Agriculture Committee on Dec. 5th, 2024

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Again, it comes down to the same question. You say you can provide shipping at rates better than the United States, but farmers and shippers seem to want access to interswitching to make things better. We're in the middle of a pilot project and you're seemingly doing fine. You're making all these new investments. I'm still wondering how getting rid of this would be better for farmers and shippers if that's what they want and feel they need to move their products.

[Nathan Cato]

It's important to remember that the farmer is not our customer and is not a shipper. Typically, very large grain companies are the customers. We've certainly seen no evidence that there's any benefit to farmers from extended interswitching. We'd be very interested to see if there is any evidence that demonstrates that, but at the end of the day, we need to create a regulatory environment in Canada that incentivizes investment in the capacity that will be needed to support a growing population and economy. As the population grows in Canada, we expect that demand for freight transportation will increase, and we need a regulatory environment that incentivizes investment in capacity-enhancing infrastructure over the long term because that is clearly what's in Canada's interest.

[The Chair, Liberal, Kody Blois]

We're at time.

If you'd like, go ahead, Richard. You have 30 seconds.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Again, why do the shippers, then, want to ship through BNSF when you are offering 29% lower costs?

[Nathan Cato]

That's an average based on the MRE discount from average Canadian rail freight rates. I think this is about large grain companies for the most part. It does apply to all traffic, I should say, but for the most part they want to move traffic for less. We can understand the motivation, but—

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Then they should do it through you because you give them a 29% discount.

[Nathan Cato]

Again, that's the average overall when you look at it.

[The Chair, Liberal, Kody Blois]

Unfortunately, we're at time. It was at the peril of the chair to give you that 30 seconds, but thank you, Mr. Cannings.

Mr. Epp, you have up to five minutes.

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

Thank you, Mr. Chair.

Thanks to the witnesses for coming back today.

I'd like to begin with an estimation that APAS calculated: Farmers in Saskatchewan paid more than $36 million last year in carbon taxes to ship their grain by rail, and they're on track to doing $57 million this year. From your own reporting, CN determined that the carbon tax charges last year were $128 million and CPKC's were $102 million. I'd ask you to table with the committee, if you would, how much of those last two numbers were carbon taxes charged to grain shipments. Can you also estimate what carbon taxes have been paid since 2019, and as the rate is forecast to increase through 2030, could you table with the committee your estimated carbon taxes?

That said, I will shift gears a bit. There's an expression that comes, I believe, out of California, that goes, “Whisky is for drinking and water is for fighting over”. It's a bit early in the morning for whisky, so let's talk a bit about water. What was the federal change, in either policy or legislation, that prompted both railways to no longer consider themselves subject to the Ontario Drainage Act?

Go ahead, Mr. Harvey.

[Eric Harvey]

None. There was no change to any legislation that prompted that. Since 1996, drainage facilities have been considered utilities for the purpose of the Canada Transportation Act. The cost apportionment between utility users or owners—like municipalities in this case—and us is decided by the agency on the basis of the relative benefits that both parties derive from the infrastructure.

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

You mentioned 1996. That is when the Railway Act was split and was updated into the Railway Safety Act and the Canada Transportation Act. There was a clause, which was not carried over, that dealt with specific references to drainage issues across the provinces.

[Eric Harvey]

I'm sorry. Your question was referring to the 1996 amendments. In basically the last 28 years, there has been no change, so I thought you were—

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

That's correct. The change was back in 1996.

[Eric Harvey]

That's right. I'm sorry about that.

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

My follow-up question is, which legal eagle picked up that omission when the act was split? Was it CP's shop, your shop or RAC's shop that picked up the omission?

It's been about five years since both railways ceased to co-operate with municipalities in Ontario and with farmers and landowners on drainage issues. Where was that change in legislation from back in the nineties, when the railway was split up, picked up? Look at your own behaviour for 100 years. Going back to my opening comment, it was 1894 when the Ontario Drainage Act came into being. It was the most important piece of legislation, the very first piece, dealing with water, and for 100 years both national railways complied. Who picked up the change?

[Eric Harvey]

I want to stress that the issue we're talking about is only in Ontario. That's the first thing, and it's an important aspect to remember.

The second thing is that, as I understand it, in 1996, the policy reason behind the change was simply that the federal government wanted the regime applicable to utilities for national railways crossing the entire country to be the same in each province, so that's what happened then.

I want to answer specifically about recent years, because in Ontario itself, recent cases have been with very specific municipalities. We're talking about maybe two or three cases.

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

Perth East in your case, and in my own municipality of CK.

[Eric Harvey]

That's right. In those cases, railways are prepared to pay for the benefit they derive from drainage infrastructure. The challenge we're facing with those very specific and limited cases is that municipalities are assessing amounts to railways that we are saying seem disproportionate to the benefit that railways derive from the infrastructure. That is where we disagree.

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

I have limited time.

I'm actually a farmer, so I've paid into many drainage schemes and have been subject to many engineering reports that determine the benefit by landowner.

I'm wearing a Great Lakes pin here, which takes care of most of the water in the southern part of Ontario where crossings come. I believe the rain still falls on your tracks in Ontario and on neighbouring landowners' farms.

Is it your testimony that the neighbouring farmers and municipalities should pay for the upkeep of drainage? The water from your own drains must outlet into the Great Lakes at some point.

[Eric Harvey]

Our position is that the contribution made by municipalities and adjacent owners should be consistent with the benefit they derive from the infrastructure, just as we would contribute if we benefited from it.

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

That would be subject to the engineering reports that are a requirement under the Ontario Drainage Act.

[Eric Harvey]

Yes, but to be clear, we're federally regulated, and what we're saying today is consistent with the federal framework.

This is why we at CN brought a case to the CTA. I engaged personally with the City of Sarnia because I thought there were perhaps better things to do than have a fight with them. However, we could not reach an agreement, so here we are.

We have to seize the CTA. They will decide, and we will comply with the final decision that will come out of this process.

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

Thank you, Mr. Chair.

[Nathan Cato]

If there's time, I would like to respond to some of that as well.

[The Chair, Liberal, Kody Blois]

Do so very quickly. I'm probably going to take it off the third round for you guys, but go ahead, Mr. Cato.