Transport Committee on Feb. 8th, 2024

[Prof. Ryan Katz-Rosene]

The first time I was invited to be here, I was actually unable to attend, because I was on one of those trains going to Waterloo. Yes, it's a full-day journey.

I think we can do a couple of things. One is that we can look at improving the existing rail service. There are some interesting ideas on the table about legislation or rules to prioritize passenger rail over freight.

The next thing is that we can restore coach bus lines. They are arguably one of the most climate-friendly and efficient forms of transport. The coach bus lines have been completely gutted in this country. That would be a good thing to restore.

To your point, I agree that we want to see a modal shift into rail and away from vehicles and planes, but those vehicles and planes are going to be around. They're not going anywhere. While we also 100% need to modernize the rail system and focus on that, we also urgently need to think about—this is the transport committee—ways to scale up our sustainable aviation sector. That can go numerous ways. You can focus on the demand-side mitigation, but you can also talk about expanding sustainable aviation fuel production, as the Biden administration has done in the U.S. I know that Air Canada has ordered electric aviation. Supposedly, these electric planes will be in service for short-haul flights by 2028. We'll see if that comes true.

[Chris Lewis, Conservative, Essex, ON]

Thank you, sir.

Mr. Chair, how much time do I have left?

[The Chair, Liberal, Peter Schiefke]

You have 14 seconds left, Mr. Lewis.

[Chris Lewis, Conservative, Essex, ON]

Oh, my goodness.

Thank you very much. I appreciate it.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Lewis.

Next we have Ms. Murray.

The floor is yours. You have five minutes for your line of questioning, please.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

Thanks.

This is a super-interesting conversation. I'm really going to be probing a bit more on the issues of cost and environmental net benefit. Thank you to all of the witnesses for the information you've given so far.

I was seized with the challenges that our government is facing with the Kinder Morgan Trans Mountain pipeline expansion project. This goes through some urban areas like Burnaby. It's a large infrastructure project. In 2013, it was estimated it would cost $5.4 billion. By the spring a year ago, the new estimate was $30.9 billion. That's between five and six times more. It seems to me that there is an inherent risk in these major infrastructure projects that intersect with urban areas and deal with weather, terrain and so on.

For those who model the costs of this high-frequency rail project, what is the risk that there will be an exponential increase in cost compared with what is estimated at the beginning? How do we mitigate or prevent that?

That's a question for Mr. Freemark, Mr. Blackburn or Mr. Katz-Rosene.

[Dr. Yonah Freemark]

The issue of cost control, as my fellow panellist noted, is an issue for countries all over the world. Bent Flyvbjerg has pointed out very clearly that megaprojects suffer from cost escalation and time escalation almost everywhere they are proposed and invested in. I agree that we need public sector transparency and constant vigilance over the scale of the project and over elements of the project that may be unnecessary or designed in a way that is inappropriate.

As an example, I would say that cost benchmarking against comparable international projects is one mechanism to ensure that a contractor is not taking the nation for a ride and not charging too much for the project as proposed.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

Are there other elements of planning that can prevent some of the cost escalations?

What is the time frame that one would expect for the project as envisioned today for the high-frequency rail, and/or the high-speed component as well? Are we talking about 10 years or two years before it's in service, or somewhere in between? What would be the estimate?

[Dr. Yonah Freemark]

I've spent a while trying to understand the government's proposals, which, as others have said, are not super-clearly defined. Based on that, I would assume that there are going to be a number of years of additional planning, so it would be a minimum of 10 years to implementation and probably more like 15 years.

If you're looking at mechanisms to reduce cost, I would suggest that early land acquisition is one mechanism to substantially reduce cost if you know where the corridor is going to be. That, however, requires a lot of planning in advance.

I think a fellow panellist pointed out that it's a better idea to have the plans as well developed as possible from the beginning and then move forward quickly with land acquisition to reduce those land costs.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

In terms of greenhouse gas emissions, I think it was Mr. Katz-Rosene who did some work around the impacts of train travel on the environment. The quote I have in my notes is this: “Taking the train across Canada is worse for the climate than flying.”

My question, Mr. Katz-Rosene, is as follows. Given that this project may not be in service for 15 years and given the speed at which our government is incentivizing the shift to electric vehicles and given the targets for phasing out the use of fossil-fuel-powered vehicles, do the calculations around the climate benefits of this high-frequency rail hold? Do they take into account where the puck is headed, in terms of bringing—

[The Chair, Liberal, Peter Schiefke]

Thank you.

I'm sorry, Ms. Murray, but we don't have any more time.

I ask that if witnesses would like to respond to that question, they do so in writing, following the meeting.

Mr. Barsalou‑Duval, the floor is yours for two and a half minutes.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you, Mr. Chair.

Professor Katz‑Rosene, I've read some of your articles, including the ones my colleague mentioned earlier. In particular, you say that crossing Canada by train would be worse for the climate than flying. You've been interested in passenger rail for a number of years, going back to 2020.

You also talked about the participation of the public sector versus the private sector in the operation of the future rail line in the Toronto-Quebec City corridor, which my colleague would like to see extended to Windsor.

We know that about 90% of VIA Rail's revenue comes from the busiest segment of its network, the very segment where it wants to build the high‑frequency rail line. This HFR project would be carried out with a private partner that is completely independent of VIA Rail. How will the entire VIA Rail network be affected if its busiest section, the one that generates most of its revenue, is no longer under its control?

[Prof. Ryan Katz-Rosene]

Thank you for the question. If I may, I'll answer in English, because it's easier for me.

That's a really good question.

I think it was Mr. Bachrach who pointed out earlier that Via is largely subsidized in a way, and the sort of non-essential coach lines that do use a lot of diesel. Essentially I think there are some real risks for Via's existing services in privatizing this line. I think we want to make sure that these jobs remain within the public sector. I think we want to make sure that these existing services remain on offer. There are some real risks that we could face service cuts outside of Via Rail if this project fails.

I think of it more in terms of risk around this project, this HFR project or HSR project or some combination thereof. We want to make sure this is a successful project in order for it to maintain the existing revenues that it can use to support the existing services—

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Katz-Rosene.

Thank you, Mr. Barsalou‑Duval.

Mr. Bachrach, the floor is yours. You have two and a half minutes. Go ahead, please.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

I'll pick up where I left off, which was on this question of the risk that this project poses to the rest of Canada's passenger rail service if the project proceeds under the current model. Perhaps the question is this: If a private consortium can turn a profit by building high-frequency or high-speed rail, could Via Rail not turn a profit and then take that profit and invest it in the public good?

[Prof. Ryan Katz-Rosene]

Yes.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Would you care to elaborate?

[Prof. Ryan Katz-Rosene]

I think there are some real risks to turning this over to the private sector. We have an existing entity. We have a Crown corporation. We can use that, and use it to our advantage. There are also a lot of real challenges or risks associated with privatizing that entity, one of which is how we value these incredible assets if we're turning them over to the private sector.

I'll leave my comments there, but yes, there's no reason that a publicly owned line could not derive revenues that could support the rest of the service.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

I'll ask Mr. Freemark for his thoughts on that same question around the national picture.

How do we structure this project so that it's in the national interest, not just in the interest of Canada's big cities?

[Dr. Yonah Freemark]

I agree with the other panellist.

The decision to privatize profit and force the cost onto the public sector will inevitably make the other elements of public sector provision more tenuous. If Via is expected to continue to provide service without making profit from the Toronto-to-Montreal corridor, for example, it's going to have more difficulties, especially if a private sector entity is taking up profit from that line.

From an operational perspective, high-speed rail service operations in other parts of the world are almost universally profitable, which means they pay for their day-to-day operations.

That said, it is worth pointing out that this doesn't mean they pay for their capital costs over time; it depends on how the project funding is structured. If the project's profits are being spent on paying back debt service on a line, for example, it may not be possible for even a profitable high-speed line to support other parts of the country. If, however, the national government chooses to pay for the high-speed line with some dedicated source that doesn't incur debt onto Via, Via could use its profit to support other parts of the country.

The key question is on profit sharing.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Freemark.

Thank you, Mr. Bachrach.

Next we have Mr. Muys. Mr. Muys, the floor is yours for five minutes.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Thank you.

I know we've talked a bit about this theme. My colleague Mr. Lewis talked about his experiences in Windsor. It was noted that the ability to connect to the U.S. through Detroit would be a great option for such a line.

However, I'm going to refer to an Order Paper question from my colleague Mr. Ben Lobb, from Huron—Bruce, who asked at the beginning of December when there would be a final report on HFR for that southwestern Ontario line. It was scheduled to come out in late 2023. The response, with the requisite excuses, is that it will come out at some point in time in 2024. We already have a delay.

I will ask each of the witnesses this.

With respect to the ability of government to deliver megaprojects on time and on budget, I do not think it is possible. What are the red flags here? What can we do about that?

[Prof. Ryan Katz-Rosene]

As my colleague pointed out, the mantra in research on megaprojects is that they're over budget and over time, over and over again.

I think of it more from the point of view of which model is riskier. We have some research pointing out that privately run projects and P3s come out looking like a cost-effective or cost-saving measure up front, but they often have a higher risk of project failure, which means that government comes in afterward and essentially has to pay more. We've seen that. We've seen examples of that in Canada.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Sure.

Mr. Freemark, would you comment?

[Dr. Yonah Freemark]

I would recommend that folks check out the example of the Purple Line. That is a light rail project in suburban Maryland outside of Washington, D.C., where a public-private partnership was expected to provide construction and 30 years of operation. That partnership collapsed entirely and resulted in the project having two years of construction and then a pause. Then the government had to re-contract the whole situation. The result was way more money than originally proposed being spent on the project.

This is not to say that a public-private partnership is necessarily wrong. I am not trying to say that. This is to suggest there is no clear evidence that public-private partnerships will definitively produce a project more cheaply and more quickly than a public entity would. There are examples all over the place on both sides.