Transport Committee on May 6th, 2014

[The Vice-Chair, NDP, Hoang Mai]

Good morning everyone. Welcome to the 25th meeting of the Standing Committee on Transport, Infrastructure and Communities.

Today, we are continuing our study on the transportation of dangerous goods and safety management systems.

Our witnesses represent the Canadian Fertilizer Institute, the Chemistry Industry Association of Canada and the Canadian Association of Chemical Distributors.

You will each have 10 minutes to make a presentation. Following that, we will move on to questions from committee members.

I will give the floor to Mr. Larson, from the Canadian Fertilizer Institute.

You have 10 minutes.

[Roger Larson, President, Canadian Fertilizer Institute]

Thank you for the introduction, Mr. Chairman.

Good morning, members of the committee.

I am the president of the Canadian Fertilizer Institute. CFI represents the manufacturers of nitrogen, phosphate, potash, and sulphur fertilizers, as well as the major retail and wholesale distributors of fertilizer materials in Canada. Our members produce 25 million metric tons of fertilizers annually, 75% of which is exported to the United States and to 60 countries around the world. Canada accounts for about one-third of world potash production and 45% of the world's potash trade. Canadian farmers purchase 3.5 billion dollars' worth of fertilizer each year to grow their crops.

We welcome the opportunity to present our industry's views on Canadian transportation. As a major rail customer our member companies make significant use of Canada's railways and are dependent on the railways to safely transport our products to farmers in Canada and around the world. Safety is at the core of the fertilizer industry's operations from production to loading and unloading of all railcars.

Two of our products, anhydrous ammonia and ammonium nitrate, are classified as dangerous goods under the TDG Act. Our members transport about 1.5 million tonnes of ammonia, and 1 million tonnes of ammonium nitrate annually.

Given our industry's experience, I will highlight three key points today. First, the fertilizer industry exercises a high level of diligence to ensure the safe transport of our products. Second, the fertilizer industry is committed to safety and security through mandatory industry-led programs. Third, railways must be held fully accountable for the safety of the operations over which they have control.

First, our member companies assume full responsibility for incidents related to activities within their care and control, and take very seriously policies and initiatives that facilitate the safe handling and transport of our products. To this end the Canadian fertilizer industry has two codes of practice for anhydrous ammonia and ammonium nitrate, which are mandatory for our members.

Ammonia is safely used by farmers across the country, but it must be handled with care. Our industry has implemented the ammonia code of practice to set requirements for distribution, storage, and handling. The ammonium nitrate code of practice is a tool for operators of storage and handling facilities to provide their employees with training and information needed to comply with federal and provincial regulations regarding this product. These codes are regularly reviewed to incorporate new technologies and procedures and include independent third-party audits of all facilities that handle and store these fertilizers.

CFI has developed resources available online for employees, transportation workers, first responders, agri-retailers, and farmers. These help to train personnel to manage fertilizer products through their life cycle and inform the general public.

As mandated by the TDG Act, some fertilizer products require an ERAP, emergency response assistance plan. These plans are established by shippers to assist first responders and carriers in managing an incident. CFI members are also involved in mutual aid programs where an individual company's ERAP resources can be deployed most effectively to respond to an incident regardless of which company shipped the product. Our industry also has an intensive maintenance schedule to ensure that our railcars meet the highest standards of safety and security.

As you are aware, the government recently announced a mandatory retrofit program for all DOT-111 tank cars used to transport dangerous goods. Our members will comply with this retrofit. However, we will ask Transport Canada to confirm that the capacity of the railcar maintenance sector is sufficient to handle both this retrofit program and the critical ongoing maintenance of the existing railcar fleets. Any lack of capacity in the maintenance sector could have a serious impact on our members' ability to deliver fertilizer to farmers.

Turning to the railways themselves, it is the view of our industry that these companies need to be accountable for the safety of their operations and their networks. Once a shipment is turned over to a railway, it is the railway's legal responsibility to ensure it arrives safely at its destination. This responsibility is clear in the Canada Transportation Act.

Allowing railways to unilaterally transfer liability for rail accidents to customers will do nothing to enhance the level of protection available to compensate third parties. Railway efforts to transfer liabilities to customers runs contrary to the public interest as it reduces incentives for railways to minimize the risks of incidents within their care and control, and to improve safety.

Furthermore, railways must meet their level of service obligations under the CTA. Since 1903 these obligations have prevented railway companies from discriminating between types of traffic. This is an increasing concern for our industry as we hear reports mentioned recently by the Mining Association of Canada to the Standing Committee on Agriculture and Agri-Food that CP is planning to refuse to ship uranium.

Unreasonable measures taken by railways to discourage particular commodities from being shipped, including the transfer of liability to rail customers, are discriminatory and exactly the type of barrier to commerce that common carrier obligations are meant to avoid.

The fertilizer industry is committed to investing in Canada's economic growth as well as maintaining global competitiveness. Our member companies have invested over $15 billion over the last 10 years to increase our production capacity. Continued domestic investment by the fertilizer industry relies in part on safe and effective transportation systems, especially railways. This includes competitive and cost-effective rates and tariffs, and a fair liability regime.

To that end, and given the mandate of the committee's current study, we wish to highlight two recent actions that caused the fertilizer industry concern.

First, CP recently issued a tariff that attempts to shift third-party liability to shippers. While the Canadian Transportation Agency's jurisdiction to address this issue is currently under appeal to the Federal Court, if upheld, the CP tariff would essentially transfer responsibility to the shipper even when the products are under the control of the railways.

Second, CP has unilaterally issued new standards for TIH railcars. These actions usurp the role of Transport Canada to establish regulatory policy regarding safety and level of service obligations.

In closing, I want to thank the members of the committee for this opportunity to present our views. We hope we have made three key points: one, the fertilizer industry exercises high levels of diligence to ensure the safe transport of our products; two, the fertilizer industry is committed to ensure safety and security through mandatory industry programs; and three, railways must be held fully accountable for the safety of their operations over which they have control.

The safe and cost-effective transportation of our products is essential to farmers, the 12,000 Canadians who work in the fertilizer industry, and the security of Canada's food supply.

We welcome the opportunity to continue this dialogue and I'm pleased to answer any questions that you may have.

Thank you.

[The Vice-Chair, NDP, Hoang Mai]

Thank you very much, Mr. Larson.

I now give the floor to the representatives from the Chemistry Industry Association of Canada.

You have 10 minutes.

[Fiona Cook, Director, Business and Economics, Chemistry Industry Association of Canada]

Thank you, Mr. Chairman.

Thank you to the committee for the opportunity to present to you here today.

Transportation safety is a top priority for Canada's chemistry industry. Our member companies support this committee's review of rail safety and safety management systems, as well as the many other processes that are under way to ensure that Canada has the strongest transportation safety standards in the world.

I'm here today with a member company representative, Marty Cove, who is manager of logistics with Canexus. Marty will give you a first-hand account of how a responsible care company—and I will go into a bit more detail on responsible care in a moment—prioritizes and practises transportation safety. He will share some views on recent developments concerning liability and compensation, and tank car standards.

First, as a brief introduction, our association represents chemistry companies from across Canada that produce a diverse group of products with a wide range of applications and customers. What unites our member companies and guides them with a common goal is responsible care.

Responsible care is more than a safety management system. It is our industry's commitment to sustainability, a requirement for membership in our association, and a true Canadian success story.

It is recognized by the UN and now practised in more than 62 countries worldwide. Its ethic and principles compel companies to innovate for safer and more environmentally friendly products and processes, to be accountable to the communities in which they operate, and to work to eliminate harm throughout the entire life cycle of their products, including their transportation. In fact, the catalyst for responsible care's development was a derailment in Mississauga some 30 years ago.

Ensuring community safety and security is in our culture and our members are committed to transparency. That is why we have programs like TransCAER and TEAP III. Through these programs responsible care companies scrutinize and carefully select their transportation business partners, so that they continuously improve their performance, and inform citizens and first responders about the hazards and risks of the goods travelling through their communities.

We do this in partnership with the railways, including CN and CP, and we're hoping to welcome more sectors into these programs in the upcoming months.

To summarize, we believe in continual improvement, sharing information, best practices, and minimizing risk wherever possible. We believe that everyone has a role to play in ensuring the safe and secure transportation of dangerous goods.

I'll now turn things over to Marty.

[Marty Cove, Manager, Logistics, Canexus Corporation, Chemistry Industry Association of Canada]

Merci. Bonjour.

My name is Marty Cove. I'm the manager of logistics for Canexus Corporation. We're a medium-sized chemical manufacturer headquartered in Calgary, and we have plants in B.C., Manitoba, and Quebec. We produce chlorine, hydrochloric acid, caustic soda, and sodium chlorate. These chemicals are primarily used in the water treatment, oil and gas, and pulp and paper industries. We also operate a crude oil railcar loading facility just northeast of Edmonton.

All of the chemicals Canexus ships are dangerous goods. In addition, Canexus leases a fleet of about 2,200 railcars, of which about 1,500 are tank cars, and about 1,100 of those are the DOT-111s that you have been talking about. Of the 1,100 DOT-111s that are in our fleet, however, almost 900 are in hydrochloric acid and caustic soda service, not crude oil.

As you can imagine, with a fleet of this size, about 90% of what we produce moves by rail. So we feel that we have a vested interest in a number of the rail safety issues the committee is exploring today. Accordingly, I'd like to thank the committee members for inviting me here to speak today in conjunction with the CIAC.

If you'll bear with me, I wanted to make two points before I turn the floor back to the chairman for questions.

First, I note the committee members have been asking about safety management systems. Canexus, as a member of CIAC, espouses the principles of responsible care, which my colleague Fiona has spoken about. We often describe responsible care as an ethic exemplified by either doing the right thing or going beyond what is required, and to a large extent it is the means by which we go about securing a social licence to manufacture the chemicals we do. Our safety management system, if you will, consists of a number of related parts covering manufacturing, research and development, warehousing, product stewardship, and transportation, to name a few.

From the transportation perspective, and without getting too far into the detail, our transportation safety management system consists of about seven subcomponents including hazard and risk assessment, carrier selection, emergency response, security, incident reporting and analysis, regulatory compliance, and community outreach. Most of the seven subcomponents are made up of policies, procedures, processes, checklists, databases, training methodologies, decision matrices, assessments, and evaluations.

The integrity of our management systems are re-verified every three years by a CIAC audit team who examines our systems for evidence of a robust management system, holistic integrity, and to ensure that we are constantly improving.

I thought I'd try to bridge the gap between the theory of responsible care and some practical examples to help illustrate how responsible care works at Canexus, and I have two examples.

In the first, in about 2007 Canexus recognized that there were a number of parties within the transportation industry who believed that with improvements in engineering and construction methods, a new TIH—which is toxic inhalation hazard—car design could provide a potentially safer means of transportation. However, the new car was roughly twice as expensive as the existing car design. Despite these costs, Canexus put the money where its mouth was and began a program to convert all of its chlorine cars to the new safer design. At present, almost 80% of our chlorine fleet is made up of the new cars, and we plan to complete our conversion program within the next two years. By the way, the Canexus chlorine cars are U.S. DOT-105J600, if you want the precise technology, so they're not DOT-111s.

A second example relates to the routing of chlorine. Several years ago the railways began to express concerns to us about the risk of moving chlorine, and especially the added risk of handling chlorine that other railroads could more safely handle or might more effectively handle. After consultation with the railways, Canexus made a decision to modify its transportation decisions to ensure that we minimize the number of rail carriers handling a shipment, and to work with all rail carriers to ensure the routing of our traffic over its lines took into account a number of safety criteria. What this meant was that our costs of shipping increased, and in some cases, quite substantially.

Secondly, I'd like to speak briefly about liability, a matter which has come up a number of times in the committee hearings to date. Mr. Creel from CP stated in his testimony that the only way to provide additional liabilities is for shippers of those products to share in that liability. From my reading of it, he leaves one with the impression that shippers don't bear any liability today, and in fact, nothing could be further from the truth.

Shippers are responsible for loading the railcars safely. Shippers must ensure that the railcar has been properly inspected and maintained prior to shipment. Shippers must provide a railcar that has the right markings. Shippers must provide the correct billing to the railways and if any of these factors and others contribute to a product release, the shipper bears the liability for that incident. In addition, I hope my foregoing examples demonstrate in a concrete way how a shipper may take on a greater share of the risk than is immediately apparent.

Conversely, it's the railway that bears liability if a product release occurs while in its care, custody, and control. In the last three major TIH incidents, all three resulted from railway causes. The shipper doesn't decide how to maintain the track, which crossings should be protected, how to police trespassing, which employees to hire, how to train them, what shift work and hours those employees are asked to work, whether to install fencing, nor on a myriad of other factors that may play a role in a derailment and subsequent release.

The railways would have the committee members believe that because they cannot decline to handle TIH shipments, the railways should somehow be excused from bearing certain liabilities while the railcar is in their possession. If the railways struggle to protect themselves from those liabilities, how could one expect that they wouldn't be even slightly less zealous in protecting the shipper from the same liabilities? Is there even a small chance that TIH shipment safety would be compromised?

I make my preceding comments not to try to argue that change isn't necessary. I think the unfortunate events related to Lac-Mégantic demonstrate that change is not only necessary, it's inevitable. Canexus recognizes the conundrum short lines, in particular, face in gaining access to large insurance caps. We would merely point out that the devil is in the details. My two examples above demonstrate where there may already be shared responsibility between the shipper and the railway to minimize risk, and therefore, insurance premiums.

Another example of the complexities of the issue is this. We would argue that our chlorine freight rates today already include a substantial risk payment. CP charges us, in ballpark terms, about $25,000 to move a carload of chlorine from North Vancouver, where it's manufactured, to Minneapolis. This is easily double, or perhaps triple, at least, what non-TIH commodity charges would be over the same origin-destination pair. Could we expect the railways to give us this premium back if we agreed to fund a pooled insurance arrangement, and if not, why not?

I won't pretend to have the answers for you today to this question, but Canexus is willing to discuss potential solutions so that we can be part of a solution and not part of the problem. Again, I'm merely pointing out that this is isn't an easy solution and there are many considerations to take into account.

Thank you.

[The Vice-Chair, NDP, Hoang Mai]

Thank you very much, Mr. Cove and Ms. Cook.

I now invite the representatives from the Canadian Association of Chemical Distributors to take the floor.

You have 10 minutes.

[Jim Bird, Environmental Health and Safety Manager, Univar Canada Limited, Canadian Association of Chemical Distributors]

Thank you, and on behalf of the Canadian Association of Chemical Distributors, we welcome this opportunity to share with the committee today. I'll just say right off the start here that I think all of the associations represented here today are on the same page.

The Canadian Association of Chemical Distributors comprises 48 Canadian companies that distribute chemical products to manufacturing end-users in Canada. We operate from 160 sites across Canada, employing 3,600 people. Our member companies receive, store, handle, and offer for transportation over 100,000 chemical products of every hazard class, with the exception of radioactive materials and crude oil. These substances range from commodity substances to complex proprietary mixtures. In addition to what I'll call straight distribution members, we have 90 members that are part of the chemical supply chain made up of transportation, brokerage, and warehousing companies.

Our member companies commit to conducting their business in strict adherence to the code for responsible distribution. Our members are passionate about responsibly distributing chemical substances in a manner without negative impact to individuals, communities, and the environment that we share with all living things. Each member company receives an on-site verification that each site they operate from complies with the responsible distribution code. Verification is done through a third party, SAI Global, Canada's largest registrar of management systems such as ISO 9000 quality, and ISO 14000 environmental.

With over 700 safe shipments made last year, our membership received a transportation incident measurement,TIM, of 1.71. This was made up of 12 incidents, of which 10 involved dangerous goods and two involved non-dangerous goods. Since statistics are somewhat limited in putting things into perspective, I can say that the 10 dangerous goods incidents were far from catastrophic. They were more along the lines of the reportables within Transport Canada's dangerous goods regulations, where five kilograms of a corrosive may have been released into containment on a site, etc., or 250 litres of a flammable. Again, there was no permanent environmental impact. A lot of these incidents happen not in transportation but in the handling and offering for transport, and that is reportable.

This is not to downplay a release, as for CACD members no release is acceptable. Prevention measures are an integral part of the responsible distribution code. Our registrar’s auditors examine a site’s release-prevention measures, as well as response measures. CACD member companies typically hold emergency response assistance plans registered with Transport Canada if they're offering for transport those substances identified under the regulations as requiring a plan.

We use the services of contractors belonging to the Canadian Emergency Response Contractors' Alliance, CERCA—and I apologize for all the acronyms creeping in here. Regular exercises are held with the contractor to ensure readiness and response. Member companies participate in regional TransCAER—transportation community awareness and emergency response—together with the chemical manufacturers; transportation companies, road and rail; regulators at all levels of government; and community responders. We seek to communicate with and educate the communities that our products are passing through or are being delivered to.

You Be The Chemist is a very well-received program that CACD has partnered together with local schools to stimulate an interest in chemistry. We've also participated with the B.C. Ministry of Environment in the process that they are going through to produce a world-class, land-based, spill prevention response regime, and have appreciated being able to be part of that.

While our members as a whole tend to ship in packaged containment via road, there is a significant number of bulk road shipments and road tankers. As well our larger member companies do have tank-car rail fleets for shipping, while many member companies may only receive in rail tank cars, and then from their storage they ship via road.

Again, I would echo the same concerns as have already been expressed, and I look forward to answering your questions surrounding our business and our concerns.

Thank you very much.

[The Vice-Chair, NDP, Hoang Mai]

Thank you, Mr. Bird.

We will now move on to questions from members. We will start with Mr. Sullivan.

[Mike Sullivan, NDP, York South—Weston, ON]

Thank you, and thank you to the witnesses.

When I heard somebody say they only have 900 cars transporting hydrochloric acid and caustic soda, and not very much crude oil, it was meant to be a sigh of relief that it wasn't crude oil. It brings home exactly how far we've come with this transportation conundrum. However, I am interested in knowing more about the materials that are transported that cause death by inhalation or are toxic by inhalation, such as chlorine. They're in a different style of tank cars, which are safer by design, I understand.

Mr. Cove, essentially the thing that interested me the most in your suggestion is that you actively seek safer railroads and safer routing so that even if it costs you more, you're going to find a way to get the product to the destination as safely as possible. Can you give me some examples of what you mean by that?

[Marty Cove]

Sure. In the example I discussed of Burlington Northern railroad, we agreed to ship our chlorine with them over a slightly longer route than the normal shortest route possible. The reason we agreed to do that was that it allowed the railway to avoid high-threat urban areas, which is the U.S. description of large cities, and also it allowed them to route our traffic over sections of their track that were already.... I'm trying to come up with the correct technical term.

[Mike Sullivan, NDP, York South—Weston, ON]

In better condition...?

[Marty Cove]

It's the situation where they have proper traffic control on their lines, as opposed to having dark territory.

Those are some small examples. Then there would be other issues that the railway would take into account such as grade, condition of the track, that kind of thing. We agreed to pay them on the basis of a longer haul to facilitate the safe movement of a product.

[Mike Sullivan, NDP, York South—Weston, ON]

Is this operation done in conjunction with the railroads or is it something you undertake unilaterally and then ask the railroads how much it would cost?

[Marty Cove]

No, it's done in conjunction with the railroads.

[Mike Sullivan, NDP, York South—Weston, ON]

So does the same thing happen routinely in Canada?

[Marty Cove]

I wouldn't say routinely. From a unilateral perspective, we certainly look at where our traffic moves in every instance, in every single origin-destination pair, and we evaluate whether we think it's the safest possible route.

[Mike Sullivan, NDP, York South—Weston, ON]

For example, if you're transporting chlorine through the city of Toronto or from one part of Ontario to the other, there's a railroad that goes through downtown, right through the densest residential neighbourhoods, and another that does not. Would you deliberately choose the other railroad or would you not have that option?

[Marty Cove]

In the example of Toronto, we don't ship that far, and I don't want to talk about where we do ship. We don't ship much chlorine in Canada, to be honest with you. The vast majority of our chlorine goes to the U.S. By nature of the railway network, there are not many options for us to ship via CN or CP and avoid certain residential or urban areas.

[Mike Sullivan, NDP, York South—Weston, ON]

What about the speed of the railroad? If the railroads or you decide that shipping at normal speeds is too dangerous, given the possibility of rupture or the possibility of an accident or the consequences of a possibility, what does speed do to your industry, if anything?

[Marty Cove]

I'm not sure we're the experts on rail operations, but with every action, there's usually an equal and opposite reaction. If you slow down traffic in urban areas, there are opposite responses such as, I think one of the railway representatives mentioned the blocking of crossings for longer periods of time. There are also impacts on staffing levels for the crews, on having to acquire more railcars to a very small extent, and acquire more power to operate them, so I'm not sure.

[Mike Sullivan, NDP, York South—Weston, ON]

In terms of the industry itself, your issue is getting something safely from A to B. They don't have a shelf life. It's not like they're going to expire before they get there, so the amount of time it takes to get from A to B is not your primary concern, is it?

[Marty Cove]

No.

Our primary concern is more the comfort that we have that the product will arrive within a certain delivery parameter. If it's consistently arriving in that timeframe, faster transit times versus slower transit times aren't really the major issue.

[Mike Sullivan, NDP, York South—Weston, ON]

As long as you know when it's going to get there.

[Marty Cove]

Exactly right.

[Mike Sullivan, NDP, York South—Weston, ON]

Getting it shipped is the most important thing, and then the speed with which the railroads move it is of no consequence to you, as long as you know on Monday it's going to arrive in wherever it's going to arrive.