Evidence of meeting #21 for Transport, Infrastructure and Communities in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was interswitching.
A recording is available from Parliament.
9:15 a.m.
Liberal
Gagan Sikand Liberal Mississauga—Streetsville, ON
Okay, fair enough.
Would you say that this is an accurate correlation or reflection of what's lost in product per day? Is that why this number is set where it is?
9:15 a.m.
Chief Compliance Officer, Canadian Transportation Agency
Yes.
I couldn't speak to that, unfortunately, because I wasn't part of setting that number, but certainly it's intended to disincentivize negative behaviours. We have not had occasion to issue an administrative monetary penalty in that regard to this point, so parties are working to avoid that circumstance. That's what we assume is occurring.
9:15 a.m.
Liberal
Gagan Sikand Liberal Mississauga—Streetsville, ON
Okay, fair enough.
Now in regard to interswitching, can you provide at least some ratios or metrics that describe what's saved when interswitching is extended in product or volume?
9:15 a.m.
Chief Compliance Officer, Canadian Transportation Agency
Yes, certainly. We can provide you with more detail on that, I think, and Randy can speak to it.
Generally, our experience has been that the use of the extended interswitching has definitely been greater at the shorter distances, and certainly as we got closer to 160, or one year of data—and the caution is one year of data only so far—which demonstrates that there hasn't been a massive use of interswitching provisions as you get closer, between 100 and 160, I think, it's increased by 1%, Randy, if I'm not mistaken?
Again, we shouldn't just rely on what the number shows, because there's also the factor of what its existence does to change the negotiating climate between the shipper and the railway. The fact that they're not necessarily using interswitching doesn't mean that it's not a useful element in the marketplace.
9:15 a.m.
Chief Strategy Officer, Canadian Transportation Agency
Unfortunately, you're going to have to rely on anecdotal evidence because the number of carloads that take advantage of the regulations is really small. We're talking well under 1% of your overall carload. If you're just looking at that as your point of comparison, I would say it's probably a little too small and not robust to draw inferences from. However, I would encourage you to go out and try to get information from shippers to see if the regulations, overall, have modified and changed behaviour so they don't have to rely on the regulations or the dispute process.
9:15 a.m.
Liberal
Gagan Sikand Liberal Mississauga—Streetsville, ON
Thank you for that.
It's been said that extending interswitching can actually be pretty complicated. Would you agree?
9:15 a.m.
Chief Compliance Officer, Canadian Transportation Agency
I certainly can't do the math, so, yes, it's complicated. We have a team of economists at the agency who do that. As Randy said, it does become an exercise in art, not science, because what you're trying to do is to determine that sweet spot of distance whereby the maximum amount of carriage has access to competitive line rates. Again there's no absolute cut-off point where our data showed that after this distance demand drops off entirely. I think it's going to be the usage and the anecdotal evidence about what the shippers and railways are telling us about what it's done to the negotiating climate that is ultimately going to solve that question. There's no substitute for time.
9:20 a.m.
Chief Strategy Officer, Canadian Transportation Agency
In 2013, when we went out and we consulted during the RIAS process, we undertook extensive consultations to try to fill the information gap because we didn't have the hard data. That was unprecedented in terms of the number of consultations and the amount of time we spent consulting.
9:20 a.m.
Liberal
Gagan Sikand Liberal Mississauga—Streetsville, ON
Thank you very much.
If I have any time, I'd like to ask my colleague if she has any questions.
9:20 a.m.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Hi, welcome. Thanks so much for your presentation.
I'm new to the topic, but I have a couple of questions.
How do our interswitching rules compare to similar jurisdictions? Did we look at others, in terms of making them more competitive, whether it's the U.S. or other places? How do they compare?
9:20 a.m.
Chief Strategy Officer, Canadian Transportation Agency
Canada is a little bit unique in terms of our rail structure to start with because we do have the presence of, at best, an oligopoly; there are just two railways.
In general, the U.S. is much more competitive for rail. That’s why I indicated at the outset that we as an agency only come into play, or should only be in play, when there is some type of market failure. That's why I indicated at the outset, we only really come into play, or we should only be in play, we, as an agency, when there is have some type of market failure. We'll come in and interswitching is one type of regulation that we have at our disposal to try to address that. The other is the dispute resolution. It's a little long-winded, but when you go to a competitive market, for example like the U.S., the need and requirement, just in general and in most instances, are less.
9:20 a.m.
Chief Compliance Officer, Canadian Transportation Agency
This is a dynamic that I'm sure the committee has been witness to across a number of different modes, in that it's endemic to Canada's population structure versus its land mass. With a large land mass and a small population base that's dispersed, the infrastructure needs to be massive and the unit costs over which those costs are recovered are fairly limited. You're never going to get the kind of infrastructure availability and duplication that you'll have in a jurisdiction like the United States, which has so many more rail lines.
9:20 a.m.
Chief Strategy Officer, Canadian Transportation Agency
Europe is a little bit different as well because the majority of their rail is passenger related and not freight related. The other thing, just building on Fred's point, is there's no other country that's as dependent on the rail system, for the movement of freight, as Canada. About 68% or 69% of our freight is moved by rail, which, if I'm not mistaken, is tops or pretty close to tops in the world.
9:20 a.m.
Conservative
The Vice-Chair Conservative Luc Berthold
Thank you very much, Mr. Meades, but your time is up.
We will now begin the second round of questions.
Mr. Badawey now has the floor.
9:20 a.m.
Liberal
Vance Badawey Liberal Niagara Centre, ON
Thank you, Mr. Chairman.
To all of you, welcome back.
I have just a few questions with respect to transportation overall and the integration of transportation. As you know, the CTA review has just been completed and tabled by the minister. The report says a great deal about economy, the movement of different product, not only within Canada but also throughout the globe and, of course, the need to integrate and get more out of our existing system, whether it be rail, road, air.
How is rail integrating with other forms of transportation here in the country?
9:20 a.m.
Chief Compliance Officer, Canadian Transportation Agency
One of the things that's very clear, and this is really not a point of controversy, is that there is a real need to keep working on the connection points between the modes, particularly with regard to provision of infrastructure. Enhancements in the marine and rail connection points in particular would really disproportionally help the efficiency of the system.
Randy, do you have anything to add? You were very exposed to that process.
9:20 a.m.
Chief Strategy Officer, Canadian Transportation Agency
It's very much supply chain driven now; the world where you have discrete points. To be perfectly blunt, if I can move my grain from point A to point B on rail and it gets stuck at the port or it gets stuck at an elevator or a ship in waiting, I don't know how that's helpful. It's very much an integrated system. That's the way that customers and shippers view the world, as an integrated supply chain that gets goods from origin to destination.
9:20 a.m.
Liberal
Vance Badawey Liberal Niagara Centre, ON
We're having a conversation today about interswitching. With respect to the bigger picture, both with the economy and transportation, nationally and internationally, do you see an opportunity to further integrate transportation, to take the next steps from the CTA to deal with the many issues that we're dealing with such as interswitching, setting up those gateway areas, those points of contact, by integrating the system?
9:25 a.m.
Chief Strategy Officer, Canadian Transportation Agency
That will be a decision at the end of the day that the government takes. It's a policy decision. Our input will be from our observations that we get from operationalizing the regulations in the act.
The other opportunity we have to provide input into that type of process is through our annual report where our chair reflects on the act and puts forward areas for improvement. That's the best I can offer in terms of responses. It's specifically outside our mandate and jurisdiction. The extent to which we would opine would be through our relationship with Transport Canada.
9:25 a.m.
Liberal
Vance Badawey Liberal Niagara Centre, ON
You mentioned those points of contact earlier. How far are you going right now with respect to using all modes of transportation with the movement of your product?
9:25 a.m.
Chief Compliance Officer, Canadian Transportation Agency
Do you mind clarifying?
9:25 a.m.
Liberal
Vance Badawey Liberal Niagara Centre, ON
How much are you utilizing interconnectivity with shipping, with road, ship, water, air? How much are you actually doing, currently?
9:25 a.m.
Chief Compliance Officer, Canadian Transportation Agency
We certainly hear from the railways that intermodal connections are critical to them, and they leverage that quite significantly. Members will have seen railcars that move on truck beds and vice versa. The industry itself is seeking out those efficiencies to the degree possible. To your point about the role of enhancing efficiencies in the sector in terms of supporting economic growth as an overall agenda, there is no doubt that for Canada it's disproportionally important because distances to the markets from the source of production are huge. You simply can't ignore the efficiency of the transportation system if the objective is to get more goods to market more efficiently.
9:25 a.m.
Liberal
Vance Badawey Liberal Niagara Centre, ON
Do you find that having in place certain strategic and identified gateway areas throughout the country that offer incentives within those areas, and therefore more infrastructure investments into those areas, whether it be through different modes of transport, infrastructure vis-à-vis rail, road, shipping, to be an advantage as well?