Transport Committee on May 6th, 2014

[Roger Larson]

No, I think what I was trying to say is that our companies' view is that we're already paying it. We've been contributing about $55 million per year for the last 10 years to a special fund called the railways.

In terms of higher freight rates, our analysis showed, to get technical, the freight rate for ammonia over long-run variable cost is 445%. For urea, which is another fertilizer that's not a Transport dangerous good, it's 249%. That difference in freight rates is approximately $55 million a year, from Canadian shipments only.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

It's interesting because what you're saying is that you're actually paying into something by the tariff or the special rate that's not common to other products. That's being paid to the person that's transporting the product that's already insured to the max, so you paying in there doesn't provide any additional coverage. It just provides what they already have.

[Fiona Cook]

One thing we haven't talked about here is self-insurance. The two major railways in Canada have significant amounts of self-insurance, $1.2 billion to $1.5 billion. Our member companies, too, self-insure to a certain extent. These rate premiums we've been paying have gone into what I would call self-insurance.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Right, but it still goes back to the company charging you for insuring at the highest level—

[Fiona Cook]

Or it's going to the shareholders.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

—but it doesn't provide any additional coverage beyond what the insurance already in place is.

[Fiona Cook]

We don't believe so, but we think it should. It should be used to fund future liabilities and not go to the shareholders.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

So you're saying that it could be rerouted—which would provide, then, additional coverage to what's already insured.

[Fiona Cook]

That is correct.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

What about short lines? I know there are an increasing number of short lines that are operating, and the circumstances may be quite different than class I rail transportation. They, of course, may have a little lower risk, as they operate at lower speeds, but there are other issues and they're not able to acquire the max insurance that other rail lines might. What's the answer to that?

I know some have said that there should be perhaps—I'm trying to find the wording they use there—a hybrid approach, in which short line railways would pool their risk and have access to a fund made up of shipper contributions, if damages exceeded the insurance coverage that they might have, just as it is done on the marine side, which you're not too familiar with.

But what are your thoughts about the short line aspect, which is different because they don't carry the amounts of insurance that others might?

[Fiona Cook]

We've supported that view. We made a submission to the Canadian Transportation Agency earlier this year on third-party liability insurance requirements. It's clear that the short lines cannot insure to the level that the class I railways can. We suggested some kind of pooling. We didn't necessarily say how it would be funded. I would think the class I railways would have a role, as well, because the short lines are part of their—

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Tie into the class I...?

[Fiona Cook]

Exactly.

But there has to be a solution, and there needs to be one found, absolutely.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

So you're saying that it could be the rail company, the shipper, and the short lines in some fashion?

[Fiona Cook]

There's the receiver in there, too, right?

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

And the receiver....

Okay, so you're saying just broaden the base.

I suppose the consumer will pay for all of that or ultimately the taxpayer. Correct...?

Mr. Larson, you had comment. Go ahead.

[Roger Larson]

Ultimately, some of the cost gets passed to the consumer. The competition and market forces will determine exactly how that cost is shared out, but it doesn't disappear by waving a magic wand.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

But the insurance is a concept. I don't want to get caught away as to where it ends up. But in terms of the concept of multi-level contribution to a pool, when you're dealing with short lines, is that something that you see as a reasonable approach?

[Roger Larson]

I think there's probably a solution there that doesn't unduly interfere with market forces. I think it's going to be very important exactly what the details of that discussion are. We have to remember that, first of all, short lines is a generic label. There are some short lines...an example is Genesee and Wyoming. The CEO of Genesee and Wyoming publicly made a statement that they had third-party liability insurance that was not significantly different from the class I railways. There are short lines and there are short lines.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

There are short lines in Saskatchewan that we're familiar with and I'm certain they won't be able to access that kind of insurance.

[Roger Larson]

I think you're probably right about that, but there are other circumstances. Are those primarily grain-only lines? Do they all transport dangerous good products?

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Well, crude will be hauled on those.

[Roger Larson]

Yes.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Another question—

[The Vice-Chair, NDP, Hoang Mai]

You have 30 seconds.