Transport Committee on Nov. 29th, 2007

[The Chair (Mr. Mervin Tweed (Brandon—Souris, CPC)), Conservative, Merv Tweed]

Good morning, everyone, and welcome to the Standing Committee on Transport, Infrastructure and Communities.

This is meeting number four, pursuant to the order of reference of Monday, October 29, 2007, on Bill C-8, an act to amend the Canada Transportation Act on railway transportation.

Joining us today, from the Coalition of Rail Shippers, is Mr. Robert Ballantyne, who is chairman of the Canadian Industrial Transportation Association; Mr. Wade Sobkowich, executive director of the Western Grain Elevator Association; and Marta Morgan, vice-president, trade and competitiveness, Forest Products Association of Canada.

We welcome you to the committee.

As in previous meetings, we'll ask you to make your presentation of ten minutes and then we'll have questions and answers from the committee members.

I would ask Mr. Ballantyne to please begin.

[Robert Ballantyne, Chairman, Canadian Industrial Transportation Association, Coalition of Rail Shippers]

Thank you very much, Mr. Chairman. We'll be a lot less than ten minutes with the opening remarks.

Again, we do appreciate the opportunity to appear before the standing committee to discuss Bill C-8.

The Coalition of Rail Shippers is comprised of 17 industry associations, and I would like to read who they are. They comprise the Animal Nutrition Association of Canada; the Canadian Canola Growers Association; the Canadian Dehydrators Association, those are the alfalfa producers; the Canadian Wheat Board; the Forest Products Association of Canada; the Grain Growers of Canada; Inland Terminal Association of Canada; Pulse Canada; the Canadian Chemical Producers' Association; the Canadian Fertilizer Institute; the Canadian Industrial Transportation Association; the Mining Association of Canada; the Propane Gas Association of Canada; the Western Canadian Shippers’ Coalition, which also has in their membership the Alberta Forest Products Shippers Association and the Canadian Oilseed Processors Association; the Western Canadian Wheat Growers Association; and the Western Grain Elevator Association.

This coalition, as you can see, is very broad, and the member companies of the associations represented in the coalition account for at least 80% of CN and CP's revenues.

The group represents widely varying industries, as you can tell, including agriculture, primary industries, resource processors, manufacturers, and retailers from all parts of the country.

The three witnesses represent all members of the coalition and we will be able to give a variety of perspectives in answer to your questions.

I won't reintroduce my two colleagues, as you did introduce them, Mr. Chairman.

The fundamental problem with railway freight is that the market does not work in a normal competitive manner, and the bargaining power between the CN-CPR dual monopoly and rail shippers is tilted very much in favour of the railways. Bill C-8 and the announced service review begin to redress this imbalance.

This bill has come out of a long process of discussions, negotiations, and ultimately a decision by the minister and his staff to move forward.

Shippers represented by the CRS group are in many different businesses, but at the end of the process this was a package that could address everyone's most significant concerns. This bill is an excellent starting point to achieving balance between shippers and railways, and as such, the members of CRS support the passage of Bill C-8 , as written, as soon as possible.

An important part of the package is the announcement that the government will undertake an independent review of railway service within 30 days of the passage of the bill. The CRS group strongly supports this initiative that will address service problems faced by shippers in industries across the country. The amendments in Bill C-8 will facilitate a climate that will promote more normal commercial dialogue between buyers and sellers in the rail freight market.

We will not repeat the comments made in our submission to this committee. I will just finish by saying that the CRS group urges rapid passage of this important piece of legislation, as written.

We would be pleased to answer any questions the members may have.

Thank you, Mr. Chairman.

[The Chair, Conservative, Merv Tweed]

Thank you very much for your brief and to-the-point submission.

Mr. Volpe, welcome.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Thank you very much.

Welcome, and thank you for your presentation. I'll try to be as succinct as you have been.

Is there anything at all that you don't like about this bill?

[Robert Ballantyne]

No. As we have said, we think this is an excellent starting point.

When one is a witness in a court one should never offer any additional information, but I'm going to do it anyway. I should say that this didn't address all of the issues that shippers raised when we were originally discussing this with Transport Canada, but we think it's a good bill and there is nothing about it that we dislike.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

The reason I asked that—I wasn't trying to be cute—was it's just that in my experience in Parliament, I don't want to say it's a unique situation but it certainly is rare for a bill to come forward that would satisfy almost completely one position that's advanced for any kind of change. I've not seen it. It has probably happened, but I haven't seen it. And I wondered, when I looked at the list of members, these are not small organizations, they're not prone to being bullied, they're quite capable of handling themselves, and yet the language that we've used and we've heard the minister use and we've even heard others use is that—not to put too fine a point on it—it would appear that the railways, the transport measures or mechanisms, are engaging in predatory practices against people who don't look like they are weak prey. Like all parliamentarians, we want to strike a balance. We want to see what's happening here.

While I already accepted that there has to be a balance, I felt I needed to at least express that view. If I had some of the farmers, the local producers, coming forward and saying that they are at the mercy of anybody who wants to take their product.... That doesn't seem to be the case, though.

[Wade Sobkowich, Executive Director, Western Grain Elevator Association, Coalition of Rail Shippers]

Could I respond to that briefly?

That is a very good question, and it is a very unique situation that we found ourselves or put ourselves in. The fact that the railways take advantage of all shippers has gotten to the point where we, as shippers in Canada, have decided to get together and try to reach consensus on what sort of most significant changes we would like to see. The reason you're seeing everybody on that list supporting this bill is because of the background work that has been done to reach consensus.

Every single shipper on that list had other things they brought to the table and other things they had to leave behind because we knew that the strength in reaching agreement would be powerful and that we could bring you a piece of legislation where there wouldn't be disputes between the shippers. It was because of the background work that was done, and the reason why it was done, again, is because things have gotten so bad out there that we felt this was our best chance to get some change.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

You appear to have succeeded in convincing both the department and the minister and, if I read the mood of the committee, the largest portion of members of the committee. It remains to be seen whether the House will feel that way, but you would appear to be—pardon the pun—on the right track.

[An hon. member]

Let's not switch the subject.

[An hon. member]

Could somebody derail this train of thought? Some things just can't be pardoned.

[Voices]

Oh, oh!

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

As you can see, you're not the only ones who have critics.

If I could pose a different question, we had some discussions here when the railway companies came forward, and they had to do with two areas, one about the issue of demonstrating commercial harm and the other one having to do with final offer arbitration. The question I asked of the minister and of them, which I will repeat for you as well, is this: Would you be in favour of a certification process for those who would be part of a final offer process so that before it is initiated people would register to be a part of that process?

[Robert Ballantyne]

No, we wouldn't be in favour of that.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Why not?

[Robert Ballantyne]

We don't think it's necessary.

If a group comes together for final offer arbitration, under the existing provisions of the bill, the agency will have a role in determining whether the members of that group are legitimate or not. We think the administration of that provision that will be carried out by the agency is enough of a process to ensure that the members of the group clearly have the same problem. The way that provision is written requires that the members of any such group have the same complaint. We think, why go to a bureaucratic process of registration when the agency already in place can handle that on an administrative basis?

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

I suppose the answer to that would be an objective observer would say that in a clash of Titans somebody is asking for the government to be involved in mediating the commercial relationship, because that's the net impact of all this. If that is an underlying principle accepted by both parties or all parties in that intervention, because we have to include government in this, why would it be inconsistent to make the system much more objective by putting in an authentification or registration process so we know who the players are from the beginning?

[Robert Ballantyne]

I think you'll know who the players are from the beginning anyway, because the group would have to come together and file a complaint, and in the complaint that would be filed with the agency, clearly, the members of that group would be enumerated in the complaint. Also, the nature of the complaint and how it applied to all members of that group would have to be spelled out in some considerable detail.

As I say, we would see a formal registration process as an unnecessary bureaucratic approach to something where there's already an administrative approach in place that can deal with this quite satisfactorily.

[The Chair, Conservative, Merv Tweed]

Monsieur Laframboise.

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

Thank you very much, Mr. Chairman.

Ladies and gentlemen, thank you for being with us today. My first question is for you, Mr. Ballantyne.

Mr. Shannon, Canadian Pacific's legal counsellor, told me, when I asked him if it was a monopoly, that there was no monopoly. He was quite offended by that.

You talked about the Canadian Pacific and Canadian National monopoly. I would like you to explain to me how it works, so that the people who will read this fully understand the monopoly the companies are operating.

[Robert Ballantyne]

Yes, I can, Mr. Laframboise.

It manifests itself in a number of ways, but I think the simplest way to start describing it is to say there are certain parts of the country where there is only one railway option, and a couple of places come to mind. In the Atlantic provinces, for example, CP has largely withdrawn from anything east of Montreal, so from Montreal through to the port of Halifax, and in New Brunswick and so on, the only viable rail option is Canadian National. The same is true in northern British Columbia since CN bought the British Columbia Railway. There are other places--southwestern British Columbia, the coal areas, where Canadian Pacific is the only game in town.

The reason we've used this term “dual monopoly”, as opposed to “duopoly”, is that there are places where there is no competition between the two companies. And some of the other practices they follow are ones that one would expect to see from a monopoly supplier, in terms of a certain arbitrary approach to the kind of service they'll offer.

An anecdotal situation: One of the companies in our membership, the Canadian Industrial Transportation Association, was receiving seven switches a week, one a day, at their plant, and this was in Montreal. The railway involved arbitrarily said, I think with a day's, or two days', advance notice, they were not going to serve them seven days a week any more, they were only going to serve them five days a week.

So that's the kind of thing....

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

Thank you.

Go ahead, Ms. Morgan.

[Marta Morgan, Vice-President, Trade and Competitiveness, Forest Products Association of Canada, Coalition of Rail Shippers]

I am going to give you an example specific to the forestry industry. We have mills throughout the country, in more than 300 communities in all provinces. We recently conducted a study on rail services and costs incurred by our companies. In the course of that study, we found that more than 90% of our producers have no alternative to rail. So one company serves them, and trucking is not an option due to the distances involved. They have no other option in terms of rail either, because there is only one company. So that is an indication for one industry, but for an industry that is spread across the country.

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

And one that you represent very well, Ms. Morgan. My second question is for you, because people in forestry in Quebec told me that you were their representative. And I am pleased with that.

The railway companies would have preferred, among other things, an amendment to proposed clause 120.1, because they find it abusive, to use their term. That clause reads as follows:

120.1 (1) If, on complaint in writing to the Agency by a shipper who is subject to any charges and associated terms and conditions for the movement of traffic or for the provision of incidental services that are found in a tariff that applies to more than one shipper other than a tariff referred to in subsection 165(3) [...]

They felt that amendment was too broad, not clear enough. They would have preferred seeing it not apply to incidental tariffs, as they told us.

So I would like you to explain all of these types of tariffs, because I am under the impression they did not tell us the whole story.

[Robert Ballantyne]

Yes, I can do that.

Let me find my papers here.

[Wade Sobkowich]

While Bob's looking, perhaps I could tell you that from the grain industry's perspective, the main one is demurrage. Demurrage would be the main type of tariff that would fit into that category. There would then be a fuel surcharge tariff that's fairly recent but something that would also fit into that category.

From our perspective, that clause--proposed section 120.1, I think it is--allows a shipper to take to the agency anything in an incidental tariff, be it a charge, a term, or a condition, that they think is unfair. In other words, any tariff the railway has the ability to set, the shipper should have the ability to challenge.