Natural Resources Committee on April 1st, 2008

[Joe Comuzzi, Conservative, Thunder Bay—Superior North, ON]

That's the future for us in being able to be competitive in the world market. We're on the shores of Lake Superior. We have three deepwater ports. We have Nipigon and we have Red Rock and we have Marathon that are not utilized.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Comuzzi. Your time is up.

Mr. Tonks, you have up to five minutes. Go ahead.

[Alan Tonks, Liberal, York South—Weston, ON]

Thank you, Mr. Chairman.

Thank you to our deputants, both on our telecom and who are before us today.

I will follow up a little from Mr. Comuzzi's line of questioning.

Last night many of us attended the Marine Pilots Association meeting, and they presented a video with respect to a realignment of the seaway and the canal structure and the integration of that to an overall national transportation strategy.

We have been attempting to undertake an analysis with an action plan that would address the forest industry. There has been abandonment of rail rights-of-way to short lines. Some short lines have been competitive on their own. Some, after capital, are not able to even declare a reasonable profit.

In fact, the argument of the railway companies themselves was that they have abandoned short lines because they could not operate these lines at a profit after capital.

You have asked for a rail services review, but the point you're making is that there are competitive realities that are driving your need to have better service from the rail, but from the total transportation system.

Instead of a rail services review, do we need an overall transportation review, looking at marine, looking at trucking, and looking at the issue with respect to the excise tax, for example, on diesel fuel?

Are you not looking for a larger prescription from government to resolve this issue because it's a very large portion that is affecting the forest industries? If you just go after rail alone, would you not accept the rejoinder from rail that they too are caught up in this very difficult competitive thing, where they would put forward their after-capital profits and say “Look at us. We're not making as much as freight. We're not even making maybe as much as the forest industry”, and then you never come up with a resolution.

My question is, should we have an overall transportation strategy that figures in, strategically, forest industry products and then make recommendations from that with respect to marine, trucking, and rail--what serves the industry best?

[Hartley Multamaki]

Perhaps I can comment on that.

[The Chair, Conservative, Leon Benoit]

Actually, Ms. Morgan is going to comment first. Perhaps you could be prepared to do that when she's finished. Thank you.

Go ahead, Ms. Morgan.

[Marta Morgan]

Mr. Chair, I think the points that have been raised are very good ones. Obviously it's the efficiency and the effectiveness of the overall transportation system that, at the end of the day, is really the bedrock of our success as a trading nation.

There are issues in other parts of the transportation as well, whether it's ports, whether it's capacity, whether it's competition within those elements of the transportation system.

We've been very supportive of successive governments' efforts, for example, to invest in the Asia-Pacific gateway. We think that can only be positive for our industry, for obvious reasons, looking at all the freight coming in and out of the west coast.

However, we do think that when we look across the system as a whole, the biggest issue for us does remain rail, simply because it is the most feasible and practical way for us to transport our products, given the location of our facilities and the location of our customers.

So I think that's the reason we focus most of our efforts on trying to improve rail service and cost, just given its dominance in our cost structure now and likely into the future. But certainly we've been active participants in other broader looks at the transportation system and recognize that we have an interest in the overall system.

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Tonks.

[Alan Tonks, Liberal, York South—Weston, ON]

Was it Mr. Multamaki who wished to make a comment?

[The Chair, Conservative, Leon Benoit]

Yes.

Mr. Multamaki, were you going to answer?

[Hartley Multamaki]

Yes, I had a couple of comments.

I agree with what Ms. Morgan had to say. She's correct: the bulk of our product is transported by rail, and that's why we tend to focus on it. Also, the alternative, for example, of marine is not necessarily available to all of the industry that's out there. It is, fortunately for us, a viable alternative. As we said to Mr. Comuzzi, we are very clearly interested in continuing to operate a marine division and providing the most competitive and cost-effective method of getting our products to market.

I do agree that there is a need for a look at a national transportation strategy that would ensure that as a trading nation we have the most competitive transportation system in the world. Our competitors, other countries like China and the Scandinavian countries, are doing that. They are very competitive in getting their products to market. We need to do the same thing, recognizing again that rail is such a large component of our transportation process that we can't ignore it or we can't gloss over the fact that there are significant problems with the rail lines.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Tonks.

Mr. Anderson, go ahead, please, for up to five minutes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

I wanted to come back a bit to the trucking and the marine shipping aspects for a minute.

We're going to do a report. It's going to be put together, and we're going to make some recommendations. I'm wondering if there are some specific things you would like us to consider recommending in terms of the trucking industry and marine shipping. I know we've talked about that a little, but I'm wondering if you have some specific things that you would like to see us recommend. Mr. Tonks mentioned things like excise tax. I know that there's been an issue with truckers regarding hours of duty and those kinds of things. It's fairly specific, but we want to make some specific recommendations as well.

[David Church]

With respect to the trucking industry, I don't think there's anything. There is enough competition in the trucking industry these days. Our mills are able to work with their trucking company providers to get the product from the mill to the market in a timely fashion.

In the marine sector, there may be a couple of issues you may want to look at. One was referred to as the marine pilotage issue. One of the things FPAC has been an advocate of for a number of years now is commercialization of the marine pilotage system. Right now in many regions of the country there is one marine pilotage authority that provides the service at the ports. We think that, like any other sector, it should be subject to commercialization and competition.

In addition to that, there's also the Shipping Conferences Exemption Act, which basically now provides for ocean carriers or ocean conferences the ability to get together and set rates. There is legislation--there is now a movement in the European community--to eliminate the antitrust immunity that conferences currently enjoy. We as FPAC and a number of other shipper associations have been strong advocates for the elimination of that antitrust immunity to force the ocean carriers that ship by container or carry containers to compete in the marketplace the same way we have to, without being able to get together and set rates and so on.

Those are two issues that come to mind right now.

The third one that you may also want to consider is the marine services fees that are presently imposed by the federal government on services provided by marine carriers. Those services include icebreaking and other marine services, like the placement of buoys in ports and so on. Those costs get passed on to our members, our shippers, and particularly those mills that are located on the east coast, where icebreaking is required, in Newfoundland and in the St. Lawrence River. There is an additional cost burden to those mills, in some cases up to 50¢ a tonne. That's a cost that we have to incur and cannot pass on to the marketplace.

In the marine sector, those are issues you may want to consider looking at down the road.

Thank you.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I'm wondering if the gentlemen have anything they would like to contribute.

[Hartley Multamaki]

I have just one comment.

I agree with everything my colleague has said about the marine side of it. The only thing I would add is on the trucking side. There is a huge amount of competition, I agree, and anybody or any organization can go out and buy a truck. You can negotiate with large numbers of competitive trucking organizations, and we do that.

The one thing that is of concern is the infrastructure that's out there. Being in northwestern Ontario or northern Ontario, the infrastructure that the trucks run on, the roads and highways, is of concern. I think as part of a national strategy, we need to look at the primary highway systems and certainly recognize that there is a role for the provincial government to play in that. We have to have primary highways that are up to standard and that are high-speed so that we can get our products to market on them in a reasonable fashion.

Thank you.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I think a number of us who are from rural communities can relate to that.

Do I have some time left, Mr. Chair?

[The Chair, Conservative, Leon Benoit]

Yes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I have a question. Earlier I think one of the gentlemen from Thunder Bay had suggested that they would like to see rail revenue caps on rail movement.

To give a little bit of background, I am from western Canada. We have rate caps on our freight on grain. I think it has resulted in a real loss of efficiency in the system. Railways don't seem to have a lot of interest in moving that product that they are getting a little lower rates on than they expect they should get.

How serious were you about that? That wasn't presented as one of the alternatives when Mr. Trost had asked what you would like to see happen with the railways. So I'm wondering what your thoughts are on that, and I'd ask FPAC for its comments as well.

[Pino Pucci]

Actually, maybe it was communicated wrong. I wasn't suggesting any great caps or anything like that. We were talking about what was going on with the farmers and what they did over there.

We were saying that we agree with FPAC's findings and Hank Ketchum's note with regard to the 15% additional freight costs that we're actually paying because of the monopoly system we're being forced to operate in.

I don't know how to address it, but one way or another, when you have decreasing demand significantly, that should generally mean that rates go down, because in the same system you should have additional car supply. At the exact same time as there is a decreasing demand, we have rate increases being announced. That's only being achieved by artificially limiting the supply.

So whether it's a rate cap or some other way of addressing it, I don't know, but I know the system today isn't working.

If you go back two years, regardless of the Canadian currency and issues like that, you have Canadian industry across the country, in the forest products industry, going down, taking extended foreclosures, shift reductions, and/or complete mill foreclosures.

[Hal Brindley]

I'd just like to add on that as well that two years ago, when I ordered x number of cars in the course of a week, I would normally get those cars through their guaranteed system. Now when I order cars, I get guaranteed only half of that. They don't have the cars in the system because they've put them in storage.

[Pino Pucci]

Just to add, in talking about rate caps and anything like that, let's not forget that the railways are all making record profits today. They're making record profits and giving us the worst service we've ever seen.

[The Chair, Conservative, Leon Benoit]

Ms. Morgan, do you have something to add to that?

[Marta Morgan]

I would agree. We're not supporting re-regulation of rates. What we are supporting is more options for shippers to challenge poor rates and poor service. We would support the long-term structural solution, which is actually introducing competition into the system, which would bring down rates.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

We do have some other business for the committee, Mr. Trost's motion that we'd started to debate at the last meeting, and also we have to talk a little about when the report for this committee will be finished.

I would like to thank all the witnesses for coming today: Mr. Brindley, Mr. Adams, Mr. Pucci, and Mr. Multamaki by video conference; and Ms. Morgan and Mr. Church here in our committee room. Thank you very much.

We're going to allow the witnesses to leave and we'll carry right on with the meeting.

The first order of business is to continue the discussion on Mr. Trost's motion. We were dealing with that at the last meeting and ran out of time.

I don't remember where we were. We have Mr. Trost and Mr. Alghabra on a list, apparently ready to speak to that now.

Mr. Trost, go ahead, please.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Mr. Chair, it has been a couple of weeks for all of us. I know I was getting indications from across the table here that members were wondering specifically what we had or hadn't decided to do at the last meeting.

According to the minutes, had we come to a conclusion or a decision? Maybe the clerk could help clarify exactly where we were.