Agriculture Committee on March 19th, 2018

[John Barlow, Conservative, Foothills, AB]

Okay, thanks.

The changes you announced on Friday could take months and weeks to come into effect, if you're talking about October.

I want to give the rest of my time to my colleague Mr. Dreeshen.

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

Thank you very much. I appreciate your being here.

As was mentioned earlier, trade is such a critical component. We've known since 2013 that things were going to get turned around, and things are going in the right direction, but it doesn't seem as though some of the logistics in CN and CP have kept up with that.

You spoke to transparency between the company, Transport Canada, and the customers. As a farmer, I have both CN and CP going right beside me, and there are issues. Elevator agents are concerned. Producers are concerned. We even have municipalities that are concerned when you start taking lines out and all that shipment then ends up being on trucks rather than on railcars.

The other issue is that they're again starting to look at moving trains intermodally. As soon as that happens, we find out that CP has raised the cost of intermodal transport by 10%—at least, that's what we were told, so the question might be whether or not that is true.

Just to comment on the demurrage issues that we have, that cost is going to the farmer. We've talked to elevator agents who are given four or five different times that the train is going to come. They're the ones who are going to call the farmers and say, “Well, here's when you're going to have to be able to deliver your loads and have this opportunity.” That's where the frustration comes from. We can talk about how it has to do with weather and it has to do with other issues, but it doesn't seem as though that plan is getting down to where it has to go.

Therefore, my basic question is this. We know that it's so important, and we have lumber, fertilizer, and oil products, and just a moment ago the concerns about not having pipelines were mentioned. You can't run lumber down a pipeline, and you can't put barley down a pipeline. How are you going to bring all of these aspects together so that the person who is ultimately really depending on this—not the shipper, but the farmer—is going to be looked after?

[James Clements]

You know, the big focus that we have—and I mentioned a precision-scheduled railroad—is delivering to that first promised delivery time of the train. That's something we're focused on. We measure internally all the time what we call “trip plan performance”. We recognize that we have to deliver what we promise, and we're focused on improving on where we are today on that delivery time.

[Michael Cory]

I'll say it one more time. We apologize, seriously, for not meeting the expectations of all the supply chains we're in, and we take it extremely seriously. The capital investment that we're making, which we'll continue to make, and our belief that we need to have integrated information views so that we can stay ahead are really at the backbone of what we're trying to do.

Please understand that for the entire CN team, this is about recovery, and then taking all necessary steps for this not to happen again.

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

I have just a moment.

Both of you have expressed concern with the expected demand and so on, and we talked about the steps you're going to take to adequately forecast and plan for bumper crops in the future. Who is doing your analysis right now? They haven't really gotten it straight. I'm curious about where it's going to be in the future.

[Michael Cory]

This isn't just about grain; this is intermodal. As James mentioned earlier, this is the energy market. Every one of these markets hits records for us. This is more than just one commodity.

We run a network. Whether it's shared assets of tracks or shared assets of locomotives or people, this is more encompassing than just one commodity. Our view is that having more information from the supply chains—reciprocal and shared—and building integrated models so that we can see it better and not be taken by surprise, as we were this year, is really the way to the future.

[The Chair, Liberal, Pat Finnigan]

Thank you, Mr. Cory. Thank you, Mr. Dreeshen.

Mr. Drouin, you have the floor for six minutes.

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

Thank you, Mr. Chair.

A few years ago I was at the Chateau Laurier listening to your former former CEO, Claude Mongeau, advocating for fewer regulations. Now, if I'm hearing correctly, we want more regulations. We want Bill C-49 passed in order for us to invest.

What is the uncertainty in Bill C-49 and why do you believe it may not pass? Why are you waiting until it does pass to make those investments?

[Sean Finn]

We're not waiting for Bill C-49 to pass. We're going to invest $250 million in the network, following our announcement two weeks ago of $3.2 billion for the year. We're not waiting for Bill C-49 to pass.

Bill C-49 comes out of a consultation by the minister and David Emerson over an almost two-year period about how the environment is working today. Clearly, we came out publicly saying we don't like to have regulation and we don't think regulation moves more product, but we're saying that there are provisions in Bill C-49 that, for example, will increase the amount of information to be exchanged with the business supply chain, allowing Transport Canada, us, and our customers to have contingency plans to face issues that come up.

Bill C-49 is a balanced bill. We don't like all of it, and that's normal, but there are provisions. My good friend Claude Mongeau has said to you that regulation is not bad, but ultimately you want commercial relations between the railways and the grain companies and between the railways and the farmers to dictate in an open market how we make sure that we serve our customers. Ultimately, we'll serve the customers because it's in our best interest to do so, and as I said to you before, Canada's reputation depends on it.

However, I think there are provisions in Bill C-49 that allow our customers to take measures to make us more accountable, which is not a bad thing. We're not looking for regulations for the whole industry, but there are areas where we think we can improve the exchange of information between the railways and our customers.

[Jeffrey Ellis]

In the regulated grain space, already an area where there is regulation, we're prevented from recouping our investment in grain cars. In economics, it's a free rider problem. We can't recoup our direct investment. That's what we want to have corrected by Bill C-49 on the discrete issue of investing in hopper cars.

That said, since 2012 we've invested close to $7 billion generally in our infrastructure and other items that James referred to around investment in people and the network. Those investments are ongoing. I think Canada benefits from the fact that the rail industry, rather than relying on taxes, makes this significant commercial investment annually in the network.

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

I've heard a lot of you talk about weaknesses in the supply chain. Can you elaborate on those weaknesses in the supply chain? I've heard data sharing is one of them, but where exactly in the supply chain does that problem lie?

[James Clements]

The biggest challenge in the Lower Mainland is that there are a number of bottlenecks and other constraints that affect the fluidity of the traffic in and out of that area, and in and out of various facilities.

Enhancing the road-rail interface by grade separations is an example. For us on the south shore, one of the projects that's been suggested is improving the alignment of rail and road infrastructure on what we call the waterfront, the area by the intermodal terminals and the grain elevators, so that we can move trains more efficiently. These are multi-stakeholder investments that will need to take place to de-bottleneck the operations in that area.

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

Do you believe that over the next year or two or three years those investments will be made?

[James Clements]

At this point they are multi-stakeholder investments. There are a number of national trade corridor fund requests that have identified significant investments that would help remove the bottlenecks. There hasn't been an announcement or a decision yet around which projects are going to proceed.

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

Mr. Cory, do you have anything else to add?

[Michael Cory]

It's the same thing; we operate in the same areas in Vancouver.

When I talk about the sharing of information, it's that integrated view of what the future holds for the commodity. We need that. We're very capital-intensive.

It's not that we aren't going to invest, but we want to make sure we make pinpointed investments to get the most return for not just us but the stakeholders, shareholders, and supply chain groups that we work with. We play a big part in the investment part. It's information.

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

If I heard you correctly, the lack of cars or the lack of companies being able to supply the current demand is not specific to only the grain sector, right? It impacted all sectors of your business.

[Michael Cory]

Yes, that's correct.

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

Then the oil sector's been impacted.

[Michael Cory]

Absolutely.

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

Are they suggesting other solutions? What are your other customers saying in order to fix that situation?

[Michael Cory]

They're unhappy also, whether it's high port dwell with containers in Vancouver, ships in the Burrard Inlet, or lumber sitting on the ground that needs to be moved. This is a capacity and resiliency issue. If you get the right number of locomotives, people, and cars, then the faster you go and the more reliably you go, and that's where we've fallen down.

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

Mr. Chair, I'm done. Thank you.

[The Chair, Liberal, Pat Finnigan]

Thank you.

This will wrap up our first round of questioning. I certainly want to thank CN and CP for coming over and giving us an update as to where it is with the shippers, the rails. I want to thank you for coming on such a short notice. Hopefully the weather and the shipping will start going better from here on. Thank you so much.

We will break and come back right away. We want to move on with our other panel.

[The Chair, Liberal, Pat Finnigan]

Welcome to our second hour.

Just before we move on, as most of you know, we have an upcoming vote. I think we have to leave at 6:15. We will suspend, and then we'll be back after the vote. That's just to give you a heads-up on that.

Also, we will move the Agricultural Producers Association of Saskatchewan from the last hour to the third hour, which will balance our panels better.

If everybody's okay, we'll get going.

In our second hour we have Mr. Rick White, Chief Executive Officer of the Canadian Canola Growers Association. Welcome, Mr. White.

From the Canadian Federation of Agriculture, we have Mr. Ron Bonnett, who needs no introduction. Thank you for being here, Ron.

We also have Mr. Mark Dyck, Senior Director of Logistics at G3 Canada Limited, and from the Western Grain Elevator Association, we have Mr. Tyler Bjornson, a consultant. Welcome to you both.

We shall start with Mr. White.

If you wish, you have up to seven minutes each for introductions.