Transport Committee on May 14th, 2009

[Paul Langan]

His whole thing is that he wants it to go downtown into Edmonton, so as far as your corridor goes, it's clearly defined.

As for the Ontario-Quebec corridor, again, there are 17 studies, and we're going to do it again. We've got to move on the next study.

[Cliff Mackay]

My understanding is that in the Ontario-Quebec study, in Toronto and in Montreal the baseline case is to go to Union Station and down to Central Station. That's the baseline case. I don't know whether that will be the final case, but I know that's what's in the baseline.

[The Chair, Conservative, Merv Tweed]

Thank you. I would certainly be interested in hearing more about the Winnipeg-to-Saskatoon corridor.

[Voices]

Oh, oh!

[The Chair, Conservative, Merv Tweed]

That completes that round of questioning. I'm going to open the floor up now and move around the table one party at a time.

Mr. Volpe is first.

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

Mr. Mackay, I'd like to take you back a few minutes to when I was asking you questions regarding financing. As a senior official in previous administrations, I know the dollar figures, the amounts, would always have been daunting, and 15 years ago the numbers that we've thrown around today--$4 billion, $20 billion, $30 billion--would have been mountains too high for people to climb. That's not the case today.

[Cliff Mackay]

Right.

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

I'm glad you said “right”.

From your experience with governments as a whole, could you give us a sense of the rollout of funds from the federal side, the amounts that would have to be allocated to, let's say, the first five years, and then the subsequent five, before you'd actually get some sort of operational revenue?

Pick a number, any number, and then base your calculations on it.

[Cliff Mackay]

Let's just say $15 billion is the initial front-end cost. I'm going to talk about the central Canadian corridor, not the Alberta corridor. Frankly, the Alberta corridor would be significantly less than that--significantly less.

The swing factor would be how much land assembly you would have to do and how much you could arrange through existing corridors. I do not know the answer. If you had to do a lot of original land assembly, it would add a lengthy period of time, number one, and number two, it would certainly escalate the costs at the front end quite significantly.

If you make the assumption that you can do a reasonably efficient job of land assembly, I would say that you would devote the first two to three years to land assembly and securing your corridor and doing all the engineering and other studies that would need to be done in order to launch a very aggressive construction phase.

For the construction phase on something like this, I'm assuming that you would go electric if you really want to do high-speed rail. There are two options on electric. Recent technology says you can put it in the ground; the other choice is to put it overhead, which is the current technology used in most places. Putting it overhead is a bit more expensive, I would think, than putting it in the ground, so that you may be able to save yourself some money, but it's going to take you probably two to three years, minimum, to build that line, even between Montreal and Toronto.

Then you're going to have to do tests and everything else, so you're probably looking at five years of fairly intensive outflow. I would say it would be in the order of $10 billion, at maybe a couple of billion dollars a year, before you'd get to a point at which you could actually start thinking about phasing in an operating system.

Obviously during that same period of time you would also be pursuing procurement activities for rolling stock and other things. You have a whole range of other things to worry about with regard to passenger movement, integration in the stations, and all of that sort of thing. Going on at the same time, of course, would be all the oversight. Transport Canada does oversight of rail construction in this country, and they would certainly be a player in that context from a safety point of view and all of those sorts of things.

That's how I would describe the process, sir. Optimistically speaking, I would say that you'd be looking at six to seven years before you would see a revenue flow.

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

You're looking at about $2 billion a year, maximum, that governments would have to put aside in order to realize this project.

[Cliff Mackay]

I'm not sure that I would make the assumption that it would be 100% government. Depending on the business case and the interests of financiers, there are very large pools of capital, as you know, that are very interested in long-term infrastructure investments. Some of those pools of capital are right here in Canada.

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

Mr. Mackay, can I just take you back? Some of the private pools of capital are associated with some of the companies that might actually be interested in partnering or in operating a system. If I'm wrong, please correct my perception, but even the railway companies looked at this, and at least one of the airline companies conducted a feasibility study to see how they could play into it. Am I wrong in that?

[Cliff Mackay]

No, you're absolutely right. I would not see them, though, as major financing vehicles.

I would say that it's much more probable that institutions like OMERS or teachers or the caisse, or some of the other bigger private outfits like Mr. Schwartz's fund, would probably be more interested in this aspect of it than some of the other companies you just mentioned. These companies may want to be minority investors, but I don't think they would be major investors in the sense you're talking about.

[The Chair, Conservative, Merv Tweed]

Go ahead, Monsieur Laframboise.

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

Mr. Mackay, the project that came closest to leaving the station was VIA Fast in 2003. Did you work on that? Were you aware of it?

[Cliff Mackay]

No, sir. At that time I was in the airline business.

[Some hon. members]

Oh, oh!

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

Mr. Langan, did you see the VIA Fast file?

[Paul Langan]

At that time I was involved just with VIA Rail day-to-day advocacy, such as getting a second passenger train, getting them to make their schedules meet, and that type of thing, so I wasn't involved with that.

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

As part of that whole idea, you certainly looked at the Ontario-Quebec proposal that Ottawa also partially funded to the tune of a million dollars.

Mr. Langan, I know that this will be one more study when you just want something to be done. But the Bloc Québécois was already in favour of VIA Fast. Mr. Duceppe was clear in his position on a high speed train from Quebec City to Montreal and Montreal to Windsor, and even Quebec City to Montreal and Montreal to New York. We believe in it.

We can talk about it, hope for it and see what is happening around the world, but we have to be able to prove to people that it is a good idea. You are right, Mr. Langan. People have to be shown.

Do you think that the proposal from Quebec, Ontario and Canada will let us achieve that objective?

[Paul Langan]

I just want to comment that I don't believe you should say it's VIA Rail.

When we're talking about high-speed rail, you get partnerships. I give the example of Moscow to St. Petersburg and Siemens. Siemens is a company well known in Edmonton for their light rail. They have a 30-year maintenance agreement with the high-speed rail. I think when we're looking at high-speed rail, we should look at partnerships and see who puts the bid in and who's the most successful.

I don't mean to be negative about VIA Rail. I'm just saying that we definitely shouldn't say it's VIA Rail's. We should ask who wants to do it and see who the partners are that come on board.

Believe me, I have Alstom and Siemens come to my presentations. I just have to make the phone call. They want to be part of this, as does Bombardier.

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

Mr. Mackay, you made a good presentation on freight transportation. Do you think that your members, Canadian National and Canadian Pacific, who are still involved in freight transportation, would be as interested in passenger transportation?

[Cliff Mackay]

It's not inconceivable. It's certainly not their core business.

I think both companies would say that their core business is freight in a continental context, and that is where they're focusing now, but they're in business to do business, and if someone were to come along and say, “Here's a business proposition; it may leverage your assets, and it may make sense from a business perspective”, I would be surprised if they didn't look at it seriously. However, I would say that it would be an unusual situation. I certainly would not see those companies shifting their basic corporate strategies.

[Paul Langan]

I know I'm going back to Calgary and Edmonton, but in the Calgary-Edmonton study there are two options. One is very clear; one is part proposed by CPR on their lines with Bombardier's jet train.

So Cliff is definitely correct, but I'm just saying there is this example in Alberta where there happens to be a CP line where they very much have made a business case to do it.

[Cliff Mackay]

In that particular case, there is very little freight that runs on that line.