Transport Committee on Nov. 22nd, 2007

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

Thank you, Mr. Chair, and thank you, Minister, for appearing.

I will be splitting my time with Mr. Fast, if that's all right.

Minister, there's no question that this bill is about more jobs in all parts of Canada, international competitiveness, the Atlantic Gateway, the Pacific Gateway, and even in fact the effect for all parts of Canada. As a small business owner for 20 years, getting furniture from Montreal across to Alberta was extremely difficult and cumbersome. Indeed, I would like to compliment you and the government in bringing this forward, because since coming to this place in 2004, this has been the number one issue for stakeholders, including cattle producers, farmers, lumber companies in Quebec and British Columbia, manufacturers in Quebec and Ontario, and even ethanol and potash producers out of Saskatchewan, and importers and exporters from all parts of the country.

My question is very simple. Has there been any group of shippers that does not like the direction this legislation is taking us in?

[Lawrence Cannon, Conservative, Pontiac, QC]

Thank you for your question, Mr. Jean.

I alluded at the very beginning of my presentation to the consultations that have been taking place. They go back to 2000-01. Shortly after I took office, I was made aware of the issues the shippers were facing, the complaints they were lodging. I met with the railway industry, and quite clearly action was required.

I have not heard of one shipper who is opposed to this piece of legislation. I think that all parliamentarians around the table have been made aware of those representations. We, as parliamentarians and lawmakers, have the obligation to correct a situation when we see that the situation, for multiple reasons, is not working.

We strongly believe that Canada needs to be competitive. We have to be able to get our products to their destination as soon as possible, as efficiently as possible. As a government, we have put forward a series of measures, whether it be the Atlantic Accord, whether it be the Ontario-Quebec Continental Gateway, the Asia Pacific Gateway, ways to seamlessly integrate our transportation network to assure our producers that our products are there. There are the port mergers in B.C., working with the authorities in Prince Rupert to make sure we can get our products to market as fast as possible. I think this government is dedicated to that principle. We've quite clearly indicated it in Advantage Canada, which the Minister of Finance has alluded to on numerous occasions. We're building our infrastructure. We're talking about short-line rail, and we want to be able to make sure that as a government, through the Building Canada Fund, we put the amounts of money that are required to make sure the infrastructure is there, and capable and efficient, to be able to undertake all these important tasks.

So, yes, to respond to your question, I haven't heard any shipper complain. They all want to be able to get their products to their final destination as efficiently as possible. I think that as parliamentarians we are committed to doing that, and hopefully this piece of legislation will see swift passage.

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

Thank you.

[The Chair, Conservative, Merv Tweed]

Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chair, and thank you, Minister, for appearing before us today.

I'm certainly pleased that this legislation is moving forward. As I recall, this is probably the third, if not the fourth, iteration of this bill, and I'm glad to see that we appear to be moving towards some consensus on this.

But there are going to be those who are still asking why we are actually introducing additional regulation into this industry. Many of us—certainly those on this side of the table—would typically hold the view that we believe strongly in free enterprise and a free market, and that for the most part it does a good job of ensuring best prices and best service. Yet we hear complaints from communities across Canada who claim they're not being served properly. They believe they're being held captive by the railways.

The same holds true for suppliers. They feel that they're being held hostage by an industry that is not truly free and open and served as well as it could be.

My observations certainly indicate that, really, the railway industry in Canada is essentially an oligopoly dominated by two main players. Many of the communities in Canada are served by only one of those, so it's not surprising that they would feel that they're underserviced and that the services that are provided are overpriced.

If the railway industry were a truly free and open marketplace where we had many players, would we expect that this kind of legislation would still be required?

[Lawrence Cannon, Conservative, Pontiac, QC]

Well, that's a hypothetical question. It's as if we go back to the 1990s, when we started talking about deregulating the long-distance telephone industry in Canada, which, as everybody knows, was owned by Bell Canada.

At the outset, if we focus on the issues that are at hand, the issue basically is to make sure we develop the proper tools to ensure that the complaints, the issues you've raised, Mr. Fast, are addressed.

We feel that final offer arbitration, commercial dispute resolutions, and the review of level of services, all the tools that are there, will ensure stability within the marketplace, will ensure stability in terms of the relationship that must be developed between the shippers, the producers, and of course the railways.

We are, of course, in a situation where, yes, you're absolutely right, we have two main owners of the railways in Canada. What we have to be able to do is put forward the best tools to make sure that, optimally speaking—and I come back to what I was saying to Mr. Jean previously—we remain competitive, we remain strong, economically speaking, and we continue on the trajectory that has been launched over the last several years; and that in terms of obstacles to seamless integration—I use the expression largely, but I use it also in terms of efficiency—we are able to find a proper resolution to that. What we are doing here today, I believe, will settle many, many of these issues.

I certainly have the privilege of listening to a lot of my caucus members, because we do have a strong representation from the western part of this country, who have expressed and voiced concerns over the last number of months that we do something, that we finally act on this issue, because, as you say, in many ways it is a situation where small communities do not feel that they are part of it. It is a lifeline to these small communities, and we have to make sure that these lifelines and these railways work efficiently and that they work cooperatively with the folks who are there.

I certainly want to thank you, and I want to thank the other members from our caucus for having so strongly defended this issue.

[The Chair, Conservative, Merv Tweed]

Mr. Bell.

[Don Bell, Liberal, North Vancouver, BC]

Thank you.

Thank you, Mr. Minister, for appearing.

I have a couple of questions. On page three of your presentation, in the fifth paragraph, you make reference to having encouraged the railways to develop a commercial solution that would complement amendments to the shipper protection provisions. You said significant progress was made, but unfortunately they were unable to reach an agreement, and you still support a commercial approach. I'm wondering how you feel that fits in with what's provided in this bill.

Secondly, I want to make a comment. I'm glad to see the issue has been addressed with respect to the incidental charges included in this bill. I know that was a concern of the shippers. I'm wondering what issues from your discussion remain to be resolved in terms of the proposed review of the services. I'm thinking of running rights, for example, about which it was indicated that there was not agreement. I think the comment was that the main proponent of expanded running rights had dropped their support and focused on the other changes.

Is that simply a shift of priorities? The running rights.... I'm thinking of the port of Prince Rupert, which you made reference to, and the port of Vancouver. We know how important the Asia Pacific is going to be. The whole Asia Pacific initiative, which was started by our government and has been carried on by yours, has huge potential for Canada and certainly for British Columbia. And rail access is vital to the success of the gateway.

We know that by 2020 the indications are that rail container shipments through the port of Vancouver will be up 300% from the current roughly two million containers, or 20-foot equivalents, to somewhere between five million and seven million. That's huge, and we have to have a system that's able to handle that.

I wonder if you would comment on that.

[Lawrence Cannon, Conservative, Pontiac, QC]

Thank you, Mr. Bell, for those questions.

Actually, we had looked at a commercial dispute resolution mechanism, and I think I've mentioned it in my comments and also publicly. We have tried and we came extremely close, I must say, to resolving that issue. Both parties were amenable to that, but at the end of the day it broke down. So I had no other recourse than to go to the next step and put in final offer arbitration or group arbitration.

I'm not against that either, of course, because it wouldn't be in the piece of legislation. But it was my first belief, Mr. Bell, that through a commercial dispute mechanism we would be able to get there. However, it didn't pan out that way.

We've left it in there. We encourage it. As a matter of fact, I believe it's an effective and useful tool, because it is a tool that saves a lot of time and is efficient and is less costly.

We've gone to group final offer arbitration because group final offer arbitration enables the smaller shippers to be able to bundle together, to come together with other shippers, to be able to strike a deal. You know, final offer arbitration, once there is a deal that is struck, generally speaking, is a benchmark. So what we've done is open the tool kit, we've put that in front, and we recommend the usage of this way of going about finding a way to resolve the problems that pit the shippers against the railways.

On the running rights issue, I'll let Ms. Borges respond to that because it's highly technical. But I do want to reassure you, of course, that we are extremely committed to seeing growth, particularly in the Vancouver area out west. We want to be able to maximize the full potential of the Asia Pacific Gateway and I think that all parties in the House are open to that. That's an objective we all share commonly.

We've gone through a process where we're encouraging port mergers and finding ways to be able to maximize our potential.

You're absolutely right to talk about the phenomenal growth that is going to take place in the next several years. The potential is enormous for the Canadian economy and we want to be able to work with our partners, particularly the province of British Columbia, its premier, and the city of Vancouver and any other interested parties, in making that happen.

I'll let Ms. Borges speak to the running rights issue.

[Helena Borges]

As you know, running rights are basically a mechanism whereby one railway uses the line of another railway. We do have lots of examples of running rights in Canada, particularly in western Canada, where both CN and CP have reached a commercial agreement whereby both railways operate over CP's line in one direction and over CN's line in the other direction, through the Rockies. In the past couple of years they have also introduced what are called co-production agreements in the lower mainland to maximize the use of the lines. These are really for efficiency reasons: you get better efficiency if you're operating in the same direction and have one railway doing it.

So it is not discouraged in law; it is encouraged. But most of these are commercial arrangements that we would like to encourage, so that the railways deal with each other and compensate each other fairly.

Now, a couple of years ago there were some parties who were asking the government to introduce what are called forced running rights, where we would force a railway to allow another railway in. The panel looked at that, but came up with a compensation mechanism that would have required the host railway to charge the other railway a fair rate for using the line. When you start looking at that, it becomes very expensive. We don't believe the government should get involved in setting those rates and how the operation happens; those should be decided between the two companies.

Since then that issue has really lost favour with the shippers. I think most of the provisions in here are what the shippers are looking for, being more related to railway service and railway rates than the relationship between railways. There are provisions in the act, however, that deal with running rights; so if a railway wants to seek authority from the Canadian Transportation Agency to use the rail line of another carrier, there are provisions in the act that already allow for that, but they do have to make their case and they have to be prepared to pay for the use of the line.

[The Chair, Conservative, Merv Tweed]

You have 30 seconds.

[Don Bell, Liberal, North Vancouver, BC]

You're aware, I presume, that the chambers of commerce—starting with the North Vancouver Chamber of Commerce, as supported by the B.C. Chamber of Commerce and then the Canadian Chamber of Commerce—raised the issue of these running rights and this line-switching because of delays some shippers were experiencing with product, particularly grain products, coming into the lower mainland

I don't know if you have any response to that.

[Helena Borges]

I can tell you just last Friday I spent a whole day with the terminal operators on the north shore, and we're looking at these very issues. The issue is really much more one of looking at how do we accommodate the growth that is happening, and future growth.

The railways were at the meeting as well, and I think we've come up with a series of measures over the next few months, including doing a study of the north shore terminals and the rail access there as part of the Asia Pacific Gateway initiative, looking at how we can improve the rail and road access into the terminals and to make those work a lot better.

We did something similar last spring at Deltaport, on the Roberts Bank rail corridor, where we announced a series of grade separations for the line through all the communities along there. As a result of that initiative, the railways are going to be investing about $60 million in lengthening the sidings to allow more, and longer, trains to accommodate growth at that port. So we're going to be looking at the north shore and trying to do a similar initiative up there.

[The Chair, Conservative, Merv Tweed]

Monsieur Carrier.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you, Mr. Chair.

Good morning, Mr. Cannon. We are always happy to have you here.

With arbitration now being open to a group of shippers, as the bill describes, could you tell me if this is as a result of requests from shippers who have expressed a desire for this kind of recourse, that is to be able to form groups?

[Lawrence Cannon, Conservative, Pontiac, QC]

It is likewise a pleasure for me, Mr. Carrier, to be here and to find you in such good form.

As I mentioned before, when we started these multilateral discussions, there were a number of complaints, specifically from shippers who felt that they were not being dealt with appropriately and, as a result, were not being getting proper service. All through the process, they proposed operating with the final offer principle. We encouraged a commercial solution to resolve disputes. So the parties came to an understanding in principle. They sat down and tried to resolve their differences. They came very close to doing so, but in the end they could not make it work.

Today, we have a bill. The shippers' preferred tool was final offer arbitration. We agreed to that for several reasons, the first being that the commercial resolution mechanism had not worked. It was an important step, but since it did not work, we must clearly have another step, which, in one sense, seems to me to be more suitable.

In another sense, and this is one of the reasons that I am in favour of it, it allows small shippers to be able to get together with others with a view to having their differences resolved. Often small shippers have neither the financial resources nor the flexibility to do these things, particularly when they are going up against big companies.

I will add another reason that led me to move in this direction and to keep the possibility of recourse in the bill. It provides a commercial solution that is frankly cheaper and more transparent.

In this bill, we have provided the parties with tools that, in my opinion, are going to allow any disputes that arise to be fairly resolved. I do not think that there will be a constant demand for final offer arbitration. Once we have been able to establish the rules and the appropriate mechanisms, they will form the basis for the process.

Practically speaking, we are trying to put some discipline back into the industry so that we can maintain our competitiveness and assure ourselves that products and services are delivered in the most effective and efficient manner.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

You mentioned in your presentation that you prefer commercial resolutions to complaints being made to the Canada Transportation Agency. Since Bill C-58 and this one have been tabled, have you noticed a reduction in the number of complaints registered?

[Lawrence Cannon, Conservative, Pontiac, QC]

I am told that there has been no change since the previous bill and this one were tabled, Mr. Carrier. There has been no difference.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Have you checked the impact on local rail lines, which have a good deal of importance in Quebec, like the Quebec-Gatineau Railway that links your community to Quebec City? Was there an impact, or have you had discussions with the government of Quebec and other provincial governments so that these rules fit together logically?

[Lawrence Cannon, Conservative, Pontiac, QC]

Actually, for local lines in Quebec or elsewhere, there is a mechanism in the bill that allows differences to be resolved, just as the director general mentioned just now.

What happens sometimes is that there is talk of closing, or a plan to close, these local lines, especially in the West. The bill contains a mechanism that may well correct that.

In the new Building Canada plan, we are introducing something that was previously developed between the federal and Quebec governments. This provides funding agreed between the two levels of government specifically to assist local rail lines. So private-sector contributions, as well as contributions from the two governments, have allowed an investment of $75 million to help these companies upgrade their rail lines and improve their infrastructure. My counterpart in Quebec, Ms. Julie Boulet, announced this last year in Trois-Rivières. This has allowed improvements to the network.

So we have taken that initiative and we have, in effect, included mechanisms both in the bill and in the new Building Canada plan. We have made the option available and relevant to all provinces of Canada. So we will have an appropriate mechanism for our involvement.

[The Chair, Conservative, Merv Tweed]

Mr. Shipley.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair, and thank you, Minister, for being here.

It's interesting, because we know the discussions on this go back to 2000 or 2001. Over those periods of time—and I'm from Ontario and I don't have the western perspective—the cattle that used to come in now don't come by rail; grain that used to be transported by rail is not nearly as prevalent. Why? What I'm hearing, especially on the grain side, is it's because of the cost and reliability. Sometimes it's the reliability. They've been able to have the cars come into the grain elevators to get unloaded, make sure they're going to be there, and they don't show up. Those are the two issues.

The charges for railways seems to have gone at their discretion. Some of those charges that are being added in, those extra charges—whether they're for the cleaning, the storage, the weighing—seem to have been at the railways' discretion.

I think the final offer of arbitration is good. The only thing that I raise, and it's always something in the back of many people's minds, especially in the rural areas, when you hear of arbitrations is that it's good for small shippers, and that's important. Mainly out where I come from, that's what we have, smaller shippers.

So I'm glad to see the shippers, when I've talked to the few in the short while I've been involved in the committee, accept the concept, because it is a good concept.

I just want some clarification or surety that it doesn't become some sort of a judicial nightmare in terms of being able to go through the process and it becomes so costly and so time-consuming that it won't be productive.

[Lawrence Cannon, Conservative, Pontiac, QC]

I'm glad you point that out. It's extremely important to indicate. That's why we've gone the route of group final offer arbitration. We've done so because not all the shippers have exactly the same capacity to be able to go negotiate with the railways, so we've introduced this mechanism. It's my belief, and I was rallied to the argument that was put forward that at the end of the day, in terms of time consumption, final offer arbitration as a mechanism will certainly offer the opportunity of having smaller shippers sit down and work with larger shippers. Therefore they will be able to share the cost and the judicial burden that's incurred with the legal burden, but at the same time will benefit from it.

It's my view that once we have one of these settlements in place, that settlement will be able to be used as a benchmark for eventual dispute settlement mechanisms or commercial mechanism dispute resolutions. This seems like a big tool, and it is an appropriate tool to be able to bring the parties together. I've indicated at the outset that we still think that commercial dispute resolution mechanism is a useful tool, so we put that there. So all the tools are there, basically, to be able to make sure that once and for all we can make appropriate headway, both from the shipper's perspective and from the railways', and that everybody is happy with the way we are going about this.

[Jeff Watson, Conservative, Essex, ON]

Mr. Minister, thank you very much for appearing before the committee.

One of the things I heard on Bill C-3, for example, was that somehow it wasn't very conservative to curb the market activities of private business monopolies. In this case there may be the question, this being a conservative government, about how conservative it is to be involved in the free market activities of big companies such as railways.

I would submit, on the other hand, that it is very conservative to ensure broader competition rather than monopoly or oligopoly. You've stated that in some regions of Canada rail in fact operates as a monopoly.

Could we have your comments on that and on why our government is bringing this forward?

[Lawrence Cannon, Conservative, Pontiac, QC]

Well, first of all, governments and politicians generally react to issues and complaints that are brought forward. Our role here as politicians—as legislators, I should say—is first and foremost to make sure that we look at the issues, that we analyze them in the proper context and perspective, and bring the appropriate tools to bear to correct the situation.

That, fundamentally, is what we're doing. We're not engaged in a political science course 101 to find out whether or not this is conservative in nature, right-wing in nature, leftist in nature. I think what we're doing here is taking a balanced approach.

It's a balanced approach that fundamentally looks at an issue. We've alluded to it. This issue has been discussed, looked at, thrashed around over the last seven years. We've been able, I think, after a lot of discussion, to come up with a solution that is satisfying to the parties, satisfying to the lawmakers of this table and of course of the Parliament of Canada, and certainly, I believe, will strengthen the Canadian economy as we move forward.

I'm very proud to see that as parliamentarians we're doing the right thing here and are getting this piece of legislation and getting the job done.