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—