Thank you, Mr. Chairman, and members of the committee.
My name is Michael Bourque and I am the president and CEO of the Railway Association of Canada. My colleagues, Gord Peters, Michael Murphy, Robert Taylor from CP, Sean Finn, and Shauntelle Paul, are here as well. Some will speak, and we'll all be here to answer questions.
Today, I've divided my presentation into three sections. First, as chief myth buster for the railway industry, I must address some of the statements made by witnesses in front of your committee these last couple of weeks. In the second section, I'll speak about some of the key service and productivity changes we have made and why we believe they are sustainable for the industry, for our employees, and for our customers. Third, I'd like to inform the committee about our proposed recommendation for this committee and to speak to the list of amendments we are seeking.
Let's start with the myths. I'll address the first myth, which is that the freight rail industry is made up of only two railways that don't compete for business. Nothing could be further from the truth. In fact, Canada has a vibrant railway industry, and our association represents 55 railroads, including CN and CP, and the Canadian operations of BNSF, Norfolk Southern, and CSX. These are all class 1 railroads.
We also represent over 30 short-line railroads. You'll hear from Gord, who is the president of a short-line railroad. These are small to medium-sized entrepreneurial Canadian railroads that are very close to the customer. Railroads, especially CN and CP, compete with each other, with other modes of transport, and as part of a globally competitive supply chain with various carriers in other countries. Railways are competing all the time, which is why they constantly work with customers to improve their productivity.
The second myth I would like to address is that somehow railways are failing the country; that our cars don't show up half the time; that they're broken, they don't work. Again, the reality is something else. Canadian freight railways own, maintain, and operate over 60,000 kilometres of track in North America, which is more than 35% larger than our national highway system. Last year we moved some 4 million originated carloads of freight goods in Canada alone. That's over 11,000 carloads per day, every day. However, this figure undermines the number of rail cars that are in transit at any one time. Class 1 railroads estimate that the number of rail cars in transit every day is approximately 140,000 cars, which is equivalent to a train that is 3,000 kilometres long, or about the distance from Vancouver to Thunder Bay. Our railways are serving. In fact, they have an obligation to serve a variety of customers from coast to coast every day.
This brings me to the third myth, which is that our service is lacking. More than one person here has said here that 80% of freight rail customers are unhappy with their service. This is simply untrue. This inaccurate number was taken from a survey done five years ago. It was based on 262 responses from a total of 8,000 shippers. The survey itself included many leading questions and its results were flawed.
A more credible and more recent survey was conducted for shippers themselves last year by Supply Chain Surveys Inc. This survey reports that 72.5% of shippers reported 95% or better on-time departures and on-time arrivals performance from their carriers, an upward trend that began a few years prior to that. There is also a very credible, publicly available survey from RBC Capital Markets, the 2012 North American Railroad Shipper Survey, which found that 69% of rail customers rated rail service as being good or excellent, up from 58% in the previous year. Notwithstanding a rough winter, today our service satisfaction is on par with other modes of transport such as shipping and trucking, reflecting our collaboration with other supply chain partners.
I think l've got time for a fourth myth, so I'll leave you with the one that bothers me the most. There seems to be an acceptance, and it's partially driven by all the rhetoric that we've heard, that railway transactions occur in what people are calling not a normally functioning market, and the inference is that railways exercise and abuse market power. So I'd like to know, what is a normally functioning market these days? Is it the stock market, defence procurement, automotive manufacturing, or how about grain elevators?
Railways are an asset-based business and it's not surprising therefore that that there are not a lot of railways in such a business. It is extremely expensive to build and maintain railroads, but once they're built, they must compete in the marketplace against seaways, trucking, pipelines, and other railroads. Railways aren't any different from pipelines or shipping, or even grain terminals for that matter. Just because there are few players doesn't mean there isn't competition, nor does it mean there is abuse of market power.
Our service is improving. We've put into place new initiatives and investments to make them sustainable. High prices could be a signal of market abuse, yet Canada enjoys the lowest freight rates in the world. In fact, commodity prices have risen significantly over the past 10 years while freight rates have remained largely flat.
Enough about myths, because they could really keep me here all day.
Let me turn to a second major point that I think needs to be addressed today and that is productivity. If we go back 30 years, successive governments realized that they couldn't run railways or contribute to the rail supply chain efficiently, nor could they afford the investment in infrastructure these required. In the late 1970s and early 1980s, the Government of Canada purchased 8,000 hopper cars for transporting grain. In 1981, the cost to repair the system in Canada was estimated at $3.2 billion, which is the equivalent of $9.3 billion in today's dollars. So how would you like to be sitting here debating how we're going to find the $9.3 billion to spend on infrastructure for rail? You don't because of what's happened.
By 1995, direct subsidies for the movement of grain to railways had peaked at $650 million. Since that time we've had a tremendous turnaround in the rail supply chain sector in Canada, thanks to good public policy. A commercial approach unleashed a range of market-based forces that allowed the rail supply chain to become efficient, competitive, and profitable over the next 15 years.
Railways are doing pretty much exactly what you would hope for. They're implementing innovative measures to operate the network more efficiently, passing savings on to their customers, and collaborating with their supply chain partners. Perhaps you have heard the term “precision railroading”. It's been in the news quite a lot these last couple of years. It's a catch-all term for improving the productivity of a railroad, based on customer demand. It focuses on asset utilization, velocity, and efficiency. These areas of focus are now widely accepted in other modes of transportation as the drivers of productivity.
We've heard a lot about the term “operating ratios”, which is interesting because railways have been driving these ratios down. What other industry can you think of that has succeeded not only in improving its productivity so demonstrably but also talked about it openly? I can't think of any other industry. You could name their indicator of productivity, but in railroads we talk about the operating ratio and we move it down. These improvements have led to efficient, competitive railways that enjoy significant investor confidence.
Again, railways are doing exactly what you would hope: increasing their productivity, keeping freight rates low, enabling the competitiveness of Canadian manufacturers and producers and, indeed, the whole supply chain, winning investor confidence, making money, and reinvesting in the network. In fact, last year Canadian railways invested more than $3 billion to enhance their infrastructure and equipment, and customer service programs. In doing so, they're helping the government achieve objectives related to job creation, economic growth, and long-term prosperity—and we're not sitting here debating how the government is going to do that infrastructure.
Let me turn to our recommendations for the bill, because I just got a signal that I've got a minute left. I would first say that we have been consistent in our message that we didn't think the bill was necessary. That is our position and our advice to this committee, that you recommend to the House of Commons that the bill not proceed.
However, the government has introduced a bill, and if we have to live with it, we would like to see some improvements. We have six amendments. We've circulated them. I believe the committee has them in both official languages.
Mr. Mongeau referred to three of those: mediation before arbitration, which is number 3; arbitration by the CTA, which is number 5; and limited recourse to customers who lack a competitive choice, which is number 1.
I'll take one second to explain number 6, which is that we would like to see clauses 12, 13, and 14 of Bill C-52 deleted. That is because a number of shippers have testified that they have not requested such a provision and that the provision is not required by them and would not assist them, nor did railways ask for penalties to be included in the bill.
Now I'm going to turn it over to Gord Peters from Cando on behalf of Canada's short-line railroad industry.