Transport Committee on June 4th, 2009

[The Chair, Conservative, Merv Tweed]

Monsieur Laframboise, do you have a comment?

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

The Bloc members will be voting against the amendment.

[The Chair, Conservative, Merv Tweed]

Ms. Chow.

[Olivia Chow, NDP, Trinity—Spadina, ON]

Thank you.

[The Chair, Conservative, Merv Tweed]

Thank you.

So now I will ask the committee to actually vote on the second report as presented.

Mr. Volpe.

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

I have a point of clarification. I guess this does not really make much of a difference, but item 1 says “to appear before the Committee at the earliest opportunity”. During our discussions, we had actually indicated that date, so I'm wondering if the chair would give us an indication whether the date that was mentioned in our debates and our discussions is the one that has been agreed upon and that “the earliest opportunity” just reflects that this date is the actual date.

[The Chair, Conservative, Merv Tweed]

Canada Post will be here on Thursday, June 11. We had originally discussed June 9, but they were actually unavailable, so they did agree to the eleventh for us. NavCanada made themselves available on June 16. So we would have split meetings on those days, with one hour for each committee.

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

And continue with the rest after...?

[The Chair, Conservative, Merv Tweed]

Yes, and continue the rest with the light rail study.

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

That's acceptable to us.

[The Chair, Conservative, Merv Tweed]

Is that agreed? Okay.

Then I will ask for agreement on the second report as presented.

[Some hon. members]

Agreed.

[The Chair, Conservative, Merv Tweed]

The report is carried.

Now we'll move to our guests who have joined us today. On our study of high-speed rail, we have with us, from VIA Rail, Mr. Paul Côté, president and chief executive officer; Mr. Gerry Kolaitis, director, strategy and financial planning; and André Gravelle, project adviser, capital programs. Also with us, from the Van Horne Institute, is Teresa Watts, associate.

We welcome you. I understand you know the rules of the game.

Mr. Côté, I would ask you to begin.

[Paul Côté, President and Chief Executive Officer, VIA Rail Canada Inc.]

Thank you very much, Mr. Chairman.

Good afternoon, members of the standing committee, and thank you for this opportunity to appear before you today. I assure you my remarks are very short, so that we'll have time for dialogue.

With me are my colleagues--you have just introduced them--Gerry Kolaitis and André Gravelle, both of whom are quite familiar with the high-speed file and whom I will call on later during the question period.

The future of Canada's national passenger rail service and the role that high-speed rail might play in the future are very important issues. Public interest in these issues is high, reflected in the study now under way by the Governments of Canada, Quebec, and Ontario to update feasibility studies for high-speed rail in the Quebec City-Windsor corridor, and by the recent coverage of a possible link between Calgary and Edmonton.

VIA welcomes this interest. We have made our expertise in this area available for the study.

We also welcome the opportunity to provide any information, expertise and resources that will help this committee as it conducts hearings on high-speed rail.

I would like to use these opening remarks to provide a brief overview of the existing passenger rail network, what VIA is doing today, and how that fits in with any future developments that might include high-speed rail service.

As you know, VIA operates the national passenger service on behalf of the Government of Canada. We deliver an efficient, reliable, environmentally sustainable service. Our responsibility is to do so in a financially responsible manner, ensuring the best possible service to Canadians and the best management of the assets and resources invested in passenger rail.

We serve communities large and small, from the Atlantic to the Pacific and north to Hudson Bay. We operate 500 trains per week, including 429 in the Quebec City-Windsor corridor. Our transcontinental service spans the distance between Toronto and Vancouver and between Montreal and Halifax. Our remote and regional services connect many rural and northern communities. In some places, we offer the only transportation option.

Our current network of services was established in 1990. Since that time, effective management and rigorous cost controls have achieved significant growth in passenger rail while improving service quality and reducing costs to the taxpayer.

For example, we have reduced reliance on government operating funding by 48%, or approximately $200 million per year; increased revenues by 110%; increased passengers by 33%; and increased our cost recovery by 102%.

This is a consistent record of continuous improvement over almost 20 years. It is a record we have maintained even in recent times, which have been challenging for the entire transportation industry.

In 2008, VIA increased revenues for the fifth consecutive year, with a 5% increase over 2007. And we set a new record for ridership, carrying 4.6 million passengers. VIA's performance reflects our success in building an organization, and a growing network of services, around our core strength in passenger transportation: delivering excellent customer service. We continuously sharpen our ability to design and deliver a service that matches and responds to the needs of our customers.

From maintenance and train operations to marketing to developing leading-edge customer relationship tools and leading-edge technologies, all aspects of our business are integrated around our single core focus on customer service.

This expertise is recognized internationally. Studies looking at passenger rail operations around the world have ranked VIA Rail above average on key operational measures. Other countries and railroads seek our advice on all aspects of passenger rail operations. We are currently working in partnership with France's SNCF to market and deliver our expertise worldwide.

Here at home, the Government of Canada gave a major vote of confidence in the future of passenger rail in this country and in VIA's ability to deliver results. In 2007 this current government announced a five-year, $516-million capital investment to strengthen passenger rail services across the country and to ensure that service remains both cost-effective and sustainable for the future.

With the 2009 federal budget, VIA received an additional $407 million for capital projects, bringing the current investment program to a total of $923 million. The investment benefits all parts of our national network--vital infrastructure improvements in the central corridor; upgrading locomotives and passenger cars that will be used throughout the system; and improving stations across the country to meet customer expectations for safety, comfort, and convenience. This investment allows us to continue moving forward, laying the foundations for higher-speed passenger rail service, a more reliable service, and a more sustainable service across Canada.

Everything we have achieved and continue to achieve is vital to the future of conventional passenger rail in Canada. And it is equally vital to the success of any high speed rail service, should the government decide to pursue that course.

On this last point, let me make three comments.

First, if a high-speed service is developed, it can only succeed on the foundation already in place for passenger rail—the understanding of the market, and the ability to serve that market. VIA has built that foundation.

Second, high-speed rail is not an alternative to conventional rail. Experience with high-speed services around the world shows that it succeeds as an integrated component of a larger, coordinated, intermodal network of passenger services, which I know the committee has heard about, including efficient conventional rail services that connect the high-speed backbone to extended communities and regions.

Third, VIA's expertise in passenger transportation, built up over 30 years in the Canadian marketplace, is unique, and would be vital for any high-speed rail service. That is why the Van Horne Institute's 2004 pre-feasibility study on high-speed for Calgary-Edmonton called on VIA's expertise in areas such as ridership and revenue forecasting, operational issues, facility requirements, and projected socio-economic benefits.

Whether high-speed rail is part of Canada's future remains, of course, an open question. We all look forward to the results of the current study on high-speed rail in the Quebec City-Windsor corridor, and the findings of this committee. However the question is answered, VIA remains committed to delivering the best possible passenger rail service to Canadians. We are confident that we can deliver results that meet the expectations of our customers and the Government of Canada as transportation needs evolve in the years ahead.

As this committee looks at options for the future, I will be happy to answer questions and provide any other assistance that you may require.

Thank you very much.

[The Chair, Conservative, Merv Tweed]

Thank you.

Ms. Watts.

[Teresa Watts, Associate, Van Horne Institute]

Thank you.

Mr. Chair, members of the committee, on behalf of the Van Horne Institute and Peter Wallis, its president and executive director--he is unable to attend today's session, and has asked me to come on his behalf--I thank you for your invitation today.

The Van Horne Institute, for those of you who may not be familiar with it, is a not-for-profit organization affiliated with the University of Calgary, University of Alberta, Southern Alberta Institute of Technology, and Athabaska University. It was established to assist industry, government, and the public in addressing transportation issues, and includes 65 public, private, and non-profit members, including our fellow presenters VIA Rail.

I am an independent consultant, and head the firm of Shirocca Consulting. I have a background in planning and economics and 34 years of professional experience primarily focused on transportation. I've worked in both the public and private sectors, on projects ranging from feasibility studies to implementation of major capital infrastructure. I've been an associate of the Van Horne Institute since 2003, and was the project manager for the 2004 Calgary-Edmonton high-speed rail study.

Like the Quebec-Windsor corridor, high-speed rail has been studied and reviewed before in Alberta, first in 1984 and again in 1995. Both of those studies concluded that the costs were high and the ridership at the time insufficient to justify proceeding, but recommended future reviews.

The 2004 study was initiated at the request of the Alberta government in response to renewed interest about high-speed rail and recognition of the technological advances that had occurred in the interim period.

I would be remiss if I did not acknowledge and thank the federal government for its financial and technical participation in that study, through Transport Canada and the Office of Western Economic Development, along with the Province of Alberta. As well, the study received both financial and in-kind technical work and expertise contributed by several members of the Van Horne, including Bombardier Transportation, CANAC, Canadian Pacific Railway, SNC-Lavalin, and VIA Rail. However, I must also emphasize that all technical work provided through these members was reviewed by independent consultants and a steering committee to ensure no bias to the study's findings and consistency with the study's overall conservative approach.

The purpose of the 2004 study was to assess the feasibility of high-speed rail within the 300-kilometre corridor between Calgary and Edmonton; to identify, for governments and others, the economic and other implications of high-speed rail implementation; and recommend next steps. The study looked at two corridors: a new, or greenfield, corridor, which had been the sole focus of the previous studies; and shared use of the existing CPR corridor. However, both options assumed access into the city centres along the CPR corridor to avoid disruption and high cost, whereas the previous studies assumed terminating outside downtown for the same reasons.

Examination of the CPR option was possible because of the recent development of a non-electric technology by Bombardier at the request of the U.S. Federal Railroad Administration. The Jet Train, as it's called, is designed to meet North American engineering standards for mixed train operations, and is capable of operating at speeds up to 240 kilometres per hour.

The study also looked at electric high-speed rail capable of speeds up to 330 kilometres per hour, similar to those trains that operate in Europe on the greenfield option, allowing an apples-to-apples comparison of the two corridor options without technology bias.

These two train technologies were chosen because they were able to offer travel time of two hours or less, which market research showed as being the threshold to shift demand from other modes, particularly the car. By comparison, travel time today is, on average, three hours by car between Calgary and Edmonton and slightly more by air and bus.

The study assumed five stations, one in each downtown, two near each city's respective airports, and one in Red Deer, located at approximately the half-way point on the line. It also included provision for a new maintenance facility.

The service plan assumed five train sets, with four in service and one in maintenance rotation or held as a spare, to provide 11 train departures per weekday and five on weekends from Calgary and Edmonton respectively, plus an additional departure, or half-trips, from Red Deer on all days.

The price was set--based on market research to optimize revenue and ridership--at $115 return for business trips and $97 for non-business trips.

The total capital cost for the project was estimated to range from $1.7 billion for the CPR option to $3.4 billion for the electric greenfield option, slightly less for the non-electric. The main difference in these costs for the two greenfield options was electrification. The higher land acquisition and more extensive infrastructure requirements accounted for the difference between the CPR option and the greenfield corridor.

Annual operating costs were estimated to be $71 million for the CPR to $97 million for the greenfield, depending on the option chosen in year three, the first stable year of operations, and were then inflated by 2% per annum. Ridership was estimated to range from 1.7 million passengers annually for the CPR option and approximately 2 million for the greenfield, the difference reflecting the faster travel time of the greenfield option. This would constitute a 28% market share of all trips between the cities, with 75% of those trips diverted from cars, which are, and will remain, the dominant mode of choice for travel in the corridor. Revenue was based on passenger fares only and estimated to range from $83 million to $101 million per year, depending on the service option chosen.

Two financing structures were also examined: a totally government-funded option, and a P3, or a private-public partnership, whereby the private sector funded all rolling stock and equipment, such as ticket-vending machines and communications, and government funded infrastructure costs. This analysis revealed that operating revenues could cover all operating costs for all options and pay back all capital, plus almost $700 million, for the CPR option, and 73% of the greenfield electric costs over 30 years. These numbers do not include other benefits, such as employment and income, travel time savings, safety benefits, greenhouse gas reduction, and economic development, nor, in the case of the CPR corridor option, the benefits to freight and industry that would result from rail upgrades.

The study concluded that high-speed rail could generate significant benefits to the province and that there was sufficient demand at that time, in 2004, to support high-speed rail that offered two hours or less in travel time in the corridor. It also confirmed the technical and financial feasibility of both corridor options, the greenfield and the existing CPR, and both train technology options. I noted the advantages offered by the CPR option of lower capital and operating costs, less property disruption, complexity, and time required for implementation, and benefits to the freight industry, but the need to balance this against higher ridership, benefits of an exclusive corridor, and more extensive negotiations was also noted.

The study's recommendations included out carrying out an investment grade ridership analysis to provide greater certainty to this, which is typically the area of largest risk and uncertainty on projects of this kind. I can report to you that the Alberta government accepted this recommendation and has since carried out the analysis, but the report has yet to be released, to my knowledge.

In closing, and on a personal note, while as a consultant I welcome more studies, and as a taxpayer I value and appreciate the need for due diligence, I have also observed in my 34 years of professional practice that at the end of the day, projects require a leap of faith, courage, conviction in the value they can deliver and the benefits they anticipate, and the determination to achieve this.

There is no question that high-speed rail will require government involvement if it is to proceed. There is equally no question that government must participate fully in that implementation. It has the authority and power necessary to acquire right-of-way and a vested interest in how this right-of-way and service can shape our future, but I also have no doubt that the private sector is willing and able to share risk and participate in these ventures if they are properly structured.

I'm happy to leave the deliberation on leaps of faith with the committee and wish you good luck.

I apologize for not having enough confidence to speak French just a little. In any event, I am very happy to be here.

Thank you.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Volpe.

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

Thank you very much, Mr. Chairman.

Thank you very much to the witnesses.

I'm happy that Madam Watts introduced an element of religiosity in this, because for a while I thought it was just simply a pragmatic economic decision that involved economic development and growth in the country. But I welcomed that anyway.

I don't mean to make light of this, and I thank you for your presentation, because there are some people who felt that perhaps the line between Calgary and Edmonton would not have been an appropriate example to consider, but I think you've put that one to rest. Thank you.

I'd like to ask Mr. Côté a couple of questions.

First of all, just for us, for the committee, do you report to the minister?

[Paul Côté]

Well, we are a crown corporation under the Minister of Transport, Infrastructure and Communities.

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

But you don't report to the deputy minister?

[Paul Côté]

The company doesn't, no.

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

I just want to say that. I just want to make sure that we understand our lines of communication.

Mr. Côté, VIA Rail actually did the kind of study that Madam Watts talked about for Calgary-Edmonton, but VIA did it for the Windsor-Quebec corridor quite some time ago, did it not?

[Paul Côté]

We participated in a study. Did we actually do a study by ourselves?

[André Gravelle, Project Advisor, Capital Programs, Strategy, VIA Rail Canada Inc.]

We did do a study by ourselves.

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

In that study, you will already have made a determination of the location of a dedicated line. Have you?