Transport Committee on June 15th, 2006

[The Chair, Conservative, Merv Tweed]

Good morning, ladies and gentlemen. Welcome to the Standing Committee on Transport, Infrastructure and Communities.

Today we'll be studying safety solutions on modes of transport. We have witnesses--I always struggle with that word, I would say suppliers of information--from the Department of Transport.

I would assume that you have a presentation to give. Perhaps what I'll ask you to do is to introduce yourself and who's with you, and then we can proceed.

Go ahead, please.

[Marc Grégoire, Assistant Deputy Minister, Safety and Security Group, Department of Transport]

Thank you very much, Mr. Chairman.

My name is Marc Grégoire, and I am the ADM of safety and security at Transport Canada.

I'm accompanied today by my directors general: Merlin Preuss from civil aviation; Luc Bourdon from rail safety; Bill Nash, acting DG for marine safety; and in case you would like touch on TDG matters, I also have John Read with us, who is the DG of transportation of dangerous goods.

I'm here today as a follow-up to your discussion a few weeks ago with the Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities. Our minister has a broad mandate with one common thread: a commitment to safety, security, effectiveness, and the sustainability of our transportation system.

We know that the global environment continues to change and evolve. While we cannot ensure 100% safety, we can manage risks at acceptable levels to enhance the transportation system on a continuous basis--an essential element towards protecting the health and well-being of Canadians.

Canada has always had one of the safest and most secure transportation systems in the world, but the dramatic growth of new markets is putting tremendous pressure on that system. Bottlenecks are beginning to develop at key ports and there are concerns about the ability of our rail and marine systems to meet current demands, let alone future growth.

The transportation system is becoming more integrated and multimodal with increased expectations that cargo and passengers move smoothly between modes and across borders. The BC cruise ship industry that sees passengers moving between the airport and port facility is a good example of this trend.

Accident statistics in recent years show an overall downward trend in all modes. The problem we're facing today is that the rate curves are almost flat. You may also be surprised to hear that even the rail statistics for accidents have been improving since the beginning of 2006.

Going back to the curves, with the traffic growth predicted, the number of accidents could increase, unless the department starts looking at different ways to improve safety and therefore reduce the rate of accidents. In other words, if we can't find ways to reduce the rates themselves, the absolute number of accidents could increase as the traffic picks up in the future.

We have studied this issue in recent years, and we have determined that one of the solutions was safety management systems. We need to build upon our existing regulatory frameworks and focus on risk management practices. The safety management systems, or SMS are part of the solution.

SMS is very much based on a partnership between the operator and the regulator, and this partnership is essential in further strengthening our program over the coming years. SMS takes a systems approach to managing risk in an organization by integrating safety into the daily operations of a transportation company. A greater share of responsibility for safety is placed on the transportation service, facility and equipment providers. This means changing the way we all do business—from safety at an operations level to a systems-wide level.

Companies will be accountable for day-to-day operations. This is more about integrating the processes that already exist in most organizations and less about creating new ones.

We all know that quality risk management is based on quality information. Information must be free-flowing within an enterprise and between the enterprise and its safety partners. The reporting system must encourage and accommodate both the proactive reporting of hazards and the reactive reporting of incidents and accidents.

SMS is not about eliminating our regulatory framework. On the contrary, it's an added layer, where Transport Canada will intervene at the system level, given that the consequences of system failure are more dramatic.

This cultural change must begin at the top of an organization, at the level of power, leadership, and ultimate accountability in the various operators.

In aviation, the new safety policy makes the person with the power to impose a new policy lead its implementation, fund and sustain it, and be accountable for the safety performance of the civil aviation organization. The accountable executive is likely the owner or chief executive officer of the enterprise. For all intents and purposes, it's the person ultimately responsible for the profitability of the enterprise. From a Transport Canada perspective, it puts a face on the certificate.

Canadian aviation organizations that have embraced SMS have found they have not only enhanced safety, they have also enjoyed the benefits of SMS for business, because risks are identified before they become an incident. Small problems are fixed before they turn into big ones. Reduced risks also mean reduced insurance rates and higher confidence, not only in the public sector, but within the industry as well.

Safety performance and economic performance can be linked, and that link can help drive a new era of aviation safety and security around the world. Accidents cost money—big money—and there are also the indirect costs of loss of business and time lost by injured persons. The bottom line is that better safety means better business for all our stakeholders.

In marine safety, the adoption of SMS in all modes of transport is a priority for us, so I want to touch on marine and rail as well.

I'll start with marine.

Safety management systems were mandated for Canadian international shipping through the 1998 Canada Shipping Act Safety Management Regulations. These regulations were developed to ensure that Canada met its international obligations. In 2002, they were expanded to cover most vessels over 500 gross tons making international voyages.

Canada has, on average, 60 ships and more than 20 companies engaged in international shipping that have obtained full statutory certification for their safety management systems. While Transport Canada does not have mandatory application of these SMS regulations for Canadian domestic shipping, we have successfully promoted voluntary adoption.

Today, there are approximately 15 Canadian companies and 155 ships operating domestically that have voluntarily adopted and obtained certification for their safety management systems.

The marine safety directorate continues to support the adoption of the International Safety Management Code and is examining ways to increase the code's implementation within the Canadian marine industry. This code provides an international standard for the safe management and operation of ships and for pollution prevention. It does this by addressing the need for a commitment to a safety culture at all levels of the company or organization, including management, masters, and crews.

Similarly, the Railway Safety Management System Regulations came into force on March 31, 2001, requiring all federally regulated railway companies to implement a safety management system.

Safety management systems provide the railways with a formal framework to integrate safety into day-to-day operations. Safety management systems also provide Transport Canada with a consistent basis to monitor safety performance and compliance with regulations through auditing and analysis of performance indicators and other safety data.

Furthermore, Transport Canada has a regular inspection program in place as well as a mechanism to audit railway infrastructure, equipment and methods of operation to determine the level of compliance with established regulations and standards as set out in the Railway Safety Act.

Transport Canada investigates all rail concerns raised by stakeholders and the general public to determine whether or not the concern constitutes a threat to railway safety or non-compliance with the Railway Safety Act and associated regulations.

Following the increase in Canadian National Railway mainline track derailments in 2005, the department took immediate action to address this upward trend. This resulted in a number of initiatives by the railway including increased track inspections that has brought about a significant reduction of track-related derailments in the past few months.

In closing, Transport Canada is working closely and diligently with the Transportation Safety Board, whom you met on Tuesday, as well as stakeholders and labour to continue improving the safety of Canada's transportation system.

Transport Canada is, first and foremost, a safety organization, and Canada continues to be internationally recognized as a leader in transportation safety, and we want to maintain this reputation.

In practical terms, that means a safe transportation system where everyone involved works together on the regulations that impose rules focused on safety results and are designed, where appropriate, to give industry the flexibility to be innovative in meeting those safety outcomes.

We would now be pleased to answer any questions you may have.

[The Chair, Conservative, Merv Tweed]

Thank you, Mr. Grégoire.

Just to advise the committee, Mr. Julian had to step out, but when he comes back in we'll work him back into the schedule--just so everyone knows what I'm doing.

Mr. McGuinty.

[David McGuinty, Liberal, Ottawa South, ON]

Good day, Mr. Grégoire.

Good morning, Monsieur Bourdon, Monsieur Preuss, and Mr. Nash.

I just wanted to go through your presentation and ask a couple of questions. I wanted to focus a little bit on aviation safety at the outset.

You talk about safety management systems, SMSs, not eliminating the regulatory framework. You talk about the potential costs--big money--indirect costs of loss of business, and time lost by injured persons, and so on.

Can you tell us a little bit about brand? I used to act for oil and gas companies, and one of the things we learned by watching a Canadian company called Talisman Energy Inc. operate in Sudan at a time when Talisman was operating with the regime running the country of Sudan was.... There's a well-documented case in business circles they call the Talisman discount, or Sudan discount--the incredible brand impact on Talisman's worldwide operations--just as Texaco has faced. And I'm sure Air France is facing similar challenges right now post its Toronto accident.

If there is a major accident, what is the impact on a major airline's brand in terms of costs and potential downturn in customers, in terms of revenues, and so on?

[Marc Grégoire]

My colleagues in the economic portion of the department would be better placed to quantify this, but the impacts are quite devastating.

If an airline crashes a big aircraft, or if a small airline crashes a small aircraft, the impacts are quite important to that company, especially if they are recognized as guilty of not having not followed the rules.

It all depends on the circumstances. Accidents cannot be eliminated totally. We have had some companies in the past that had crashes and lost lives, but that were able to demonstrate publicly, with our support, that they were operating in a very safe manner but had had an accident. In other cases accidents have led to closures of companies.

Accidents can have an impact on brand, and they can have an impact on insurance. If a company has one or more accidents, normally their insurance, like your car insurance, will go up. If a company has a number of accidents, the insurance may drive the company out of business faster than we could, if that company has followed the rules.

[David McGuinty, Liberal, Ottawa South, ON]

Can I ask a related question with respect to aviation safety?

You talk about the person ultimately responsible for the profitability of the enterprise putting a face on the certificate, which would, I assume, help ratchet up the implementation of SMSs in the aviation sector. Does your SMS compel lenders?

A large number of aircraft in this industry are leased—financed, not owned—by the companies in play. The Irish, I think, still dominate the leasing market world-wide. Are there any provisions in the SMS, or is there a reach-back for liability purposes to the lenders?

[Marc Grégoire]

No, it's strictly to the CEO, the main shareholder, or the owner of the company. If he rents aircraft, he must maintain them to our standard. If he has a problem, he is accountable.

[David McGuinty, Liberal, Ottawa South, ON]

Is the SMS a condition precedent of receiving financing or of being able to lease airplanes?

[Marc Grégoire]

No, the SMS is an overlay. It's an umbrella regulation that sits above all of the regulatory structure we have now. It's not replacing anything; it's added above the regulations.

[David McGuinty, Liberal, Ottawa South, ON]

If a Canadian airline company is leasing planes, then, it must warrant that it's in full compliance with Canadian standards and Transport Canada regulations, which would include an SMS. Is that correct?

[Marc Grégoire]

Yes...well, an SMS for some companies; an SMS has not been imposed on all companies yet.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you.

You mention on page 4 that there are on average 60 ships and more than 20 companies engaged in international shipping that have obtained full statutory certification for their safety management systems. We do not have mandatory application of these SMS regulations for Canadian domestic shipping, but you're promoting voluntary adoption.

Why would we not have mandatory application of these SMS regulations for domestic shipping?

[Marc Grégoire]

It's because we're not there yet. We may get there. We're talking with industry at this point in time. We have them for big ships because those big ships have to be certified under SOLAS class, “Safety Of Life at Sea”, under the International Maritime Organization. It varies between approximately 60 and 66 ships. We would encourage people to “go SMS”, as we did in aviation, for instance. Then we will regulate when we feel the industry is ready.

[David McGuinty, Liberal, Ottawa South, ON]

Fifteen Canadian companies and 155 ships operating domestically have voluntarily adopted. How many have not?

[Marc Grégoire]

We would have to do a subtraction here. It may be half. It's probably the smaller ships, because most of the big ships would have adhered. There are roughly 200 big ships, including the 66—or 60, now— SOLAS-class vessels. It would be the smaller ships that wouldn't have adhered, and there are tens of thousands of those, if you include the fishing fleet and the small commercial fleet. There are a lot of those.

We are now looking at what other countries are doing in the maritime environment to see how we can tailor the SMS approach to smaller operators. We can't require the same complex framework as for a big company from a small company or an operator of just one ship or one boat.

[David McGuinty, Liberal, Ottawa South, ON]

I'm not sure if my colleagues want to jump in here on any questions, but lastly, there is no reference in your text or in your presentation to...except for in the very beginning, where you talk about the sustainability of our transportation system. I'm never sure if that means the economic sustainability or sustainability in the sense of sustainable development.

[Marc Grégoire]

The way I like to explain this is that in Transport Canada we have three main pillars: the economy, safety and security, and the environment. If you have those three pillars in balance, en équilibre, then you have sustainable transportation. If I want to push this for safety, for instance, if you want to have absolute safety, stop everything from moving, then you will have absolute safety. The safest day we had in the last 60 years in aviation was September 12, 2001. No aircraft moved. There wasn't a single accident or incident, but that's not good for the economy. It's good for the environment, though. Those three have to be in balance in order to have sustainable transportation.

To answer your question, it's for both: economically speaking and environmentally speaking.

[The Chair, Conservative, Merv Tweed]

Mr. Laframboise.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

I am all for you trying to achieve this balance, but I think that you have focused all your efforts on a management system that, ultimately, requires the industry to use voluntary compliance with regard to safety. You have given some examples, and I want to try to proceed sector by sector.

There has been a railway safety management system in place since 2001, but the number of accidents increased in 2005 and the department took immediate action. However, you have a regular inspection program.

How is it that there were more rail accidents in 2004 and in 2005 if you had an inspection system in place and if, since 2001, the industry was using voluntary compliance? In my opinion, it is because the inspection system was not working. What other explanation could there be?

[Marc Grégoire]

A safety management system requires a profound change in culture that does not happen overnight. It takes a great deal of time before the companies and the operators, both in the rail, air and marine sectors, fully embrace the SMS philosophy. We estimate that this will take between eight and ten years. We are currently taking our first steps toward changing this culture.

We have a very good record. There was a drop in the number of accidents in nearly all modes of transport, except in 2004 and 2005 in rail transportation. We admit that and we are addressing the situation, but we have not managed to generate a significant drop in the rates. Only minor changes have been made. We are trying to see what we could do to generate a significant change and lower these accident rates. After numerous discussions with international risk management experts over the past ten years, we asked ourselves the following question: would our transportation system in Canada be safer if a Transport Canada inspector were placed on each plane, boat and train? Would it be safer than it is today? Would we succeed in lowering the accident rate?

I want to make an analogy with road transportation. If there were a police officer in every car, would the roads be safer? All the experts have said no. In order for road transportation to be safer, the operator must integrate the philosophy that security takes precedence over all else.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Grégoire, you are saying that it will take between eight and ten years to integrate the system into the industry. What do you intend to do in the meantime? Instead of you saying that the industry will take eight to ten years to embrace voluntary compliance, we should have had more track inspectors. But you didn't do that and the problem has gotten worse.

On another note, the Quebec City Bridge is rusting, and no one can agree on what to do. So the problem continues. It is really something. We are talking here about the Quebec City Bridge, which is not hidden in the backwoods. No one can agree on who should paint it. Based on what you are saying today, I think we can expect that it will fall down and then we will hear, “What a pity that there was a problem with the Quebec City Bridge.”

You must understand that we represent the public. People are having trouble following you, because no decisions have been made. Furthermore you have opted to let the industry discipline itself. This leads me to the marine industry where the problem is even more apparent. Those people are operating on a voluntary compliance basis. You have even made it optional whether they get a certificate or not.

As you know, a boat hit a bridge in Quebec two days ago. We are being told that there may have been a mechanical problem with the rudder. Can the public be content with the way that Transport Canada is monitoring ships on the river? The legislation regulating the marine sector was implemented in 1998. Since you are talking about a 10-year period, we can expect that, by 2008, these measures will be implemented, unless you expect people in this industry to be able to voluntarily.

[Marc Grégoire]

Mr. Laframboise, this does not mean we are going to cease our activities. It is not about our withdrawal, as I've already explained. The SMS is an addition to regulations already in force. This is the case in aviation. We think that this will allow us to take a step forward and reduce the accident rate. Nonetheless until the SMS are in place, there will be accidents, and Transport Canada will take measures, as it has done in rail transportation. In fact, a large number of inspectors audited CN. This company then implemented the necessary measures.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

I will stop you there, otherwise I will run out of time. You have opened the door for me and I will take advantage of this opportunity to talk about civil aviation.

With regard to civil aviation inspections you are restricting your inspectors' training budget, meaning your own employees. As least this is true for inspectors in Quebec. You are telling me today that you are not going to withdraw. I would recommend that you go and talk to your inspectors. According to them, they are not getting enough training, and it's because you have cut the budget. They also say that you are telling them that a management system is being implemented and that companies will take more initiatives.

It appears that you are cutting civil aviation budgets. In fact, in all sectors, you are limiting your own capacity to conduct follow-ups. I am far from convinced that this is in the public interest.

Rail accidents, shipping accidents and the air transportation situation lead me to believe what the people working on the ground are saying, meaning that you are cutting your inspectors' training budgets.

You think that the industry is able to implement voluntary compliance. For my part, I believe that we must maintain oversight and that the government must play a role in inspection. If you think leaving the industry to its own devices is a success, I can tell you that, to date, this is not true. At the very least, you have not managed to prove to me that things have improved.

[Marc Grégoire]

I see that I still have some work to do to convince you, but we have all the time we need. I do not know where you are getting your information that we reduced training budgets. To the best of my knowledge, civil aviation inspectors are on the contrary those who, throughout the department, have the largest training budgets. Unfortunately, I do not have the figures at my fingertips. Quite often, their colleagues from the rail and maritime sectors envy them.

[Steven Blaney, Conservative, Lévis—Bellechasse, QC]

I would like to start with a personal anecdote, Mr. Chairman. Since the House is adjourning soon, we can take some liberties.

In the winter of 1987, I was an engineering trainee at the Dorval airport. I was part of the marine navigation group, and I conducted a study on the acoustic environment. I can tell you that the commitment of the people there towards transportation safety is not new, since Mr. Grégoire was my supervisor at the time. He took me to Sept-Îles twice by plane. Our assistant deputy minister is also a pilot. So he must know what he is talking about when he talks about aviation safety.

I am pleased to be here with you today, Mr. Grégoire. I became a politician, but I am still interested in transportation and infrastructure.

My riding has the largest Canadian shipyard, the Lévis shipyard. On page 4 of your presentation, you say:

Canada has on average 60 ships and more than 20 companies engaged in international shipping that have obtained full statutory certification for their safety management systems. While we do not have mandatory application of these SMS regulations for Canadian domestic shipping, Transport Canada Marine Safety has successfully promoted voluntary adoption.

Are there any operators who have not yet signed on to the system? Would it be desirable to go from a voluntary approach to a mandatory one by way of legislation?