Transport Committee on Oct. 26th, 2006

[Cliff Mackay]

The answer is that this is exactly what we've been doing under the MOU for the last few years. We have undertaken a number of very extensive technical studies to look at what reasonable standards for setback are, what reasonable standards are for the kinds of operations. It's not in the document you have today. As I said in my remarks, we will be publishing that document in the near future, because it is part of the guidance we intend to give to our friends in the municipalities and ourselves to manage issues at the local level.

It varies by the kind of rail operation you're talking about. Is it a mainline? Is it a subsidiary line? Is it a yard work? Is it a siding? There are a whole bunch of different factors that go into it.

I don't want to bore everybody in this room, but the railway business is a complicated business. I know it looks simple when you watch a train go down the road, but it's a lot more complicated than that.

[Olivia Chow, NDP, Trinity—Spadina, ON]

Is there a timeframe for when you might publish this?

[Cliff Mackay]

We hope the steering committee will deal with it within the next month or so. As I say, we're not characterizing these things as cast in concrete, because we just don't believe that's the right way to manage the issue. You should manage the issue at the local level in the context of the local conditions you're dealing with. What we're trying to do is provide guidance, so that everyone can go to some benchmarks and say, “If we're generally in this ballpark, then we should be pointed in the right direction.”

[The Chair, Conservative, Merv Tweed]

Mr. Jean.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you, Mr. Chair.

I thought I was in second place today. But thanks, Mr. Passed. Yes, I have some questions, Mr. Chair.

The first one is: what would your reaction be to adopting, in essence, the noise emission standards that Europe has in place in many of the major metropolitan centres, as far as decibel levels, etc. are concerned?

[Cliff Mackay]

One of the big problems we have with parachuting things directly in from Europe is that we just have an extremely different kind of railway system from theirs.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

How?

[Cliff Mackay]

We're 90% freight and 10% passenger; they're 90% passenger and 10% freight, to start with. We do long haul; we deal with huge distances; we deal with different climatic areas. It's just very difficult to set a standard in an environment like Europe and think it would work in a country like Canada.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I understand, but my question was not really directed towards the type of freight. Trains make noise no matter what they carry, and they make noise in major metropolitan centres no matter what they carry, but the reality is that Europe and countries around the world have standards set for decibels at night and during the day to ensure people don't suffer from sleep apnea and other major chronic problems caused by noise at night. As far as that goes, even though there are differences in freight and length of travel, the reality is that people live by rail in Europe and they have set standards for noise, fumes, and whistles blowing at two in the morning in shunting yards to make sure people have a reasonable quality of life. How would it be so different in terms of the freight, people, or whatever other criteria you consider necessary?

[Claude Mongeau]

I'm not familiar with the decibel standards they have in Europe, but I am very familiar with the differences in operating the railway. The railway is a freight railway in North America and it's a very passenger-oriented railway in Europe. The railway is an electrified railway in Europe and it's largely a diesel railroad in North America. In Europe most of the signals and crossings are guarded crossings, so whistling is not an issue. They just do not whistle as much as we do here because as a safety matter the government has paid for crossings, and the crossings are protected in most instances, other than in the most rural areas. They have a fundamentally different railroad environment.

I believe that what we have to deal with here are the particulars of our land use in North America--the particulars of our railroad technology, the particulars of our community. We have to make efforts to deal with the Federation of Canadian Municipalities to come to an understanding as to how we can deal with these issues as good neighbours. As you're contemplating it, this law provides an additional safety measure so that you would ultimately have recourse to the agency that has expertise in looking not only at the railroad operations issue but also the noise issue. You have to have both.

If you understand the flexibility that a railroad might have to do things differently, maybe the agency will be a little tougher in assessing what's reasonable or not reasonable. It's not always just the noise; it's about what the railroad could do about it. If the railroad has no choice, if we're talking about a mainline aspect, if it's right there and there's no other way for the railroad to service its customers and meet its common-carrier obligation without shunting cars at certain hours of the day, then the agency, I would hope, would take that into account in setting what's reasonable. I believe the approach and the law you have in front of you will go a long way to address those issues.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

You are aware, of course, of the technology that's available to keep shunting quiet in yards in Europe. I know there is a cost to technology, but have you looked at the technology that's available now in the marketplace to alleviate much of the noise that happens at late hours? For instance, we've heard from witnesses here that it's at two, three, or four o'clock in the morning, and very often yards are going all night. People find it very difficult to sleep, and they cite many problems. As you know, many groups across Canada, in Quebec, and in many other jurisdictions have been formed as a result of railway noise.

[Claude Mongeau]

I understand that, Mr. Jean. I will tell you as a railroad operator that we operate a network. We have shippers on the one side who would like to have the lowest possible transit time and the best possible service, and we have people who would like us not to operate at night and not to operate on the weekends. The reality is that if you want to bring a movement from Halifax to Chicago in four days, at some point during the journey you're going to have to be operating your railroad at night. That's just the reality.

To your point, from a shunting standpoint our railroad operation is fundamentally different from what it is in Europe. Europe has flat switching, and they have much more of a unit train operation. They do very few hump operations the way we do. The coupling mechanism and the entire fleet of rolling stock in Europe are fundamentally different.

Would it be possible to have roller bearings, or different kinds of bogeys or coupling mechanisms? Absolutely, but we're talking about hundreds of thousands of cars and billions of dollars of investments that cannot be made over time to replicate what some other countries have done for different reasons. I think we have to be pragmatic; I think we have to address those issues, and we have to look at land use as much as we look at noise. Railroads were often there long before residential areas caught up to them. We have to have a forum to address issues with experts who understand rail and noise issues. I think that's what your bill will do.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I understand the compromise that's necessary.

What about traffic congestion? I'll tell you about one particular place where I was this summer, looking at congestion and some of the major problems we're going to have in the future with transportation, and that is in the Lower Mainland in British Columbia. It is a huge issue. Quite frankly, I was appalled by what's taking place there in terms of the crossings and the traffic congestion and the quality of life of citizens, not to mention the GHGs and all the other environmental hazards that are put off as a result of, quite frankly, trains congesting the railway and congesting roads with crossings. In Langley in particular, with the infrastructure deficit that we've had for such a time, we have to look at innovations.

What are your comments as far as hours of operation, first?

Second, I understand there's a way around the middle of Langley in particular through an alternative track. I'd like your comments on that too. I know they are privately owned, but can there not be some sort of compromise between owners of tracks to have some sort of avoidance of these traffic congestion problems?

[Cliff Mackay]

Let me speak specifically to Langley.

The city of Langley is probably the poster boy in Canada of conflict between rapid urban development and rapid growth of rail services happening at the same time. It is a very serious problem, and it's one that we've been focused on for quite some time.

Our view is that what we need to do in Langley--and we need to do it as quickly as is humanly possible--is to get grade separation between the railway main line and the main roads where the congestion is currently taking place. It is the only long-term solution. Experts have already looked at the idea of that diverting line. The costs are astronomical. The inefficiency losses are astronomical. Because of our customers and because of the growth in Asia-Pacific trade, there's no scenario that we can see in which the traffic pressure is not going to go up in that part of the world. We absolutely need to separate traffic between vehicles and trains, and we need to do it quickly.

There are some modest allocations in the current Pacific gateway. We would urge the members of this committee to urge the government to increase those allocations on an urgent basis and to make these projects a high priority.

[Claude Mongeau]

Can I give you the good news, Mr. Chairman? As the CFO of CN, I know that next year CN will send $650 million of income tax to the federal government for the first time in its private history. Some of that money should go back to some of these projects to address crossing issues, because the reality of the booming Asian trade is not going to disappear, and if we want the Pacific gateway--if we want the Port of Vancouver to try--we'll have to find ways for the railroad infrastructure to be able to address that volume.

The solution is for the government to step in with infrastructure and do crossings and grade separation in the same way that the government does roads and other infrastructure for transportation if goods have to go on trucks.

[The Chair, Conservative, Merv Tweed]

Mr. Hubbard is next.

[Charles Hubbard, Liberal, Miramichi, NB]

Thank you, Mr. Chair.

I'm glad to hear that the income tax is going to come. I'm rather surprised that you give that figure, because I would have assumed that you've been paying income tax over the last eight or ten years.

[Claude Mongeau]

Actually CN lost so much money previously, when it was a crown corporation, that we had a tax shield for those ten years, but next year the price of success is coming at us, and that is very good news for the federal government.

[Charles Hubbard, Liberal, Miramichi, NB]

It's rather surprising that you can carry so much old debt that you're able to do that.

It brings me to my point in terms of this so-called net book value. In this country, in terms of the government's direction, we want to see more effort put toward inner city transit, which would be a major improvement in terms of our environment. When you look at the value of CN or CP or most of the railways and you put the different values that are there, in many cases the land that you acquired you got for nothing. Is that correct?

[Claude Mongeau]

If you go back, in the west that is true.

[Charles Hubbard, Liberal, Miramichi, NB]

You still have it, so I would suggest that in terms of the arrangements you make with light rail, you should be considered more in terms of the cost of having that land, rather than going to some abstract figure that a municipality could be assessing you with. It seems to be rather unfair, at least in terms of what our transit people said, to put it very high. They think you're making a lot of money, which apparently you are doing now, and the evidence said the other day they think they're sort of being ripped off by the very high tariffs that you're charging them for the use of--

[Claude Mongeau]

Mr. Hubbard, I read their transcript and I would take exception to the description they made. I would tell you that CN is the predominant railroad for passenger operations, whether it's VIA or commuter. The vast majority of the deals that we have with the commuters were done when CN was owned by the government and operating under the direct authority of the Minister of Transport. I have seen every one of those transactions and I have told you the example of the Deux-Montagnes line; they pay less then half of what market value would call for.

I will tell you, for instance, about the Deux-Montagnes line just to give you a sense of things. They go on 30 kilometres of prime property in the suburbs on Montreal. They go through a five-kilometre tunnel, which is the longest tunnel in North America, and arrive right in the middle of downtown, and we charge them 25¢ per passenger for access. If we were to charge them on net book value, it would be a cent or two. Are you telling me that 25¢ is not a fair amount? It is a very fair amount.

Would the commuter agency like to have an even better deal? I can understand that. Would they like to have recourse to the agency to arbitrate in case we don't agree? I would agree with that. Should the determination be done on historical net book value at the beginning of the century? I think that's just unfair and I don't think it's the proper guideline.

[Charles Hubbard, Liberal, Miramichi, NB]

In terms of this legislation, you're concerned with the part of it that talks about how resolutions would come to conflicts between value and cost?

[Claude Mongeau]

I would make a very simple change. Instead of net book value, I would have net salvage value, which is exactly what the CTA is using today in the case of selling a line.

If you're not careful, it would be advantageous for a railroad to sell the line at net salvage value and get whatever the agency determines that way, as opposed to receiving nothing under net book value. The net book value is not the right standard, not for assets that have historical values that were set at the beginning of the century.

[Charles Hubbard, Liberal, Miramichi, NB]

The second major conflict we seem to see between your group and the other presentations we've heard was with noise.

I think the evidence again--which you've probably noticed--was that when particular locations and people in those locations were concerned with noise, they would often try to contact, and when they did make contact, whether verbally or by letter, often there was no response. Was that a true impression that they conveyed to this committee? Do your railways really answer complaints from citizens, or do they simply ignore them? What was your reaction in terms of the evidence we received on the relationship from communities?