Transport Committee on May 14th, 2009

[Cliff Mackay]

If you're talking about high-speed rail, I think the biggest thing the government could do would be to expedite the study, get it out of the way and get to a decision point so that we can start to move on land assembly and engineering studies. Those are nowhere near as expensive, of course, as the construction costs, but they're absolutely a precondition to being able to get anywhere.

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

Has the right of way itself been set aside in Alberta? I know we've heard information.

[Cliff Mackay]

Generally speaking, the Alberta government has been assembling land for quite some time, a number of years, not simply for high-speed rail. They have a concept of a transportation corridor that could accommodate any range of basic services and utilities. They've been doing that for quite some time.

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

Is there any chance we're going to see high-speed rail go up to Fort McMurray from Edmonton? I'm kind of excited about that. We're getting a twinned highway, but it's taking a few more years than we expected.

[Cliff Mackay]

I think in the short term, sir, probably not, but let me give you some good news. I'm sure you know this: CN is putting $100 million into that line as we speak, and I can say that you are going to have a much, much more efficient freight service than you had in the past.

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

In fact that's good news, because that's a 30% savings from what they expected to put in there, $123 million. Is that what you're suggesting there has actually been in the last year, a 30% savings on the cost of rail? I think it was to be $123 million.

[Cliff Mackay]

I would have to go back to CN and get precise numbers, but I do know that they're getting better deals than they got when they originally did their estimates.

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

That's great news.

[The Chair, Conservative, Merv Tweed]

Mr. Volpe.

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

Mr. Mackay and Mr. Langan, let me be arrogant and say on behalf of the entire committee, thanks for coming. It's been a great conversation and exchange of facts and ideas.

I want to go back again, if I can, Mr. Mackay, to current issues on financing, and then I'll come back to Mr. Langan on future issues.

You just addressed a matter with Mr. Jean about land assembly. When I asked you earlier about the amount of money that governments, if we're going Windsor-Quebec, have to put aside on a yearly basis, I think we struck a figure more or less around $2 billion, and governments wouldn't have to use all of that $2 billion. It wouldn't be all theirs and it might be divided among three separate governments.

One of the things you didn't give an indication of, although you alluded to it now, is that when you're assembling land, you're not giving away that asset. As you're building this line, government, however it's defined, actually acquires a real and material benefit that it does not lose.

So when you're giving the figure--and we picked $15 billion, but we could have picked $20 billion--you haven't discounted that amount with the value of the land that's going to stay with the government. So that's a benefit for down the road, is that what you're saying?

[Cliff Mackay]

Precisely, and it would be very difficult to put a number on that in this context until you knew the relationship of the operator to the owner of the land. That would to some degree determine the nature of the valuation of the asset. So it's just very difficult to do that at this point in time.

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

But it's not an inconsistent component. I think you said if you went from brand-new land assembly, it's a significant increase in cost, but it's also a significant saving for down the road.

[Cliff Mackay]

Absolutely.

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

Mr. Langan, I know that you're sort of a public advocate for this, but you talked early on about the excitement associated with the innovative technologies for Canada, but not necessarily for the rest of the world, that would flow into our economy as a result of embarking on a project like this, high speed, not higher speed. I gather you've done some studies as well on the number of jobs that would be created during the construction phase.

I think, Mr. Mackay, you were a part of those kinds of studies as well.

Have you got a sense of what some of those technologies might be? You haven't shared them with this committee and you've left us to imagine what they might be and to fill in the blanks.

[Paul Langan]

As far as the technologies we're going to choose for the types of trains...?

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

Well, no, I wasn't thinking so much about rolling stock.

I guess it must have been Mr. Mackay who talked about your probably having to think in terms of technology, in terms of rolling stock that's not associated with manned vehicles but with computerized technology, etc. What kind of technology are we looking at? In Canada, I think I've seen that on the SkyTrain in Vancouver.

[Paul Langan]

Basically, this comes up a lot at the symposiums too: Do we have a knowledge base in technology in Canada that we can utilize to have a modern rail system? How much of it do we have to bring in from somewhere else? It is new to Canada. It just doesn't mean that we can't play an important role in it, and that's not a reason not to move forward in it.

The studies all talk about the percentage of it built in Canada, percentages of it in Canada, percentages that we'd have to bring in. We have to acknowledge that some of the technology we don't have. If we choose Bombardier, that's one thing; if we choose other options, the technology's not in the country yet.

[Cliff Mackay]

We're talking about the types of technology. We're talking about communications technology. We're talking about sensing technology. We're talking about control technologies of various shapes and descriptions. We're talking about a whole range of materials technologies, depending on the nature of the beast you're talking about. Then, of course, we're talking about technologies that are well known to Canadian companies but don't exist here, because we don't produce them--for example, the specialized rail, that sort of thing.

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

But all of that can be produced here.

[Cliff Mackay]

If the volumes are right, the short answer is yes. We have the basic ability to do these things.

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

One of the figures you gave was that you'd be requiring something like $6 billion worth of new rail. I would imagine that some of the companies that are currently under-utilized would be quick to put some of their production systems in place to satisfy that demand. I'm thinking about Stelco, Dofasco, and Algoma Steel.

[Cliff Mackay]

The short answer is maybe. You'd have to see what it costs to put that kind of a system in place. Ideally, you would want to develop a business case for creating a North American node. You'd want to leverage not only the Canadian work, but also the work that's going on across North America. Nobody in North America produces that kind of rail.

[The Chair, Conservative, Merv Tweed]

Thank you.

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

Mr. Mackay, thank you for raising that. I'm sure it surprised some members of this committee that your association would be interested in making a presentation, and I'm glad you did. But I'm wondering, here we have a North American market that's about the size of Europe—some 330 million if we exclude Mexico. We don't have the application or the technologies that have come to be taken for granted in Europe and which are resident here. But we haven't thought about using this kind of project to pole-vault our industries into a larger pool in North America. I wonder if that's a business model your association has twigged to.

[Cliff Mackay]

We haven't done so directly. We have a number of associate members who are interested in this, and we work closely with an organization called the Canadian Association of Railway Suppliers. But it is not unusual from an industrial development point of view to think about those sorts of models, particularly if you know that governments are planning to embark on a multi-year, multi-billion-dollar activity that will be as transformative as the kinds of things that have been announced by President Obama and others. We must not overlook the broader industrial benefits that could be associated with this kind of activity across North America.