Mr. Speaker, when Bill C-89 was in committee I was told by the government's underwriters, Nesbitt Burns, Scotia McLeod and Goldman Sachs, that CN Rail had an accumulated debt of approximately $2.5 billion and that in order for CN to achieve an investment grade bond rating of BBB it would have to reduce its debt load to $1.5 billion.
They then went on to explain that CN had excess cash reserves of $300 million to $400 million as a result of recent subsidiary company sales and actual cash reserves, plus $400 million to $600 million in non-rail real estate assets. At the upper end of these figures was the amount by which the underwriters were telling us the debt had to be reduced. The lower value of these figures indicated that the government might be faced with a cost of up to $300 million in order to reach the debt reduction target that was stable.
It was the stated plan of the government to purchase CN's non-rail real estate assets. In response to my question on how the value would be set, government officials who also appeared before the committee testified that a full appraisal would be completed and that would set the price the taxpayers had to pay to purchase the assets from the company which they already owned.
The wording of the debt reduction clause in Bill C-89 concerned me in that it allowed the Minister of Transport to reduce CN's debt by any amount he chose. I attempted to have the legislation amended to tighten this arbitrary power of the minister but the amendment was defeated.
On May 17, 1995 I wrote to the minister requesting answers to a number of questions which were not clearly answered by the minister in committee. One of the most important questions was the amount of money the minister was going to give to CN to reduce its debt. In his response the minister stated: "The government will undertake only the minimum, if any, debt reduction necessary to facilitate an investment grade rating of CN's debt".
My concerns about the minister's real debt reduction plans were well founded. On August 28, 1995 the government announced that it would be injecting $1.4 billion into CN Rail to reduce its debt. This amount includes a $500 million payment for real estate assets with a book value of $235 million and no appraisals to the contrary forthcoming.
The government pushed Bill C-89 through the House and into committee after first reading. I supported this with the understanding this was meant to make it easier to examine and amend the bill in committee where it is theoretically less partisan. This turned out not to be the case.
I presented many amendments, none of which were accepted in spite of little argument against them. One of my amendments dealing with Atlantic Canada did have the support of one Liberal on the committee but was defeated by a tie breaking vote by the committee chairman.
Given the lack of co-operation that we were led to believe this procedure of sending legislation to committee after first reading would provide, coupled with the deception that took place on the debt reduction, I would be very reluctant to trust Liberal intentions on transport issues in the future.
When Bill C-101 was first proposed I was approached by the parliamentary secretary to the minister seeking my co-operation in not only sending it to committee after first reading, but reducing the first reading debate time to one hour. At that point I had not yet received a copy of the bill nor was I aware of its contents. He informed me that it was not available yet but it was fairly straightforward and simple, essentially nothing more than enabling legislation allowing necessary changes to occur on an as needed basis. We now all know that Bill C-101 is a massive piece of legislation with major ramifications for both the rail and shipping industries.
It seems that this deception also continued into the summer. In a telephone conversation with the chair of the Standing Committee on Transport, I agreed to request submissions from interested
parties over the summer as long as it did not restrict anyone's access to testifying before the committee in the fall. I was assured it would not and that the intent was only to allow us to obtain some of the material during the summer instead of having it all bunched together when we returned in September.
Subsequent to this, several affected groups complained to me about the tight timetable for getting their submissions to the committee. I obtained a copy of the notice sent out from the transport committee under the signature of the chair advising that if they wished to appear before the standing committee regarding Bill C-101 they must send in 25 copies of their submissions to the committee not later than August 31.
At the end of August I sent the following fax to the committee chair:
It has recently been brought to my attention that the notice sent out to interested parties regarding Bill C-101 is written in such a way that has caused many of them to believe that August 31 is a cut off after which we will not accept any submissions. It also implies that if they do not submit a written submission within that time frame, they will not be allowed to appear before the standing committee on this issue.
Neither of these positions were agreed to by myself either as a regular committee member representing the Reform Party or as a member of the transport steering committee. You and I discussed early submissions by telephone and I agreed that it was not a bad idea to request early submissions to be made so that we might be able to review some of them during the summer. As it has turned out, if any such submissions were made, I have not received a copy of them. When I gave my agreement to this early start, it was with the clear understanding that this early submission request would not impede any party's right to appear before the committee.
I trust that this is a misunderstanding on the part of concerned parties and anyone wishing to appear before the committee and/or provide written submission may still do so. After all, we are attempting to determine all the facts and concerns available. Surely, we will not do anything to impede this information gathering process.
The reaction I received from the chair's office is interesting. Through follow up inquiries my office was informed by an assistant in the chair's office that they were preparing a response to my letter which I finally received on September 26.
Verbally and later in writing we have been informed that there has been a tremendous response which makes me curious why these were not forwarded to me as a committee member. I did receive a huge stack of submissions when Parliament reconvened, the very situation summer submissions were meant to avoid.
We have also been told that all stakeholders interested in appearing before the committee are welcome and not subject to a deadline. They advised that 800 letters were sent out, too many for a second letter to retract the false message that had been received and it was up to us to notify any parties concerned with the previously stated deadline and tell them it was not in effect.
As far as the bill is concerned it is long past the time that Canada's archaic rail legislation was revisited. To continue with the existing legislation is simply to ensure economic failure which will affect rail companies and shippers alike. We must move quickly to a market driven competitive system able to compete with the U.S. companies unencumbered by restrictive and uneconomical government regulations.
In the late 1970s the American rail industry was suffering from many of the same problems currently faced by the Canadian rail companies. In 1980 the U.S. Congress passed the Staggers act which deregulated the industry. Since that time the American rail industry has prospered.
Bill C-101 is a half Staggers bill which addresses some parts of the need to simplify rail line abandonment but does not address many of the other necessary components for rail industry prosperity with proper consideration for shipper needs.
The rail industry is quick to point out that we cannot compare ourselves directly to the United States because of differing taxation and labour laws. While that is not incorrect, our approach would be to harmonize these differences instead of bowing to them as unsolvable and tinkering with our problems instead of dealing with them head on.
Rail transportation is essential to get Canadian goods to their markets and to get supplies and materials to Canadian companies. Likewise, economic survival of these same Canadian companies is essential to the rail companies.
Many years ago I remember seeing a cartoon dealing with nuclear war. A single picture showed the president of Russia and the president of the United States both with their heads in guillotines each holding the release rope of the other. If either of them released the rope the blade would fall which would cause the other to release his rope in the ultimate no win situation. That is similar to what would happen in Bill C-101 if the legislation does not consider both sides fairly and pushes them into hard adversarial roles.
Shippers' products must be able to compete internationally with those of their competitors from the United States. A significant component in their cost structure is transportation. If their cost component for transportation is substantially higher than that of their American competitors, shippers are operating under a severe handicap. The potential is that these shippers will use the American shipping system affecting the Canadian economy through job losses not only in the rail sector but at Canadian ports as well,
moving their operations to the United States, or folding their operations if they are unable to market their products at a profit.
The first thing the bill should examine is the reduction or removal of unreasonable cost factors to rail companies. This includes such items as federal fuel taxes, lengthy capital cost allowance terms, application and renewal fees and cabinet authority on rail line abandonment.
We must also address problems at the provincial level. Provincial fuel and property taxation as well as labour legislation impact on the competitiveness of federal rail lines and their ability to divest themselves of low density lines without loss of that rail infrastructure. This issue will not be resolved by ignoring it.
The other main problem with the bill is the lack of a clear sense of direction. The ultimate goal of rail deregulation is to establish a market driven and market regulated industry which can compete with the United States. I recognize this may be a huge single step but Bill C-101 not only fails to allow the market to be the final arbiter over price decisions, it also attempts to block access to the present arbiter through clauses like 27(2) and 34(1).
I could provide much more detail on the deficiencies of this bill and solutions for the problems faced by both the rail industry and Canadian shippers, but the action of the Liberal government to eliminate second reading debate severely restricts the amount of time available.
Be assured I will deal with these solutions in detail at committee hearings and I will ensure that all interested parties have the opportunity to bring their concerns before their elected representatives. I call on the Liberal members to co-operate with this process and agree to deal with the needs of the Canadian transportation industry instead of their own partisan agenda.