Transport Committee on Sept. 13th, 2017

[Pierre Gratton]

It may be better if I ask my colleague to answer your question, since he deals directly and daily with railway companies. I think he could give you a specific answer.

[Robert Aubin, NDP, Trois-Rivières, QC]

Great.

[Brad Johnston, General Manager, Logistics and Planning, Teck Resources Limited]

“Adequate and suitable” is currently defined in the act, and in our original submission—and I speak on behalf of Teck in this answer—we asked for one small change to the language, that “adequate and suitable” be based on the requirements of the shipper as opposed to the means of the railway. There's a very specific reason for that, and it goes to when a forecast turns into an order, for a mining company or even a forestry company. In our case, where obviously Canada's an exporting nation, “adequate and suitable” mean that we can export our goods in a timely fashion.

It goes to my comment yesterday. It's not if the trains will come; it's when. That's because in our case or in the case of a mining company—someone shipping copper, zinc, or coal—we have a vessel sitting at a port. That's not an abstract concept. It's as much looking forward as it is reporting on the past. “Adequate and suitable” mean what I need in order to meet my shipments, or my sales, or the delivery of my goods to my customers in Asia, South America, and Europe.

[Robert Aubin, NDP, Trois-Rivières, QC]

You say that it's not “if” but “when” the train will come. For me, that also involves the number of cars that will arrive. But that has to be consistent with the contract you have concluded with a railway company and with its capacity to deliver the number of cars you really need.

[Brad Johnston]

That's right, and that's adequate and suitable. In the case of Teck, we give forecasts to the railway going out four years and very specifically over five months. Then for ourselves or for a forestry company or a shipping company—I'm going to use a technical term—we schedule a laycan. The vessel is going to arrive at the port. It's coming. Once again, there's no “if” about that. We don't want to have a debate about whether we will get the trains. There can be no such debate because that falls short of the common carrier obligation. That is not adequate and suitable service. It's not an abstract concept.

If we just change the language in the act to say “according to the requirements of the shipper”, that will satisfy what you're addressing.

[Joel Neuheimer]

To try to clarify what I think you're looking for, let's say you're a mill operating in northern Quebec and you're typically ordering 10 cars a week that arrive on a given day of the week, and all of a sudden you get three cars. Hopefully the next week it's made up, but if on a chronic basis, on a repeated basis, you're ordering 10 cars a week and you're only receiving four or six or seven over an extended period of time, it doesn't feel as if that's meeting the needs of the shipper. So to go back to what they were saying, it needs to meet the needs of the shipper, and this is how I would try to add a little more precision maybe to what you're looking for, if that answers your question.

[The Chair, Liberal, Judy Sgro]

Thank you very much for your answer.

Go ahead, Mr. Graham.

[David Graham, Liberal, Laurentides—Labelle, QC]

Thank you, Madam Chair.

I will start in the water. For ships, are there Canadian-flag ships currently moving these, or is it all done by rail and road?

[Karen Kancens]

Could you repeat your question?

[David Graham, Liberal, Laurentides—Labelle, QC]

For the empty containers being moved, are there any Canadian-flag ships that do this, or does this just not happen?

[Karen Kancens]

Theoretically, because the activity right now is prohibited to foreign-flag ships under the Coasting Trade Act, a foreign-flag ship could apply for a waiver to carry out the activity, which has happened in the past, so then you will get a domestic ship that will oppose the waiver and say it can carry the empties.

We're aware of a case where that happened. The carrier needed to reposition 400 empties, I think it was, from Montreal to Halifax. The domestic ship owner said it could do that movement and the cost would be $2,000 per container, so that was an $800,000 cost. The cost of transporting those containers on board the ship would have been $2,000 for the domestic ship, and the cost for the foreign-flag ship importing them would have been $300 per container, so it's almost seven times more.

Theoretically, yes, the domestic ship could reposition empties. It will never happen because, even though the foreign-flag carrier's options are not perfect in terms of using rail or importing from overseas, costs will never amount to the $2,000 per container that the domestic ship owner is charging. It exists as an option, but it's one that has never been used, and it won't be used.

[David Graham, Liberal, Laurentides—Labelle, QC]

For the owners, the leasers of the containers, these are not revenue-generating moves.

[Karen Kancens]

No. We're only talking about the repositioning of their own containers, ones that they own or lease, on a non-revenue basis, so it is purely for logistical purposes.

[David Graham, Liberal, Laurentides—Labelle, QC]

Thank you. Now I'm going to jump out of the water and onto the train tracks.

The mining industry is unique in that some mines don't have any rail, and there are some places that have nothing other than rail, and those rails don't connect to anything. I'm thinking of Quebec Cartier Mining or Quebec North Shore and Labrador Railway where, if you don't get there by train, you're not getting there. Then you only have one company, so there are absolutely no alternatives. How well did that work?

Most of the competition increasing things in Bill C-49 don't really apply to those areas.

[Pierre Gratton]

In the case of, for example, the Iron Ore Company of Canada, they own and operate their own railway. Obviously, that's how they manage.

[David Graham, Liberal, Laurentides—Labelle, QC]

By vertical integration, then.

[Pierre Gratton]

Yes.

[David Graham, Liberal, Laurentides—Labelle, QC]

That makes sense. One thing that I'm enjoying teasing—I guess you could say—the larger railway companies about since Monday is their saying that you are not a captive shipper if you have access to trucks.

I think a railway industry should be defending rail, but that's just me. How do you feel about that? If there's access to trucks, are you then not a captive shipper?

[Pierre Gratton]

Trucking can be much more expensive. It depends on the length of the route. It's also not as safe. Trying to move the kinds of volumes that we would move across the country by truck would just be uneconomical, and in some cases, with some bulk commodities, it's just not feasible at all. You're not going to move metallurgical coal in the volumes Teck produces by truck. It's just not an option.

[David Graham, Liberal, Laurentides—Labelle, QC]

Thanks. I'll go to the forestry industry with the same question.

What do you think of trucks as an alternative to making you not captive?

[Joel Neuheimer]

If you think about the government's priority to reduce greenhouse gases, it certainly doesn't make very much sense, does it? If you think about the government's priority to reduce greenhouse gases, we should be shipping by rail more of the products that Pierre and I are describing here and representing here this morning and getting more trucks off the road. It might even be better for our highway system to take those trucks off the road. Wouldn't that be interesting as an impact?

Here's some quick math for you. If we're at a facility using 10 railcars a day, that would be the equivalent of 25 trucks a day, so for a seven-day week, that boils down to 175 trucks a week versus 70 railcars. It's a question of the magnitude of the products we're shipping, and hopefully, it's just a question of common sense, dare I say.

[David Graham, Liberal, Laurentides—Labelle, QC]

That's a perfect segue to my next question.

My riding is mostly forestry lands, a very heavily forested riding. We lost the railways in 1987. They ripped them out. We lost log driving three years later in 1990, and now we have a two-lane highway with 500,000 trucks a year on it that takes care of our logging industry. What can we can do, from your perspective, to protect these rail lines and bring them back? Is there an appetite to bring them back to this kind of place?

[Joel Neuheimer]

I think you'd want to do some kind of cost-benefit analysis in the situation you're describing, but I'm very sympathetic to the point you've just made. We have two specific members who have been hurt in the same way you've just described in the example you've given.

The fifth key ask that we had in our remarks this morning was about making it harder for railways to discontinue rail lines. There's already a number of hurdles in place, but I think the one we need to worry about in the bill and the part we need to have removed is that we need to prohibit, for example, hypothetically, a class 1 from suspending service in that kind of situation, if it's no longer economically viable for them, and give somebody else a chance to come in and run it before it disappears. Once the tracks come up, it's quite difficult to put them back.

To try to go back to my fifth ask, I think it's key to what you're trying to avoid happening again.

[David Graham, Liberal, Laurentides—Labelle, QC]

Right, and in my riding you couldn't track in, so I appreciate that. Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Graham.

We go on to Mr. Fraser.