Good afternoon, Madam Chair and committee. Thank you for inviting me to speak today, and for giving the western Canadian association our opportunity to input into the transportation modernization act.
First, I'm thinking after listening this morning that this might be my last trip to Ottawa. According to CN, we're dead in the water—all our members. We don't operate over 500 miles of track. Some are as little as 23 miles, to as high as about 247 miles.
Let me start by saying we've just done a bit of an update on the western Canada association. On a positive note, we've been encouraged by Transport Canada's willingness and interest in working with us in short lines. Our relationship over the past couple of years has grown very strong, and we appreciate being consulted with and included in discussions surrounding direction of both policy and regulatory changes. This co-operation with Transport Canada is making us safer and better-informed short-line partners.
We've also been encouraged by some inroads with, believe it or not, CN. There's a renewed sense of co-operation on such efforts as our safety training program in Saskatchewan. There are some joint efforts where CN has allowed short-line partners to do intercompany switching, or switching at terminals where maybe they weren't very good and the short-line partners got in and supplied some excellent service. There were discussions this morning about where there is a win-win. I think that is one of them. They've also allowed one of our short-line partners to operate on their track into one of their mainline terminals and set off cars and take out their own cars. Again, that's a very efficient operation and cost-effective way of doing business, and a win-win for both.
The Western Canadian Short Line Railway Association, previously the Saskatchewan Short Line Railway Association, is a not-for-profit, membership-based organization that represents the interests of 14 short lines in western Canada. This morning I think CN talked a bit about its having 70% of its customers locked up in service agreements. The WGEA mentioned that it has about 90% of its farmers involved in its organization. I'd venture to guess that the other 10% to 30% are customers of ours, and we're here today to talk on their behalf.
While present in all western provinces, Saskatchewan has the most extensive network of short-line railways. Saskatchewan short lines own and operate 24% of Saskatchewan's 8,722 kilometres of track. We employ about 183 residents. When I say “residents”, these are folks who have grown up and live in the area where we work.
It should also be noted that we serve 72 small and medium-sized businesses and transport approximately 500 million dollars' worth of commodities each year. Every one of our head offices is within one mile of our own track. Also, I think it should be important to know that all of these small and medium-sized businesses that we support are also some of the bigger businesses that CN supports today. Not everybody starts as a corporate company. Some people have to start as single-point shippers and build their business from there. I think short lines are a great place to do that, because we're able to help them get that leg off the ground without a huge expense at the start.
Our members, our railways, and our customers depend on competitive rates and rail transportation options. We believe that the future of transportation should improve competitive choice for farmers, shippers, and small business. It is our fear in the proposed legislation that it will further deter competition. The newly introduced long-haul interswitching rate mechanism is designed in such a way as to be inaccessible to our shipper customers. Using commercial short-haul rates, which are currently higher than that of trucks, makes competing virtually impossible for us.
The legislation is prescriptive, and small shippers are not capable of spending years in litigation with class 1s, meaning that they will not bother to apply some of the mechanisms available to them, as was discussed this morning. It's inconceivable for a producer to take on a class 1. They're not only scared, but financially it does not make sense.
Paired with the sunsetting of the 160-kilometre interswitching mechanism and the rapid disappearance of the producer car, this risks putting shippers and short lines in a worse position should the legislation be passed as it is. We believed that the intent of this legislation was not to put small business or short lines out of business, but that appears to be the direction we're going.
I will begin with a quick discussion on the current rate structure for short haul and single car movements to provide some context to what I have been saying. Short-line railways have a variety of customers. Many shippers are single car shippers or, what we refer to as, producer car shippers. We would like to assist all of our customers with their transportation needs and movements. This is not feasible because of excessively high short-haul and single car rates imposed by the class 1s. These goods are often forced or shipped by truck and add significantly to greenhouse gas emissions, destroying our provincial highways and roads, and decentralizing small business economic growth.
Shipping by truck, for distances less than 500 kilometres, is typically more affordable than shipping by rail. The only point to add to that is the fact that, on a short line, we are cheaper than a truck. We can compete with the truck. The problem is that when they give that car over to our class 1 partners, they are unable to compete at that rate, as you heard from them this morning.
To give you an example, we have a line we run from Leader to Swift Current. We go 120 kilometres. We can run in there for about $650, which would be about half of what a truck would be, but if he wanted to move that car to Moose Jaw, which is another 122 kilometres away, we've been quoted rates from CP of about $2,600. All of a sudden, we can't compete anymore. What does the producer do? He puts his grain in his truck, turns on Fox News, and heads off to a distant large terminal or shipper.
As was mentioned this morning, the WGEA members supply competition, but some of that competition is increasing the number of trucks we're putting on the highway. That creates another problem and there will be another committee to decide what to do with our highway infrastructure in the future. Please keep in mind that it is important we understand that we are dealing with the current situation, but what will the future be?
We do need the capacity to move grain. There were discussions the other day about truck driver shortages. Rail is still going to be an option to do that and rail to mainline terminal points doesn't necessarily have to be to the export position. It could be to an inland terminal, which in turn, cleans that grain up and readies it for shipments in those larger trains, which CN and CP do a very good job of hauling.
The other challenge for us is that there is getting to be quite a spread between single and multiple car rates. Right now, even between single and 25-car rates going to the U.S., we see a difference of about $1,000 a car. If a shipper wants to ship 15 cars, he is probably looking at a $15,000 added expense and there is just no way he can justify doing that. Again, he is putting that grain in a truck and not always sending it to the most local inland terminal. He is sending it to where, in his mind, he is getting a better deal and that's a whole other discussion.
The other thing that we want to talk about is interswitching, of course. It is a major part of the legislation. The loss of the 160-kilometre interswitching option is very disappointing to our members. While not available to shippers on our entire network or short lines, it did provide a strengthened bargaining position in most locations. The return to a 30-kilometre switching zone will only make that available to the two of our 14 members that can make it cost effective, while the rest will be outside of that.
This affects our ability to attract new customers. Without access to multiple rail lines, businesses recognize that they will be captive to the class 1 that connects to our short lines. This decreases our ability to build new business on our lines.
Unfortunately, the proposed long-haul interswitching is not a good alternative to the 160-kilometre interswitching that has sunset. It is our understanding that the intent of the long-haul interswitching was to increase competition by providing expanded transportation options to shippers. We do not feel that proposed long-haul interswitching will achieve that goal.