Thank you, Mr. Chair, and good morning.
There are many opportunities to improve Canada's grain supply chain. One is the need for new tools in the Canada Labour Code to more effectively address labour disruptions. Another is the ongoing challenge of loading grain onto vessels when it is raining at port of Vancouver grain terminals. It is a problem that does not exist, or at least not to the same extent, at other rainy ports.
That said, we understand that the committee would like to have our comments today on extended interswitching and Transport Canada's grade crossing regulations. I'll start with extended interswitching.
Advocates of extended interswitching argue that the policy is needed for competition. This argument is not valid. Extended interswitching does not create one new competitive option.
The real motivation of shipper advocates is access to a regulated, cost-based rate, even though Canada’s average rail freight rates are among the lowest anywhere in the world and agricultural traffic is discounted by virtue of regulation under the maximum revenue entitlement. What shipper advocates fail to mention is that shippers already have regulated access to a competing rail carrier up to 1,200 kilometres away through long-haul interswitching, or LHI. LHI was created as a replacement for extended interswitching because of the unintended and harmful consequences observed when the policy was tried previously from 2014 to 2017.
Long-haul interswitching is also more consistent with Canada's national transportation policy, which is set out in section 5 of the Canada Transportation Act.
The difference between LHI and extended interswitching is the rate. The LHI rate is based on actual market rates for comparable traffic, which is essentially a commercial rate. This avoids the harmful market distortions caused by cost-based rate regulation, such as incentivizing the export of jobs and investment to the U.S. The evidence is clear from when extended interswitching was previously in place: The overwhelming consequence was the diversion of Canadian rail traffic to a U.S.-based rail carrier, the BNSF.
We are seeing the same damaging pattern emerge under this second trial of extended interswitching. The reason is simple: Extended interswitching gives the BNSF a 160-kilometre reach into Canada to solicit traffic at a cost-based rate, while the same is not true for rail carriers with traffic into the U.S. This imbalance was one of David Emerson's key conclusions when his statutory CTA review panel studied extended interswitching and recommended that it be sunset. The 2001 CTA statutory review panel also studied expanded interswitching limits and recommended against it.
Cost-based rate regulation harms the long-term interests of Canadian workers, shippers and consumers. Every carload of freight interchanged to a U.S. carrier under extended interswitching takes away the work of unionized Canadian railroaders. It also undermines private sector investment in capacity-enhancing infrastructure. CPKC competes fiercely in the market with other railways, other modes of transportation, and different routes and gateways. The competition must be on a level playing field. Canadian law should not be tilted to favour an American rail carrier at the expense of Canada. The policy should be sunset once again.
The grade crossings regulations were promulgated in November 2014 by the previous Conservative government following decades of consultation by TC. The department said it first started stakeholder consultation in 1991. The TSB identified a serious public safety concern regarding the risk of collisions at railway crossings.
In 2001, the TSB recommended that TC expedite new grade crossings regulations. Then in 2010, the TSB added this issue to its safety watch-list. Throughout the consultation, stakeholders raised concerns about the time needed for and costs associated with upgrading crossings to meet the new regulatory requirements. In response, the previous Conservative government allowed a seven-year period for crossings to be upgraded.
In November 2021, as the original deadline was approaching, the current government granted an extension of up to three years.
Crossing safety is a shared responsibility between railways and crossing owners.
We worked co-operatively, diligently and transparently with crossing owners to ensure compliance.
The responsibility for costs varies depending on the level crossing.
Financial responsibility for the maintenance and upgrades at private crossings is assigned by agreement or statutory right. Landowners who have a statutory right to a crossing are not responsible for maintenance costs. Those costs are covered by the railway. In other cases, crossings exist because an adjacent landowner whose land was not bisected by the construction of the railway requested one for their benefit.
The cost for these crossings is assigned according to the terms of an agreement between the landowner and the railway. If no agreement exists and there is a disagreement regarding cost apportionment, the law provides that a landowner can seek recourse from the agency. CPKC has taken a reasonable and pragmatic approach to finding a workable solution with each landowner. We were successful in the overwhelming majority of cases, and I am pleased to say that today we have completed the crossing safety upgrades required by the regulations.
Thank you, Mr. Chair.