Transport Committee on Oct. 26th, 2006

[Claude Mongeau]

You will always find areas where problems arise, and I don't dispute the testimonies of the people who are feeling the brunt of the noise in certain areas, but I would tell you that by and large, we are good neighbours in most of the communities that we operate in.

When we have issues that are very difficult and protracted and problems that do not get solved, they have occurred because residential developments have encroached so much on our property that the noise becomes unbearable. Often we were not even consulted in how the residential developments were put in place. We have very few problems in Ontario because the setback rules are a lot more sound in terms of the way it's done; we have a lot of problems in Quebec because, unfortunately, some developments are right beside the railway operations.

[Charles Hubbard, Liberal, Miramichi, NB]

My concern, though, on hearing the evidence was that there was no reply. Would that be true?

[The Chair, Conservative, Merv Tweed]

Could you give a brief reply, please?

[Cliff Mackay]

I suspect it has been true in certain cases. Having said that, I think if you do an analysis of the hotspots for noise across the country, you'll find that most of them are in the B.C. Lower Mainland or in Quebec.

We have more work to do. I'm not denying that for a moment, in terms of trying to make some of these conflict resolution mechanisms that we've been talking about work consistently across the country, but there's another party at the table, and I think it needs to be recognized.

Frankly, one of the reasons we have some of the problems in some of those particular areas in the country is that land-use planning has not done as good a job as it should have, and we need to all work on these problems. Just to give you a number, CN receives somewhere between 40 and 60 noise complaints a month through their 1-800 number, and CP about half that, but we've got about 15 or 20 community advisory services working already across the country, and we hope to have a heck of a lot more before we're finished.

[The Chair, Conservative, Merv Tweed]

Madame Picard.

[Pauline Picard, Bloc, Drummond, QC]

Mr. Chairman, you have to excuse me because I'm not a regular member of this committee. I'm substituting for my colleague. However, I'm familiar with railways because I live in Drummondville, in the heart of Quebec. Freight and passenger trains from New Brunswick travel through the area on their way to Toronto.

I have two questions for you concerning two problems. Drummondville has 70,000 residents. Back when the city was first built, no one ever dreamed that its population would grow this much. Regardless, trains pass right through the city centre, which poses a problem.

A rural municipality near Drummondville had complained a great deal about the noise caused by train whistles. The municipality had long complained about this problem and ultimately reached a agreement with CN. The company upgraded the level crossings at rural concession roads. However, CN has not been able to meet the ever-growing demands of Transport Canada to ensure safety at level crossings.

The new legislation to deal with conflicts of interest may establish a mechanism for resolving disputes between CN and Transport Canada. That's the first problem we see.

The second problem concerns the downtown area of Drummondville. Freight trains are becoming increasingly longer and a railway siding is needed. Can you imagine a railway siding right in the downtown core, with all the noise and congestion that this would entail? A train cannot remain idle for half an hour or three quarters of an hour in a downtown or urban area without creating an impossible situation. A portion of the siding should be built in a rural area. CN has spent four million dollars on feasibility studies. This could have been an option, and Transport Canada made 14 recommendations. CN responded to these 14 recommendations and the idea was again rejected. CN maintained that it had no other choice but to build the railway siding right in the heart of the city.

I'm not sure what is going on between CN and Transport Canada. This is the Transport Committee, but there are a number of disputes with Transport Canada that remain unresolved.

[Claude Mongeau]

I'm not familiar with this particular case, but the problem of the noise generated by train whistles is a good example. Discussions are taking place and the committee is looking into safety issues. By law in Canada, trains must blow their whistles at level crossings. Railways must comply with this operational requirement and we have no quarrel with this stipulation. However, sounding the whistle is not a rail company requirement.

[Pauline Picard, Bloc, Drummond, QC]

You've invested money to improve level crossings to ensure passenger safety. I don't understand why permission hasn't been granted.

[Cliff Mackay]

I'll look into this, but there is a procedure--and I'm sure the officials in Drummondville are aware of this--whereby you can apply for a variance on the safety regulations, so that whistles do not have to be sounded. It requires the specific approval of Transport Canada to do that, and they do a special study. Because if they feel that will create a public safety problem, then they will not allow us to not do it, and then we have no choice. It's a law: we must blow the whistle.

I'll happily follow up on Drummondville and see if we can find out more and I'll get back to your office.

[Pauline Picard, Bloc, Drummond, QC]

I see. Thank you very much.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chairman.

My thanks to both of you for attending today. My question is going to be directed mostly to Mr. Mongeau.

You've done a wonderful job of defending your record as a company, but I believe it was Mr. Mackay who said the rail business is a complicated business. When you have a complicated business, you also need sophisticated ways of dealing with the concerns of residents, with government authorities, and with municipalities. Unfortunately, I think you're in a position where you haven't yet convinced Canadians. In fact, I think Canadians may have lost confidence in your ability to respond in a way that's accountable.

I can only relate to you my own experience, coming from the west coast. We have now had a number of very serious derailments, one of which caused serious environmental degradation and another one of which ended up in the loss of two human lives. Obviously none of us ever wants to see that happen again.

If it was only the safety issue and it was being addressed adequately, I think most Canadians would understand that there are hazards in any kind of transportation. But I look first of all at noise complaints. We had ordinary Canadian residents before us a couple of meetings ago, and we had municipalities in front of us. The general consensus was that the way the railway companies are responding to noise complaints is just not adequate.

The consultation process and the dispute resolution process haven't worked for them. We heard this from residents of New Westminster, of the city of Richmond. We heard this from mayors from British Columbia and from Quebec. That concerns me.

And then we move over to the whole issue of the net book value discussion that we just had. I know CN wasn't involved in the West Coast Express issue, but the general public's understanding of that—and certainly the provincial government's understanding and the local government's understanding—was that CP held the public up for ransom in order to get commuter rail in. Again, it's just a black mark on the industry.

Of course, we then get to the whole safety issue. What puzzles me with respect to CN was that we had these two serious derailments in British Columbia, we had one in Alberta as well, and the minister took a number of actions. He asked you to take corrective action. There was monitoring, direct enforcement, and a series of targeted inspections that took place. And then it all culminated on July 24, when the minister issued a ministerial order that CN had to take the necessary corrective measures to address the deficiencies.

Had that been addressed immediately, I suppose we could say there was at least some good faith there. In fact, the action that CN took was to appeal the minister's order. So you can understand how the public reacts to that and how we, as a committee, would react to that.

To your credit, you submitted an action plan on, I believe, August 14, and it is with the minister right now. I'm assuming you're going to follow through on that action plan. But the point I'm making is that the industry needs to have its credibility restored.

My experience with local government for fourteen years, and now at this level of government, is that typically regulation only happens as a response to some level of non-compliance with publicly accepted norms and behaviour. This bill is presumably a response to a lack of conformity to what the public generally and government in particular expect of corporate citizens.

I would ask you to respond. You're in the hot seat. You knew this was coming. There's a motion that may be coming forward later today requesting an in-depth inquiry into safety, and it does focus on CN in particular. Anything you can do to provide this committee with some confidence that we're moving in the right direction on all of those issues....

[Claude Mongeau]

Can we improve on community relations? Absolutely. Is it a difficult business to be in from a community relations standpoint, though? The reality, as I said, is that it is. Railroads and communities have a love–hate relationship. It goes back historically. It's a challenge always for us to raise up and be more sophisticated in how we do this. We'd be happy to take some of your advice to improve on that score.

I will tell you, though, that part of the issue why you're hearing so many of these concerns is a set timeline for a review of the law. The law is being reviewed as a matter of legislative requirement. This review has been going on for the last five years, so people are lobbying you to make changes to suit their concerns.

On the issue of the noise or the dispute resolution, for instance, the fact is that there is no dispute resolution today. That's a disconnect in the law and you're fixing that.

West Coast Express is an unfortunate file. It's CP in this case, not CN, but the reality is that there was also no recourse at all for West Coast Express at that time. They could not go through FOA and they could not go to the agency. They had no recourse because of a disconnect in the law. Now the law not only allows them to go FOA if they want to, but if you pass this bill, they can soon go to the agency directly to solve any matter.

All we're saying is that we agree with this. But in giving guidelines to the agency, please tell them to do what's in the public interest, what's fair and in the interest of Canada, and not to do it in terms of an artificial historical book value, which would just depress revenues and create more problems than it would solve over the long term.

On your issue of safety, Mr. Fast, our commitment to safety is without any condition at CN. It is absolute. It's a matter of business sense. We are more focused on safety, particularly these days, given the problems that we've had, than we are on any other matter.

We have had very unfortunate accidents, but I think you should be able to recognize that when people are vacationing in the middle of August and you have a rail break that causes a train to dump 800,000 litres of oil in a lake, you have a massive problem. From there, it is just very difficult to manage under any circumstances.

Could we do better? Are there ways to minimize the impact? We're looking for advice on this, but the fact is that if this derailment had occurred only 200 metres earlier, it would have been a very small issue.

The rail break is a problem with the metallurgy of the rail. There's very little you can do except to increase your inspections. At CN, we have increased our inspection frequency by 50% since last year. We do inspections far more than the regulations require in Canada. We are spending $5 million for a new geometry car. We are focused on safety issues like on a dirty shirt.

Transport Canada is on us every day because they read the political tea leaves. They see the pressure out there. They're listening to you relaying your constituents' concerns, and they're keeping our feet to the fire.

On this particular issue of the section 32 from the minister, we did not appeal the minister's order because we disagree. We wanted time to review the request of the Transport Canada officials. The Transport Canada officials were on vacation for a three- or four-week period at the time when we responded. We have said from the get-go in our response to the minister that we would be willing to sit down and discuss and provide the information that he's looking for, which we have done since then. We believe Transport Canada will be satisfied with what we've done, and we will comply with the order.

We only appealed because we had no way of stopping the clock before the deadline of August 14, which was only twenty or thirty days after we received the order and nobody at Transport Canada was to discuss the matter in detail.

So we're not appealing. We're not trying to hide anything. We're not trying to skirt our responsibility. We take safety very seriously. And as you step back, I think you should be proud to look at the facts and realize that the two railroads in Canada are the safest railroads in North America. Those are the facts, and we continue to improve.

If I were you, as a committee, I would let the members of Transport Canada, the experts, continue to grill CN. As we speak, we are having road shows on safety in CN.

We have invited Transport Canada to observe those meetings with our field people. They are doing their work, and we will fix the issues and see a better trend in safety performance. The committee should give it some time, and hopefully you'll do your review or study when Transport Canada has done its work and we've responded to the challenge.

[The Chair, Conservative, Merv Tweed]

Mr. Scott.

[Andy Scott, Liberal, Fredericton, NB]

Thank you very much.

Welcome.

You would have received revenues as a result of tariffs for others to use the line when CN was a public entity. Would those revenues have gone back to CN, or would they have been in general revenues?

[Claude Mongeau]

I said what I said just to give you a sense that railroads.... I take a bit of exception with what the people who came yesterday told this committee. They portrayed us as gouging.

All I'm saying is that for the transactions with VIA, for instance, or the transactions we have with GO Transit, or the transactions that we have with the commuter agency in Montreal, AMT, the vast majority of them were negotiated at a time when CN was a Department of Transport crown corporation.

[Andy Scott, Liberal, Fredericton, NB]

Did the revenues go to CN then, or to general revenues?

[Claude Mongeau]

They would have gone to CN as an entity then.

All I'm saying is that VIA is important. We share the importance of public transit. I've given you specific numbers on one line, for instance. We are very fair. Could it be even better? Would an agency rule slightly more in favour of the passenger/commuter operator? It's possible, but it shouldn't be done on the basis of net book value at historical prices.

[Andy Scott, Liberal, Fredericton, NB]

When you were talking about the great deal in Montreal with the five-kilometre tunnel, you identified the tunnel as the longest in North America—

[Claude Mongeau]

It's the longest in North America.

[Andy Scott, Liberal, Fredericton, NB]

—as part of the value. Who paid for the tunnel?

[Claude Mongeau]

CN paid for the tunnel.

[Andy Scott, Liberal, Fredericton, NB]

When it was a public company.

[Claude Mongeau]

If we were charging for this tunnel, Mr. Scott, there would not be a passenger line at Deux-Montagnes.

[Andy Scott, Liberal, Fredericton, NB]

But my point is that you're arguing in favour of a cost that you impose on these users on the backs of a public investment in the asset. That's historically the case.