Transport Committee on April 13th, 2016

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

I would expect that if you have a class A rail line with a lot of traffic, you could actually divert some of that to the short line, which would cause less congestion and less traffic on those lines that are, perhaps, a high risk in terms of crossings and things like that. That would be a mitigation. Thank you.

Do you want to go ahead?

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you very much.

I heard the representatives of the three small companies present here talk about the need to have access to refundable tax credits. That program was also introduced by the Railway Association of Canada. You want to present that to the government.

The need for investment in short-line railways must be rather significant. Mr. Ratledge, you have become the owner of an unfortunately infamous company and a rail route that has sadly become well known. You have invested a lot of money, but there are still a lot of needs.

Are the scheduled investments sufficient? Would it be possible to use the current funding to create jobs and help companies like yours develop the economy more in the regions? That is right up your alley: you are absolutely vital for the regions you’re serving and for the economy in our rural regions, as in the case of Tafisa to Lac-Mégantic.

[Ryan Ratledge]

Yes, sir. We have been able, fortunately, to invest quite a bit of capital into our infrastructure, and yes, the ability to have a refundable tax credit similar to what we appreciate in the state of Maine and in the state of Vermont does foster further investment. It does allow a short-line railway to continue to make those investments for years and years to come.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I’m not sure I understood correctly. You have invested an amount of $22 million and you’re going to invest $14 million dollars in 2016. With the tax credit, would you double the company's investments or would you reduce the investments by that amount?

[Ryan Ratledge]

I'm not sure that I understand the question.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Since 2014, you have invested an amount of $22 million in the route. If you had access to a tax credit of 50%, meaning that for each dollar invested, you would receive the equivalent in tax credits, could we expect companies such as yours to invest that additional money in the network or would it simply be used to enhance your financial performance? That is the fear people might have when a request for a program like that is made.

An investment of $22 million is great. This means that, with a tax credit, you would have invested an amount of $44 million, which might have been good for the small communities.

How can we ensure that the investments will actually go to the railway, if you’re asking the government to set up a program like that?

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Berthold.

Can we have a very short answer? I don't know if that's possible either.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Just say yes.

[Som hon. members]

Oh, oh!

[Ryan Ratledge]

It has been my experience that it would increase additional investment, not lessen it.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Ratledge.

Mr. Hardie.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Thank you, Madam Chair. I'll split my time with Mr. Badawey.

Mr. Pellerin, I have a question way out of left field. Inter-switching is due to be shrunk substantially by August and perhaps eliminated totally, if Mr. Emerson's report is taken forward. Would that have an effect on your finances?

[Perry Pellerin]

No, sir, it wouldn't. Actually, inter-switching for short lines, at least for the Saskatchewan association, really has no impact. It is more, I believe, for producers, grain companies, and that type of thing. For a railway, we would have no impact at all.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

For all witnesses, you don't own many railcars, if any at all, although it's interesting that the B.C. operation still has cabooses, which is a blast from the past. At least I think you have, do you not?

[Frank Butzelaar]

Yes, we still operate cabooses because they really assist in the type of work we do, which is intensive switching and essentially it's a safety element as well. When we are moving a train in a reverse direction, we can put a crew member on the front of that. It's a much safer position for a crew person to be in.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

This is my last question then I'll turn it over to Mr. Badawey.

You see everybody else's equipment coming in. We see issues like what is called “truck hunting” leading to derailments and all the rest, but generally, what are your observations about the state of repair and condition of the material that's delivered to you, the railcars?

[Perry Pellerin]

If I could, I'll speak. We have an aging grain car fleet. I've seen some reports that within the next eight to 18 years there will be over 12,000 cars that will expire, which we will have to replace. As we see those cars coming to us today, they are starting to show their age, but we are very conscious that the rules are in place for us to do inspections on those cars to look for hazardous conditions, but as for concerns for short lines in Saskatchewan, our concern would be how those cars are going to be replaced. Who is, in fact, going to own those cars? How would producers and short lines have access to those cars? Those are things that we are more worried about at this point.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

Are there any comments from others on the state of the railcars you are seeing in your operations?

[Ryan Ratledge]

While they are aging, we have added a few extra mechanical employees to help ensure we are able to correct any deficiencies that are identified while on the railway.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

I'll turn it over to Vance.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you and thank you, Madam Chair.

I have to preface my comments, gentlemen, by stating that I truly do appreciate the services that you provide. I was formerly the mayor of a city for the past 14 years and I negotiated from CN the ownership of a short line and then successfully brought on a short-line operator, Trillium Railway, a tour operation, to the community, which really taught me a lot about the service you provide. You pretty well pick up the scraps that CN and CP leave behind and with that you're connecting those small businesses within pockets of this country into global markets, eventually giving them the ability to get on those short lines.

You're on low-density rail lines, and tax credit type programs, and grants, and revenue opportunities were mentioned earlier.

What I would ask you for is—and I know the answer already, so I'm not going to ask the question—is there a possibility that you can get some of those ideas to this committee so that we can look at the options through our investigation, our review, of the transportation act review, the Emerson report, and look at some opportunities that we might be able to present to you, whether it be opportunities when it comes to leveraging with partners, grant opportunities, revenue-sharing opportunities with other partners, etc.?

Any ideas that you may have, if you can get them to us, and therefore, if the minister does proceed down the road of possibly establishing a national transportation strategy, we can ensure that you're a great part of that, as you should be, because you're actually connecting those small pockets throughout the nation to the markets that they must attach themselves to.

[The Chair, Liberal, Judy Sgro]

Please give a short response if you'd like.

[Perry Pellerin]

I know for the Saskatchewan association, when the review first came out, we did a quick survey of our folks. We know we have 30 million dollars' worth of projects that are shovel ready. We could start within the next couple of months, and we have identified a further $150 million that would be that three- to seven-year type of project. We very much could do that and would appreciate the opportunity.

[Vance Badawey, Liberal, Niagara Centre, ON]

That would be great, guys, and could you also, if possible, within those requests establish with that some returns attached to them, economic returns?

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Badawey.

Ms. Duncan you have five minutes.