Thank you very much, Chair and members of the committee, and clerk and fellow witnesses. It's a pleasure to be here.
My name is Pierre Gratton. I'm president and CEO of the Mining Association of Canada. I'm joined by my colleague, Brad Johnston, whom I think you met yesterday. He is the general manager of logistics and planning for Teck Resources Limited and is someone who works with the railways on a daily basis.
I'll begin by saying just a few words about the mining sector, which, as you know, is an economic stalwart, contributing some $56 billion to national GDP in 2015 in what was a down market. We're major employers, with some 373,000 people working directly and another 190,000 working indirectly for our sector. We pay the highest industrial wage in the country. We're active in both urban and rural settings. Proportionally, we're the largest private sector employer of indigenous peoples and a major supporter of indigenous businesses and are thus a powerful partner in indigenous economic reconciliation.
While increased mineral prices have returned some confidence to the global mining industry, increasing domestic uncertainty and business costs are raising questions over whether Canada is well positioned to take advantage of the next upswing. We are seeing Australia, our major competitor, rebound at a far greater rate than we are currently in Canada, which is concerning.
The effectiveness and reliability of rail freight service are critical to Canada's mineral investment competitiveness throughout the ups and downs of the commodity cycle. There are significant costs associated with transporting goods to and from the mine site, and companies need to get their goods to their international customers on time. I can report that our members' customers are closely monitoring this bill and its potential impacts as a measure of Canada's reliability as a source for raw materials.
If railways are the arteries of our trading nation, then the mining industry is the lifeblood upon which they depend. We account for 20% of Canada's exports and over half of total rail freight revenue generated each year, making us the largest single customer group of Canada's railways. I would just ask you to imagine the state of Canadian rail without mining and the impacts it would have on grain, forest products, and all other rail-reliant industries in Canada.
Despite this, we are continually facing an unlevel playing field in the rail freight market, which manifests itself as significant and perennial service failures. The reason is that the Canada Transportation Act is an imperfect surrogate for competition in a monopoly marketplace. Many shippers are captive to one railway and are beholden to railway market power as a result.
It's crucial to get this bill right on this third legislative attempt in four years. We hope the committee is also encouraged by Minister Garneau's boldness in introducing an ambitious package of reforms. On this note, we are highly supportive of a number of provisions in the bill, including new reporting requirements for railways on rates, service, and performance; the addition of a definition of “adequate and suitable” rail service that confirms railways should provide shippers with the highest level of service that can reasonably be provided in the circumstances; and strengthening the prohibitions against railways shifting liability onto shippers through tariffs.
We want profitable railways, but not at the expense of national economic growth. That is why we support the objectives of Bill C-49, with minor adjustments that will ensure its intended outcomes are achieved. I will now address three areas where we think that's necessary.
The first is data transparency. Enhancing railway data transparency is not only consistent with the government's commitment to data transparency and evidence-based policy, but critical to improving the functionality of rail freight markets. Robust disclosure would inform public policy-making, improve railway-shipper relations, and avoid unnecessary and costly disputes. All parties having a clearer picture of respective capacity and limitations would better compel them to achieve the optimal workable outcome.
While Bill C-49 proposes positive measures to address service-level data deficiencies, we're concerned that, as written, certain transparency provisions will not lead to meaningful data on supply chain performance. Of specific concern is the requirement in subclause 77(2), a measure that would align the Canadian and U.S. systems.
Our concern is that the U.S. model is based on internal railway data that is only partially reported. It doesn't represent shipments accurately or completely. It was created decades ago when large-scale data storage and transmissions were not technologically possible. With the data-storage capabilities that exist today, there is no rationale for such a restriction in either the waybill system for long-haul interswitching outlined in clause 76, or for system performance outlined in clause 77.
To ensure the appropriate level of data granularity and to ensure the proposed legislation reflects Canada's unique rail freight context, MAC recommends an amendment that would require all waybills to be provided by the railways, rather than the limited reporting that is outlined in subclause 77(2). This modest enhancement is consistent with the direction of this bill, but with the added benefit of modernizing a system that was designed decades ago.
While MAC is supportive of Bill C-49 improvements to costing data collection and processing by the agency, we also raise one minor but important consideration related to final arbitration.
Currently, arbitrators request an agency costing determination only when the two parties agree to make the request. However, railways habitually decline to co-operate with shippers for this request, thus limiting the ability of the parties involved to be equally informed. We know of no legitimate rationale for a railway to decline an agency costing determination, other than to deliberately frustrate the process. To ensure that the right level of transparency and accessibility is struck so that remedies under the act are meaningful and usable, we recommend that shippers be granted the right to an agency costing determination. Often confidentiality considerations are raised, but the committee should note that in agency proceedings redacted decisions protect confidentiality. Further, FOA processes are already confidential. We are not proposing any changes to these practices.
The second issue addresses level-of-service obligations. In proposed subsection 116(1.2), this bill would require the agency to determine whether a railway company is fulfilling its obligations by taking into account the railway company's and the shipper's operational requirements and restrictions. Identical language is also proposed to govern how an arbitrator oversees level-of-service arbitrations.
Our members are concerned that the proposed language for determining whether a railway has fulfilled its service obligations does not reflect the reality of Canada's monopolistic rail freight market. The quality of service that a railway company offers is influenced by how it allocates its resources. These decisions include purchasing assets, staffing, and construction. All those restrictions are determined solely by the rail carrier. Their consideration and fulfillment of service obligations leaves the shipper structurally disadvantaged. The goal of the agency should be facilitating the correct decision based on the facts, not a balanced decision between the parties. To address this, we recommend either striking out this requirement or making the restrictions themselves subject to a separate review.
Third and last, Bill C-49 proposes a long-haul interswitching remedy that demonstrates in principle a creative approach to addressing a long-standing competitive imbalance in our rail freight market. By design, however, when the number of non-entitlement provisions are taken into account, a remedy that could hold significant promise if implemented more liberally, becomes unduly restricted to the exclusion of many. As proposed, it mirrors the current competitive line rate remedy that it proposes to replace.
However, CLR has been largely inoperative for the past three decades because class 1 railways have declined to compete for traffic and are not naturally compelled to do so by market forces. Hypothetically, even if the railways chose to compete using long-haul interswitching, Bill C-49 includes a number of provisions that would make LHI unusable or would create unnecessary barriers for many captive shippers, including a long list of excluded traffic, including by cargo type or geographical restriction. Unless these are revisited, the remedy as proposed will de facto confirm in policy and law the captivity of a host of shippers, the very same shippers it purports to assist.
To conclude, we acknowledge that this bill represents a bold and holistic attempt to addressing the anti-competitive challenges inherent in Canada's monopolistic rail freight market, and the disproportionate burden that shippers endure as a result. For this reason, its direction should be lauded.
The amendments we are seeking are modest and highly consistent with the legislative package. They continue to allow the railways to be profitable and have operational flexibility, but are material enough, and definitely important enough, to make a critical difference if not taken into account. In fact, we fear that without these amendments, this bill may leave us in the same situation that the previous bills have done in the past, not ultimately solving the issues we have been challenged with.
Thank you for your time, and I would be pleased to answer questions.