Transport Committee on Sept. 26th, 2018

[The Chair, Liberal, Judy Sgro]

Mr. Bodner, I'm sorry, but I have to cut you off there.

[Brad Bodner]

The rest was just the closing.

[The Chair, Liberal, Judy Sgro]

Thank you very much. Hopefully you'll get it in as part of your comments on something else.

Mr. Clements, go ahead, please.

[James Clements, Vice-President, Strategic Planning and Transportation Services, Canadian Pacific Railway]

Thank you, Madam Chair. It's a pleasure to be here this morning.

My name is James Clements. I'm CP's vice-president of strategic planning and transportation services. CP is pleased that your committee is studying the efficiency of Canada's trade corridors.

CP's transcontinental rail network across North America is a critical component of the supply chain that connects Canada's exporters with international markets and consumers with goods. Two-thirds of our traffic crosses the border. Thirty per cent of that traffic crosses the Canada-U.S. border, including in the Niagara region—where you were the other day—into Buffalo. A further 37% is imports or exports for Asia or Europe through the Canadian ports.

As international trade increases, our transportation systems throughout North America must develop the capacity to handle growing freight volumes. This includes export-driven demand for Canada's natural resources, such as grain, forest products, coal, potash and energy products, as well as import-driven demand from consumers.

CP has been investing significantly to expand the capacity and efficiency of our rail network, especially in the critical trade corridors, such as the one through the Rocky Mountains from Calgary to Vancouver.

Since 2012, CP has invested nearly $9.5 billion in our infrastructure to improve safety, service and throughput. Over this time, our capital investments have outpaced our growth in demand. This year alone, we are investing more than $1.5 billion to replace basic infrastructure, upgrade the network and expand capacity. In particular, we're focused on capacity and efficiency improvements in the grain supply chain.

We have announced that we are investing half a billion dollars to purchase 5,900 new high-capacity grain hoppers, which will replace the aging low-capacity government hopper cars. The new hoppers will handle 15% greater volume and 10% greater weight while featuring a shorter car body that allows more cars in the same train length.

In collaboration with our customers, we're also developing expanded train lengths of 8,500 feet. Those trains will haul 20% more grain than the current 7,000-foot train model we use to move grain and, when combined with hopper cars, represents 44% more grain per train.

The efficiency gains will yield real improvements in the efficiency and capacity of the grain supply chain, a critical element of Canada's trade corridors.

That said, Canada's trade corridors face future challenges. Looking at grain in particular, our railroad meets the market demand everywhere except the critical gateway of the port of Vancouver. There, the railway is sized to the overall supply chain capacity. There's simply more market demand through Vancouver than there is capacity in the supply chain to accommodate the grain traffic. The supply chain through Vancouver is constrained by terminal capacity, the impacts of inclement weather and the operational complexity of the railways, including having to manage around the West Coast Express commuter rail operations.

We are pleased that the government has announced funding under the national trade corridors fund for important grade separations at the Vancouver Intermodal Terminal in Pitt Meadows and the 50th street overpass in Lambton Park Yard in Edmonton. These projects will help alleviate congestion in the rail system. I give the government credit for committing these funds to these projects.

However, federal infrastructure programs in general need to continue to be targeted to support trade-enabling infrastructure, as this is critical to achieving the efficiency gains in Canada's trade corridors.

We recognize that there are political pressures from other levels of government for the finite infrastructure dollars, but the fact remains that the federal government is uniquely positioned to concentrate infrastructure investments on projects that will generate material gains for Canada's national economic needs. We strongly recommend that future federal government programs focus on this trade-enabling infrastructure and include consideration of the separation of freight and commuter operations in the Lower Mainland.

Finally, it is worth noting that the goal of achieving more efficient trade corridors is undermined by federal policy-making that favours additional regulatory interventions in the marketplace and the imposition of significant new requirements for major projects that fall under federal jurisdiction, such as those proposed in Bill C-69. An overbearing regulatory environment constrains the supply chain and the market's ability to build the infrastructure needed to accommodate market demand.

Thank you for your time this morning.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go on to Mr. Liepert for five minutes.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Thank you, all, for being here this morning. I am going to focus my questions on the two rail lines. Mr. Clements and Mr. Bodner, both my colleague Matt Jeneroux and I represent Alberta ridings. I would preface my remarks by saying the testimony in front of House committees is effectively under oath. I'm going to ask you a couple of questions that I would really appreciate solid answers to.

There is no industry that is more important to the economic well-being of the Prairies than the two rail lines. I think you probably are well aware of that. However, consistently, whether it's the movement of grain, potash or other commodities, there seems to be continual bottlenecks.

One of the pressures that both of you must be facing these days is that we're now shipping 200,000 barrels of oil a day on your two rail lines because of constraints on pipelines. How much pressure is that putting on other commodities such as grain? I'll leave it at that. How much pressure is there?

[James Clements]

I'll go first. Thank you.

Certainly, the increasing demand across all commodities has been a bit of a challenge. Last year we saw the ramp up, principally once the Keystone pipeline had the problems in South Dakota, and that widened oil spreads and then increased demand I would have said unexpectedly early. We knew there was a coming pipeline constraint that was more a late 2018-19 kind of thing, which we're now seeing. That's certainly impacting demand for crews and resources.

The other thing we've seen is that potash tends to be on the northern part of our territory. We've also seen the dryness in the south on the Prairies, and more production to the north has concentrated a lot of demand. We are congested to some degree in the Edmonton area, but we are responding. We're hiring. We're expanding capacity and moving record volumes at the same time.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Mr. Bodner.

[Brad Bodner]

What James said at the end is exactly what we're doing. We're hiring. We're acquiring locomotives. We've invested substantial amounts. In the last 10 years we've invested $20 billion in our railway. We've really accelerated our capacity builds in the last couple of years to make sure we can operate efficiently.

Crude by rail only represents about 3% of our revenues. It's a relatively small part of the business, and our focus is on moving the commodities that give us long-term stability in our revenue.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

It may be only 3% of your revenues, but your capacity has to be higher than that. Every time I drive down a road in Alberta there's a trainload of railcars sitting somewhere on the siding. It may be only 3% of your revenue. In other words, you're not making a lot of money off it, but it probably....

[Brad Bodner]

It's an indication of workload, though, because grain is about 10 times that.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Okay. Then why do we continually have the problems every year with grain movement out of Saskatchewan? It seems like every winter we come to the same conclusion. Farmers are up in arms and the Conservative government had to bring in legislation. What's the problem?

[Brad Bodner]

I guess there's a combination of things. In the last couple of years we've had crops that have been far beyond what anyone had forecast. At the same time, I know people say you know winter's going to happen, but the reality in railroading is that winter causes you to run short of trains, which means you have more trains in your capacity slots. You need more crews. You need more locomotives, and all of that has quite an impact on the network.

It's a difficult situation if someone wants you to try to maintain all of this additional capacity for these surges under a regulated rate structure.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I know you're incredibly proud of your safety records, but can either of you sit there today and tell this committee that to ship oil by rail is safer than by pipeline? I'd like an answer from you.

[James Clements]

I think it's complicated.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I'd like a yes or no answer.

[James Clements]

The overall, let's say, loss of barrels from rail versus pipeline incidents isn't significantly different. Obviously, the nature of some of the incidents, including a tragedy, have been different.

We would advocate for safer railcars. We applaud the government for the recent move on the non-jacketed CPC-1232, but we believe with the right railcars and the right focus on safety we can be equivalent.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Even with a 100-year-old bridge...?

Actually, it was Mr. Bodner who raised the 100-year-old bridge, so I'd like a comment on that from a safety standpoint, with oil railcars.

[Brad Bodner]

Everything is moving across that bridge. The reality is that we have a common carrier obligation. If a shipper wants us to move their traffic, we can't tell them no. It's Transport Canada that imposes that on us, so we can't choose what we move.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I understand that.

I think I've run out of time.

[The Chair, Liberal, Judy Sgro]

Yes you have, by about 50 seconds.

On we go to Mr. Hardie.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Thank you, Madam Chair.

It's regrettable that we actually don't have a separate panel on roadways, partially because—and I have to put this on the record—the Province of B.C. declined to participate in our discussions today. Therefore, Mr. Cross, it's going to fall to you. I'm going to talk roads a little bit, and I'll get back to the railways in just a minute.

If you could start from scratch and redesign metro Vancouver for the efficient movement of goods by truck, what would you change?

[Geoff Cross]

Wow.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

You're in the planning business, so, you know....

[Geoff Cross]

What we end up with.... I'll take, for example, a situation.... It's hard to disentangle them.

New Westminster sits in the centre of the region. It is one of the oldest communities, as you're aware, and it is a choke point on the road system. There are also lots of interactions going over the three bridges right in that vicinity, so you have a mixture of uses that is very difficult. Historically, there's a reason why it's located there—the Royal City Centre shopping mall—but at this point, the industrial use has become incompatible in many situations with the actual neighbourhood character and the residential densification that's happening around there.

There are a number of situations throughout the region like that. Because of our river alignment and where the industrial land is most productive, it's in strips and it's in tight competition for other uses. That makes it very difficult. I would think in other regions they would set up larger sections.