Transport Committee on April 13th, 2016

[Keith Shearer]

We manage it through technology. If the crossing, by the regulation, has a certain cross-product—trains and vehicles, certain speeds of trains and vehicles—that will dictate whether the crossing needs to have a warning system or if it's sufficient to have crosswalks or a stop sign. That's the hierarchy, if you will, of how it gets managed.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Okay. A lot of these are within municipalities. You made some comments that you'd like to see them closed down, because of course that's going to affect the flow of—

[Keith Shearer]

In some cases, yes.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

—the municipality and the roads that they cross, right? I want to get back to identifying how high that risk is and what it is that you would do to mitigate that risk.

[Keith Shearer]

It's putting in a warning system. In the worst case, in the riskiest case, you would want to grade-separate the crossing.

But as I said earlier, if you get to that extent, and we share the cost with the municipality, you want to be looking at why you wouldn't take the opportunity to close crossings that are adjacent to the crossing that you've just invested in to make safer. That's the piece that's absent in the regime today.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Well, I think it's hard on some municipalities to actually fund an overpass or the closing of a crossing. It's just something that is not affordable. There have to be tri-party agreements in terms of the railway, the federal government, and the province contributing. Everybody has to be a partner, right?

[Keith Shearer]

I agree.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

If you look at the Roberts Bank rail corridor—

[Keith Shearer]

That was done well.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Yes, it was done well.

[Keith Shearer]

That's one example of something that was done well.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Yes, absolutely, and that whole entire corridor was looked at in terms of the high risk and grade separations and everything else.

I would suggest reviewing that high-risk piece, because it seems to me that this model would work in other areas—

[Keith Shearer]

We would agree.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

—rather than just saying that it's a high-risk area, so put a warning there and we're done.

[Keith Shearer]

Well, that's what we're seeing. The current regulation says to look at this individual crossing and never mind the crossings that are directly adjacent to it.

In the city of Langley right now, we have one where we had the Transport Canada notice in order, we've upgraded the crossing, and we've made it safer. Just down the road from it is another one that the TSB has issued a safety advisory on, completely oblivious to the fact that just down the street there's a safer crossing that's actually used.

That's the view that we collectively need to have.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Shearer.

I'm sorry, Ms. Watts, but we'll have to move on from here.

This is the end of this panel. I'm sorry if you feel that we might have rushed you a bit, but thank you very much for the information you've provided us today. We will ensure that you receive a copy of our ultimate report. Thank you very much.

I will suspend so the other panel can come up. Our time is getting tighter.

[The Chair, Liberal, Judy Sgro]

We're back to order.

By video conference from British Columbia, we have with us representatives of the Southern Railway of British Columbia: Frank Butzelaar, president, and Derek Ollmann, director of operations.

With us here at the table we have the Saskatchewan Shortline Railway Association, with Perry Pellerin, chairman, and we also have Ryan Ratledge, the chief operating officer of the Central Maine and Quebec Railway.

Welcome to all of you.

I'm going to start with our gentlemen who are on our video conference. We are a bit short of time, so if you can, please keep your presentation to the points that you know the committee is dealing with, which are specifically the issues of railway safety and what kinds of recommendations we might ultimately be able to make that would improve it for Canadians and for all of those involved.

Southern Railway, I'll turn the floor over to you if you'd like to go forward.

[Frank Butzelaar, President, Southern Railway of British Columbia]

Good afternoon, Madam Chair.

My name is Frank Butzelaar. I am the president and CEO of Southern Railway of British Columbia, known as SRY. With me today is Derek Ollmann, director of operations for SRY.

SRY is a provincially regulated short-line railway headquartered in New Westminster, British Columbia, with 185 employees operating 196 kilometres of track, including 101 kilometres of mainline track between New Westminster and Chilliwack, B.C., with connections to CN, CP, and BNSF.

Through our subsidiary company, Southern Railway of Vancouver Island, we provide rail service on Vancouver Island on former CP trackage now owned by the Island Corridor Foundation, which consists of 11 first nations and five regional districts. Handling more than 65,000 railcars a year and 20% of all new vehicles purchased in Canada, SRY is a critical link in the supply chains for more than 140 customers located in Asia and across North America.

In addition to automobiles, we handle agricultural products, forest products, steel and machinery, building products, consumer products, and plastics and chemicals.

Our chemical business consists of 3,450 carloads of which 1,400 are classified as hazardous.

We're proud of our safety record. Looking at the past year, 2015, we had zero lost-time injuries, and we haven't had a lost-time injury in over four years. Our reportable injury frequency rate is 0.83%, which is well below the short-line average of 2.59%. We had 18 non-mainline derailments and zero mainline derailments in 2015. Our derailments overall are down 25% over the past five years. Nine of our 18 derailments were the result of human error, six the result of truck failure, and three the result of mechanical failure.

Given that 50% of our derailments are the result of human error, we continue to focus on improving our training programs and expanding our proficiency testing. On average, we conduct approximately 170 proficiency tests every month.

Managing worker fatigue is also a priority at SRY, but it's important to note that SRY does not operate in the same manner as a class 1 railway. SRY does not run trains that start in one location and terminate in another location. All trains originate and terminate at the same terminal, thus all employees have the ability to go home at the end of their shift and manage rests between shifts.

Although SRY is a provincially regulated railway, SRY complies with Transport Canada federal work-rest rules for railway operating employees. SRY has a fatigue management policy within our safety management system and collective agreement. Within the fatigue management system, there is a series of procedures and strategies designed to manage fatigue in the workplace. Some of these are the responsibility of the company, such as compliance with federal work-rest rules, and some are the responsibility of the employees, such as managing their off time to ensure alertness while on the job.

It's incumbent on the employees to come to work rested and prepared for their tour of duty, as per Canadian Railway Operating Rules, general rule A, which says that when reporting for duty, employees must be “rested and familiar with their duties and the territory over which they operate”. Within the collective agreement, employees have the ability to book rest. This procedure allows employees to limit overtime and guarantees them a minimum of 10 hours between shifts.

With respect to remote-control train operations, SRY does not operate remote-control trains and currently has no plans to operate remote-control trains. Our operation is intensively switching, and it's more efficient to have the three-person crews that we use—conductor, locomotive engineer, and brakeman.

On the subject of locomotive video recorders, we support legislation for railways to be required to install cab video monitoring devices. We believe that the legislation should support railways to use the in-cab video to conduct rules-compliance testing and promote safety.

Finally, I want to talk briefly about the challenges facing short-line railways in Canada. In total there are about 60 short-line railways across Canada, of which 40 are provincially regulated and 20 are federally regulated. Short lines are an integral part of the North American rail network. Of all rail traffic in Canada, 20 per cent or more than 135 million tonnes each year, begins on short lines. Many industries simply wouldn't exist without these railways. They provide an essential link between sometimes remote businesses and their domestic and international markets.

It should be noted that short lines in Canada, similar to those in the United States, often operate on low-density rail lines with razor-thin margins and often don't generate sufficient revenues to upgrade or expand their infrastructure.

At SRY, capital investments in rail infrastructure will total $7.3 million this year, which is up 26% over 2015 and up 21% over 2014. Over the next six years, railways will need to upgrade crossings to a new standard that will require significant investment in new signal systems. SRY has a total of 206 crossings at grade; 129 are road crossings and 57 are property access crossings. Six are farm crossings and 14 are pedestrian crossings.

Of the 129 crossings, 37 are currently signalized, but 92 road crossings are not signalized. Our current estimate of the cost to signalize, to finish this program, is that it will cost $30 million over the next six years. It is important to note that these required upgrades are not eligible for funding under the existing grade crossing improvement program and will further restrict the ability of short lines to make growth and productivity-enabling investments in their infrastructure.

In conclusion, Canadian short-line railways request that Transport Canada carefully consider recommendations contained within the recently released Canada Transportation Act review report pertaining to short-line infrastructure funding. Specifically, the review recommends modifying eligibility criteria for federal infrastructure programs to allow short-line railways to apply for funding directly, without a government sponsor, and to create a federal-provincial short-line infrastructure program in order to support capital infrastructure investments.

In the United States the short-line rail industry is supported through a variety of programs. At the federal level those include funding for railway highway grade crossings, covering 90% to 100% of the project costs. Additionally, a transportation investment-generating economic recovery program, known as the TIGER program in the United States, provides infrastructure grants to short lines, and the 45G short-line railroad tax credit program helps short lines leverage private investment. This is accomplished by allowing short-line railways a tax credit of 50 cents for every dollar spent on track improvements up to a cap based on the number of miles they operate.

As the Government of Canada looks to invest in the renewal and expansion of Canada's critical infrastructure, we urge you not to overlook the need to invest in Canada's short-line railways.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much. We appreciate your briefness.

We will now go on to Mr. Pellerin and Mr. Ratledge.

[Perry Pellerin, Chairman, Saskatchewan Shortline Railway Association]

Good afternoon, Madam Chair, and committee.

Thank you for inviting me to speak today and for giving the Saskatchewan Shortline Railway Association the opportunity to share our thoughts on rail safety.

As you are aware, Saskatchewan has the most short lines of any province in Canada. We operate 24% of Saskatchewan's rail network and are a major employer in many rural towns. Over the past 20 years we have successfully created jobs, increased export capacity, and driven economic growth for rural Saskatchewan, the province, and Canada. We pride ourselves on being a green transportation option, with an average of over 125,000 truck loads being kept off the roads per year in the province, resulting in a 75% reduction in greenhouse gas emissions.

Even more important than our economic and environmental contributions is our dedication to rail safety. For our small short lines safety is not something that is an option. In our communities, where our employees live and work, our attention to safety is what brings home our children, wives, grandparents, and neighbours at the end of each day. It is at the core of our business and takes first place on our agenda.

Our railways follow all safety protocols dictated by the federal and provincial governments, safety management plans, and systems, as well as the requirements set out in the Railway Safety Act. We also go above and beyond that by using reduced speeds, increased track patrols, and yearly X-ray and track geometry car tests to reduce the risk of derailment.

Despite increased traffic and demand for services, we have maintained an excellent safety record. Between 2010 and 2014 Saskatchewan short lines experienced a 53% increase in grain carloads and a 93% increase in non-grain carloads. During this time period, we did not see an increase in main track derailments, and we were able to decrease our crossing collisions.

In 2015 with approximately 28,000 railcars transported, our record was as follows. We had three main track derailments, five non-main track derailments, zero dangerous commodity derailments, zero dangerous goods spills, one crossing collision, zero trespasser incidents or injury, and zero fail accidents. Although derailments are not to be taken lightly, the eight in Saskatchewan in 2015 involved an average of two cars. None were carrying dangerous goods, and the largest involved six cars carrying sand. We believe that railroading is not inherently dangerous, and we are open to learning new ways to improve safety by challenging our assumptions and changing to improve our safety record.

This brings me to the topic of consultation. Short lines come in many shapes and sizes. In Saskatchewan the majority of the short lines are relatively small operations with one to nine locomotives and between three and 35 employees. Recent changes to regulations have caused expenses that are increasingly difficult to manage, as they do not always fit the realities of running a small railway operation. Direct consultation with regulators is important to us, and we welcome more thorough and regular consultations with Transport Canada to ensure the complexity and the particularities of our operations are understood. Through consultations between Transport Canada and short lines, and between Transport Canada and provincial regulators, we would help to ensure that regulatory decisions are being made that reflect our business and can be implemented in ways that make us effective and as safe as possible.

The Saskatchewan Shortline Association also supports increased inspection by Transport Canada. We would welcome both positive and negative feedback in a timely fashion to allow us to celebrate our successes and be more proactive about the issues we have yet to improve.

In Saskatchewan we inherited rail lines from class 1 railways that were already showing signs of age and need of repair. Our small staff sizes and narrow profit margins, when compared to class 1 railways, must be taken into account when considering rail safety. To be as safe as possible, Saskatchewan short-line railways require major infrastructure overhauls to maintain safe track conditions.

The CTA reviews supported this notion, suggesting several funding options, including infrastructure funding modelled after the 45G tax credit funding system in the United States. The Saskatchewan Shortline Association supports infrastructure investments in short-line rail as critical to the continued safety of our transportation network, solidifying Canada's ability to drive trade and export capacity.

Federal support is critical in addressing the increased costs associated with any new regulatory requirements. For example, requirements concerning cab noise levels represent a major investment for a short line as our locomotive fleets are often aging. To retrofit a cab it costs over $20,000 per locomotive, and this is just a small example of how short lines differ from class 1s. It is very difficult for us to meet some of these financial changes under a barrage of change.

Another example of financial repercussions of regulatory changes is new securement requirements. For example, when a railway secures a train, they must leave it protected by derails or leave the locomotives running. For short lines, derails are not easily accessible. As a result, using one of our railways as an example, this has meant an additional $150,000 a year in fuel costs.

Infrastructure and regulatory changes have a critical impact on safety. Consultation before regulatory changes are made, and federal support for those changes, would make managing the associated costs and maintaining safety records more realistic for small short lines.

Finally, two other issues have an impact on short lines' ability to invest in infrastructure and safety: insurance and the potential elimination of the maximum revenue entitlement. Insurance premiums have skyrocketed. With a limited number of providers and a lack of insurance tailored to the operating realities and safety records of short lines, much-needed funds are being pulled from short lines' operating funds, thus affecting our ability to maintain infrastructure and invest in safety. Regarding the MRE, in 2015, 72% of the traffic on short lines in Saskatchewan was made up of producer cars. Any changes to rates that have a negative impact on producer cars will also have a negative impact on short lines.

While we are independent operations, we are still at the mercy of class 1 railways for car supply, schedule, and whatever rate structure they pursue. We have already seen a large discrepancy between single- and multi-car rates under the current MRE, and we are worried that increased rate freedom could be catastrophic for the producer and subsequently for the short lines.

In conclusion, ensuring open and transparent governance by making consultation with short-line industry stakeholders a requirement for future regulatory changes is critical for a short-line rail's ability to continue to create jobs, support economic growth, and increase export capacity. Infrastructure investment, financial support for regulatory changes, and close consideration of insurance and rate protection are also critical components to ensure that the railway can continue to contribute to middle-class prosperity.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Pellerin.

Mr. Ratledge.

[Ryan Ratledge, Chief Operating Officer, Central Maine and Quebec Railway]

Good afternoon, Madam Chair, members of the committee.

My name is Ryan Ratledge and I lead the operating team at Central Maine and Quebec Railway. Our Canadian operations are headquartered in Farnham, Quebec. Our customers originate and terminate a multitude of carloads on our railway, as well as utilize the CMQ to bridge carload traffic from the Maritimes and northern Maine through Montreal, then flowing into the North American railway network. We handle a very diverse range of commodities that include forest and paper products, chemicals, and propane. Three of our larger clients include NGL, AkzoNobel, and Tafisa.

CMQ has invested in excess of $22 million in our track and infrastructure since we started up in 2014. We will invest an additional $10 million of CMQ's money in 2016. We fully support and advocate for a refundable short-line tax credit for Canadian short-line railways.

CMQ is a federally regulated railway that began operations on June 30, 2014. We provide employment for about 50 team members in Quebec, and 70 in Maine and Vermont. Over the last 22 months, when compared with our former operator, we have realized a reduction in frequency, cost, and severity associated with injuries and derailments. We have made progress, but we continue to strive for improvement.

We connect directly with Canadian Pacific in the Montreal area, as well as the St. Lawrence and Quebec railway, Vermont Railway, Maine Northern Railway, New Brunswick Southern Railway, and Pan Am Railway.

Many leaders within the communities in which we operate have expressed interest in resuming passenger and commuter operations on our line between St-Jean-sur-Richelieu and Sherbrooke, Quebec. If this makes sense for Quebec, then CMQ supports this idea. Needless to say, this will require many millions of dollars of additional investment in the track and infrastructure.

Short-line railways have proven themselves to be safe and friendly to the environment, and I'm honoured to be a part of this industry.

I'm open and happy to answer any questions that you may have.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Ratledge.

Mr. Berthold and Ms. Watts. Ms. Watts, you're going first.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Thank you very much.

I have just a couple of quick questions.

Frank, you were just saying, in terms of the upgrades that are required, that you can't access federal dollars. Can you explain that to me in terms of why you're prohibited from accessing or making an application for those dollars?

[Frank Butzelaar]

Certainly. The challenge the short-line railways have is that although investments in short-line railways are eligible for the build Canada fund, you need to have government sponsors. You need to have a government that's backing the program and is prepared to go in with you on it.

As far as I'm aware, no short-line railway has ever been successful in finding government partners for their projects. Our experience is that the municipalities and the province all have their own projects, which are much more of a higher priority to them than investing in a short-line railway jointly, working together on a project with short-line railway. They have critical things they need to achieve with those dollars and it just doesn't include investing in short-line railways.