Agriculture Committee on Nov. 7th, 2024

[Drew Spoelstra]

The costs are the same as those in Quebec, especially for private railway crossings. We're seeing costs, though, that are exorbitant for drainage, with the railways trying to abdicate their responsibility to cover the costs to drain the railways. It's not only about the drainage of our farm properties. The drainage around the railway tracks and the system underneath them also need the drainage system to work well.

This is an opportunity for railways, municipalities and farmers to come together. That's how the Ontario Drainage Act works. The people who are using the system pay for the costs. That includes the railways, so we want to make sure that the agreements from the early 20th century are all met and continue into the future.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Mr. Sobkowich, you referred to a dual monopoly.

What is your opinion about the attitude of the two big Canadian railway companies, Canadian National and Canadian Pacific, in general?

Mr. Spoelstra, you can begin.

[Wade Sobkowich]

If you're an elevator planted in the middle of Saskatchewan and have CN or CPKC running past you, you're beholden to a monopoly. You're shipping on the terms that are dictated by the railway.

What we're looking for are legislative measures that try to rebalance that relationship and make it into a more commercial relationship—the type of relationship you would find if there were a competitive environment. It's about supply chains, and supply chains are about the economy. It's now more important than ever that we do everything in our power to get product to our customers in a timely way. We suffer reputational damage and costs. We're not taking advantage of opportunities, and we're not able to return as many foreign dollars to the Canadian economy for the product we grow and export. That relationship is very imbalanced right now.

Extended interswitching would provide one tool, but we need more tools than extended interswitching. We need reciprocal penalties. We need other measures in the Canada Transportation Act to help rebalance that relationship so there's more equal bargaining power. When the railway and grain elevator sit down to discuss and agree on terms of service, they should do so as equal partners in a commercial relationship, not the railway dictating terms of service, essentially, to the grain company.

I hope that answers your question.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Sobkowich and Mr. Boulerice. We're at time.

We'll now go to Mr. Epp for up to five minutes.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for being here today.

As a past processing tomato grower, I've had the chance to go to California many times. There's an expression that comes from that state: Whiskey is for drinking and water is for fighting over. The province of Ontario has been around for a long time and addresses that, albeit from the opposite perspective—not access to water, as in California, but rather drainage of water. The Ontario Drainage Act is the oldest act in the province of Ontario. For a hundred years, both railways respected that act.

I'd like to begin with the OFA.

Mr. Spoelstra, why do you believe that over the last five years, both railways seem to be challenging an act they respected for over a hundred years? My municipality of Chatham-Kent has the most bridges, largely over drains. In the municipality of Perth East, CN is being sued. My municipality is suing CPKC. Why is that?

[Drew Spoelstra]

Thanks for the question. I think Jason may have some comments on this as well.

Largely, everyone is seeing increased costs in their operations thanks to inflation and other challenges, and farmers are certainly bearing the brunt of a lot of the inflationary pressures on our industries. Crop inputs are higher, and all the other things we have to deal with are higher. I'm sure the railways are no different. They're looking for ways to spread out those costs.

There are historical agreements in place. We want to make sure they're honoured. We want to make sure farmers are supported in these efforts. When it comes to the Ontario Drainage Act, these costs have to be covered by the people using them. As I mentioned, municipalities are covering a portion of those costs. The railways should cover their portion of the costs, and the farmers should do their best to cover their portion of the costs as well.

Do you have anything to add, Jason?

[Jason Bent, Director, Policy Research, Ontario Federation of Agriculture]

The railways are hanging their hat on the fact that they are federally regulated. In their minds, that means they don't have to comply with or adhere to the law of the land where drainage work is situated—or crossing, in this case.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

I've done some digging, because this doesn't just affect my municipality at home. I guess it was in 1996 that the Railway Act was repealed and replaced by provisions split into both the Canada Transportation Act and the Railway Safety Act.

Is it your understanding that the government of the time intended to change the policy around drainage and the opportunity for railways? I find it a bit odd that it was changed back in the late nineties, and then all of a sudden, about five years later, both of our national railways appeared to challenge it. Comment on that, please.

[Jason Bent]

Thanks for pointing out that the Railway Act was repealed and replaced.

There were provisions in the Railway Act that contained a clause requiring railways to abide by provincial drainage legislation, with some conditions. That's why our request is that we amend the Canada Transportation Act to include those types of provisions and direct the Canadian Transportation Agency to consider provincial drainage legislation and their past rulings when a matter is brought forward to them.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

I have had a chance to meet with the railways on this exact issue. Their claim is that after 100 years, all of a sudden, they are taking care of their own water. I find that, as a farmer and someone who's been involved with the Drainage Act many times over the years, a bit incredulous because last time I checked, water still flows downhill and has to go somewhere.

What is the effect if they are successful in avoiding paying costs into the drainage schemes? Can you explain again—I think Mr. Spoelstra began—how the costs for cleaning a drain, putting up a bridge or replacing a bridge work for all those affected?

[Drew Spoelstra]

If the railways are deemed not responsible for the costs of their drainage, those costs are going to be shifted onto farmers and municipalities. We know that farmers are already facing exorbitant costs from some of the other challenges. Municipalities are having their own set of challenges with affording some of these costs and passing them on to taxpayers. Ultimately, taxpayers across municipalities are going to be responsible for a bigger portion of the cost.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you.

I normally take all of my time, but I'll cede a few seconds.

[The Chair, Liberal, Kody Blois]

You'll get on my Christmas card list this year, then, Mr. Epp.

We'll go to Mr. Louis for up to five minutes.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you, Chair.

I want to thank all the witnesses here.

We're talking about railway as infrastructure, and in general, infrastructure is very important in Kitchener—Conestoga, specifically roads and bridges.

We mentioned infrastructure that's not used much. Railway crossings are not used much. Roads and bridges are not used often. That's important because I have a Mennonite community using horses and buggies. When we're talking about a bridge or road that needs to be closed and people have to drive a few minutes down the road, our Mennonite community has extra challenges doing that.

I appreciate this conversation. We're trying to balance safety with practicality. I want to point out that we're talking about private railway crossings, not public crossings, and that these crossings are used by the farmers themselves and not that often.

I'll direct my questions to Mr. Spoelstra from OFA.

You mentioned the costs that could be passed down to farmers—$600,000 to $2 million per farm—if we don't find cost-effective measures to do this. Farmers can't afford a bill like that. That's going to cost them money or, if they have to go around, would cost them time, which is also money. In my region, Waterloo, there are 15 private and farm crossings on the CN line and 12 on the CP line, and we even have nine on a smaller Elmira line, so this absolutely affects us in the Waterloo region.

Can you explain how we can make the railways pay for these changes or how we can change the process of how a train passes through private lands? What kind of mechanisms can we enforce?

[Drew Spoelstra]

To the second part, I'm not sure there's any way to really change the process of how trains pass through, other than looking at alternatives for safety. There may be ways to track the trains. I think we've chatted about that already. There may be opportunities to blow the horn more frequently when they're coming up to some of these private crossings.

The private crossings themselves, as you mentioned, are absolutely critical for farmers and for other parts of the community. These crossings are in place because once upon a time, the railway cut farms in half. For the good of the rest of the country, putting the railways in place also meant access to these crossings for the farmers who needed them.

We outlined a few things that we think are possible for the government to move forward with. Imposing an immediate moratorium on the closure of railway crossings is important for us. We can reinforce that the upgrades to these crossings and the drainage issues are the responsibility of the railway. We can prevent unilateral agreements that shift the maintenance and cost upgrades to landowners. Funding the rail safety improvement program is important so that municipalities and farmers have access to funding to make improvements. Then there's working on legislative amendments to the Canada Transportation Act to prevent railways from shifting costs that are historically covered by the railways.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

I appreciate that and your being here to have this discussion.

Perhaps we can talk about the Drainage Act again. I know you've said this before, but it helps to get it on record again. You mentioned that the people using the system pay the cost, and the railways are using the system. Can you expand on why they need to pay their share?

[Drew Spoelstra]

Absolutely. That's the way the system works. The users of the system pay the cost. For a number of years, it's worked very successfully.

The railways are not immune to drainage issues. Even though they might be up on a raised platform, there still needs to be drainage around them. The water still needs to get away. The water still needs to flow underneath railways so that they don't erode and cause issues with the infrastructure underneath them.

Railways are as big a user of the drainage system as any of us farmers or municipalities across Ontario.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

I will switch, for the minute I have left, to Mr. Sobkowich from the Western Grain Elevator Association.

We're going to hear from the railways in the next week or so. The railways are probably going to say that extended interswitching makes supply chains less efficient or possibly directs more grain to the U.S. Can you help address those issues, because we're about to hear that from them?

[Wade Sobkowich]

Barely any grain gets interswitched. In terms of operational impact, it's minimal. When the pilot ran from 2014 to 2017, less than 1% of all traffic was interswitched, and less than 0.6% of that was grain.

It really has a negligible to non-existent operational impact. The railways will play that up. They don't want it because it creates some measure of competition, which is distasteful to them. That is just a non-thing.

It's very useful to us, because if the railway is not providing you with a train or with competitive rates, today, you as an elevator and as a shipper would wait for a train. You don't really have any leverage. I shouldn't say “today”, because under extended interswitching, you do have some leverage to say that if they're not going to provide you with that service, you're going to avail yourself of your right to connect to the competing carrier. What happens after is that the primary carrier comes back and says that everybody should just back away from the ledge and that they think they can get you a train next week.

The effectiveness of extended interswitching isn't in the actual interswitch. It's in the leverage you get in presenting the competitive alternative and introducing that into the discussion. That's really a non-issue.

In terms of employment and trains to the U.S., we have to remember that both major primary carriers in Canada exist on both sides of the border. They have employees on both sides of the border, and they have vast networks on both sides of the border. They move product across the border all the time.

We export a lot of grain to the U.S., but the vast majority of our grain moves east-west. It moves to one of Canada's ports for a destination overseas. We don't move grain to or through the U.S. unless it's destined for the U.S. In that case, it crosses the border, and it can go a certain distance before the railway needs to change from a Canadian crew to a U.S. crew. Then it moves on. It really doesn't have an impact on Canadian jobs either, other than that the railways—

[The Chair, Liberal, Kody Blois]

Mr. Sobkowich, I apologize.

Mr. Louis, you had two extra minutes there. You'll have to send me a Christmas card. I like good scotch, so you can send that in the mail too.

Mr. Perron, the floor is yours for two and a half minutes.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you, Mr. Chair.

Ms. Levasseur, I would like to hear your comments on the subject of interswitching.

From what I understand, this is a major problem in the west. In Quebec, is the 160-kilometre distance used?

[Stéphanie Levasseur]

No, we don't have this problem in Quebec because we have direct road access to the ports, I believe. So this is not a problem for the province of Quebec.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

I am going to ask the other witnesses. I don't know who will want to speak on the subject of interswitching.

The act provides for a distance of 30 kilometres, and the pilot project is now extending that distance to 160 kilometres. Everyone says that this works well and should be made permanent.

Some are now calling for the distance to now be 500 kilometres. I am not opposed to raising it from 160 to 500 kilometres, but I would like to understand the reason for asking to make it so far. Is this 500-kilometre distance needed everywhere? Could the 160 kilometres be made permanent, and exceptions provided to enable certain producers to have the 500 kilometres?

I would like to hear your opinion on that.

[Drew Spoelstra]

As in Quebec, interswitching isn't a big issue for our members across Ontario. We have very good access to ports, like the port of Hamilton, the port of Thunder Bay and others around the province. We have a good ability to move our products, but we certainly support some of the challenges that our western friends are facing when it comes to interswitching, and we support extending the project to up to 500 kilometres.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

What do you think, Mr. Sobkowich?

I will ask Mr. Youzwa to answer after that.