Transport Committee on April 23rd, 2015

[The Chair, Conservative, Larry Miller]

Given your thoughtful question, we'll get the answer.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you, Mr. Chair.

[James Beardsley]

It's very difficult for me to say whether it's being addressed properly in a piece of legislation, as I'm not a legislator. However, I'm happy to offer an opinion on dangerous goods.

It really depends. The two things that we have are frequency and severity. We have a number of models out there that target TIH/PIH as a very difficult commodity with regard to the aspect of severity, but there are very few and falling shipments of that. As was noted, crude by rail has been on the increase but has started to flatten out.

Looking forward, it's very difficult to rate them as one through four or something like that, but as was alluded to by Robert, one accident is too many. The crude-by-rail accident at Lac-Mégantic was very severe. The TIH accident in Graniteville, South Carolina, 10 years ago, was very severe. It's almost, dare I say it, a tie. They're all severe and one accident is way too many.

[The Chair, Conservative, Larry Miller]

Thank you. Your time has expired.

Mr. Braid, you have seven minutes.

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

Thank you very much, Mr. Chair.

Before I begin, I wanted to ask, Mr. Chair, if we could have a couple of minutes for committee business in camera at the end of our meeting today for me to table a motion, as I know all of my colleagues have been anxiously awaiting this motion.

[The Chair, Conservative, Larry Miller]

Okay.

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

Thank you, Mr. Chair.

Thank you to our witnesses for being here.

Mr. Taylor from CP, I wanted to start with a couple of questions for you. You mentioned that there are a number of items in Bill C-52 that you have been calling for, and for some time. Could you outline what aspects of the bill those are? Obviously, these are aspects of the bill that you deem to be critically important. Could you tell us what they are?

[Robert Taylor]

I think one element of the bill relates to a liability cap. As has been alluded to, we have a common carrier obligation, so we have no choice but to move goods that are tendered to the railway, and obviously that includes dangerous goods. The quid pro quo for being essentially compelled by law to move a good, in our view, is a cap on liability. You shouldn't be forced as a company to move a good that could actually bankrupt your company.

I think the intent of the bill and the intent of these regimes is also to trade off a strict liability with a liability cap. A strict liability we automatically pay out, or our insurers automatically pay out, which obviously compensates damaged parties. For that, you have a cap on your liability. This is something that we've been talking about as a company for quite a while.

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

Could you give us some insight? I presume that currently as a railway you enter into agreements with shippers on certain types of goods that you transport by rail. Could you give us some insight into how those agreements work, what they cover, and specifically how they deal with the issue of third party liability and insurance?

[Robert Taylor]

That's a very, very good question.

Shippers have a number of recourses under law, and one of those is final offer arbitration. We have been focused on liability in our negotiations, and in a number of cases these contracts have been brought forward for final offer arbitration, which is a very blunt instrument. An arbitrator looks at your offer or the other offer and often makes a determination on price without any consideration of the other clauses. One of those clauses would relate to liability, and we are trying, through those clauses, to incent shippers of dangerous goods in terms of the means of containment—the tank car—to ensure that they're moved as safely as possible.

Jean, you are an expert. I don't know if you want to pick up on that.

[Jean Patenaude, Assistant General Counsel, Canadian National Railway Company, Railway Association of Canada]

No. I think you've explained it well. The only addition I would provide is that this goes even beyond just the limitation of liability that you could have on the goods themselves. If you damage the goods, you could have an agreement with your shipper on how you're going to share the risk, but this is third party risk. For example, in Lac-Mégantic, it's the risk of the victims and the environment and all that. That typically would not be part of your shipper relationship. It would be a liability-based or fault-based regime that we would have. This establishes a strict liability. You cannot say, “I'm not paying because I'm not at fault.” You pay, and you do have recourse. The bill provides recourse against third parties who may have been involved.

We always use this example. Let's assume that there's a truck that hits your railroad at a crossing and it causes a dramatic accident. We can sue the truck company, but chances are that it won't have a billion dollars of insurance, so that's a major difference. We are the first ones to whom they will turn for compensation. We're okay with that. We can accept that, but there has to be something other than that, like the cap. We want to make sure that this is a solid cap. It's $1 billion and not more than $1 billion.

We think that the word “involved”, for example, or the fact that there's stacking.... For example, if we're operating on CN and we have an accident of a billion dollars, fine, we're stuck with it. But if we happen to have the same accident operating on CP with the same causes, all of a sudden the cap becomes $2 billion, because with both companies a limitation is involved. These are adjustments that we were looking at, especially on the word “involved”.

I'm sorry for the length of my answer.

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

Thank you.

Are you okay with and do you support the $1-billion level?

[Jean Patenaude]

Well, we could say that it's a bit high, but yes, we're prepared to accept that and to live with that. Yes, we do—

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

As a class I rail line, can you tell me how much insurance coverage you have now or is that proprietary?

[Jean Patenaude]

The actual amount is proprietary, but we have said that right now, in the current market, we have in excess of $1 billion.

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

Mr. Benson, I believe I heard you say that you feel these levels of required insurance are appropriate. Was that correct?

[Phil Benson]

I think it's up to the companies. It's not the level of the insurance. I think it's more to do with the fund. When you look at Lac-Mégantic and $400 million or $800 million.... It's not for the main lines. I have no concern about CN and CP, but for some of the shorter lines there may be more funding required. I'm leaving it to the committee, but it was a concern raised by the rail conference, and they asked me to pass it on.

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

Thank you.

[The Chair, Conservative, Larry Miller]

You have just a few seconds left, Mr. Braid.

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

Mr. Beardsley, which Marsh office are you with? There is no indication here.

[James Beardsley]

I'm actually a Global employee, but I sit in Washington, D.C.

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

How familiar are you with the Canadian market?

[James Beardsley]

I'm more familiar with the global railway market than I am with the local Canadian market—

[The Chair, Conservative, Larry Miller]

Okay. I'm going to have to—

[James Beardsley]

—and there is a difference.