the outcome is a favourable one, especially for farmers. I truly believe that with food demand growing exponentially in the next 30 years, it's going to be important.

If we were to let the clause sunset, has the department done an analysis of what would happen to the grain industry?

[Lenore Duff]

I guess the short answer to that is no. The volume requirements haven't been used since March 2015, when the system returned to normal operation, so they're not in play. The compensation provisions would disappear, but they have been used very infrequently. In terms of interswitching, as I say, we don't have a significant reach with respect to knowing how much it's used. The regulations are under the agency's authority. They were to monitor that situation.

We expect the system would return to normal operations. These were temporary provisions put in place to address a specific circumstance. We don't have any expectation that the system would be different from what it was two years before.

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

Okay, thanks,

Merci, Mr. Chair.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Drouin.

For the second round, the turns are of six minutes.

Ms. Lockhart.

[Alaina Lockhart, Liberal, Fundy Royal, NB]

I'm going to follow up on that.

Can you go back again?

[The Chair, Liberal, Pat Finnigan]

Yes.

[Alaina Lockhart, Liberal, Fundy Royal, NB]

Among the provisions of Bill C-30, we have compensation, interswitching....

What were the other provisions?

[Lenore Duff]

They included minimum grain volumes requirements and defining operational terms in service level agreements.

[Alaina Lockhart, Liberal, Fundy Royal, NB]

As I understand from your briefing, these provisions came about right after we had a boom season, an influx of grain, didn't they?

Just break down what each of these does, I guess—what each of the provisions addresses.