Transport Committee on April 23rd, 2015

[Lisa Raitt, Conservative, Halton, ON]

Through you, Mr. Chair, if the member is interested in seeing what the projections are that we used to base this math on, we would be very happy to provide that to the committee through you, and you can distribute it to the members.

[Matthew Kellway, NDP, Beaches—East York, ON]

That would be great. Thank you very much.

Second, the sum we're talking about is being called reasonable and a notional target. I'm wondering if you could tell me more about the scenario that gives rise to that sum.

You are in receipt, I know, Minister, of a letter by Mayor John Tory of Toronto and 17 councillors who are quite reasonably anxious about dangerous goods running through quite literally their backyards in Toronto, in very dense neighbourhoods. I'm wondering if you could lay out for us what scenario you imagine this sum would actually end up covering.

[Lisa Raitt, Conservative, Halton, ON]

Through you, Mr. Chair, the department undertook a number of analyses. They took a look at the types of accidents that had occurred historically and at the levels of damage that had occurred from them. From there they did a statistical analysis, literally, of how much we would need to have, given that there would be insurance involved as well, too, in order to make sure that they would be able to carry off the entire amount in terms of an accident that could happen.

I'm just looking for the particular information, because I know what you're seeking. I've had that information in the past.

Mr. Tupper has it right there, so perhaps he could speak to it.

[Shawn Tupper]

Essentially, what we did was a thorough analysis of our historical data, and we came up with a projection that we believe will cover between the 90th and the 99th percentiles in terms of risk—

[Matthew Kellway, NDP, Beaches—East York, ON]

This is my question—

[The Chair, Conservative, Larry Miller]

Mr. Kellway, your time—

[Matthew Kellway, NDP, Beaches—East York, ON]

For all the paper flipping, can I get 30 seconds in?

[The Chair, Conservative, Larry Miller]

Well, not 30 seconds, but—

[Matthew Kellway, NDP, Beaches—East York, ON]

I'm concerned about the reliance on historical data when the growth in dangerous goods by rail has been increasing exponentially. Clearly, the probabilities are growing over time, and that's my interest in the formula.

[The Chair, Conservative, Larry Miller]

That's more of a statement than a question.

Minister, can you give us your comments, please?

[Lisa Raitt, Conservative, Halton, ON]

The answer to that question is that this is exactly why we ended up having this ability to use the consolidated revenue fund as the backup and then put a levy on the shipper to recoup that loan, as well as continue to recapitalize the fund again. That's exactly why we did that: to make sure that we set it at a level that is between the 91st and the 99th percentile, which is a good analysis. From there, we do have the ability to ensure that the polluter pays and that taxpayers are not on the hook.

[The Chair, Conservative, Larry Miller]

Thank you very much.

Mr. Leung, you have five minutes.

[Chungsen Leung, Conservative, Willowdale, ON]

Thank you, Mr. Chair.

Minister, I would like you to elaborate a little on how the fund for railroad accidents involving dangerous goods will be financed. More specifically, once it is financed, is there a cap to it, or is this a continuous fund that grows into an astronomical figure? How is that fund expected to be managed in such a way that, like any other fund, there is growth involved, or is it given to a third party, such as an insurance company, to do the work?

[Lisa Raitt, Conservative, Halton, ON]

Thank you very much for the question.

Mr. Chair, the fund has been based upon and mirrored on very successful funds that we have had in the past. That would be the ship-source oil pollution fund, where, simply put, you put a levy on the shipper, collect that levy, and maintain a fund to be utilized in the event that other sources to do the cleanup or to compensate are exhausted. In this case, we say that there will be a minimum insurance level. After that, the fund is available.

We discussed at length a minute ago the importance of ensuring that we took a look at the historical information on quantum associated with accidents. I'm comfortable that the department did a thorough analysis, and that is why the target for this initial capitalization is $250 million.

To give you an example, in the case of CN or CP, if there were to be an accident that did indicate there would be compensation to victims or an environmental cleanup for crude oil, then, first and foremost, victims would turn to the rail company, because it has strict liability to the limit of its insurance. It caused it. They would turn to it and produce their receipts, and they would be paid through the insurance company.

One of the important parts of this bill is that before this bill, and currently as it stands, there would be a process through which CN or CP, if they disagreed that the cause of the accident was theirs, could make the individual take them to court. We wanted to cut out the expense and uncertainty associated with that, to ensure that compensation would flow quickly. As such, the individuals would be able to claim first to the insurance company.

If that first billion dollars, in the case of CN or CP, were to be exhausted, then they could turn to this fund and go through our administrator here in the government to ensure that they would be paid quickly and to ensure that they are held whole. That fund is solely funded by shippers. It is not a railway fund; it is a shipper fund. The process by which that fund is accumulated is that the railways charge the shippers and the railways remit to the administrator of the fund, and that is held in a separate account as part of the consolidated revenue fund. That is the scheme that has worked in the past and that we have put together.

We have to abide by the Constitution and we have to make sure we are doing things legally, and that is the best process in order to ensure that the taxpayer is not on the hook for cleanups and that the polluter who caused it, either the rail or the shipper—because by nature these goods are dangerous to move—is adequately fulfilling its respective liabilities.

[Chungsen Leung, Conservative, Willowdale, ON]

It's supplementary, then. Are we in the process of consultation to speak to the stakeholders, the railroad transporters, about how this would impact on their costs and competitiveness of doing business in transporting products in Canada or the United States?

[Lisa Raitt, Conservative, Halton, ON]

With respect to the railways, because it's a pass-through fee, it's not going to affect the railway company. What I can say with respect to railway insurance levels is that CN and CP already carry a billion dollars.

There are going to be some short-line companies in the country that will have to significantly increase the amount of insurance they're paying and, as a result, they're going to see their premiums go up. But we did have those conversations with the affected companies, and they understand the importance of making sure there's adequate insurance in place, and we understand what the effect will be on their bottom lines.

With respect to the effect on the shippers of the crude oil who will be paying the $1.65, we are comfortable and satisfied that it is in the range that can be absorbed by these companies, that they are fully aware of what our intention is, and that they understand the reasons behind it. Also, as I've said, it happens in other modes of transport already.

[The Chair, Conservative, Larry Miller]

Thank you. Your time has just expired.

We have time for about two-and-a-half to three minutes on each side.

Mr. Mai, you can ask one or two questions depending on the....

Oh, I'm sorry, Mr. Kellway.

[Matthew Kellway, NDP, Beaches—East York, ON]

Very quickly, I'm going to pick up where we left off, Mr. Chair.

Minister, I say it's becoming increasingly dangerous with exponential growth in oil by rail, with probabilities increasing and risk is increasing. You say “exactly”, and that's why the CRF sits at the end of this. That's what I want to know. What's the scenario you're anticipating? What damage to buildings, what environmental degradation, and, most importantly, how many lost lives are we talking about?

[Lisa Raitt, Conservative, Halton, ON]

Mr. Chair, as committee members know, the best way to come up with an idea of what the number should be going forward is by examining historical data. By far and away, Lac-Mégantic—

[Matthew Kellway, NDP, Beaches—East York, ON]

But the numbers are growing.

[Lisa Raitt, Conservative, Halton, ON]

By far and away, Lac-Mégantic is the most serious of all the accidents that have happened with respect to the transportation of dangerous goods—

[Matthew Kellway, NDP, Beaches—East York, ON]

Luckily.

[Lisa Raitt, Conservative, Halton, ON]

—so you do keep that in mind as you're figuring out what the quantification is.

Mr. Chair, the important part with this as well is to make sure you balance it against the reasonableness of that happening again. Everything we've done since July 2013 is to prevent that from happening: preventing derailments from happening, and mitigating, should a derailment happen, to ensure the cleanup can be done quickly, with the third principle being that the polluter pays. That's been the focus for us since then.

This is part of it. Part of it is the lowering of the speed in urban areas, as we talked about. Part of it, too, is developing the new tank car standard. Part of it is saying that you have to phase out the older legacy DOT-111s, which we've done as well, and creating a schedule upon which everything has to be converted to the brand new car that's coming out soon.

It's a work in progress. We'll continue to work on it. We continue to monitor. You had CN officials appear before you as witnesses. They gave good information. They have a responsibility for safe operation as well. It's not just about what we do here in creating laws. They have to operate safely on a day-to-day basis, and they need to invest in their infrastructure, and we'll be here to hold them accountable.

[The Chair, Conservative, Larry Miller]

You have 40 seconds for a question and an answer.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

I will be brief, Madam Minister.

We know that municipalities and first responders suffer from insufficient resources. When we met with the Canadian Association of Fire Chiefs, they talked to us about government assistance, along the lines of what is being suggested here, assistance for training, support for resources, and so on. Has consideration been given to using a part of those funds or additional funds? What has been done along those lines?