Evidence of meeting #69 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 c-49.
A video is available from Parliament.
Lawyer, McMillan LLP, As an Individual
For a slightly more nuanced answer, think about it like this. I heard one comment that if they have access to trucking for 25% of their production, that party is no longer captive. Well, there is the other 75% that's still captive, and that's the thing we're looking for.
Let's just take a sawmill, for example, that's trying to ship its product to 3,000 destinations in the United States, and it's stuck in northwest British Columbia. There is one option, and that option is Canadian National Railway. Now, they could truck to Edmonton and connect to CP. Anybody who hasn't completely lost their minds will realize that this is a much more expensive option. We heard, the railways have said it, that trucking is more expensive once you get beyond a distance. The railways can't compete at the shorter distances, they say. I question their number, but let's just take it for what it is. You still have to get your stuff off the truck and then back onto a railcar. Well, that cross-docking is an expensive process.
Have I used up all the time?
Lawyer, McMillan LLP, As an Individual
I could do an example like this for virtually every shipment in Canada. Anybody who would want to use trucks to move coal would similarly have lost their mind. I did this calculation once, put 25 million tonnes on the road, and you're talking about one truck every two and a half minutes, 24 hours a day, 365 days a year. The roads couldn't tolerate it. No bridge could tolerate it. That's only one commodity. It is simply not real to say that somebody is not captive because they have some access to trucking.
Liberal
President, Canadian National Millers Association
Just a quick comment. Trucking is not an alternative to moving grains out of Prairie provinces into processing facilities anywhere else in Canada. It's impractical for reasons of costs, in addition to those of logistics.
NDP
Robert Aubin NDP Trois-Rivières, QC
Thank you, Madam Chair.
I thank the witnesses for joining us.
I would like to begin the conversation with Mr. Harrison.
In your opening remarks, you provided us with a new perspective. For a few days, we have been hearing many producers of grain and ore complain about railway companies. People are saying that those types of productions are growing, that they are trying to export more to international markets and grow the economy. This afternoon, you are bringing us the notion of just-in-time production, the concept involving smaller productions. You are saying that most mills are not equipped to receive many cars.
Does Bill C-49 provide any benefits for you? I will let you tell me, but I am under the impression that railway companies would perhaps have to offer you different treatment than the one large productions get. Am I mistaken?
President, Canadian National Millers Association
The just-in-time delivery aspect takes place at the milling and beyond stage. Before that stage there is some latitude in milling establishments, provided that the pipeline or the flow of grain is continuous and as anticipated. The milling industry can't deliver just-in-time if the milling industry is allowed to run out of grain.
Eastern Canadian grain—Ontario, Quebec, and Atlantic grain—is not generally substitutable for grain of western Canadian classes and quality. You can't make the same products. In addition to that, to operate a mill efficiently you need different grades and classes and protein levels of western Canadian wheat. In the case of oatmeal, you need specific varieties that have to be declared and delivered.
If you have your inventories drawn down to a level, like we experienced three years ago, where you can't do the blending that is required and you can't achieve the end-use performance required, you can't do just-in-time delivery of the end-use performance that a large further processor would wish.
Mills in Canada would have anywhere from four weeks to, perhaps, a few months of storage, but if your rail service is interrupted for weeks on end, which is what happened—and we would never want anyone to experience that again—that's where you would get into the disruption of just-in-time delivery. The people who are trying to do that just-in-time work and put those products with short shelf life out there in the marketplace don't have the luxury of going to other suppliers on that kind of turnaround time.
That's the way it has become. It requires an adequate supply of raw materials and, beyond the primary manufacturer, an adequate and continuous supply of those products.
I hope that answers your question.
NDP
Robert Aubin NDP Trois-Rivières, QC
Yes, it does. Thank you.
On a different note, you would really have to be psychic to know what recommendations will be unanimously supported in this committee over the next few weeks. There are many proposals on the table. Nearly everyone agrees that the legislation should be reviewed on a regular basis. Some have suggested that this be done every two years, and others, every four years.
I would like to rephrase the question. Once Bill C-49 has been passed, regardless of the amendments made to it, how much time do you think will be needed to measure its effectiveness? In other words, should the first review of the legislation be done after a year, two years, three years or four years? Then, we could establish the cycle.
September 13th, 2017 / 2:35 p.m.
Lawyer, McMillan LLP, As an Individual
My view is that we already have some precedents to help us address how quickly a review should occur. I'll give you the answer first. I think it should be two years, but I would live with four. Here's the reason.
The SLA mechanism was introduced through Bill C-52 in 2013. Last year we had precisely zero SLAs go before the agency. The year before that, we had two. The year before that, we had five.
That's the record: five, two, zero. Why is that? Maybe it's not working. Maybe there's a need to review that mechanism. Just as in the case of any other mechanism that we use, we should be constantly reviewing it in a continuous improvement kind of environment.
I know it's very difficult at the parliamentary level to do that, but this committee has been doing it forever. You guys actually have the expertise. You have lots of people whom you can resource to do a proper review of each of the remedies—how they're working, how the act is working in an integrated or unintegrated fashion. This can all be done. I think you could do it two years from now, but I wouldn't go any further than four years.
President, Canadian National Millers Association
I would add that growers have spoken today about the future, and the future for producers of all crops including wheat is that the crop genetics and agricultural practices will see a continuous line of growth in the commodities that need to be moved.
In contrast, we're not going to see such robust growth, because of population growth, in Canada—it's a little below that in the United States.
The point I want to make is that the circumstances of the marketplace can change rather quickly, and the performance of any aspect of supply chains could change rather quickly. I would agree, particularly after these amendments are made, that there's a need for review in a timely fashion. I find the example to be excellent. Things can change very quickly, but we certainly know that there will not be less demand to move agricultural commodities, because producers are going to be needing more and more capacity to get commodities to market, including our market.
I hope I didn't misstate.
Liberal
Sean Fraser Liberal Central Nova, NS
Thanks very much. I'll start with the lawyer at the table to talk about dispute resolution, mostly because it's one of my favourite subjects, being a dispute resolution lawyer myself before I got into this.
On the final offer arbitration piece, you hinted at the fact that there might be fewer disputes if we had an effective mechanism. One of my great frustrations sometimes, in my previous career, was getting a new file, because it meant that something had gone so wrong that somebody wanted to pay legal fees to sort it out rather than invest those dollars into growing their business.
Can you expand a little on how making participation in this process mandatory, essentially, would actually reduce the time for which shippers or producers are pulled into the dispute resolution process?
Lawyer, McMillan LLP, As an Individual
That's a very good question. If I had it my way, we would do it differently from the way I'm articulating. I'd be asking a lot of you.
Ideally what would happen is that shippers would have an opportunity to get a sense of the railway's costs before they went into the final offer arbitration process. That's what the ideal would be. Then they could assess: “Whoa. It really is costing the railway this much; I'm not getting ripped off.” Right now, they can't tell that. They're clueless about it.
Liberal
Sean Fraser Liberal Central Nova, NS
On that point, before we get too deep into it, is better data disclosure even within the realm of possibility right now?
Lawyer, McMillan LLP, As an Individual
If you made the data that's found in clause 76 available to you and you had in Canada a data disclosure system like the URCS that I described, then you could do it, but not with these amendments. It would take quite a bit more.
Liberal
Sean Fraser Liberal Central Nova, NS
Then we're getting into the realm of disclosing the railways' proprietary data to the industry publicly.
Lawyer, McMillan LLP, As an Individual
Nonsense. Let me just get on that one, because I hear that a lot too.
They do this in the States. The URCS requires this data disclosure right now. CN and CP have to disclose that data in the United States; there's no reason that it can't be disclosed in Canada.
Further, this bill does a lot of aggregation, even on the performance data, that does not occur in the States. CN and CP have to report individually what they are doing in the United States. They have big operations in the States.
This is just such a red herring.
Liberal
Sean Fraser Liberal Central Nova, NS
Before we get into the initial portion, I like the path we're going down.
In terms of the data disclosure, is the gold standard here to just say let's harmonize with the U.S. and that's a perfect outcome or...?
Lawyer, McMillan LLP, As an Individual
No, that isn't the case. I know that it's a very tempting thing to say, but I can tell you that U.S. shippers are frustrated by what they have. What they have is more than what we have on this front, but what we should do because of our modern data ability—data gathering and data transferring abilities—is to make this stuff transparent. Why should it be transparent? If it was a normally functioning market, you wouldn't need that transparency. The market would take care of everything by itself. Because they're monopolies—that's why we talk about data disclosure. This hiding behind the veil of confidentiality is just a red herring. It does not occur in the United States. There is some data that is kept confidential until you get inside a process. So now, just to bring it back to where you started, if you can get into the final offer arbitration process, nothing works more like a charm, from a railway's perspective, than saying, “uh-uh, no, I'm not going to tell you my cost.”
Good luck, shipper, trying to find out whether your rate is high or low.
Good luck, arbitrator, trying to find out whether the offer of the carrier is reasonable in relation to anything, because their shipper doesn't have anybody else's rates. They're confidential. The rates are confidential, so you can't do a comparative thing. All you have is the cost to compare your rate against.
Liberal
Sean Fraser Liberal Central Nova, NS
You made another comment about the requirement you would strike that says that the decision should be made in a balanced way. Is your problem there that it's superfluous and could be interpreted in an unpredictable way or is your fear that where there might be a correct outcome, the balance that might be struck might not be the correct legal outcome? What's the fear here?
