Evidence of meeting #62 for Transport, Infrastructure and Communities in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was customers.
A recording is available from Parliament.
NDP
Philip Toone NDP Gaspésie—Îles-de-la-Madeleine, QC
Indeed. Do you have a percentage for that? Do you have a number on that?
General Manager, Service Delivery, Canadian National Railway Company
Not with me, I'm sorry.
NDP
Philip Toone NDP Gaspésie—Îles-de-la-Madeleine, QC
Again in the regions, I think we're looking at seeing more and more short-line companies servicing them. You were mentioning earlier, Mr. Peters, that the larger railways are paying you to improve their systems.
Could you elaborate what you meant by that?
President and Chief Executing Officer, Cando Contracting Limited
There are a number of services we can give. We can take a train and break it apart and go to 10 customers. For example, in central Manitoba we handle 12,000 cars a year with about 15 customers. It's not a service at CN or CP in particular. There are short moves of small blocks of cars, which they are really suited to. They have big horsepower locomotives, and there's even a question of going on in some of the yards now with some of the equipment they have.
Can we do a better job? We focus on the smaller customer. We have a transload facility in our yard where any small shipper can come and unload two or three cars. They use us. That's typically how we help them. That car could be coming from Texas and going to Manitoba. We only get it for the last mile, but without us I think the supply of those services would be a problem.
I want to comment on forestry. That is where we get hit. We had a forestry line on ours that shipped about 20% of their product by rail, 80% by truck, and expected us to upgrade the line—which would cost multi-millions of dollars, with no commitments.
You can look at northern Saskatchewan. There are three or four of them that have been abandoned because the provincial government...nobody would up.... There's one by Manitoba where they put $40 million into the road and gave us nothing, absolutely nothing, to do anything on the rail.
NDP
Philip Toone NDP Gaspésie—Îles-de-la-Madeleine, QC
That's a good point. I think in a lot of places across this country, in the regions at least, when the railways aren't used the trucking is murder for the road network. Provinces are certainly very motivated to try to avoid seeing railways abandoned in their regions.
I'll give an example of something that's happening right now. In New Brunswick, CN announced that it wanted to abandon a rail line essentially between Moncton and Bathurst. It essentially told the provincial government, pay up $50 million or else we're walking away from this railway.
People in regions whether they are shippers or municipalities, or even provincial governments, often feel threatened by the railways. They feel that the railways have them over a barrel because otherwise they are going to have to spend a lot more provincial tax money or municipal tax money to be able to survive.
President and Chief Executing Officer, Cando Contracting Limited
They put $50 million in the road. It's provincial tax money.
NDP
Executive Vice-President, Corporate Services and Chief Legal Officer, Canadian National
As someone personally involved in that matter, to the contrary I think the process that's in your law today allows for the railway to indicate the fact that there's no traffic between Bathurst and Moncton on the Miramichi line.
NDP
Philip Toone NDP Gaspésie—Îles-de-la-Madeleine, QC
There's certainly more than no traffic; there is traffic. The mines might be closing, but other traffic is going to be.... That is why you're looking for new partners.
What you're probably going to do is sell it to some conglomerate of the municipalities. That's probably what's going to happen.
Executive Vice-President, Corporate Services and Chief Legal Officer, Canadian National
I don't want to prejudge how the province is going to react, but my comment was the following. That process is to be transparent. We purposefully sat down with the province and said here's the issue about the carloads having gone from $16,000 down to $9,000.
The big issue is capital requirements, to put the capital into the line to maintain it at a level where we could serve the customers.
It becomes a vicious circle. If there's no capital, there are no customers. If there are no customers, there's no capital.
NDP
Philip Toone NDP Gaspésie—Îles-de-la-Madeleine, QC
But you're also obligated to disclose by law. That's one of the benefits of our actually having a regulatory process in this country. You have to disclose that before you abandon a line.
I think it's important that partners be found, because that region is going to suffer markedly if it doesn't have a railway.
Executive Vice-President, Corporate Services and Chief Legal Officer, Canadian National
We are working extremely closely—and I'm involved in it personally—with the Province of New Brunswick.
NDP
Philip Toone NDP Gaspésie—Îles-de-la-Madeleine, QC
Regarding CN's plans in New Brunswick at this point, are there any other lines you're planning on abandoning at this point?
Executive Vice-President, Corporate Services and Chief Legal Officer, Canadian National
We have a list of lines that is posted on an ongoing basis. It's an ongoing process. We're a lot less than 10 years ago. As much as we can, we work with our colleagues in the short-line industry, with the provinces, and with the municipalities, but ultimately the issue is whether there is traffic to be served there. Depending on the answer to that, there's a process that we follow.
But we're not into the days of mass abandonment of short lines. We're very much at the margins looking at what can be done to make sure that lines are viable, because that's the issue. You don't want to have a line, as Gord said very well, that lacks capital and becomes a self-fulfilling prophecy, and all of a sudden there's no traffic because the line can't support it.
Conservative
Ed Holder Conservative London West, ON
Thank you, Chair.
I'd like to thank our guests for coming today.
It's been rather interesting. A comment was made earlier that we've had some different perspectives from other guests who have been here. I'm not going to ask specifically about things that relate to my region, as some of our colleagues have. London, Ontario—
Conservative
Ed Holder Conservative London West, ON
Yes, it is the tenth largest city. It has the CN and the CP lines that run through it for different purposes. I'm just wondering how we ever got to this point. I'm looking at the people here. I'm not sure what I want to say to all of you.
When Mr. Mongeau was there last week—and in our last meeting we had some shippers here—I thought it was healthy. I recall that some of my comments were to the effect, why didn't you just do this before? I want to give you a gentle boot. Frankly, I'm not necessarily a person who thinks that legislation is always the answer. But when you do have a different kind of marketplace—which you must admit, no matter what you call it—that has been supported, then I think it requires different obligations. You don't need a lecture from me, but it just strikes me as odd.
By the way, I found Mr. Mongeau's testimony at the last meeting to be credible, although I thought he was a little generous in his definition of competition. I also thought what several of the shippers' organizations said was credible as well. I also thought the shippers were more supportive than they might have let on. Once again, when I hear the shippers say that you're not doing enough, and I hear the railways say that they're doing too much, I'm almost at a point of thinking that we're getting pretty close to where it needs to be. That's just my personal reflection.
Executive Vice-President, Corporate Services and Chief Legal Officer, Canadian National
If I may say, I think the railways deserve to get the boot once in a while. We're not perfect. I think that Claude Mongeau said that very well. To answer your question, in a nutshell, there were periods of time in late 2007-08 where our service was not where it should have been. We're making major changes in how we serve customers. We're not very good always at explaining why changes are necessary, but I think that led into the rail service review. We got the message and we said to ourselves, there's no way we're going to grow these businesses by not growing with our customers. To your point, I think very few industries in Canada can afford to do this.
Conservative
Ed Holder Conservative London West, ON
Mr. Finn, I appreciate that, although it was interesting when one of the representatives, Mr. Sobkowich, from the Coalition of Rail Shippers, and a couple of others, including Ian May, certainly took a different view than your perspective.
I want to talk about a couple of things. I'm going to start with capacity. I've heard you talk about the weather being an issue this winter, and certainly we had shippers say, but winter happens every winter, and we all know that. I'll leave that there. Let's go the other way. Let's say it's really good weather. With some of the things this government has done with the Wheat Board and so on, we're seeing more production and better times in what has been a challenging economy. How do you handle the issue of capacity when the land is strong, the production is better in all sectors of the economy that rail associates with, and you have so many cars?
I was surprised, Mr. Murphy, when you outlined some of the issues with the numbers of cars out there at any given point in time. But as the economy gets stronger—and we're optimistic as politicians, and we pray as politicians that it gets stronger—how do you handle that capacity issue without then potentially being in violation of an agreement? How do you produce enough cars to satisfy demand, and enough trained personnel to be able to handle it?
I'll stop there and get a response from the train folks, either Mr. Finn, Ms. Paul, or Mr. Murphy.
There's no disrespect, Mr. Bourque, because I think you know something about trains.
Perhaps I could just get some reaction, please.
Vice-President, Government Affairs, Law and Risk Management, Canadian Pacific Railway
If you want me to start, I'll give you a couple of comments on that. There are two things. It's the essence of planning to be able to do exactly what you described.
The first thing I have already talked about—the notion of working closely with enough customers to have a line of sight on visibility, in terms of the traffic that we're going to be presented with. The better job we do of working with our customers to do that, the better the service level is going to be. We've done a lot in dealing with how to improve that.
The other thing is to make sure that we have the capacity to spend capital in the right way. We spent between $1 billion and $1.1 billion last year. We're going to do the same this year . We do that on a number of things, some of which are related to technology. A lot of it's is just related to maintaining the system that we have, which is something you had better do every year, but it's also about planning for growth. Because we work with our customers, we understand what's going to happen in marketplaces.
I'll use a couple of examples of the amount of money we've spent over the last several years on upgrading our main lines in western Canada to be able to move product to the port of Vancouver. We've seen over the last several years tremendous growth there, not only on the intermodal side but also on the bulk commodity side in terms of grain, potash, and coal. You have to be able to handle that, and we're doing that. We're now seeing the same thing with respect to crude oil movements, for example.
General Manager, Service Delivery, Canadian National Railway Company
I would just reiterate that as our network becomes more fluid and you can move cars faster and faster, that creates its own capacity.
I would just piggyback on what Mike said. Working with your customers to get an advance forecast or an advance commitment on traffic is really important because it takes nine months to train somebody to be a conductor on our railway. And it takes six months, if not longer, to get rail cars. The more closely we work with our customers and the longer term we do it in advance, that's how we're able, from a forward-planning perspective, to meet the needs that are coming.
As you've said, when we have a great winter and we can turn the fleet faster, that creates its own capacity in itself.
