Transport Committee on Sept. 20th, 2016

[The Vice-Chair, Conservative, Luc Berthold]

Thank you.

Mr. Aubin, you have the floor for six minutes.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for being here today and sharing their expertise with us.

I would also like to return to 160 km of interswitching distance. My question is for the three witnesses and I would like as specific an answer as you can provide.

Can you estimate by how much this provision reduces the price of rail services?

[Jean-Marc Ruest]

Canada's main grain exporters have begun keeping track of the number of times this provision has been used. This information is gathered by a grain monitor who reviews and analyzes the rail transport data.

According to the report we received—and which Ms. Cook referred to earlier—, 4,800 cars were interswitched as a result of this provision. Grain exporters and grain carriers report that this saved approximately $5.2 million. Very broadly speaking, that is not a huge amount relative to the total cost of transportation, but it shows that this provision, which is still very new, is being used and is effective in achieving savings.

[Robert Aubin, NDP, Trois-Rivières, QC]

From what I understand, it is in large part used as leverage in bargaining. Moreover, interswitching allows you to achieve what you could not necessarily have achieved through a service level agreement with rail companies in the past.

Is that correct?

[Jean-Marc Ruest]

Yes, absolutely. As we said, this tool gives us bargaining power that we did not have before. It is not as good, however as a clear, specific, and long-term agreement. From one request to another, it is really transactional in nature, but it is very important all the same.

[Robert Aubin, NDP, Trois-Rivières, QC]

In your presentations, you all mentioned the quality of this year's harvest.

[Humphrey Banack]

I'm not getting any translation here.

[The Vice-Chair, Conservative, Luc Berthold]

I will send someone to help you with that right away.

[Robert Aubin, NDP, Trois-Rivières, QC]

In your presentations, you all mentioned the quality of this year's harvest. You also said there would not likely be a problem.

Is it a cyclical thing that there is no problem in 2016? We know that crops that seemed outstanding to you in 2013 will become the norm, and that is a good thing. However, is grain transport a sure thing because other natural resources sectors will be using less rail service in 2016? If that is the case, we have not solved the problem. When both sectors of the economy are in full swing, we will have the same problem again.

[Jean-Marc Ruest]

Exactly.

First of all, in the agriculture sector, I think we have always been eternal optimists, and we are at the beginning of the season.

Moreover, as you said, demand from other sectors is lower than in 2013 owing to the current economic climate. I think our sector has learned from what happened in 2013. I hope the rail companies have made the necessary investments to better meet the demand this year. Grain companies have also improved their systems.

[Humphrey Banack]

Where I live in central Alberta, it's very much an oil-dependent part of the province and the country. We've seen huge infrastructure developments by the oil and gas industry to ship by rail—100 or 120 car loading spots to ship oil. Those are not built inexpensively without a lot of planning for future use, so I expect to see that as our economy turns around—and it will turn around—we will see an increase from the other sectors, and we will get a higher demand for the infrastructure from the railways. We're hoping that it can be balanced, because as we saw in 2013, there was a lot of infrastructure that we believe moved to other commodities in the time that we needed it. I think there's enough infrastructure there to move everything, but we have to make sure that no commodities are left behind.

Our grain industry is captive. We have 30 or 40 million tonnes a year to move by rail. Sometimes the railway just takes time to move it on their timelines rather than when we need it to be moved.

[The Vice-Chair, Conservative, Luc Berthold]

Mr. Aubin, you have 30 seconds left.

[Robert Aubin, NDP, Trois-Rivières, QC]

I would like to ask Ms. Cook to talk about service

“just in time” .

That is something an MP from eastern Canada has not really thought about.

What percentage of our main Canadian clients would you say are repeat users of rail services

just in time

Is it 10% or 20% of clients?

[Fiona Cook]

I would have to check the automotive sector...

just in time.

I can't give you an exact figure today, but I can send you the data later on.

[The Vice-Chair, Conservative, Luc Berthold]

Thank you very much, Ms. Cook.

I will turn it over to Mr. Fraser now.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you very much.

I'll start on the issue of demand in the export market.

I know that you're dealing with the largest export market that we have in our country, but where are the areas of growing demand that you referred to during your remarks? Where is the biggest demand internationally for Canadian grain products?

[Jean-Marc Ruest]

We're definitely seeing growth in the Asian markets, the developing worlds, as their economies improve. One of the first things that improves is the quality of their food, and Canada supplies very high-quality food products that are in much demand around the world. The areas of growth are primarily in those Asian markets.

[Sean Fraser, Liberal, Central Nova, NS]

Are we adequately served on the Pacific side with marine transport infrastructure to connect the rail transport to our ports to get the products to the Asian markets?

[Jean-Marc Ruest]

If you look at the parts of the network that grain shippers operate, the grain terminals, specifically in the ports of Vancouver and Prince Rupert, there is surplus capacity available. We are still able to meet even crops of this size, and increased crops going forward.

There are issues with respect to infrastructure in Vancouver, and rail infrastructure servicing primarily the north shore terminals, that would need to be addressed going forward. There's talk of a third terminal being built on the north shore of Vancouver, and there are serious questions about whether the infrastructure is adequate to accommodate a third terminal. Those are areas that need to be addressed or considered.

[Sean Fraser, Liberal, Central Nova, NS]

If we have another year like we did in 2013—and by all accounts it seems like on the crop side it will be—and if we have a bad winter, then maybe we'll be in the same situation. Will we be left with product that's stored indefinitely, or will it eventually get to market?

[Jean-Marc Ruest]

It will eventually get to market, and that's historically been the lesson that we've learned. The difficulty with it eventually getting to market is that we are not taking advantage of the peak pricing periods. In any commercial relationship, a willing buyer and a willing seller are critical parts of it, but equally critical is providing a product at the time when the buyer wants it. If that is our level of satisfaction, that eventually it will move, then that's not good enough. We have to be able to meet the demands of quality, quantity, price, and time of the buyers.

[Sean Fraser, Liberal, Central Nova, NS]

Absolutely. Just quickly, I'm going to be splitting my time.

It seems like the greatest benefit is not that people are using interswitching as much, but they're using it at the negotiating table. Is that the primary benefit for suppliers?

[Fiona Cook]

From what I've heard I would say, yes. Hopefully, that will build a better commercial relationship in the longer run, as well.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you very much.

I want to share my time with Mr. Sikand.

[Gagan Sikand, Liberal, Mississauga—Streetsville, ON]

Thank you.

Mr. Ruest, you said earlier that most interswitching happens outside the 30-kilometre limit. We heard from the previous panel, the CTA, that people using the provision are closer to the 30-kilometre limit than 160, so which would be true?