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.

On the agenda

MPs speaking

Also speaking

Cam Dahl  President, Cereals Canada
Bob Masterson  President and Chief Executive Officer, Chemistry Industry Association of Canada
Jeff Nielsen  President, Grain Growers of Canada
Kara Edwards  Director, Transportation, Chemistry Industry Association of Canada
Fiona Cook  Executive Director, Grain Growers of Canada
Pierre Gratton  President and Chief Executive Officer, Mining Association of Canada
Joel Neuheimer  Vice-President, International Trade and Transportation and Corporate Secretary, Forest Products Association of Canada
Karen Kancens  Director, Policy and Trade Affairs, Shipping Federation of Canada
Brad Johnston  General Manager, Logistics and Planning, Teck Resources Limited
Sonia Simard  Director, Legislative Affairs, Shipping Federation of Canada
Gordon Harrison  President, Canadian National Millers Association
Jack Froese  President, Canadian Canola Growers Association
Steve Pratte  Policy Manager, Canadian Canola Growers Association
François Tougas  Lawyer, McMillan LLP, As an Individual
James Given  President, Seafarers' International Union of Canada
Sarah Clark  Chief Executive Officer, Fraser River Pile & Dredge (GP) Inc.
Jean-Philippe Brunet  Executive Vice-President, Corporate and Legal Affairs, Ocean
Martin Fournier  Executive Director, St. Lawrence Shipoperators
Mike McNaney  Vice-President, Industry, Corporate and Airport Affairs, WestJet Airlines Ltd.
Lucie Guillemette  Executive Vice-President and Chief Commercial Officer, Air Canada
Marina Pavlovic  Assistant Professor, University of Ottawa, Faculty of Law, As an Individual
David Rheault  Senior Director, Government Affairs and Community Relations, Air Canada
Lorne Mackenzie  Senior Manager, Regulatory Affairs, WestJet Airlines Ltd.

2:40 p.m.

Lawyer, McMillan LLP, As an Individual

François Tougas

First of all, it does look like the former point, so I'll concede that, but it's really on the latter point that I'm trying to focus my comments.

If an agency decides, for example, that this x level of service is required in these circumstances in order to meet the adequate and suitable standard that everybody seems to have problems with, which, by the way, I don't have a problem with, but if the agency has to make a decision that is now balanced between the two, the agency has to give meaning to those words. What is that meaning? Does it mean, "oh, I was going to give you an adequate and suitable standard, which I think is this, but because the act says I have to do something balanced, provide some equilibrium, does that mean that I have to take into account how much money you're losing and how much money you're losing off the deal?” The agency is the impartial arbitrator. It is at the very least superfluous, but, I think, much more dangerous, much less benign.

2:40 p.m.

Liberal

Sean Fraser Liberal Central Nova, NS

I think I'm out of time. Thank you.

2:40 p.m.

Liberal

The Chair Liberal Judy Sgro

Thank you very much.

We go now to Mr. Badawey.

2:40 p.m.

Liberal

Vance Badawey Liberal Niagara Centre, ON

I was actually enjoying that, two lawyers going back and forth. That was just good. Thank you.

I want to make two comments before I ask a question.

Thank you, guys, for being here and for your input into this whole process.

I also want to thank you folks across the table. You've taken the partisanship out of this whole process and really, really embraced being in this together to ensure that these folks are being looked after well into the future, so I want to thank you as well.

With that said, I have questions with respect to, one, reciprocal penalties, and, two, as mentioned earlier, short-line operations.

The first question is with respect to reciprocal penalties. What are your thoughts on the reciprocal penalties?

2:40 p.m.

Policy Manager, Canadian Canola Growers Association

Steve Pratte

From the perspective of grain producers, which, as several grain groups have mentioned, are not legal shippers, when our bulk shippers, our smaller specialty crop and containerized shippers, and/or the value-added processors have all consistently talked about reciprocal penalties for over a decade as something that they see as tightening up just that conceptual and not legal relationship between the shipper and the railway, we as a producer group are 100% in support of the reciprocal penalties as a concept and in terms of their application. As far as their perspectives go, I will let their submissions to you stand on that. But certainly there is that balanced accountability, if you will, in all of the other aspects of the supply chain currently, other than between the shipper and the rail provider, in the eyes of our shippers and in our eyes as well.

2:45 p.m.

Liberal

Vance Badawey Liberal Niagara Centre, ON

Are there any other comments?

2:45 p.m.

Lawyer, McMillan LLP, As an Individual

François Tougas

I accept all of those comments, but I would do one thing on reciprocal penalties for sure. I would allow the agency a lot more latitude in the setting of those reciprocal penalties than they currently have. Right now, when you invoke a process, the agency has the ability to award a return of expenses incurred, hard costs. I would give the agency a fair bit of latitude on the magnitude of those reciprocal penalties.

Let's say you order 16 cars—we heard that example this morning—and you get 10 cars. What's the penalty? Is it $100 a car? That shipment could be worth $100,000 or a million dollars, depending on what's in the... So it's not much of a return. The penalty has to be meaningful. In order to do that, rather than prescribing it, I'd give the agency the authority to do that.

2:45 p.m.

Liberal

Vance Badawey Liberal Niagara Centre, ON

Great.

My next question is with respect to short-line operators. I think you were the one who mentioned earlier about the responsibility when a line is abandoned. We all try to protect the economy of the area, and a lot of times that area economy is dependent upon that infrastructure or service.

In your opinion, besides defaulting to municipalities, which are also stretched for both capital and operating funds, how can we move forward with respect to a realistic strategy to react to the abandonment of rail lines, and therefore preserve the services available for industry that depend on these very services in partnership with a short-line operator?

2:45 p.m.

Lawyer, McMillan LLP, As an Individual

François Tougas

I've been listening to you on this topic, so I can tell that you have a fair bit of experience in this.

This is complex. I act for some short-lines—strapped for cash, hard to get capital, hard to get customers, and they're squeezed oftentimes by the class I rail carrier to which they connect. I think it's that connection problem, the terms on which the short-line railway can obtain abandoned infrastructure or a short-line piece of class I infrastructure.... The terms on which they obtain it and the terms on which they get to operate it after that I think need to be looked at.

I might have even gone so far, heaven forbid, as asking to have a look at those contracts before they're approved, so that there is some oversight body. This is very uneven bargaining power between the class Is and the shorties.

2:45 p.m.

Liberal

Vance Badawey Liberal Niagara Centre, ON

Are there other comments?

Go ahead.

2:45 p.m.

Policy Manager, Canadian Canola Growers Association

Steve Pratte

As we heard from the witness from the Western Canadian Short Line Railway Association yesterday, we see in the grain sector that, when viable, the short-lines play a very prominent role in that kind of collection system of grain, from country, from lesser used lines historically, and can act as quite a funnel for grain into the main line system of the class Is hook and haul.

Certainly, as mentioned yesterday, with the provincial authority over those rail lines, certain provinces have historically gone out in front of others in terms of helping those short-lines, but it is an important part of our sector's grain movement, collection, and distribution.

2:45 p.m.

Liberal

Vance Badawey Liberal Niagara Centre, ON

Do you also find that there may be opportunity for partnership with the end-users?

What I mean by that is a lot of times obviously the short-lines make their way on to a main line. It is, I guess, up to the main lines to actually allow access to those main lines. As well, it may find itself on a ship. It might find its way on a truck.

Do you think there's opportunity for partnership and/or integration there, as well, with an overall broader strategy?

2:45 p.m.

Policy Manager, Canadian Canola Growers Association

Steve Pratte

Certainly I would think in cases where, let's say, it's producers who are the shareholders of that particular short-line to their benefit and transport, they would be contracting with an end terminal for the export. So they're already in interaction with that actual shipper, for instance, off the west coast.

I would say there is that commercial piece there already. The facilitator of that movement, though, is the class I for the long haul.

2:45 p.m.

Liberal

The Chair Liberal Judy Sgro

Thank you very much.

We'll move on to Mr. Shields.

2:45 p.m.

Conservative

Martin Shields Conservative Bow River, AB

Thank you, Madam Chair.

I appreciate the expertise you bring to this and your sharing it with us.

Going to the Millers Association, I think you bring a different context to it. It's not just real time, but it's shelf life that you deal with. It's a real factor in its service.

Do you want to reiterate how critical that piece is? It's a two-part...versus others, because of that factor.

2:50 p.m.

President, Canadian National Millers Association

Gordon Harrison

I'll try to take as little time as possible.

Essentially, in order to serve customers in the milling industry well, you don't need just one type of wheat of a particular origin, you need a number of them. You have to have an inventory of all of those at all times. You can't have the kind of interruption we experienced some years ago that affected so many mills adversely in North America.

If you want to provide level of service to someone who wants to make a bagel instead of a whole wheat loaf of bread or flatbread or a tortilla or frozen dough, you have to have those ingredients. These various ingredients are predominantly from western Canada, and CWRS wheat is the real workhorse. You have to have that raw material in order to provide the service, and beyond the mill's door, that service, mostly within a 150-kilometre radius, is just in time. If you miss a delivery as a milling company, it's not that you missed today's delivery to a big bakery, but you might have missed the 11 o'clock shipment to the bakery as opposed to the 7 p.m. shipment. The just-in-time aspect is beyond that.

The shelf life of fresh goods, which accounts for much of the consumption, is very short. Those further processors who are making packaged goods....massive tonnage as compared to things with a longer shelf life, is short. It's a matter of several days. It really depends whether you're satisfying a retail market or a food service market.

I'll stop there. Thank you.

2:50 p.m.

Conservative

Martin Shields Conservative Bow River, AB

That's very important.

Canola growers, you did mention something about infrastructure and cars. In the world I live in one of the things I hear about on grain, that is on the grain-carrying cars going through the national parks, is the need to have newer cars so they don’t spill grain, and I hear that constantly. But that's not what you're talking about.

2:50 p.m.

Policy Manager, Canadian Canola Growers Association

Steve Pratte

It actually is in the fact that—again, it was talked about briefly yesterday—the age of the currently owned public fleet, which is that amalgam of the federal government's fleet and that of the two provinces of Alberta and Saskatchewan, which purchased in the mid seventies, early eighties. Originally, those were 40-year lives, and those aren't dictated by the company, that is an international railway standard that they adhere to because they do cross the 49th. Under that agreement, in 2007, the operating agreement with the two class Is for the movement of Canadian grain, they were given an extra 10-year service life, so they were up to 50. We are approaching that 50-year mark, and as that rolling stock, which is of a different design and different carrying capacity from what we see now in the marketplace with new builds, the gates at the bottom of those hoppers indeed are becoming...you are seeing numbers when cars are received that are rejected for mechanical failures. The gates in the bottom of the hoppers, as they are gravity-fed, there are instances there where they are spilling product across tracks.

2:50 p.m.

Conservative

Martin Shields Conservative Bow River, AB

You didn't talk about long haul.

2:50 p.m.

Policy Manager, Canadian Canola Growers Association

Steve Pratte

Yes. From a producer's perspective, we would defer to our shippers, and you would have heard their testimony yesterday as far as their perspectives on that go. Because of, as Mr. Froese mentioned, the nature of the structure of our industry, if it's good for them and that fluidity is maintained and they can access those markets and that competition, in economic theory, it's good for that producer as well.

2:50 p.m.

Conservative

Martin Shields Conservative Bow River, AB

It comes down to you at the bottom line, right?

2:50 p.m.

Policy Manager, Canadian Canola Growers Association

2:50 p.m.

President, Canadian National Millers Association

Gordon Harrison

To comment on long haul, it was a disappointment that the extended interswitching rates were not extended, and others have expressed that before this committee, I'm sure—I read a couple of the submissions. There has also been an observation that there is a prerequisite in order to have access to long-haul interswitching rights, and we would support others who would have recommended that that be removed. Anybody who is now going to be denied access to extended interswitching should, by choice, have access to long haul for those reasons that are set out for its very existence, and at their entire discretion, not as a consequence of a hurdle to jump over to satisfy an audit requirement, if you will, of the agency.

Thank you.

2:50 p.m.

Conservative

Martin Shields Conservative Bow River, AB

What about exclusion zones?

2:50 p.m.

Lawyer, McMillan LLP, As an Individual

François Tougas

You've heard testimony already that those exclusion zones essentially mean the remedy, if it's going to be viable at all, will be viable for I think the group that my colleague here was intending to have replaced with long-haul interswitching that used to have access to extended interswitching. The difficulty is this. To give you a very quick example of how it happens, imagine a shipper that is trying to get into the zone, that has only one interchange between where they are and the zone they're trying to get to. Let's take a shipper that is north of Kamloops, British Columbia, trying to get to Vancouver. There is only one place to interchange, and that's at Kamloops, and it's excluded. That means everybody in northern British Columbia is excluded from access to the LHI remedy. A similar situation would arise in the Quebec-Windsor corridor.

It's not so much about competition within the corridor—yes, sure, they have competition, great—it's the people who are outside the corridor trying to get into the corridor, that's the problem. I would eliminate those restrictions altogether, those geographical restrictions. I would get rid of a couple of other restrictions while I was at it. Why make that remedy so hard? It looks to me to be quite a bit harder than the CLR remedy, and just is not getting used, and I would fix the rate mechanism that's attached to it. That's how I would deal with LHI.