Transport Committee on March 8th, 2011

[The Chair, Conservative, Merv Tweed]

Good afternoon, everyone. Welcome to the Standing Committee on Transport, Infrastructure and Communities, meeting number 54.

Pursuant to Standing Order 81(5), we are considering supplementary estimates (C) 2010-11. We will be voting, if the committee so desires, on 40c and 55c, under Transport, referred to the committee on Tuesday, February 8, 2011.

Joining us for the first hour are the Honourable Chuck Strahl, Minister of Transport, Infrastructure and Communities, and the Honourable Rob Merrifield, Minister of State for Transport.

Welcome. I know that you have other people with you. I'll let you do the introductions.

As you've attended many times, I'm sure you know the process.

Please proceed.

[Chuck Strahl, Conservative, Minister of Transport]

Thank you, Mr. Chairman. Thank you for the invitation to meet with you and the committee.

I'm pleased to be here with my colleague, Minister Rob Merrifield, to provide you with an update on the transport, infrastructure, and communities portfolio.

I'd also like to extend my thanks for the hard work you've done recently on Bill C-33, the Safer Railways Act; Bill C-42, the Strengthening Aviation Security Act; and Bill C-511, the Proactive Enforcement and Defect Accountability Legislation (PEDAL) Act.

With us today are Yaprak Baltacioglu, Deputy Minister of Transport, Infrastructure and Communities; John Forster, associate deputy minister of infrastructure; and André Morency, assistant deputy minister of corporate management and crown corporations governance at Transport Canada.

Committee members, at our previous appearance, in December, we provided you with an update on the portfolio. I spoke about the funds under my portfolio and how our infrastructure investments are benefiting communities across Canada, as well as our successful and productive partnerships with provinces, territories, and municipalities. I also spoke about aviation security and our borders and gateways.

Minister Merrifield spoke about Marine Atlantic Incorporated.

Today I'd like to update you on our accomplishments to date under the transport and infrastructure portfolio, as well as speak to you about what the future may bring.

In my December appearance, I spoke to you about the four funds that Infrastructure Canada manages under the economic action plan: the $4 billion infrastructure stimulus fund; the $1 billion green infrastructure fund; the $500 million top-up to the communities component of the Building Canada fund; and the $25 million for the National Trails Coalition.

As part of the economic action plan, the Government of Canada accelerated and streamlined existing funds under the $33 billion Building Canada plan announced in Budget 2007. We did this so that our partners could benefit from these funds earlier than originally scheduled.

Across all of its programs since January 2009, Infrastructure Canada has now committed over $10.75 billion toward more than 6,300 infrastructure projects as part of Canada's economic action plan. When combined with the contributions of our funding partners, this means that approximately $31 billion is being committed to infrastructure projects across the country.

Shortly before my last appearance before this committee, the Prime Minister announced an extension to four of the funds under the economic action plan and extending the deadline to October 31, 2011. This extension includes two of Infrastructure Canada's funds—the infrastructure stimulus fund and the top-up to the Building Canada fund's communities component.

We've also been encouraged to see that most projects are still on target to be completed by March 31 of this year. A recent example of a project that will be fully completed by the end of this month are the new sails at Canada Place, which the Prime Minister visited on February 21. It's great to see that project, one of many that will be completed on time and on budget.

Across the country work is progressing extremely well. I know that some proponents who would have completed their projects by the deadline are taking advantage of the extra time for construction, which in some cases is resulting in savings on project costs. This sustained stimulus to the economy is allowing Canada to maintain its strength as we emerge from the recession, while respecting the fragility of the global recovery and without increasing costs for the taxpayers. It's a good win-win-win.

As we move forward in our exit strategy for the economic action plan, it's important to note that infrastructure funding will continue to flow to municipalities across the country. Infrastructure Canada is continuing to play a significant role in delivering long-term funding under the $33 billion Building Canada plan, including the gas tax fund. The gas tax fund was doubled to $2 billion per year in 2009, and the government has announced this funding is permanent so that communities can continue to rely on stable, reliable funding for their important infrastructure projects.

I will turn to transport. We continue our efforts to provide a safe and secure, efficient, and environmentally responsible transportation system. We're proud of this system because it's among the best in the world, and with the input of Canadians, all orders of government, and private stakeholders, we're making it even better.

I am a firm believer that progress can only be made through partnership.

I guess all of us in government realize that these world-class transportation systems aren't built from the top down. They really require those partnerships to be serious. It requires that we listen to those partners, and it really requires all of us, whether we're in the private or public sector, to work together. It's why I've been travelling across the country, speaking with everyday Canadians and with industry groups, getting a sense of their transportation vision. These groups include, amongst many others, the Chamber of Marine Commerce, the Railway Association of Canada, and WESTAC—I had a meeting a week or so ago in B.C—to name just a few. We've heard great ideas and will continue to dialogue with them as we move forward through the new year.

Today is also about moving forward. I know in the supplementary estimates we're seeking $23.9 million to take action on initiatives that were not fully developed or known when the main estimates were prepared, initiatives such as $14 million in annual funding to support the regional and remote passenger rail services class contribution program. That program ensures safe and reliable access to passenger rail service and ensures that it's provided to certain regional and remote areas of the country by contributing to operating and capital requirements for these important rail services.

The estimates also include $7.4 million for operating requirements related to the ferry services contribution program. This program supports regional and remote ferry services in Atlantic Canada and eastern Quebec. These services not only provide safe transportation to communities, but they support eastern Canada's regional economy and the transportation network.

This program supports regional and remote ferry services in Atlantic Canada and eastern Quebec. These services not only provide safe transportation to communities, they support eastern Canada's regional economy and the transportation network.

Existing agreements for these various services are set to expire on March 31, but on November 30, 2010, the Government of Canada announced an investment of up to $44.7 million to support ferry operations and to maintain the ferry assets.

In previous appearances before this committee, I have discussed the importance of the government's gateways and corridors strategy, which positions Canada as an integrated, efficient, and reliable transportation route. I know there's interest in the committee about the gateways. We continue to make progress on the 47 infrastructure projects that are part of the Asia-Pacific gateway and corridor initiative. We're moving forward with great interest and quite a bit of pride in how that has been rolled out. The next phase of the gateway will focus more on issues such as modernizing policy, regulatory issues, and legislative frameworks. This will improve efficiency and reliability through that partnership, which has been enhanced through this whole initiative, while boosting innovation.

I'm convinced it will also lever the benefits that both the private and public sectors gain from the Asia-Pacific initiative, and that's becoming more clear as we move through the process into phase two.

The line item noting the reprofiling of $17.1 million in funding for the Asia-Pacific gateway will help this process continue, and lessons that were learned on the Asia-Pacific gateway, which was first out of the gate, if I can use that phrase, will be applied to the Atlantic gateway and the Ontario-Quebec continental gateway.

You'll notice also, and this I think I should highlight, that within the estimates we're seeking to access $1 million from previously frozen allotments due to the reprofiling of funds for the acquisition of real property for the Detroit River international crossing, which is a key part of the continental gateway. We remain committed to the building of that new crossing. We continue to work closely with the State of Michigan and the United States government to make it a reality. We are monitoring the Michigan legislative process and continue to urge the Michigan legislature to authorize this project, which will benefit workers and industry on both sides of the border.

Now I will turn the microphone over to Minister Merrifield to speak on a specific line item.

Thank you.

[Rob Merrifield, Conservative, Minister of State (Transport)]

Thank you, Minister Strahl, and my thanks to the committee for the opportunity to speak on some of these estimates. I want to encourage the committee to continue with Bill C-33. I follow your work closely and encourage you to have that clear very soon so that we can get it into law as quickly as possible, and I know that's the intent of the committee. So I encourage you to do that.

I want to talk a little bit about Marine Atlantic. Marine Atlantic is a line issue that is $4.4 million to the corporation. These funds are covered because of the changes in the specific vessel and the shore-based capital projects included in the 2010-11 budget right up to 2014-15. That's in the corporate plan.

MAI ferry service is a tremendously vital link to Newfoundland and Labrador, the Atlantic region, and Canada as a whole, both for the businesses that work there and for the economic growth of the region. Marine Atlantic serves thousands of travellers each year and it carries over 50% of the goods entering Newfoundland and Labrador. The ferry service also supports the tourism industry in that area and will be able to do so in a much better way as we move forward.

The government has invested almost a billion dollars since 2007 in Marine Atlantic, revitalizing not only its vessels but also its onshore facilities. It will be flowed out over the next couple of years. We have had the opportunity to bring into service MV Blue Puttees, a brand new vessel, and the first of two. This is a tremendous vessel. I had the opportunity to visit and inspect it, and to talk to the individuals who work on the vessel. They're very proud of it, and rightfully so. It's two football fields in length. It's a massive vessel that will have over 40% more capacity than the MV Joseph and Clara Smallwood and the MV Caribou, the vessels it is replacing. We also have the MV Highlanders, which is expected to be in operation on April 1 as well. I can tell you MV Blue Puttees is in operation for the first week this last week and is serving that area very well.

In fact, the most significant change in these supplementary estimates occurred because these vessels actually came in a little bit earlier, and that's why the money had to be advanced. Both are important and needed investments. It's important for Marine Atlantic to have the ability to supply the services to Newfoundland and Labrador. We're working closely with the Newfoundland and Labrador department of tourism, not only because of the increase in demand for capacity for vessels and passengers, but also for tourism in the area. With these new vessels, the opportunity for tourism in that area will greatly increase as we go into the summer.

So with that, we'd love to take any questions you might have on these estimates.

[The Chair, Conservative, Merv Tweed]

Thank you very much.

Mr. McCallum

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

And thank you all for being here.

My first question is to Minister Strahl. This morning we heard from representatives of the Air Canada maintenance workers. There are 4,500 jobs, approximately, and we're very concerned that those jobs might be lost from Canada to a jurisdiction where the labour costs are a fraction of the level.

My understanding is that you've received assurances from Air Canada, but I think the main issue is with Aveos, the company that will have the bulk of those employees. My understanding is that the jobs in Canada are safe until the contract ends in 2013. The concern is what will happen then.

My question is, can you give assurances to those people who are all very concerned that their jobs will be secure post-2013? If necessary, would you entertain a legislative change to ensure that is the case?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Thank you. I think you've accurately described the situation. I know there are some people out there who are worried about job prospects and so on, and I did ask who has been laid off. No one has been laid off. People should be assured of that. My understanding is that no one has been laid off. In fact, Air Canada points out they've actually hired 500 people this year.

All I can talk about is the press release from Aveos. They point out that things are going very well. They've actually hired more people as well. Aveos has obviously been doing a good business, and they are pleased with it as well.

With regard to some of the questions, you may have to get Aveos and Air Canada in. As you know, it's not a government corporation; it's a private publicly traded corporation. They make decisions based on the interests of their shareholders and in compliance with government legislation. That's what you may want to do, because I can't really comment on a private company's plans.

[John McCallum, Liberal, Markham—Unionville, ON]

I think Air Canada is a special case because of the legislation. In the legislation, government required that these maintenance jobs be in three locations in Canada. Now, because the owner is Aveos and Air Canada is only a minority owner, the letter of the legislation may not apply anymore. But I think the spirit of the legislation is that Air Canada's maintenance facilities should be in Canada, not South America.

I don't think you really answered my question. In order to guarantee that these jobs remain in Canada, would you entertain some legislative amendment to the act that would ensure that?

As I understand it, some of these workers are planning to stay on with Air Canada rather than going with Aveos, even though they may not have a job. But they will at least have their pensions. Whereas if they go to Aveos, they are concerned their jobs will disappear after two years.

Even though it's two years from now, it's having a real impact on people's lives as we speak. My question is, would you consider a legislative fix to guarantee that Air Canada maintenance jobs don't leave the country in two years' time?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

I'm not sure what legislative fix you would have the Government of Canada apply to a private publicly traded corporation. I'm not exactly sure what you have in mind. I'd be interested, if you have a proposal. I don't have a proposal to do any such thing at this time.

I just hope the committee, if it wants to look at this...I understand you had a union representative here this morning. Again, it's a private company doing a private thing, so I'm not sure what role we should play in this. My understanding is that in the restructuring of Air Canada, the unions, as part of that restructuring, voted in favour of the restructured process, including the use of Aveos as a partner in this. The restructuring, as I understand it, was approved by the creditors, including the union, at that time.

I'm not sure what they see in this now that's worrisome, and I'm not quite sure what proposals you would have us entertain for a private company.

[John McCallum, Liberal, Markham—Unionville, ON]

I think I heard you say you might entertain our proposals, if we were to come up with something.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

I'd be interested to hear what they are.

[John McCallum, Liberal, Markham—Unionville, ON]

I have a little bit of time left, but I'd like to share it with my colleague, Sukh Dhaliwal.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you.

Thank you, Minister, for coming out.

Minister, you mentioned the Asia-Pacific gateway. It's a really good initiative from the Liberals, which you took over. The next big step and success story is Ridley Terminals and the railroad and the utility corridor. What are your plans to put that in perspective, so they have the support from the government and Prince Rupert gets its share to develop?

[Rob Merrifield, Conservative, Yellowhead, AB]

That's another great success story that actually I don't think you as the Liberal Party can take any credit for, because I think you wanted to sell the Ridley Terminals. One of the first acts of our government was to stop that sale.

The great thing about Ridley Terminals is that it normally did around 3 million to 4 million tonnes per year; last year, a record year, it did 8.3 million tonnes. This year, coming forward, it will be up to capacity or a little bit beyond; Ridley Terminals is actually becoming a little innovative about how it can increase capacity. The agenda is actually to move to even more capacity, because the demand is so strong on metallurgical and even some thermal coal.

So it is a great news story, and in terms of the infrastructure build that needs to take place—I think that's gets to your question whether it's going to be there--we're working as hard as we can, together with Ridley and the machinery of government, to make certain that it meets the capacity needs of the industry.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

But when are you going to make the announcement to give that money so that Ridley Island is developed? That's what it is all about. Ridley Terminals is already clogged, and we cannot make any further progress in that area unless they get the necessary financing from the government.

[Rob Merrifield, Conservative, Yellowhead, AB]

You have to understand that in regard to Ridley Terminals, and with what has happened in the coal industry over the last year and a half, it could hardly meet payroll a year and a half ago; it moved from there to record capacity within a year and a half, and beyond record capacity. This year it will go up to full capacity and actually a little beyond that, because of the innovative things that need to be done.

There's a dumper that has to be retrofitted. There's a new dumper that they want to order in order to help out. CN is actually helping on this, to make certain that steel vessels or steel containers, instead of aluminum containers, are fitted better for the dumper that is there, and that it accelerates the kind of flow that needs to take place this year. So everyone is actually working together, right from the shippers, to CN Rail, to Ridley Terminals, to make sure that capacity is there. We're working very hard to make certain that extra capacity, even beyond the maximum capacity, which is 12 million to 13 million tonnes, gets grown into the future over the next five years. We'll be making announcements in due course with regard to that.

[The Chair, Conservative, Merv Tweed]

Thank you.

Monsieur Guimond.

[Michel Guimond, Bloc, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

Thank you, Mr. Chair.

Minister Strahl, in answer to a question that my colleague Mr. McCallum asked you earlier, you said that this involved a private company, and you wondered what could be done. Which private company are you referring to? Is it Air Canada?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

I think both companies that were mentioned are private. Both Air Canada and Aveos are private companies. Air Canada, of course, has to be in compliance with the Air Canada Public Participation Act, which they must do, and which they will do. When I meet with them, they give assurances that they will be in compliance with the act, and that's what we would expect. But they are public companies. They were devolved from crown corporations and are public companies, and they have been for quite a number of years.

[Michel Guimond, Bloc, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

Yes, but, Mr. Minister, the government and the minister of the day put conditions on the privatization, back in 1988. It was the Progressive Conservative government of Brian Mulroney. When Air Canada was privatized, Don Mazankowski was the Minister of Finance and responsible for the legislation. It would have been too easy to say, 15 or 20 years later, that Air Canada had been sold to a Chilean airline and that its headquarters would be in San Diego from now on. The government at that time put provisions in place to protect jobs. You know, Minister, we are talking about 4,500 jobs in Montreal, Mississauga, Winnipeg, Calgary and Vancouver at an average salary of $60,000, I am sure of it. We are not talking about minimum wage jobs. When that legislation was passed, there was a requirement to keep the headquarters in the Montreal Urban Community, to comply with the Official Languages Act, and to keep the three service and maintenance centres.

I can tell you that the testimony we heard from the Air Canada people was not at all reassuring. Ms. Sénécal, who is the Assistant General Counsel with the Law Branch at Air Canada, told us that things would continue just because she said they would. She was not able to guarantee it until 2098.

Would you be prepared to consider a legislative amendment with some teeth? It would prevent Air Canada from doing indirectly what they cannot do directly. It is funny to see a sovereigntist like myself defending well-paying jobs across Canada. We should pass a legislative amendment to ensure that, even if a unit were sold, the original obligations in the 1988 legislation would remain in effect. Would you be prepared to consider that?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

My understanding, and again these questions are best put I think to Air Canada and to Aveos, is that during the restructuring that occurred in the last decade with Air Canada, it went into bankruptcy protection and came out of that--I think we're all fairly proud of the fact--and now I think it's the 13th largest airline in the world, with 23,000 employees. It's a Canadian success story. As I mentioned earlier, I looked at one of their press releases recently, and they've hired another 500 people. It's a good story. We're happy for Air Canada, and we want it to continue to be a success.

But in the restructuring of Air Canada, what everyone agreed to on the creditors' side, including the unions, who voted in favour of it and participated in the restructuring, was that the maintenance would be spun off to Aveos and done by Aveos, and it has been done by them since. It's been done, as I understand it, very successfully. Both Aveos and Air Canada have hired additional personnel. It's been a successful relationship. And Air Canada says it will continue to comply with the legislation.

People are always concerned about jobs. We're all concerned about jobs, but we also have to understand there's a limit to how much a government can say about a publicly traded private company that competes with companies around the world and in Canada. The idea that we're going to pull one company out of a list and demand an additional new layer of requirements for this company, it seems to me, is going to be very difficult to sell in the public square.

[Michel Guimond, Bloc, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

So I am asking you why your party's predecessor, the Progressive Conservative Party, included provisions like that in the act. It became a private company; it might just have been left to the free market.

Imagine that we are in 2013 today and that Aveos decides to move the jobs to El Salvador. Would you feel that Air Canada is still complying with the provisions of its own act of incorporation?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

I think the question is a good one. Why did the government of the day put these things in place? The reason the government of the day put these things in place--this is 23 or 24 years ago--was because it was transferring it from a crown corporation, with all of the benefits that came with that, to the private sector. At the time, they said it was going to be privatized. With that came a whole raft of government investment. It was long ago, but at the time, it made sense that you'd say that when you transfer to the private sector, here are some things you have to do, because the Government of Canada had a huge investment in the company at that time.

This is a quarter of a century later. I would ask you to consider whether it is in the best interest of the air industry to select one company out of a list of many and say that what we're going to do with one company, but not with the rest, is have a legislative restriction, and all that goes with it, on the activities of what's now a completely private company. I just urge you to think about the impact of that. I don't think it's wise.

Right now we have two companies, both healthy, both adding employers and employees, and both talking about the bright future together. If you start to say that you're going to run that company right from this committee table, I think you're going to have more difficulties rather than fewer.

[The Chair, Conservative, Merv Tweed]

Thank you, Mr. Guimond.

Mr. Bevington.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Minister, for joining us here with your staff. I'm glad to have you here.

On this particular issue--and I don't want to belabour it too much here today because there are other things to go on to--quite clearly, if unions agreed to changes in management, it was with the understanding that their jobs would remain here in Canada. They would remain as part of the agreed-upon act of Parliament that made this happen. I don't see it being a particularly important point that the unions went along with the merger, because they were under the understanding that these laws would remain in place and that these operational centres would remain.

Basically what they're looking for is that the Canada Industrial Relations Board's decision concerning the transition of Air Canada employees to a subcontractor be set aside until the government takes a position on this act. Do you support the act? With that, this relationship will remain. Two years is not a long contract when you're talking about highly skilled professional workers who are in the field right now in the numbers they are. Where is the assurance these people can have, moving forward, on their benefits and their relationships?

This is something that has great importance in the Canadian economy as well.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Absolutely it does. That's why everyone wants to have a healthy airline industry and a healthy maintenance industry as well. I think both are in good shape, and we should ensure that they stay that way.

When it comes to a collective bargaining agreement between a private sector company and a union, which is two years away, and there's a perfectly good and well-managed and working arrangement between a union and a company, I think we should let them run their business.

What I find a little unusual is that committee members would suggest, when there's a perfectly good agreement between a company and the labour union and it's going very well, that we should intervene and do something to screw that up. I just think that's unwise.

What we should be doing is asking what we can do to make sure the airline industry remains profitable and continues to grow in Canada. You do that by reducing taxes, by reducing red tape, and by lowering tariffs on manufactured imports, as we're doing, to help Air Canada remain competitive worldwide. The unions, of course, will benefit, because a profitable and sustainable industry means that the workers, in turn, get profitable and sustainable jobs.