Transport Committee on Feb. 26th, 2013

[Richard Phillips]

If I could maybe just finish on that, we don't actually have the numbers. You can guesstimate what the demurrage is in a total year and you can divide it back. The other cost that we don't know is when we will see the premium prices. As farmers, we see a premium price out there, but we don't know how much basis the company has had to take for risk on this. It's really hard to quantify what that number would be.

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

You just know it's costly.

[Richard Phillips]

Yes.

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

And from the forestry association?

[Catherine Cobden]

I would just add that we have been spending a lot of time on this issue. We look at the impacts on the companies we represent. It's in the tens of millions of dollars in the forest industry. We add up all of the bits that Wade was talking about and it translates into—I'm just talking about one sector—tens of millions of dollars.

[The Chair, Conservative, Larry Miller]

Okay, thank you.

Your time has expired, Ms. Chow.

Mr. Goodale, seven minutes.

[Ralph Goodale, Liberal, Wascana, SK]

Thank you very much, Mr. Chairman.

Maybe I'll just run over three or four questions to start with all at once.

For efficient use of time, wait for your answers. Again, thank you to all of you for coming to talk about this legislation.

At our hearing with the minister, there were questions raised about the existence of confidential contracts already. Some shippers have them. There is language in the bill that would appear to prevent access to an arbitrated SLAs if an existing confidential contract is there.

I wonder if you could just give us some idea of how many of those contracts currently exist and how long they typically run. Is it one year, two years, or ten years? What impediment is there to accessing the arbitrated procedure? That's question number one.

Secondly, Mr. Chair, you went through the five items that the shippers have typically argued for. I gather from your testimony that those five areas are to some extent covered in Bill C-52, but they're covered only up to your level of expectation if the five or six clarifying amendments are in fact adopted. So some of your expectations are covered, but the five or six amendments here would actually make that coverage more effective and more complete. I wonder if we could have a little more explanation of that. Thirdly, there is a difference between AMPs, the administrative monetary penalties, and liquidated damages. The act provides for AMPs; it doesn't provide for liquidated damages.

Mr. Sobkowich gave us a practical example of why having access to liquidated damages is also a crucial part of the enforcement procedure here. I wonder if there are examples other than simply that of the train being late. I think it would be useful to hear some other examples. Also, in the case of grain, if we were able to find the right way to get liquidated damages into the legislation, obviously grain companies would have access to that remedy. Would some of that remedy also be shared with farmers? Would it be reflected back to producers, or is it a benefit to the grain companies that is maybe or maybe not making its way through the chain to producers? I'd like to hear a little more about that.

Reference has been made to removal of the word "operational". I think I know the point you're trying to make there, but I think we need a little more explanation as to why the use of the word "operational" in one of the sections in Bill C-52 is such a limiting legal matter.

Finally, with respect to your last two amendments and proposed section 169.37, are your fifth and your sixth recommendations for amendments alternatives to each other? I'm just trying to fully understand their legal effect. If you got amendment number five, would you also need amendment number six, or are you arguing for amendment number six only if you don't get amendment number five? Are they both necessary, or is it one or the other in sequence?

I know that's a lot of questions to dump on you at once.

[The Chair, Conservative, Larry Miller]

Mr. Goodale has left you three minutes to answer.

[Wade Sobkowich]

I can start on the grain side, if you'd like, Mr. Goodale.

There are more examples. Some of it has to do with car condition, where there are service problems. I'll give you a recent example. I was just talking to one of the companies yesterday. They said they had a train booked to arrive at their facility on Wednesday and were all geared up to load, but the train didn't come on Wednesday. It didn't come on Thursday or Friday. It came on Saturday or Sunday, or whatever it was, so it cost time and a half to load the train. Then on Monday, another train arrived for the next week's order. Now the company has two trains. But they can't load them up within the time period because they can't do two trains at once. So the company ends up paying what they call a delayed lift charge to the railway, because the railway will give you a delayed lift charge if you aren't able to load the train within the timeframe that you're given. That's one.

Then on the other side of it, you end up with both of those trains arriving at a terminal for unloading at the same time. The terminal can't handle all of that at the same time, so you're paying rail care demurrage on the train that you're not unloading while you're unloading the first one. That's probably the most prominent example, but we do end up with rail car condition problems that we pay penalties on, and that sort of thing. I don't know if that answers that question for you.

On whether the costs go back to farmers—I'll just finish up on that particular point—yes, anything that's a standard cost in the system, like fees that we pay to the Canadian Grain Commission, we don't compete on. So it's a line item that's the same for every company and it's factored into the basis. What the companies compete on are the efficiencies of their own operations. That's where they try to gain efficiencies as much as possible to try to attract that farmer's grain.

[The Chair, Conservative, Larry Miller]

Mr. Phillips.

[Richard Phillips]

To take just a few seconds, I think Wade is right. In Tisdale we have four major terminals competing for our grain. Any time anybody has a little extra money, they all want my grain badly. I find that they give most of that profit away back on the driveway, trying to buy my grain.

[The Chair, Conservative, Larry Miller]

Ms. Cobden.

[Catherine Cobden]

I'll make two points, if I may.

The first point is that I'd be very careful on how I defined confidential contracts. What we experience is a strong creep, albeit the latter is perhaps an insufficient word to describe it. Would you consider an email from the railways telling you that this is your confidential contract to actually be a contract between two willing parties, or a product of the monopolistic situation we're facing? When you ask that question, it is a loaded question. Some may characterize us as being under contract, but we do not accept the railway's definition of contract.

The second point is on the point of operational—thank you for asking that. I've given a description of the implications of that, but if you're interested I'll hand over to Allan to give just a few words on the legalistic perspective.

[The Chair, Conservative, Larry Miller]

Okay, briefly, Mr. Foran.

[Allan Foran, Legal Counsel, Forest Products Association of Canada]

Thank you.

From a lawyer's perspective, anything that's loose or requires some subjective requirements leads to litigation and expense. There's no definition of “operational”. When you deal with operational, you may exclude inadvertently other service terms, things like force majeure or other things that would be part of a standard contract.

Operational requirements have been referred to already by members of this panel. If you look at what a railway's operational requirements are to others, you're moving the focus away from you as the shipper to other scenarios, and that's going to become an evidentiary issue as well.

[The Chair, Conservative, Larry Miller]

Okay, thank you.

Mr. Poilievre, seven minutes.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Thank you very much.

My first question is for the representative from the grain growers association. I'm looking here at an October 31 letter from your association—in fact I think it's directly from you, Mr. Phillips. In it you had three demands with respect to this legislation: one, the right for a service level agreement; two, a dispute resolution process; and three, consequences for the railway for non-performance.

Do you see those three demands reflected in the legislation?

[Richard Phillips]

Yes and no. I think what we have here is the framework for it, but the amendments that the gentlemen are suggesting here would greatly enhance and give us comfort and ability to actually enforce what we think we're getting.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

What enforcement mechanisms do you require for these three demands to be met?

[Richard Phillips]

Let me just back up a little bit and say that as the growers, we're not the actual shippers. The actual enforcement will fall upon the grain and the forest companies to do that enforcement themselves. We as the farmers would not be actually enforcing this because we don't actually ship.

What I would say is that we've worked very closely and listened to everything they've had to say, and amendments that they have put forward are a really good step toward that. If the shippers don't get the ability to enforce and if they don't ship the product and they don't do what needs to be done on that side of things, then it comes out of our pockets, because they don't pay us as much money as they know that they have to pay the penalties on the other side.

I think they have answered the questions fairly well. If we look at the six amendments, they are a really good place to go.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Are all of you in favour of the liquidated damages?

[Robert Ballantyne]

That is included as part of the six amendments and all 16 members of the coalition have indicated that they are in favour of that.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Do you have a model on which that could be based?

[Wade Sobkowich]

It could be based on a model from the commodity exchanges. In agriculture we use arbitration a lot to resolve disputes. The Grain Commission resolves grading disputes between producers and grain companies. Commodity exchanges resolve disputes between their clients and customers. There are models like that which can be used. They are quick, expeditious, cost effective and all the rest, where you end up with a result at the end of the day that doesn't require you to go to court and spend $600,000 in two years to try to get a liquidated damages claim paid by the railway that was for $50,000,

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

You're saying that there are mechanisms for fines against one party to be awarded to another without going through a court?