Evidence of meeting #68 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 video is available from Parliament.
3:40 p.m.
Liberal
The Chair Liberal Judy Sgro
Thank you very much.
Now we go to Mr. Ballantyne from the Freight Management Association of Canada.
3:40 p.m.
Robert Ballantyne President, Freight Management Association of Canada
Thank you for the opportunity to appear.
FMA has been representing the freight transportation concerns of Canadian industry, including rail, truck, marine, and air cargo, to various levels of government and international agencies since 1916. We're now in our 101st year, and, despite appearances, I was not at the first meeting.
In our remarks today, we will focus primarily on Bill C-49's amendments to the rail shipper sections of the Canada Transportation Act, but we will make brief comments on the proposed amendments to the Railway Safety Act and the Coasting Trade Act.
There are approximately 50 railways in Canada, but the rail freight industry is dominated by the two class 1 carriers, and these two companies account for approximately 90% of Canadian rail freight revenues. The fundamental problem is that there is not effective competition within the railways, and the barriers to new entrants are so high that this situation will not be rectified through market forces.
The best that can be done, therefore, is to provide a legal and regulatory regime that is a surrogate for real competition and that rebalances the bargaining power between the buyers and sellers in the freight market.
While there is limited competition between CN and CP in a few markets, primarily intermodal, for many shippers the rail market can best be characterized as being a dual monopoly rather than even a duopoly; that is, each of CN and CP is the only railway available to shippers at many locations. It should be noted that this is not just a western Canadian problem. I'd like to stress that. This is not just a western Canadian problem, but it exists in the east as well, including in the Quebec-Windsor corridor. Rail freight is not a normally functioning competitive market, and this fact has been acknowledged in railway law in Canada for over 100 years.
The minister, in introducing Bill C-49, stated the objectives of the bill, as follows:
The Government of Canada...introduced legislation to provide a better experience for travellers and a transparent, fair, efficient and safer freight rail system to facilitate trade and economic growth.
Bill C-49 contains a number of provisions that will go some distance to meeting that objective. In its review of the bill, FMA has analyzed the changes that are proposed in Bill C-49 and how well they will play out in practice when shippers attempt to use them. Our recommendations address the places in the bill where our experience indicates that the provisions, as drafted, will not meet the government's stated objectives.
My colleague, Mr. Hume, will refer to the 10 recommendations that we're making on the rail shipper provisions and comment on the policy basis for Bill C-49.
I should mention that Mr. Hume has worked in the law departments of both CN and CP in his career, and for the past 23 years has built a successful practice representing rail shippers before not only the Canadian Transportation Agency, using all the provisions of the act that are in place now, but in the courts, up to and including the Supreme Court of Canada. He has important insights that are somewhat unique, in that he is one of the few people who has been using these provisions over his career.
At the conclusion of Mr. Hume's remarks, unless we run out of time, Madam Chair, I'll comment very briefly on the proposed changes to the Railway Safety Act and to the Coasting Trade Act.
Forrest.
3:45 p.m.
Forrest Hume Legal Advisor, and Partner, DLA Piper (Canada) LLP, Freight Management Association of Canada
Thank you, Bob.
The recommendations we're making on the rail shipper provisions are summarized in our submissions beginning on page 25. As Mr. Ballantyne has indicated, the recommendations that FMA is making have been designed to give effect to what we believe to be the goals of the transportation modernization act.
Our recommendations deal with the proposed changes to the level of service provisions; the proposed creation of a long-haul interswitching remedy; the need for enhancing the powers of the agency over interswitching; providing the agency with adequate funding and the ability to act on its own motion, and on an ex parte basis where necessary, authorizing the agency to share reasonable railway-provided costs and rate information with shippers, and I stress “with shippers”; clarifying the proposed change requiring the filing of a list of interchanges; and suggesting changes to the service level agreement arbitration and summary process FOA amendments.
Following the filing of our submission with this committee, we received a copy of a Transport Canada document entitled “FAQs—Trade Corridors to Global Markets”, which provides insight as to the issues in Bill C-49 that the bill seeks to address. Unfortunately, the document contains a number of misconceptions that need to be addressed.
For instance, on page 11, the FAQ document claims that various factors help ensure that the LHI rate will be competitive. However, the bill has a provision that ensures that it will not be competitive. For instance, proposed subsection 135(2) requires that the agency not determine the LHI rate to be less than the average of the revenue per tonne kilometre for the movement by the local carrier of comparable traffic. What that means is that an LHI rate will necessarily be uncompetitive with other comparable traffic revenues that are below the average.
The document states in a number of places that the LHI provisions give the agency discretion in defining what traffic is comparable. However, when the agency does that, it is restricted in setting a competitive rate by the operation of subsection 135(2).
Our recommendation to fix the problem is twofold. First, specify in subsection 135(2) that the agency shall not determine an LHI rate that is more than—not less than—the average of the revenue per tonne kilometre for the movement by the local carrier of comparable traffic.
Second, amend the section to require the agency to determine the LHI rate from among rates where shippers have access to two or more railways at origin. If there are no competitive rates, i.e. rates where a shipper has access to two or more railways at origin, the agency should be required to set the LHI rate on a cost-plus basis. Thus, LHI rates would be determined from competitive rates, not from a menu of captive rates. I'll be talking a little more about “cost plus” later, because I understand that to be an issue before you that's somewhat controversial.
On page 11, the FAQ document refers to the many LHI exclusions in the bill, and attempts to justify them by citing possible congestion issues and the difficulty in allocating liability for certain hazardous materials. With great respect, Madam Chair, and members of the committee, these concerns have no merit whatsoever.
Why should the LHI remedy, a competitive remedy, be unavailable to large groups of shippers? Why should the remedy discriminate against shippers because of location or the type of commodity shipped? How does all of that comport with our national transportation policy?
In summing up on the exclusions, the FAQ document at page 12 refers the excluded shippers to other remedies since access to LHI is being withheld from them. This provides little comfort and doesn't say much about the efficacy of the remedy. Our recommendation is to eliminate the exclusions for LHI.
At page 7, the FAQ document states that extended interswitching demonstrated that railways can and will compete for traffic from each other's networks, providing shippers with leverage in negotiations. Similarly, it is expected that LHI will stimulate this kind of competition.
However, the comparison between extended interswitching and LHI is not an apt comparison. Extended interswitching rates—
3:50 p.m.
Liberal
The Chair Liberal Judy Sgro
I'm sorry to interrupt, but the committee has a lot of questions, and each member is restricted to just 10 minutes. I'm sure that the valuable information you have there will get passed on through the questions that will be asked by many of the members. We have to go on to our questioners, starting with Ms. Block.
3:55 p.m.
Conservative
Kelly Block Conservative Carlton Trail—Eagle Creek, SK
Thank you very much, Madam Chair.
I want to thank all of our witnesses for being here today. It's been a long day, and it's only going to get longer, but I certainly do appreciate everything we've heard today.
I want to start with some questions for you, Mr. Johnston, and for you, Ms. Young, in regard to your presentation. I did look at the document that you circulated. In your conclusion you state that getting the design right on Bill C-49 will help Canada shift away from a status quo that has resulted in continued rail service failures, has damaged Canada's global reputation as a trading nation, has led to the proliferation of quick-fix policy solutions that have not been based on evidence, and has picked winners and losers across industries over the years.
I'm not sure if you suggested that Bill C-49 was the result of a bold vision. I want to give you an opportunity to perhaps speak to some of the areas in Bill C-49 where you see there being that bold vision. Also, I want you to comment on the creation of the corridors in Bill C-49. I'm not sure if that was what you were referring to when you talked about the five areas that weren't going to be able to access long-haul interswitching or that weren't going to be able to use these remedies. I'm wondering if you could speak to that as well.
3:55 p.m.
General Manager, Logistics and Planning, Teck Resources Limited
I was taking notes as you were asking your question, because you touched on a great many points. If I overlook any of them, please remind me.
3:55 p.m.
General Manager, Logistics and Planning, Teck Resources Limited
First, I'll talk about the exclusion, because you referenced that. Teck is the second-largest exporter of steelmaking coal in the world. Our main competitor is in Australia. We service customers all over the world, including in China, Asia, North and South America, and Europe. It's basically just a fact that the geographic exclusions for long-haul interswitching will bar our five southeast B.C. steelmaking coal mines from utilizing that remedy. Under the current draft, it just won't be an option for us.
In fact, it is our view that will serve to further cement our captivity to the rail carrier, which in this case happens to be CP, for those mines. They export approximately 28 million tonnes a year. I referenced that we're the largest user of rail in the country as a company, not as a commodity but as a company.
So yes, long-haul interswitching under the current drafted legislation will not be a remedy for us. We will continue to rely on things like final-offer arbitration.
Does that answer that part of the question?
3:55 p.m.
Conservative
3:55 p.m.
General Manager, Logistics and Planning, Teck Resources Limited
I guess it would be our view that currently policy-makers or users are trying to carry out their different activities in an evidence vacuum. That's basically due to the fact that a coherent or rational system for measuring the movement of goods in Canada—like the waybill system—just simply does not exist.
Moving towards a data regime is part of that whole vision, and we welcome that step and think that we're moving in the right direction, but as it is currently drafted, it's not quite there yet. As for some simple changes to the legislation, ensuring that all data is accounted for is a very easy thing to do. Being a bit of a data-wonk myself, I'll say that we want to look at data. We want to look at raw data, not aggregated data.
On clause 76, the data piece on long-haul interswitching, our concern is that if we mimic the U.S. system, not all data is reported by the railways. It's all collected by the railways, but it's not reported by the railways. This we understand from our subject matter experts who also practise in the United States. That would be a concern. There's no point in collecting data and not getting all the data. That would quite likely lead to imperfect assessments or conclusions, whether that has to do with service failures or infrastructure investment.
On clause 77 on performance indicators, if we're going to measure the performance of the rail system with data, once again we have to look at all the data. I talked about the waybill system. It's not addressed in clause 77, but the waybill system is in essence a record. It's a record of movement of a good from a particular origin to a particular destination. It's a very easy way to document the movement of goods in our system. The two class 1 railways are doing it in the United States. They can do it in Canada.
I'm sorry. It was a lengthy question and—
4 p.m.
Liberal
4 p.m.
General Manager, Logistics and Planning, Teck Resources Limited
Yes. Thank you.
4 p.m.
General Manager, Logistics and Planning, Teck Resources Limited
Thank you, Madam Chair.
Hopefully, that answers it.
4 p.m.
Liberal
David Graham Liberal Laurentides—Labelle, QC
Thank you, Madam Chair.
Mr. Audet, thank you for taking the time to meet with us.
Since you have more experience than others in rail safety issues in your region, could you tell us about the plan to establish a training centre specialized in rail safety. We don't often hear about something like that.
4 p.m.
President, Institut en Culture Sécurité Industrielle Mégantic
There is no training in rail safety or the culture of safety.
The national railway companies, the CN and CP, provide training on safety, specifically to operators, but that training is not recognized from company to company. In other words, a CN employee who is going to work at CP has to redo the training.
Shortlines provide no training. CN or CP retirees are often the ones providing the training.
There is no common training whatsoever, whether in terms of operations or the culture of safety. We have been talking about the culture of rail safety since the 2013 accident, but that did not use to be the case in the industry in general. That said, I think that's a very important point.
The bill talks about voice and video recorders only. It is a useful type of technology, but the fact remains that it is used after a tragedy happens. But what is being done to ensure tragedies no longer happen? We want to make sure that no one ever has to go through a disaster like the one we experienced in Lac-Mégantic.
We want to work with Transport Canada and the Canadian government to improve this aspect of training, which is very important.
The second aspect that we are addressing is the training of first responders. In eastern Canada, they receive no training on rail safety. Not all the cities can afford to send their first responders to the training courses in Vancouver or Pueblo, in the United States. So a centre for francophones, a bilingual centre, needs to be established in eastern Canada. In my view, that's very important. The bill is silent on training like that. It only talks about voice and video recorders.
4 p.m.
Liberal
David Graham Liberal Laurentides—Labelle, QC
Does Lac-Mégantic itself have a new way of training regional firefighters and first responders?
4 p.m.
President, Institut en Culture Sécurité Industrielle Mégantic
We have organized training with the folks from TRANSCAER, who came to Lac-Mégantic to provide training to the people in the region. In fact, people from New Brunswick, Nova Scotia, Montreal and Quebec City also came for the training on rail issues. The event was on a weekend with an eight-hour training session one day, but that was just an overview. More in-depth training is needed.
As I said in my presentation, in Canada, 1,200 cities have a railway, but there is no training on rail issues. So there is great urgency to have something for that. However, since Lac-Mégantic, nothing suggests that the Canadian government wants to head in that direction.
4:05 p.m.
Liberal
David Graham Liberal Laurentides—Labelle, QC
Thank you for coming to tell us about that.
I want to go now to Teck and Mr. Johnston.
I was interested in your comments about universal running rights. I think it's an interesting concept. It would separate the infrastructure from the operations on railways. How would you see it working? By having the infrastructure in private hands, would there be a risk, to smaller lines, that nobody would be interested in operating a line they don't own?
I'm curious to hear your thoughts on that. You had suggested that allowing running rights on a much more widespread basis would increase competition. I like the theory, but I'm trying to see how it would work in practice.
4:05 p.m.
General Manager, Logistics and Planning, Teck Resources Limited
I guess the best example would be our competition in Australia, where they have what's called an above-rail and below-rail freight regime. Having more than one carrier operate on rail lines is something that's done throughout the world.
Just a month ago I was in Poland visiting our customers in eastern Europe. Certainly in Poland they have such a regime. I believe they have as many as five carriers on the rail network there. How it would work, I would say, would be pretty similar to air traffic, with one centralized rail traffic control and many carriers.
4:05 p.m.
Liberal
David Graham Liberal Laurentides—Labelle, QC
You're taking the infrastructure away from the private companies to make a national system. To accomplish what you're saying, you're not talking about running rights on a CN track; you're talking about changing the whole nature of the infrastructure, which is a fairly significant paradigm shift.
4:05 p.m.
General Manager, Logistics and Planning, Teck Resources Limited
I don't see it that way. To us it answers a question we've faced in the past: what happens when the rail carrier either can't or won't move your traffic? For us, moving 25 million tonnes a year, this is a significant problem. What do you do? Is it a significant step? Of course. For a new entrant, there would be very high barriers on things like operational capability, safety, and insurance. Nevertheless, it's something that's done quite efficiently and safely in different jurisdictions, including Australia. If a company such as Teck simply can't get its goods moved to market, then this could be a potential remedy.
4:05 p.m.
NDP
Robert Aubin NDP Trois-Rivières, QC
Thank you, Madam Chair.
I would first like to turn to Mr. Ballantyne.
In your opening remarks, you drew my attention to a topic that you did not have time to address, namely coasting. I'm ready to give you two of my six minutes to summarize your position. I will then probably have one or two questions for you about it.