Transport Committee on May 6th, 2014

[Roger Larson]

In terms of the labelling of transport of dangerous goods, we have two products that are classified as TDG, anhydrous ammonia and ammonium nitrate. We worked with Transport Canada in the definition and the classifications, such as exactly what the MSDS requires, whether it's this level or another level.

I should probably qualify my first answer to say that there are a couple of other products that our member companies do either use or produce and ship and bring in. There's ammonia solution, which is related to anhydrous ammonia. There are things like caustic potash. There are some other dangerous goods. In all the cases, our member companies have safety divisions that actively work with the regulators to define what the parameters are for the classification.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay. Thank you.

Mr. Cove, in your opening presentation you talked about where from your perspective responsibility should be assigned to ensure the safety of Canadians, the safety of communities. Could you just elaborate a little bit on your initial thoughts? From your perspective, what is the role of the chemical company to ensure the safety of Canadians, and what is the role of the railway company?

[Marty Cove]

Wow. How long do we have?

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

You have four minutes.

[Marty Cove]

I'll try to do it in less.

Our role is to ensure that we are doing everything we reasonably can to ship safely. I listed a bunch of those, and I won't go over them again. It also goes beyond just shipping. It also goes to product stewardship. So, it's a cradle-to-grave concept where we even go out to qualify our receivers and make sure that they have the appropriate equipment, training, and technology. We go to the railroads and we speak with them about their safety management systems and processes. So we do absolutely everything we can throughout the supply chain. We don't have the resources to get too far into how the railway operates. You know, we ultimately have to, at some point, say that we've done our due diligence and the railway looks like it's doing the appropriate things.

From the railway's perspective, in my view, they have care, custody, and control of that product when they're shipping it. They are professionals. They make a tremendous amount of money, and they have a very effective safety management system in place—I would hope. So their responsibility is to make sure that they move that product safely when they have control of it.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

So, elements of this are shared, are collaborative, then, between the originating shipping company and the railway shipping company.

[Marty Cove]

Yes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay. Very good.

Another question I wanted you to touch on is that we've spent some time in this committee talking about the importance of having information shared with municipalities so that municipalities are aware of the various goods that are being shipped through their communities. We have, I think, currently a very appropriate communications protocol that involved railway companies, the Federation of Canadian Municipalities, to ensure that municipalities, generally speaking, are aware of the goods that are being shipping through so they can properly train their first responders. Could you speak to the importance of the balance between transparency on the one hand and security on the other, from your perspective as a chemical company?

Is this an appropriate balance, and does the current communications regime strike the right balance?

[Marty Cove]

I think there's probably always room for improvement, and yes, there is always the concern that you're providing information to people who will use that information inappropriately. Ultimately, though, as it was pointed out in the discussion I had yesterday, when the railcar is moving through that community, it's placarded. Anybody who wants to get on the Internet can look and see what that placard number is and realize what the car type is and what it's carrying. I think in terms of our role, really, more information is better than less information.

I'm not sure if I've answered your question.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

That's fine.

[The Vice-Chair, NDP, Hoang Mai]

Thank you, Mr. Braid.

We'll have a last round of five minutes each.

Madame Morin.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

Thank you very much.

I want to go back to what I was talking about in my remarks, the safety culture.

Mr. Larson, you said earlier that in your view, safety represented an economic threat, because safety costs are passed on to your clients. I understand. That is the principle of paying and passing on the costs.

Currently, you have the choice between safety and your viability. In my view, self-regulation has limits, despite what you mentioned having done in this regard. I asked you in what proportions, respectively, the choices you made flowed from self-regulation and regulations that are imposed upon you. A larger number of things are imposed by regulation, and therein lies the problem.

If we keep saying that basic regulations that apply nationally do not go far enough, some companies will prefer to invest a great deal in safety, since the safety culture exists. A professor came to talk to us about that specifically. However, other companies or associations will not want to invest in safety, because if they do so, they will have to pass the costs on to their clients.

If there are no national regulations so that everyone pays the same amount for common safety measures, companies will have to choose between viability and safety. Unfortunately, I am not convinced of your willingness to go farther.

Once you have respected the rules that are already established, how do you determine what additional safety measures are warranted given the costs and your concern with not wanting to pass them on to your clients? What are these decisions based on?

[Roger Larson]

Madame Morin, those are good questions.

First, I think we want to be very cautious about saying that costs are passed on to customers. The costs have to be absorbed within the company's economic structure, and if they can't be globally competitive after absorbing those costs, then they don't continue to operate in Canada. Their business fails. They have to close down their plant. That's the reality. Those costs are built into their structures, and to some extent it affects everybody in the system.

I think we want to be very careful when we look at adding on additional costs in terms of the impact on competitiveness. Canada's a trading country. We had a question on trade a little bit earlier. We export 75% to 80% of our production, and it's not just to the United States. It's also to 60 countries around the world. We are competing with producers from other countries for that business.

I'd like to add that we applaud the trade initiatives. Canada-Honduras was just announced. We're thrilled to see the government moving forward with trade negotiations. TPP is also very important for our industry.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

Since I do not have much time left, I would like you to answer my question about transportation.

[Roger Larson]

I think companies need to be able to develop their own safety management systems and their own way of fitting safety within their business models. When you have a blanket safety requirement that is national and broad, it tends to be a blunt instrument as opposed to when companies are able to incorporate safety systems within their operations.

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

Can you explain what you are doing as an association, in this case, to evaluate your safety management system? How do you evaluate it internally? You say that you make your own plan because the one put in place nationally is too broad. How do you evaluate it? What exactly do you measure? How do you determine that it is the best plan for you?

[Roger Larson]

I think, as Fiona indicated earlier, there are broad verification systems for responsible care where other industry programs—

[Isabelle Morin, NDP, Notre-Dame-de-Grâce—Lachine, QC]

Can you name them, please?

[Fiona Cook]

I talked about responsible care for the chemical industry, but I believe in the fertilizer industry you have your own program.

[Roger Larson]

Yes.

[Fiona Cook]

That's verified.

I think to answer your question, we believe a strong regulatory framework is essential. So if changes are needed there, fine. Our companies go beyond regulation and that's what they're verified on as well.

[The Vice-Chair, NDP, Hoang Mai]

Thank you very much.

Mr. McGuinty, you have five minutes.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you, Mr. Chairman.

Thank you very much.

Mr. Larson, can I go back to a comment you made in your opening remarks? You talked about the effects of the government's recent announcement on the capacity of the railcar maintenance sector.

We know that the minister made a fictitious announcement about the replacement of 3,000 DOT-111 cars. We know it because one of the most prominent companies in Canada came to this committee and testified, and here is the testimony from the vice-president of the company involved. I quote:

Right now, all of our manufacturers [of cars] are at the highest capacity ever. This is what it is. If you come to NSC and put in an order for a car, you have to wait until 2015. With other car builders, it's getting to 2016. So we are talking about a big backlog right now.

So the minister—smoke and mirrors—came out and issued this directive, but we all know, based on facts and evidence, that the capacity of the industry to meet those standards is not there, not just in the Canadian context, he testified, but also in a North American context.

I'm going to ask about the effects of this announcement on the important sector you alluded to. Can you help us understand?

[Roger Larson]

We're still trying to get a hard number on the number of DOT-111s our industry has. We're roughly estimating it at about 10,000 cars. Many of those cars are not in TDG service. They haul non-TDG goods, and I think that's an important distinction.

Our member companies do use DOT-111s for some TDG movements that I've mentioned before—sulphuric acid, caustic potash, etc. We are at the point of asking Transport Canada to confirm their assessment of the capacity of the railcar maintenance system to move that hundred or so thousand DOT-111s that need to be retrofitted, as well as doing ongoing maintenance on the other cars in the fleet.

[David McGuinty, Liberal, Ottawa South, ON]

I wish you luck with that request to Transport Canada because the Auditor General tells us that the capacity within Transport Canada to do anything of that kind may not even exist. Transport Canada, under this government, says it needs 20 qualified audit inspectors. They have nine, maybe 10. They're not our numbers. It's Transport Canada's numbers.

In a three-year period they only conducted 25% of the audits that they said they had to conduct in order to ensure that rail was safe in this country. So we have a capacity problem at Transport Canada, and need I remind Canadians that the government spends more on economic action plan advertising every year than it does on rail safety.

But I want to go to another issue raised by a colleague across the way here earlier, about the new sampling, testing, and classification of the products. I want to ask you about your members and whether they are in fact conducting the sampling, the testing, and the classification of the products, becauseThe Globe and Mail broke a series of stories, saying that even after the directive had been issued, it's not happening. It wasn't happening in Bakken, and it's not happening.

Can you assure Canadians now that at the very least all of your member companies are in full compliance with those requirements?

Ms. Cook.