Evidence of meeting #24 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 railways.
A recording is available from Parliament.
Vice President, Economic and Northern Affairs, Mining Association of Canada
Go ahead. I've taken up some time.
Executive Director, Barley Council of Canada
As far as the grain industry is concerned, as mentioned in a lot of the comments here today, the hallmark of any modern commercial relationship is that parties are held accountable to each other for their respective performance. If the railways are saying they'll give you the service, but they need more money....
Twenty years ago, the issue was to close some of the elevators, get the efficiencies in the system, and get 100-car spots. The grain industry, whether it's the shippers or the producers, walked the talk and did that. Now it's like a bait and switch; they're saying they'll give the service, but at a higher price.
We wouldn't have this issue if.... The mining and the chemical and the grain industry, and what have you. They don't have an MRE, but they can get a car, supposedly, if they want a car. The issue is service. All of a sudden they're saying, “We'll get you the service, but it's going to cost you a lot more.” That's what the railway is saying.
We're constraining our P and Ls right now to match what we think we need to get for shareholders. We have a huge system to move everything for all of us, east and west, to the ports. As far as a balancing act is concerned, and interswitching with the U.S., we wouldn't have these discussions on interswitching or what have you if the service were there, if the power were there, if the cars were there. We wouldn't have to go through this time and time again.
Vice President, Economic and Northern Affairs, Mining Association of Canada
The only thing I would add is that what we mean by the words that we say is important. A huge part of service is capacity, meaning how many crews, how many locomotives, how many places are needed for that service to be most optimally balanced to meet network needs.
That's the biggest question mark right now. We just don't know what the railways' actual capacity is. When we ask them questions about this, they tend to say they're making record investments back into the network, that $1.5 billion, 20% of their revenue, is going back in. It seems like a lot, but in reality we don't know whether that's sufficient. We have no idea whether it needs to be $2 billion or whether it's more than enough.
Liberal
Ken Hardie Liberal Fleetwood—Port Kells, BC
Okay. I take that point.
Do I have any time left, Madam Chair?
Liberal
Sean Fraser Liberal Central Nova, NS
Thank you very much. I very much appreciate it. I'll get to the questions, just to be efficient.
Competition is at the heart of what we're talking about. It seems to me there's insufficient competition in the rail industry right now. Aside from interswitching, is there another tool that's available or could be made available to enhance competition in the rail industry in Canada?
Vice-President, Business and Economics, Chemistry Industry Association of Canada
One has already been raised, which is that transparency in information is very important. Another one is deliberately having your system mesh well with what happens south of the border. We move virtually 80% of production into the U.S, so a seamless move because of similar standards is very important.
One thing I want to say is that we would like to see expansion and growth in investment. We are told by the investors that it is going to be constrained because we don't know if we can count on moving the finished incremental product, so knowing what the service level is today and whether there's any space for incrementality....
When you talk about buying cars and getting more cars, we've gone from paying $6,000 a car to $26,000 a car in the last decade, and that has not resulted in getting a whole bunch more cars. Shareholder value during the great recession stayed up at the two major railways. If you look at their performance, you can ask yourself whether we are setting regulations and legislation to deal with market power, which is very real. This is a private sector monopoly.
Liberal
Sean Fraser Liberal Central Nova, NS
On the point of greater transparency as a segue into a conversation about data, I think, Mr. Northey, you were the one who flagged the fact that you can't just look at how many times interswitching has been used, because the shippers at the negotiating table are using anecdotal experiences to say what the benefit from interswitching is. Is there a way that we can get the kind of data Mr. Marshall was talking about when we're dealing with this sort of anecdotal negotiating table experience that shippers are having?
Director, Industry Relations, Pulse Canada
Do you mean for shippers who are going to the railway and requesting interswitching and using that a negotiating power?
Director, Industry Relations, Pulse Canada
At the moment, in the grain industry the data is collected from a certain group of shippers in terms of how many people have actually used interswitching, how many cars they've moved, and to some extent the money savings they've achieved from just the behaviour change of the railways willing to supply them the business and not do the interswitch. Generally that kind of information is going to be with the shipper. It's not necessarily publicly available information unless an industry like ours is willing to start to correlate that kind of information.
Vice President, Economic and Northern Affairs, Mining Association of Canada
I just want to say two things very briefly. I think the initiative that the grain industry has put together to assemble and produce performance metrics is commendable. The piece that I would underscore is missing, just for the committee's benefit, is capacity data. It's an equation, right? Performance metrics are the numerator; capacity data is the denominator. You need to measure one against the other to get a clear picture of what's happening, and right now we only have limited examples of what that numerator is. We have no idea what the denominator is, so how do you measure the sufficiency of that equation?
Liberal
Sean Fraser Liberal Central Nova, NS
On the issue of harmonizing our standards in the rail industry, what could be done in the short term to bring it in line with the U.S. that would help make sure that we're competing in getting our products to global markets?
Vice President, Economic and Northern Affairs, Mining Association of Canada
I think some of the other commodity groups ship perhaps a little bit more extensively in the U.S. than we do, so maybe they'd be a better fit to answer that question.
Manager, Business and Stakeholder Engagement, Chemistry Industry Association of Canada
We work very closely with our sister association down south, the American Chemistry Council, and with the STB, the transportation board in the States, to ensure that if we're not on the same page yet, at least we're all in the same book.
When we're talking about the thickness of tank car standards, or which screws go where, and what the shell might look like, if they're not harmonized, it means the tank car will get to the border and then just be turned away, so what we're looking at doing, and what we thoroughly recommend, is keeping pace with the U.S., quite frankly. I know it's not a very exciting recommendation, but ultimately it's how things are most going to move quickly from producers through to shippers through to customers at the end of the market.
Executive Director, Barley Council of Canada
The only comment is with respect to value added in the grains industry. I know I can't speak for the Canadian Oilseed Processors, which are the manufacturer for canola oil, but they have highlighted it in a number of speeches before, and certainly the malting industry as well in terms of value-added malt. For all sales that go to the United States, virtually all of the cars in the Canadian oilseed crushing industry are leased cars. They own those cars for a period of time, obviously. It's the same thing in the malting industry. The issue then isn't the supply of cars; it's going to be the supply, the performance, and the service of getting a locomotive in front of it to get it to their customer. The turnaround times are 27 to 30 days, but they own the cars. The supply of cars is not an issue; it's the supply of the service and the locomotive.
Liberal
Sean Fraser Liberal Central Nova, NS
And you all want to arbitrate non-performance when it comes to that service level.
Executive Director, Barley Council of Canada
That's going to settle 95% of the issues here around the table, and for the last 25 years.
September 29th, 2016 / 9:50 a.m.
Conservative
Dianne Lynn Watts Conservative South Surrey—White Rock, BC
Thank you very much, and thank you for a great deal of information in your comments and answers to questions.
I want to drill down a little bit because, as you know, over the past number of sessions a number of witnesses have come forward, and their recommendations cover a broad spectrum.
I want to go back to the rail line. It struck me as very interesting, because I heard you say that the interswitching zone should be expanded. The rail lines have said that putting the 160-kilometre capacity in was totally unnecessary, that it should be removed permanently, that it should only be 30 kilometres, and that basically we didn't know what we were doing when we put that in. That's one piece.
The second piece, when I asked about competition, was with BNSF. They were saying that our requirements are not parallel to the U.S. requirements, so if we did away with the legislation, that basically would take BNSF out of the game.
I have one more thing to say, then I'd like your comments on it.
The last piece is that 785 additional railcars are basically simply sitting there, by leaving the 160-kilometre interswitching limit in place.
Can you guys comment on any of that?
