EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 5, 1995

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[English]

The Chairman: Good morning, colleagues. We move to consideration of Bill C-101. This morning we have a briefing session on Bill C-101 with officials from the Department of Transport. Moya Greene is a face familiar to the committee. Maybe she can introduce those she's brought with her this morning.

Just before you do that, Moya, it is customary for the Chair to welcome any new members who have come to this committee. We welcome Mr. David Chatters, who's the newest member of the committee.

Welcome, David. We hope you enjoy your stay with us, as so many other members of this committee do.

Moya, maybe you could introduce your colleagues and we can get into some statements from you.

Ms Moya Greene (Assistant Deputy Minister, Policy and Coordination, Department of Transport): Thank you, Mr. Chairman.

With me this morning I have Jed Cochrane, Jean Patenaude, and Clyde McElman. Among the lot of us our hope is that we will be able to answer succinctly and clearly all the questions the committee might have for us this morning. If we cannot, Mr. Chairman, we endeavour to get responses to the committee as quickly as possible.

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Perhaps you will allow me to make a few opening comments before we get down to the business at hand.

First, on behalf of the department I would very much like to thank the committee for accepting to review this important piece of legislation so very early in this legislative season. It is a very important bill for the transportation sector and for the reform that the government is proposing across all modes of transport as we move toward the next century.

You will know about many aspects of that reform, because, as you have pointed out, we have been in front of this committee on many occasions in the past couple of years. This bill is important because it will be the primary economic regulation that will remain in place for the transportation sector and it consolidates a lot of pieces of fairly archaic and antiquated legislation.

The objectives of the reform were put quite precisely by the minister yesterday, so I won't go into any great detail on that. Indeed, they are set out in clause 5 of the bill. There is one aspect, though, that I think bears a little bit of reinforcement. It is that, as clause 5 states, economic regulation should be used only where it is necessary, which is where the competitive and the commercial forces of the market are inadequate or are incapable of moderating the relationships between the parties. That is set out in clause 5, and it has been there for some time.

At various occasions in history, in 1967 and 1987, we have looked afresh to ask ourselves if we have the right balance in place between what is necessary in terms of economic regulation and what can reasonably be left to commercial forces to mediate the transportation relationship between the parties.

That really is what we're about with this new bill.

I wanted to stress that, because, even though that has been an abiding objective of previous reforms, it is the guiding principle again today for this bill.

So, for every section of the framework that was in place, we asked ourselves, is this regulation still necessary? If the regulation is drafted and if we say that it is necessary, then is there a way in which to write it so that we will encourage the parties to take over more of the subject-matter that might be covered by that aspect of the regulation?

When we looked at the bill, we found that there were still many items in the NTA 1987 that probably were no longer needed. We found that we were purporting to regulate motor vehicles when, in all cases but one, the matters were handled under separate legislation and by the parties themselves. We found, for example, that we had not given sufficient weight to the maturity of the industry and the ability of other generic legislation to look after particular concerns. So, for example, we had provisions in the Railway Act that purported to regulate the corporate affairs of railways in a manner that was very different from all other corporations in Canada and at a time when there is general, modern corporations legislation on the books. We found in the 1987 act we were probably too timid with the application of general competition law and competition principles as they apply to the transportation act.

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When we looked through the 1987 bill, we found a number of redundancies. We found a number of places where general business legislation could be made to apply more directly. One of the things we therefore attempted to do was to reduce the weight of regulation if it was covered off adequately in some other area.

What the 1995 bill attempts to do is to strike, as I say, a new balance between what the parties can and should do themselves in the marketplace, what should be matters of government policy left for Parliament to decide, and what must remain a matter for the regulator to be involved in. As I have been involved in this process now for several years in consultations across the country, in very detailed discussions on how best to find that new balance in the bill, and in the reading of the briefs that are before the committee, there are five or six items that are likely to be items of prominent discussion for the committee.

One concerns the agency powers. In finding this new balance among commercial decision-making, economic regulation, and government policy-making, has access to the agency been given short shrift? As the first item I would like to address in my remarks, Mr. Chairman, I'd like to give you our thoughts on this.

I think if you read the first part of the bill, you will want to ask yourself, well, in response to this claim that access to the agency has been given short shrift or curtailed, does that seem correct or accurate to you, when you consider that the agency, under part I, has all the powers of a superior court? Under part I the agency can subpoena witnesses, can inquire into any complaint that is laid before it. The agency ``must'' decide the matter. The agency does not have a discretion to say ``well, that one I'm not going to look at''. The agency must decide the matter, and must decide the matter with dispatch.

The agency can make regulations on its own to govern its procedures. The orders of the agency are enforceable in a federal court, as if they were orders of the federal court, such that the normal procedures.... If you were to ignore that order, the normal procedures that apply to court orders can be brought to bear.

The agency will have its own powers to construct new penalties to enforce its decisions. The agency can inquire into a matter even if some of the facts that are in dispute are before another court. The agency is not constrained in its ability to hear the matter.

Most importantly, under clause 38, the agency has to hear any complaint, on any matter or act that is the subject of this or other pieces of legislation under its jurisdiction, and the agency shall make a decision. Under clause 29 it is obliged to hear it, obliged to decide.

Where I think you're likely to hear some concern about agency powers relates to subclause 29(2), where Parliament would give guidance to the agency; guidance on when restraints in decision-making should be exercised. That is all that subclause 29(2) does. It does not allow an agency to say it won't hear a complaint, it won't decide a complaint or it won't decide the complaint quickly. Subclause 27(2) simply tells the agency that when making a decision on a complaint, it should be restrained if there is no interest seriously at stake - if there is no significant prejudice.

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So when this honourable committee comes to look at subclause 27(2) - and it was already raised in the discussions yesterday - I would ask that you look at it in the context of the agency powers and ask yourself whether this curtails access to the agency or gives guidance to the agency to reinforce what is already an objective in the act.

That is to say, economic regulations should be used in places where competitive commercial forces are inadequate. So it is guidance on restraint, not to turn away a complaint, not to refuse to decide, but in the context of making a decision it should be one of the considerations.

The Chairman: Excuse me, Moya. I don't want to slow the process down at all, but because there are five or six items, if anyone has a concern or a question they'd like to ask at this particular point, maybe we could do that.

Ms Greene: Certainly we can engage in a bit of debate.

The Chairman: That way we can stick with a theme as we go.

So if anybody has a question at this point on Moya's opening remarks or on the agency powers, just give me the signal.

Mr. Fontana (London East): I have just one question. It relates to the size of the agency - it's going from nine to three, I believe, with some part-time members - and the fact that the agency itself will be composed of something around 200 people in its final form.

Do you feel, given the mandate it still will have with the coming of this bill, that it will have sufficient resources and representation on its board to fulfil that mandate?

Ms Greene: Yes, I do, Mr. Fontana.

You will all know that the agency, in addition to its quasi-judicial functions, used to have a fair amount of administrative duties. It had to administer big subsidies with lots of claimants. That was not really a quasi-judicial function but an administrative function.

You will know that the agency had to accept all kinds of filings, even though it didn't do anything with them. The law made the agency accept those filings. With the budget, these subsidies are discontinued, so a lot of the resources of the agency that had been devoted to these kinds of administrative actions are simply no longer required.

On the matter of three members and part-time members, in discussions with the agency it was felt that this is perhaps the most flexible way of going at the agency's residual and core quasi-judicial functions. Looking at the number of actual complaints the agency has to decide in a given year and looking at the ability of the government to increase the number of people who would be available through the roster of temporary members should something unusual occur so that there would be a backlog of complaints, I'm very confident that the agency is resourced with a sufficient number of people and will have a sufficient number of decision-makers available to it to deal with it.

The other thing I would point out is that our agency is a large agency for reasons that are perhaps justifiable. Over the years Canadians have come to rely upon the agency, quite rightly, for a range of things that in some cases are still necessary. But relative to the size of the agency that exists in the United States for similar functions, it is still almost the same size.

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In discussions I've had with the minister...the minister is very anxious that the agency never be put in a position where it cannot expeditiously deal with whatever is in front of it. Part of helping make sure the agency can deal with dispatch with things in front of it is the things found in the bill: that the agency shall make decisions within a certain timeframe and that the agency should be empowered to award costs against somebody who would use its process unnecessarily. But in addition, the minister wants to make sure the agency does have access to resources to enable it to get on with that timely decision-making. Relative to what has to be done, I am very confident those resources are there.

The Chairman: Mr. Gouk.

Mr. Gouk (Kootenay West - Revelstoke): I'm curious about the concept of the agency expeditiously dealing with things that come before it at the same time as clauses such as subclauses 27(2) and 34(1) place obstacles in the way of getting things to them in the first place. Right now if there's a dispute between the shipper and the railroad, the process allows it to go to the agency, period, and then it is dealt with in one way or the other. But the concept of significant prejudice means there has to be some process, as yet undefined in what I've seen, that says there has to be someone else who goes through a determination, first on what the significant prejudice really is, and second, on whether or not significant prejudice occurred. I don't know what that process is, I don't know how long it will take, before it can eventually make its way to this expeditious handling.

I also still think you're working in conflict between subclauses 27(2) and 34(1). Subclause 27(2) provides a potential roadblock in getting something to the agency. It says we may or may not look at it, depending on whether or not it's judged to be significant prejudice. Then you're providing another clause that says if you bring something before us that is frivolous and vexatious, we will penalize you for it - having said in an earlier clause if it isn't significant prejudice we won't even allow you to bring it before us in the first place.

I'd like to have some of those things cleared up.

Ms Greene: There is a misconception that I think it is very important the committee get on its table early. Subclause 27(2) does not entitle the agency not to deal with the complaint. The agency is required by law to take complaints and required to make decisions.

Subclause 27(2) is not an obstacle, in the sense that you don't have to prove a significant prejudice in order to get access to the agency. That's not how it works. You can go to the agency on any matter and the agency must decide.

If you look at the language of subclause 27(2), it simply says ``in its decision''. So the agency has accepted the complaint, because it's obliged by law to do so. The agency is making a decision because it's obliged by law to do so. In its decision the agency must consider whether or not this is a matter that raises a significant prejudice. There's no need for a process.

I would submit to you, Mr. Gouk, that if there were a process, you could fairly argue that it was an obstacle or a roadblock to the agency. But if you look at clause 38, they have to hear a complaint. If you look at clause 30, they have to hear that complaint even if a fact is in dispute in another forum. They can still go on.

Subclause 27(2), if you look at the wording of it...and it's well to read it in terms of subclause 27(1).

The agency has always been empowered to grant the relief, in whole or in part, it thinks appropriate under the circumstances. Subclause 27(2) says the application is made, the agency may grant the relief in whole or in part, just as it always has been able to - that's at the discretion of the agency - and then there's a bit of parliamentary guidance, meant to reinforce the objectives of the bill. It says ``in the decision''. Please satisfy yourself, agency, that there's a significant interest here that would not be satisfied if you didn't give the relief people are asking you to give.

So there's a misconception that this is a roadblock and this is a process. I am not going to say to this committee that simply because one is industrious you've done a good job. That's for you to decide: whether at the end of the day, in finding that balance, we've done a good job. But I will say the concern about a roadblock was certainly heard by those who were involved in drafting. And it was accepted: we certainly don't want to put a roadblock to the agency.

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We considered other alternatives that the committee also might want to keep in its mind.

Right now the act says that the agency must accept all complaints, and it must accept complaints from all classes of shippers, whether they're captive or not.

There are captive shippers in this country, but there are far more in the country who are not captive. They are not captive to a single railroad or to a single mode of transport.

So we felt maybe what we will do in this effort at regulatory reform is narrow the classes of complaint that can have access to the agency. People did not want us to do that.

The other alternative we considered was to narrow the class of shippers that can go to the agency. Only captive shippers, for example, would have access to a regulatory remedy. People did not want us to do that.

We said if all classes of complaint from all classes of shipper can go to the agency and if the agency will be legally obliged to accept them and to deal with them and make a decision on them, is it inappropriate to provide a little bit of guidance to reinforce the objectives of the act?

In your decision, yes, take the complaint. Yes, decide it with dispatch; don't put up a roadblock to anybody. Take the complaint, decide it with dispatch, but consider if a significant interest is at stake.

On frivolous and vexatious, I think they deal with slightly different things.

Remember, the agency has the complaint. It must take the complaint. The agency has to make a decision and do so within a period of time. The law requires the agency so to act.

On the basis of what I know, most cases are legitimate. But, Mr. Gouk, you know that there have been very protracted proceedings in front of the agency in certain cases, proceedings that did not help to tease out what the issues were, did not help the agency to come to its ultimate determination, only served to delay, only served to cost the parties money.

If you look at the civil procedure handbooks of this country, almost every court in the land is able to control that kind of misuse of its process by saying to people: you have a legal right to come to us and we are legally obliged to decide your case, but if you cause the process to be a frivolous and vexatious one, then we are going to ask you to pay costs. This is standard for almost every kind of procedure that is carried out across the land. It's not a roadblock, but it is an indicator that you get the agency, you get the decision, but if you're found to have delayed the agency in an untoward way and caused people to bear unnecessary legal costs in the process, then you will be asked to pay.

The Chairman: Thanks, Moya.

Mr. Guimond.

[Translation]

Mr. Guimond (Beauport - Montmorency - Orléans): Ms Greene, I missed the beginning of your presentation. Subsection 7(2) says that the number of members in the agency will decrease from nine to three, but that they will still be appointed by the Governor in Council.

You have studied the legislations that exist elsewhere in the world. Wouldn't it have been time to innovate and adopt a procedure different from this antiquated partisan nomination process? In the Bill, you could have tried to innovate by setting up a process of appeal for the nominations; we hire the services of a head hunter who systematically evaluates the candidates and we hire the best person.

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Why are we keeping such a system, which is worthy of 1867 and the early days of Confederation?

Ms Greene: Mr. Guimond, if I may, I will answer in English because I will then be sure of being able to carefully qualify my answers.

[English]

I really think that's a question you should put to the government. As you point out in your commentary and your remarks, it is standard; it is exactly how appointments are made to all bodies of this kind. It has been the practice for, lo, these many years.

I personally don't believe it is accurate to say that because the Governor in Council appoints, people are not qualified. I don't agree with that. My experience with Governor in Council appointments is that far and away, in the vast majority of cases, concern is taken to ensure that people are qualified.

You can take issue with Governor in Council appointments, but that's the standard way in which these appointments are made, for this agency and others.

The Chairman: Is there anything else, Michel?

[Translation]

Mr. Guimond: Section 48 refers to extraordinary disruptions. Can you give me examples of what is meant in paragraph 48(1)(a): ``other than a labour disruption''? Are we to understand that a labour disruption will not be considered as an extraordinary disruption? Can you give me an example of an extraordinary disruption? What is meant by that?

[English]

Ms Greene: Clause 48.... This came up yesterday as well, and if you would allow me, I would like to put it in a bit of context.

As the government makes a decision to withdraw from the day-to-day overseeing of commercial entities such as railways and airlines, and to allow more breathing room for the marketplace to mediate the relationship; as the government reforms the regulatory scheme and deregulates, if you will; and as the government tries to move out from its direct bailiwick parts of the transportation sector that historically have been owned and operated directly by government, by people appointed directly by government, the government cannot lose sight of the fact that even though it is very remote as a possibility, it does not wish to abdicate entirely a sense of concern about the good workings of the transportation system, which is critically important to Canada's economy, and particularly to the trade of the country. This clause is designed to allow the minister in really remote, unusual, extraordinary circumstances, and working with the minister responsible for competition, to get that measure, in the short term, of breathing room in the face of an extraordinary disruption of the system, should that ever arise, to allow the government to consider what, if anything, needs to be done.

You asked me for examples. I'm loathe to suggest examples of when it might be used, because it's hard to foretell. But the structure of our industry, as you know, Mr. Guimond, is that on the air side we have two dominant air carriers and on the rail side we have two dominant railways. Let us say, God forbid, at some time in the future both of them were to come into such perilous financial circumstances that you would be faced not with an ordinary bankruptcy of a single company but with a disruption affecting a whole mode, or the sector in general.

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In that case, what tools does a government have? Well, some may say, so be it, the government should shrug its shoulders. I think the importance of the sector is such that you as parliamentarians would not be able to shrug your shoulders if that extremely remote kind of eventuality were to occur. You would have to ask, is there anything we as a government need to do here? You may need to give yourself a very narrow window - a sixty-day window - of breathing room to bring together, for example, parties in the whole sector that may be facing this extraordinary disruption. If you could not bring them together, you could not even know whether or not this is a situation where government has any interest, has any reason to act.

So this provision, as the minister said yesterday, will likely never be used, because the parties in the industry are mature and reasonable people. But given the regulatory reform that has been going on in Canada now, progressively, for twenty years, and given the structure of our industry, in the remote circumstance that such a disruption were to arise, the government needs to give itself a very, very narrow, controlled latitude, with the supervision of the houses of Parliament, to act.

I wanted to spend a few minutes giving you my thoughts on agency powers, the meaning of significant prejudice, and costs against anyone who would misuse the process. I wanted to spend a few minutes talking about other items that are likely to be prominent items in front of the committee as you go through the debate.

Shipper protections. In trying to find a new balance between regulation, government policy, and commercial action, have we left shippers in our country who are very reliant on transportation, particularly rail transportation, in the lurch?

The first thing I would see is that under the NTA of 1987 shippers won quite extraordinary protections in Canada. I think they recognized their position in the historical tension there has been in the relationship with rail particularly. They won a manner of regulation that attempts to mimic competition. This is notable in competition line rates and it's notable in the interswitching provisions.

In addition to that, shippers won the extraordinary right to bring any dispute they have to final offer arbitration and to have it settled. Final offer arbitration, as you know, is an unusually designed form of arbitration, because it's designed to try to get the parties to put their best offer on the table and thereby come to their own decision. But in the event that they can't, they won the right to have a dispute submitted to final offer arbitration.

This is unusual not just for transportation.... This really does not exist for other services or goods that are sold in the economy. You might be able to negotiate that commercially, but to have the law say you have a right to it is unusual. It's also unusual in relation to what is available to transportation shippers in other countries.

Very early on in this process the minister made a decision and a commitment that although these rights impose significant obligations on Canadian rail that don't exist in other modes, that don't exist in other sectors, that don't exist in other countries, the minister did not want to curtail these hard-won rights, because the minister knows shippers feel even if they do not use them - they do not come to the agency and ask that a CLR, a competitive line rate, be imposed - the fact that these protections are there helps shippers in commercial negotiations with railways and that help has had a benefit for shippers, so that benefit ought not to be constrained.

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What you are likely to hear is on the one hand there are real advantages to short lines being created in the country. It sometimes allows the continuation of service in areas where otherwise it could not continue, because it's just not economically viable. Many shippers will tell you that short lines have closer access to the local shipper and therefore deliver flexible, better service for shippers. So on the one hand you're going to hear we do want to encourage short line creation in the country.

But you're also going to hear concerns that the very important protections - competitive line rates, interswitching and final offer arbitration - have somehow been constrained. I would ask you to look at the provisions.

The bill makes it clear that competitive line rates, interswitching and final offer arbitration are available. They are available, even in the presence of a short line, for whatever portion of the line still remains under federal jurisdiction, because that's the only thing a federal law can do. For whatever portion of a line is still under federal jurisdiction, competitive line rates and interswitching apply, and in any event, final offer arbitration is available, not just for rates but also for conditions of service. These protections are available whether or not you are in fact captive to the railroad.

So when the concern is raised, which is a legitimate concern, I would ask you to ask yourself this question: As far as it is possible for a federal law to do so, have these protections been continued? I hope you find, with us, that the answer is yes.

I have one more word about final offer arbitration. Final offer arbitration is truly an extraordinary remedy. It has been available since 1987. Thankfully it hasn't actually been relied upon in all but one or two cases we know of. But access to it, I believe, and others will tell you, is very important, again, so that negotiation goes on as smoothly as possible. The threat of it is sometimes enough to get a deal to cement for you where it would not otherwise.

In the bill, the government is proposing that final offer arbitration be enhanced and improved. Some complained that if, heaven forbid, we do have to rely upon the process, it takes too long. So the bill proposes that the timeframes be brought down from 120 days for a decision to 90 days for a decision.

Then the government decided that there may now be new circumstances analogous to the concerns shippers raised in 1987, which gave rise to final offer arbitration, that should also have access to final offer arbitration. For example, where municipalities are trying to negotiate with the large railroads for the commuter rails, or where VIA Rail is trying to negotiate for train services agreements with CN, they could be in a situation where the railroads would exercise a heavier hand than would otherwise be the case if access to final offer arbitration were not available. Therefore the new bill enhances final offer arbitration in that way.

But final offer arbitration is still designed to encourage, first and foremost, a deal. The way it's structured, the arbitrator doesn't have a lot of discretion. He can't say ``I'm going to tell you what I think is the most reasonable thing here and impose that''. He must take the last offer of one or other of the parties. In that sense it is the fear that the other guy's offer will be accepted that is the greatest encouragement to try to get a deal yourself.

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Some would say that in the process we should not allow the railways to respond in ten days to the final offer of the shipper, but it is the shipper who is claiming the final offer arbitration. So if we're going to try to encourage that a last-ditch effort be made to get a deal, the proposal is that after the shipper has put his final offer on the table, the railways will be given ten days to say whether they will buy it or not.

The Chairman: It's question time. I'd like to kick it off on this one. In some of the briefs we're receiving from the shippers, the shippers are saying they're afraid that subclause 27(2) will apply to final offer arbitration.

Ms Greene: Subclause 27(2) applies only to agency decisions. It does not apply to final offer arbitration. Final offer arbitration is not a decision of the agency. It is a decision of the third party that the railway and the shipper agree to. It's not an agency decision, and therefore whether or not there's a significant prejudice to be protected through the regulator's decision is simply not applicable to final offer arbitration.

The Chairman: Thanks, Moya.

Mr. Gouk: At some point later on I'd like to go back for a supplemental on subclauses 27(2) and 34(1).

Dealing with what you're talking about right now, specifically final offer arbitration, in the general concept I think it's a good process. I think it has a lot of merit. But I have never heard of any other explanation for final offer arbitration except, simplistically put, each side decides their final position, thus the name. Each submits that final position. Then the arbitrator selects either one or the other.

The process currently being used and, as I understand, that will be continued in Bill C-101 is the shipper submits blindly their final position. The railroad then looks at it, studies it, decides what they can do and makes their final offer based on the knowledge of what the shipper has submitted. Is that the current process? Is that the process the Department of Transport intends to be continued under Bill C-101?

Ms Greene: Yes. I'd make a distinction, though, between the process and the actual decision, Mr. Gouk.

If you think about it, much negotiation has gone on before a shipper gets mad enough to say ``That's it. I'm going to the agency to ask them to appoint an arbitrator for me.'' That, shippers will tell you, is how it actually works.

Let's say a shipper does get mad enough and says they're going to get an arbitrator appointed. The objective of having final offer arbitration in the bill in the first place is to encourage the parties to come to their own deal as much as possible. There are three ways to do that.

One is the threat that the arbitrated decision you end up with will be a whole lot worse than what you and the other party had on the table in the negotiations that led up to it. That's the biggest incentive to get to your own decision.

Number two is the arbitrator can't make up his own mind about what he thinks is reasonable; he has to pick one or the other of the parties. If the parties are way apart, the fear on the part of one of them that he's going to pick this one, which seems totally outrageous to that party, is enough to start moving the parties, in a negotiation sense, closer together.

The third way in which the provision is designed to get people to come to their own deals is it says that after a certain period of time you're into the process of arbitration and you can't pull it back. When does that start? When is it that you can no longer say you're going to negotiate this yourself?

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Well, if the shipper is asked, you put your last ditch on, you give the railway a chance, ten days last ditch to reply to you, the shipper can then decide, I'm either going forward with arbitration, it's still not good enough, or I'm not.

That's the purpose of the ten days. It's another mechanism in the process, as opposed to the decision, to encourage the parties to come to their own negotiated result.

Mr. Gouk: As an example, if I were looking for a raise in the industry standard on behalf of whatever organization I represent, say that there's a standard out there that can be measured that says the average raise should be $10,000. The employer is offering nothing. I'm greedy; I'm asking for $20,000.

So I submit my final offer, which says I want a $20,000 raise for my group. The employer gets to look at it and says, well, we're both $10,000 out, so all I have to do is raise it and give them $1,000; mine is closer, and therefore I will prevail. The other doesn't get a chance to have that same access.

That is not final offer arbitration. That is some hybrid version of it, which gives a clear and distinct advantage to the side that gets to review what the other side has put in blindly. It does not have the opportunity to have that same advantage, unless it is prepared to go back to the other and say, here is the rail's final position; do you want to modify yours?

If you're really interested in modifying and making a hybrid process out of this to get them back together, then why not go back to the shipper? If you don't, then what you have is not final offer arbitration in the traditional sense and it's clearly biased to one side.

Ms Greene: I think you put to me an interesting point in the case of just wild offers, not serious negotiation offers.

Does the opportunity for the railway to have a final kick at the can before being pushed to final offer arbitration give it somehow a bit of an upper hand? I'll have to think about that.

If, after speaking to everybody here, you come to the conclusion that it doesn't encourage the parties to avoid the process - which is what we're trying to do, to use a process to avoid a process - then, in the spirit of what the minister has always said, we certainly would be very interested in having the committee's views on that.

Mr. Fontana: I'll leave final arbitration for a moment. The fact is that in the system, as Moya has indicated, since 1987 that has been in place. The fact that it has been used only twice in eight years indicates that, in whatever form, it does work. I think it's the threat of final arbitration, in no matter what form.... I can understand where Jim's coming from, and we might want to discuss that. But, in fact, obviously that mechanism is working. So I'm prepared to be open to it too.

I want to get to the nuts and bolts of the CLR, the running rights, or the interswitching. You didn't cover running rights, but you will the next time.

Ms Greene: I was going to get to it.

Mr. Fontana: Yes, you'll get to it.

This is what this bill is all about in terms of the economic deregulation. It has been said that in 1987 - I wasn't around then - that was the shipper's bill, that that was an opportunity for the government at the time essentially to put some balance back into what was perceived prior to 1987, which was all in favour of the railroads. What we've found out since 1987, because we live not in a modal-competitive environment.... We also live in a North American competitive environment, which means that we have to stack our railroads up to the American ones and other transportation modes. If we don't get it right in terms of that transportation mode, namely rail, and if the unforeseen happens, which means that both railroads can compete, then we won't have transportation in this country.

If we don't have transportation in this country, then everything else, including shippers, will go down the tubes, because unless we can move our stuff, nothing else happens.

I know that that's the balance we're trying to achieve here. I want to talk about whether or not, if you've given the proponents, shippers and railroads and everybody else, final arbitration as a way of negotiating....

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I can understand why the CLR is there, and the interswitching, which essentially means that you want to have that as a safeguard for the shippers. But in the true marketplace, if they have that opportunity under final arbitration to take it, why do you need the CLR and the interswitching and all these economic regulations that in fact might make it impossible for the railroads to compete with their counterparts, be they trucking, railroads in the United States, or anybody else?

So while we're trying to achieve the viability of railroads, because that's key to the transportation sector, all of a sudden we put those things in place. I can understand why, but in trying to create that balance have we gone far enough vis-à-vis our ability to be able to compete with railroads in the United States that can operate at least 20% better off than we can? We have to worry about that.

My point is that if you have final arbitration, why do you need all these other things? Leave that to the parties to negotiate in good faith.

Ms Greene: That, too, is a very good point, because there's no question that for the agency to be imposing something called a competitive line rate and to be imposing rates at every interchange to interswitch traffic, causing a railway to lose what is most revenue advantageous, which is a long-haul move, and actually turn its traffic over to its competitor, is extraordinary.

The government believes that, certainly for the shippers who are captive to rail, it is a creative regulatory mimicking, if I can put it in that way, of a state of competition. It says you must quote the rate for the short haul and you must turn your traffic over to your competitor if that's what the shipper requests under the circumstances. The fear of that is enough to cause railways to negotiate harder than they otherwise would.

There's no question that, given the financial state of rail in this country and the importance of rail in this country, any government would have to be concerned about the ability of our railroads to be viable in the future. I think, though, that when you look at the whole package of the bill and you look at the other measures the government has taken to try to cement a new and better labour relationship in rail, to try to remove the weight of regulatory burden that prevented the railways from having a plant that best suited their needs, it probably balances the extraordinary rights in competitive access and interswitching.

Yes, you could probably leave everything to final offer arbitration. Conceptually it's possible. But in crafting any bill, as members of the committee know better than I do, lots of interests have to be accommodated. We have had these competitive access provisions and interswitching provisions since 1987, and shippers are very concerned that they should be there for some time into the future.

Mr. Fontana: I have a quick supplemental that relates very much to this.

Obviously we want to create short lines in this country, because, as you said, there are great benefits when those occur. But when a short line is created on part of a main line or on a piece of track, CLR, interswitching, and final arbitration - because the short line I guess won't be under federal jurisdiction, but in most cases it will be under provincial jurisdiction - won't prevail. This essentially means that what happens with a short line under provincial jurisdiction to negotiate with the shippers negotiating with the short-line rail on CLR, interswitching, or even anything, because it's not going to be under federal jurisdiction.... We're assuming that the provincial governments will have to pass parallel legislation to protect the shippers on the short line under provincial jurisdiction.

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Ms Greene: I would not advise provincial governments to do that, but certainly they could do it.

I think what's going to protect the shipper in the presence of a short line is this perspective: if the short line had not been there, there would probably be no service on that segment of the line.

Secondly, a short line regulated provincially is probably a lower-cost alternative than the main line was, and some of that lower cost is going to be reflected in the rates the shipper is going to get.

Thirdly, the shipper knows that as soon as he gets to that interchange point where the federal system begins again, he has access for the rest of the move to competitive line rates, and for all purposes to final offer arbitration.

So the protections the shipper has for the short line segment come from the nature of short lines, from the presence of short lines, and from the lower-cost alternative that short lines present.

The protection the shipper has if he's dealing with main lines comes from the fact that Parliament took the view in 1987 that these are big guys and they're probably not always as fair as they might be in the marketplace, so here's a regulatory mimic of competition so that you'll be able to negotiate harder and better with them. It's a different kind of protection, but the protection is still there by the very presence of the short line.

The Chairman: Thanks, Moya.

For those who are just joining us, Moya is touching on five or six prominent discussions that are going on about the bill. She's already done agency powers and now we're at shippers' protections. She's also going to go into short lines and interswitching, running rights and those kinds of things.

So if your questions have to do specifically with shipper protection, go ahead. If they're on some other matter, you might want to wait until that particular hot point is discussed.

Mrs. Cowling (Dauphin - Swan River): My question somewhat ties to the questionMr. Fontana just raised. It's with respect to running rights and short lines.

I just recently got back from Washington, and it's my understanding, from the representatives I met there, that Burlington Northern has pushed its rates up quite high. That concerns me when we talk about competition. What is your perception of that?

Ms Greene: If a shipper is captive to a railway, obviously that means the railway is in a monopoly position vis-à-vis that shipper. If that's the case, the railway is in a position to extract a higher rate than would be the case if the shipper could turn around and go to somebody else.

In the United States they do not have these regulatory protections, these competitive line rates or these access protections. In fact I don't know of any place where they exist the way they do in Canada.

In Canada they're there for exactly that kind of situation. Where a shipper is at risk of being exploited, in a rate sense, by the railway because the shipper has no choice except to use that particular railway, the competitive line rate says as soon as the shipper gets to that interchange, he can transfer his traffic over to a competitor, wherever one might arise on that route.

In the United States I think it's true that in cases where shippers are truly captive, rates are higher. That is the benefit of the competitive line provisions in Canada that just simply aren't there in the United States.

I should add that in Canada competitive line rates apply whether or not you're captive. You don't have to be captive to get them.

Mr. Gouk: I have two questions, one dealing with public interest and the other with running rights.

The Chairman: Jim, we haven't touched on running rights yet. She's going to come to that hot point.

Mr. Gouk: Okay, well, I'll just deal with the public interest then. I'm having trouble keeping up with where we're going.

You were either part of or certainly aware of the negotiations - sorry, the consultations; they were not negotiations and I don't wish to infer that there were any commitments made - that went on between the rail companies and certain shippers this spring. Is it not true that during the consultation sessions the railways had tentatively agreed to remove all public interest tests in the new legislation, including the public interest test relating to running rights? Was that not something -

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Ms Greene: That's not my take on what happened. In a consultation session where there are lots of things on the table, just as there are here, all kinds of working ideas are put forward, different ways of solving the same problems are raised. None of them get boiled down to what you could say is a consensus view, meaning that you say, ``Okay, the alternatives are on the table; here's the way we should go''.

It is certainly not my take. In fact, I'm going to be more emphatic: railways never agreed in my presence that the public interest test could be removed in all cases. We're going to get to it, but they certainly never agreed to unlimited mandatory running rights.

Mr. Gouk: So it is a qualified denial.

The Chairman: Point three, Moya.

Ms Greene: Before we leave what are called the competitive access provisions - competitive line rates, interswitching, and final offer arbitration - I'd like to say a word about ``commercially fair and reasonable'', because that's another item you're going to hear a fair bit about.

Again, as our colleagues on this side of the table point out, the competitive access provisions are extraordinary regulatory remedies - very useful for some shippers who might otherwise be exploited, but extraordinary. If the regulator is going to be called upon, and if the regulator is going to be called upon to impose a rate, whether it be an interswitching rate or a competitive line rate, not just for a shipper who's captive, because these rights are for any shipper in Canada, and if we are concerned about rail viability in the future, what this provision attempts to do is to again give guidance to the agency that in taking over the commercial negotiations and in imposing that rate on the railway, it should please make itself sure that what it's imposing is commercially fair and reasonable.

Shippers will tell you that this curtails access to the remedy. It is my opinion that that is an inaccurate view of the guidance in ``commercially fair and reasonable''. ``Commercially fair and reasonable'' is a simple guideline to the agency that says, ``Okay, we agree that this is a time when regulation is needed'' - which itself is extraordinary - ``You can take it out of your own commercial hands and you, the agency, can set the rates here. But make sure that it's commercially fair and reasonable.''

If you will look at the clause, the question that I would ask you to ask yourself and to ask others, under the circumstances of a rate that's imposed, not just to protect those who are captive but at the behest of any shipper, is this: is it justifiable under the circumstances that the agency's decision should be guided by what it considers to be fair and reasonable?

Those are my comments with respect to the competitive access provisions.

Mr. Chairman, if you agree, I propose to go to running rights and common carrier obligations.

The Chairman: Thanks.

Ms Greene: You probably won't hear very much about common carrier obligations, because the common carrier obligation in the bill is exactly as it has been for many years. But I want to say a little bit about common carrier obligations to reinforce the view that shippers who feel exploited by railways still have extremely ample access to a regulator.

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The common carrier obligation - in your bill it's called the level of service obligation - allows any shipper to complain about any aspect of the service, rate or facility he is seeking to obtain from the railway.

This section has been held in the bill in its entirety, word for word, to the way it was. It gives the agency powers to hear the complaint and to, if need be, order even the construction of works to satisfy the agency. So at the end of the day, the obligation on Canadian railways to provide service is an obligation that goes well beyond what the railway as a commercial actor looking for business would seek to provide in the marketplace. In fact it goes well beyond what the old common law - the judge-determined law - would have imposed on the railway.

But it has been there a very long time, and as I say, the minister made a decision early on that he did not want to curtail access to the agency. Although he would want it to modernize and try to treat the railways as normal business, anxious to get business and anxious to keep business, he wanted to do so in a way that didn't leave someone in a very vulnerable position.

For that reason the common carrier obligation has been left in place word for word. It was the subject of considerable discussion as part of the consultations. As officials, we originally proposed that we simply remove it. We felt it was antiquated and treated railways as if somehow they were public utilities with guaranteed rates of return that could have imposed upon them by a regulator a notion of acceptable service well beyond what would have been provider-supplied in the marketplace.

That was not an acceptable position to shippers. They believed that in addition to competitive access provisions it was necessary to have this in place. Given the balance that seemed achievable at the time, the minister ultimately agreed with that position.

The reason I raised that is I started out by talking about the balance between what the regulator should do, what the parties should negotiate themselves and what the government should hold itself in reserve to do if, but only if, need be.

One of the things we were trying to balance was the extent of the overall regulatory burden on rail. In each and every case we were asking ourselves whether this was still necessary. Shippers, on the other hand, wanted to have a new opportunity to review what was in place from the perspective of whether they were adequately protected. They asked themselves if they could be protected more by the regulation. It is from that perspective that shippers raised the possibility of running rights. This gets to your question.

As you know, the act has always had a provision that allows the agency to intervene and order running rights over and for federal carriers, because that's the jurisdiction of the act. In the consultation we considered whether or not it would be appropriate to change that. Some shippers would have liked short lines to have running rights over main-line carriers - not just running rights that the short line and the railway would negotiate together, but running rights that could be imposed by the regulator.

Well, we did consider that. There were technical difficulties, because the federal law is the federal law, and in many cases short lines are regulated by provincial governments. We certainly worked quite hard, but it wasn't clear that we could overcome that technical jurisdictional difficulty.

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More importantly than that, when we spoke to short lines, the majority of them said, ``Wait a second. That misconstrues the nature of the relationship between a short-line railway and a main-line railway.''

In most cases, the relationship between a short-line railway and a main-line railway is a cooperative one, as opposed to an adversarial, competitive one. So short lines were not pressing that they should have running rights over main lines.

On the other hand, main lines were extremely concerned that government would purport to give a regulator the right to order that they open their plant to a short line that might have bought a segment of line to them on terms and conditions to which they agreed, that they then turn around and open their plant to what started out as a cooperative relationship to a competitor.

When we looked at the entirety of the bill - the obligations that remained on the railways, the extraordinary protections that were still there for shippers - on balance the decision was made that even if the technical difficulties could be overcome, a matter on which I'm just not sure, in the interest of that balance, the balance of obligation and right, given what we had heard and what you will probably hear from short lines, it did not seem appropriate for us to consider any further how to open main lines up to a short-line running right.

The Chairman: I want to go back to the common carrier obligation. I'm looking at 114.

Why doesn't 114 say somewhere that the obligations carried out here are done in a fair and equitable fashion, or a fair and reasonable one? I read this, and it's done without delay. It's done with diligence. It's furnished all proper appliances, accommodations. Is there already a template somewhere else, such as in the Canada Post act, where you have to take the mail but you don't necessarily have to deliver it by a Rolls-Royce? Is there something in there?

Ms Greene: Yes. It is 113, which is that the rate or the service that the agency decides has to be provided should be commercially fair and reasonable.

The Chairman: Great, thanks.

Mr. Fontana: I understand that the competitive carrier obligations and level of service obligations are intact, based on what was in the act before. I hope that at the end of this whole exercise, when we get a chance to - and perhaps an evaluation has been done.

Obviously, the true test for this new bill will be how much will it reduce the transportation costs for, ultimately, the export goods that we want to sell to others. Let's face it, for the most part what moves across this country is exports.

Therefore, we have to make sure that the price of transportation has in fact come down with respect to this new bill, as opposed to the one we've been working with for the past number of years. Perhaps that evaluation can be done.

With this particular provision in the existing bill, as the chairman indicated, there needs to be a balance. I don't know whether or not you look for that balance to try to achieve the same thing as you might have in some of the other sections.

I'll just take the absurd. The agency has made certain rulings in the past, either because of a captive shipper or in fact where other alternative modes have been in place, to require a bridge or something else to be built for tons of money that in fact has not proven to be the best and most efficient way to do it.

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That's why I think somewhere, somehow, one needs to strike a balance in this particular thing. While I want to protect the shipper, especially the captive shipper that has absolutely nowhere to go, surely we could draft something in a way that tries to protect those eventualities.

When I talk about shippers, obviously VIA or any passenger service, in my opinion, is different. I treat VIA and passenger rail services as railroad companies and not necessarily as shippers, and therefore one might want to look at passenger travel in an entirely different way.

Moya, I know the balancing act you've been trying to do involves the total package. Was leaving the provisions not changed at all part of the balancing act on the whole bill, or is there a way this committee could be helpful in looking at this specific clause to try to achieve a better balance?

Ms Greene: Mr. Fontana, I would never presume to say to you or anybody else on this committee who has to deal with all kinds of balancing acts every day that you can't find a better balance. Maybe you can. You're going to hear 100 different submissions. I don't know. What I can say is we went hard at it for quite a long time.

I take your point that the true test is going to be the efficiency of the system overall. Is it better? In the course of the next four years we're going to have ample opportunity to demonstrate to Parliament, to shippers and to carriers whether or not it is better, because, as you know, this bill also builds in four different reviews on grain transportation, on the system overall, on whether or not the act is working from the agency's perspective and annually from the government's perspective, and on what sorts of changes we have seen in transportation. So we will have an opportunity to know whether or not this bill has it right or wrong.

You raised a specific question on the guidance to the agency in clause 113 that:

A rate or condition of service established by the Agency under this Division must be commercially fair and reasonable.

Is this enough to ensure that decisions take account of the competitive pressures that everybody, including railways, is under? I think so.

Your second specific question was on the language of the level of service provision, which has been kept entirely intact. Yes, that was part of the balancing act the minister made in the last weeks of the consultation, when very many things were on the table. After really vocal concern on the part of shippers, the minister agreed to leave it in place.

Mr. Fontana: Can I ask one final question that relates to this? How many times has the NTA had to intervene with respect to common carrier access or level of service complaints from shippers and/or anybody else? I take it that even in this clause, that's something that can be brought to the agency if there is an agreement between one party and another. Is that right? Or it could even form part of a commercial agreement between a short line or a shipper and both the railroads, which agreement is subject to final arbitration if that's the case.

Ms Greene: Absolutely. Most of the things covered in the level of service provision are, as a matter of course, in thousands of shipping negotiations that take place every day. Most of those things are agreed between the parties. It is only when they're not agreed between the parties and the shipper feels really strongly about something that this becomes a kind of fail-safe provision.

It has not been relied upon very frequently - there have been eight or nine cases in the past few years - or at least it hasn't been involved in many decisions. There may have been complaints made to the agency that got resolved in the normal course of events by simply talking to the parties as opposed to actually activating the full-blown decision-making process, but there haven't been many decisions on this.

But shippers will tell you that is because the fact that it is there, again, gives them the leverage they need when they're negotiating.

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The Chairman: Next stop-point.

Ms Greene: We've now gone through the balance between agency, government, and the commercial negotiations and looked at the specific protections, the competitive access provisions, running rights, and level of service. The last set of issues I wanted to raise, because I think they will be fairly prominent for you, is that if we don't have it right, then we've given ourselves a lot of opportunity to get it right. We've given ourselves opportunity to know whether we don't have it right.

What we've found is that for some modes of transport, trucking being a particularly good example, we have very little information on what is going on in Canada. Most trucking associations are extremely helpful; if you ask for something in particular, they will tell you.

In other areas we really didn't have all the tools that you as members of Parliament or government would need in order to make a fair assessment of whether the system is working efficiently, working better.

We've given ourselves room here to find out more about how the system is working than we had in the past, and to report to you on a regular basis, on an annual basis, ``Here's what we find''. We have done that in the context of the whole system. We've done that in the context of grain.

The agency in this bill is going to be asked to report on exactly the kinds of complaints it is getting and what there is in the bill that helps it to resolve them or impinges on its ability to do so.

Finding the right balance is very difficult. I'll be the first to tell you that and to admit that. But if you do your best, listening to all of the parties, and then you give yourself these opportunities to know what's going on and to take a sounding periodically as you go through the piece every year, then you're in a position at least to make whatever correction you think you need to make for the overall efficiency of the system.

Finally, Mr. Chairman, you're not going to hear very much about this, because it falls to you to listen to only the things that people don't like. People rarely come and tell you, ``This is what we like about it''. Let me depart a little bit here. There's a lot that you're not going to hear about that I think is very good about this bill, that you might want to keep in mind as you ask yourself if the balance is here.

There were hundreds of pages of statutory material, most of them going back to the turn of the century in certain cases - regulating rail, treating rail as if it was in a nursery. There were filings of corporate documents. They couldn't lease anything; they couldn't transfer anything; they couldn't get on with normal business without filings.

It was not necessarily that anybody was going to make any decisions.

You had to ask yourself what all that administrative trivia was about, as you went through, section by section, the Railway Act, the Government of Canada Railway Act, and the Canadian National Railways Act.

Many times people have looked at this legislation in the past, and they have groaned, just as we did, and said, ``My goodness, isn't there something we can do to simplify and get rid of that?'' But by the time we dealt with all of the immediate concerns, we sort of always left all of that. So it stayed on the statute books for, lo, these many years.

This time, finally, I think we've made a really important step in starting to treat the railways like new businesses. Where all of that Railway Act provision was not needed, it has been repealed with this bill or the suggestion is made that you repeal it with this bill. Where there's a generic law that every other business can use, like the Canada Business Corporations Act or the Competition Act, rather than have the agency duplicate what has been going on under that generic piece of business legislation, we can recede and let the generic business legislation apply. I think that's a good thing that again is also part of whether we got the balance right, but it's something that you're not as likely to hear about.

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Thank you very much for the opportunity, Mr. Chairman.

The Chairman: Thank you, Ms Greene. We appreciate your coming to the committee.

I see we have some questions, so we'll get to them.

Mr. Gouk: First I'd just like to go back for a supplemental on that business of subclauses 27(2) and 34(1).

If something is frivolous or vexatious, then obviously that shipper cannot prove significant prejudice. I cannot envision an example of something that has significant prejudice but is frivolous and vexatious or vice-versa.

So if you're giving the agency the power to reject something on the basis that it doesn't prove significant prejudice, I wonder why you also have to have ``frivolous or vexatious'' in there. You're double-coupling yourself.

Ms Greene: Frivolous and vexatious is really a cost that's applied after the fact because you've made a decision that somebody has delayed proceedings or brought an action that, after looking at all the facts of it, really just ended up costing people a whole pile of money. Frivolous and vexatious is the last thing you decide.

Let's say there's a case where the agency is making its decision. It's accepted the complaint, it has all the parties rounded up in front of it, it's having the hearing and it's listening to all the arguments made, and finally, after due process and giving everybody a chance to say everything, it says ``Okay, now we're going to go away and make our decision''.

Before they just jump in and grant relief, one of the things they have to consider in the decision is whether there is a significant interest that would not otherwise be protected if this relief were not granted. I can see how they could say no to that.

If we didn't have the power of the agency to then go forward and actually award costs for someone having unduly delayed the proceedings, they couldn't do it. They don't have any power to award costs except in the frivolous and vexatious clause.

Having decided that something doesn't have a significant interest attached to it doesn't necessarily mean a person has brought an action that was frivolous in the sense that it attaches cost to it. That's how I would put it. Does that make it clear?

Mr. Gouk: Yes, now I understand your position.

I've just two other short questions, one that hopefully will have a simple yes or no answer. Does Transport Canada intend to hold off the issuance or offer for sale of shares of CN Rail until Bill C-101 is passed?

Ms Greene: No.

Mr. Gouk: The only other question I have is could you offer clarification on the point you discussed with me yesterday, for the record?

Ms Greene: Oh, yes. Thank you very much.

Mr. Gouk raised an issue yesterday about clause 140 dealing with discontinuance of service and transfer of rail lines, and I was mistaken in my answer. He asked: If a railway amends the plan, can it go out right away after that, if it has a sale on the hook, and sell the line, as opposed to going through the whole process of waiting for other expressions of interest to come forward and then and only then discontinuing its operation of the line?

I said no, and I was wrong; Mr. Gouk is right. The railway can. If it has a sale on the line, the law doesn't prevent the railway from going ahead with the sale, even if it's the sale of a segment that it really didn't think it was going to try to sever off and sell right away. That is, you wouldn't want to use the law that is meant to encourage these transfers so that the absolute opposite took place.

The reason I was mistaken is we went back and forth on this. We want maximum notice to be given to people to give them a chance to express their interest, but on the other hand, if something comes up that nobody could have foreseen, it would not be helpful if railways were prevented or stopped from going forward. So we went back and forth on how to do that and I just forgot for the second how we came down.

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Mr. Gouk is right. We will not prevent a railway from selling where there is an offer, albeit an unforeseen offer, that has come to their attention.

[Translation]

Mr. Mercier (Blainville - Deux-Montagnes): My question concerns one of the proposed amendments to subclause 27(2) of the Bill. We are told that they want to amend the wording of the English version so as to reflect the intention stated in the French version. Could you explain to me what is the difference between the two?

Ms Greene: Yes I understand, Mr. Mercier, and you are quite right. It is a mistake in translation. Mr. Young and the government wishes to propose an amendment to the Committee so as to correct that mistake.

Mr. Mercier: What is the difference in the meaning between the two versions as they are at present?

Ms Greene: There is no difference in meaning. It is a translation error.

Mr. Mercier: Therefore, the French version is the right one.

Ms Greene: Yes, that is correct.

Mr. Mercier: I would also like you to explain why trackage rights will not be extended to short lines.

You said that there were two different pieces of legislation concerning at least short lines, and I don't think that you gave any other reasons. Could you explain somewhat the position of short lines in the terms of trackage rights? I would like you to elaborate a little on the issue of trackage rights, which the legislation does not provide in the case of short lines.

Ms Greene: Most short lines don't want any changes to trackage rights. Most of them tell us that the relationship between railways and short lines is one of cooperation. Once the railway company decides to sell a section, it expects the short line to be its partner. Thus, they serve each other's mutual interests. The short line can guarantee continuation of service in circumstances where it would be dangerous if the service were to be discontinued. It can guarantee to the railway that traffic will be transferred. Continuation of traffic is very important for the railway. Therefore, the relationship is based on cooperation rather than direct competition.

In the case of the shippers, the benefits result not from a relationship based on direct competition, but rather from the fact that the short line costs are lower than those of the railways, and that service to shippers continues in circumstances where otherwise it would not have been possible. In most cases, the short lines don't have any problem with current legislative provisions.

Mr. Mercier: Therefore, not all the short lines agree on this point.

Ms Greene: There was only one which was against. We consulted all the short lines in Canada and even in the United States. There was only one which was not happy with the provision in the Bill.

[English]

Mr. Hubbard (Miramichi): Mr. Chairman, just an opportunity here. We're thinking railways, I guess. Chemin de fer is the story of the day. But the bill also has a good number of clauses that change other acts in the transportation field. Would our witnesses have any comments to make on these other changes? Are there important points that should be brought to the attention of this committee in terms of safety acts, the St. Lawrence Seaway Act, etc.? There must be 40 or 50 listed clause by clause.

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Ms Greene: Are you talking about the consequential amendments?

Mr. Hubbard: Yes.

Ms Greene: Yes, there are a goodly number of consequential amendments. I'm not certain that it's an unusual number for a bill of this size.

Most of the consequential amendments arise because of the repeal of large parts of the Railway Act. The Railway Act had some very arcane provisions with respect to a railway's ability to expropriate, with respect to how native land claims were going to be treated in the context of railways' old, turn-of-the-century powers to expropriate. There were many other acts that made reference to the Railway Act. The Railway Act has been on the books since the turn of the century, so when hundreds of pieces of legislation would be brought before Parliament, there were lots of cases where, in these pieces of legislation that were coming before Parliament, you had to be mindful of the phrases in the Railway Act. As soon as you talk about repealing the Railway Act, you automatically touch upon a large number of pieces of legislation, but mostly in a technical sense.

Did you have something in particular in mind?

Mr. Hubbard: No. The question is that we might be side-swiped by some other act that's being amended. The example you mentioned was the aboriginal communities across this country, who've had great sections of land affected by the Railway Acts.

Have you any comments about changes that are being put forward in the various clauses that might affect this committee in its deliberations in the next couple of weeks?

Ms Greene: We have been very careful, particularly with the item you cite, to maintain exactly the status quo with respect to aboriginal peoples' claims to land that at the turn of the century might have come under railway use. We've been very careful not to do that and have had, I think, good discussion with our colleagues in the department responsible for those matters in order to make sure we didn't.

If I can just cast my eye over this, you're asking me if there is any surprise in here.

Mr. Hubbard: Any surprises that we might encounter.

Ms Greene: I surely hope not. I think it's all -

The Chairman: We'll have to go through them one at a time.

Ms Greene: You're going to have to go through them one at a time. But I think it's okay.

The Chairman: And, Charles, we know that you're going to read through each and every one of them before we sit down and pass them all.

Ms Greene: There's nothing that we need to raise here.

Mr. Fontana: The bill talks about ``compensatory rates'' and then it talks a lot about ``fair and reasonable rates''. Should I take it that ``compensatory'' and ``fair and reasonable'' mean the same thing? As I understand it, you don't define ``compensatory rates'' anywhere in the bill. Is there a reason for that, or can we define it? Would it be difficult to define it? Or is it in fact supposed to mean ``fair and reasonable''?

Ms Greene: ``Compensatory'' has been around for a long time as a term that the regulator has used to decide whether or not a rate met the requirements of the act. It usually means variable costs, which, as you know, with respect to railways is not nearly all of the costs of a movement because railways are a big, capital-intensive business. But ``compensatory rate'' has come to be interpreted by the railway as meaning at least the variable costs of a movement.

Given that it has been around for a long time, there's probably no need to define it.

``Commercially fair and reasonable'' is a broader guidance to the agency. It applies to rates, but it also applies to levels of service. The guidance there is that if on the facts of a case - it might be a rate case or it might be a level-of-service case - you, agency, make up your mind that what you're about to impose on, let's say, a railway is commercially fair and reasonable.... It might not in every circumstance be exactly the same as ``variable costs'' - ``variable costs'' in the context of a competitive line rate, for example, which is a a rate action. It might in fact differ from how ``commercially fair and reasonable'' would be interpreted in relation to a more general complaint.

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The other thing the government is proposing.... This has come up with us. We are going to propose that on that issue we should be clearer in the bill than we have been. As you know, the minister put forward - obviously not legislative language, as you will have to do that.... In an effort to show that we are still thinking about how we can address some of at least the technical concerns that have been made, one of the things the minister proposed to do was to address exactly that, to make it clear that ``commercially fair and reasonable'' and ``compensatory'' can be different in the right circumstances.

Mr. Fontana: I want to understand the hierarchy - or at least make it so people can understand it - of how the abandonment or discontinuance provisions will actually work from a railroad to every one that in fact will be offered for sale the abandoned piece.

I should point out that the minister covered off the non-VIA passenger rail subsidies in a news release and it's covered off here, that in fact this bill does something, but in the public interest the minister has other mechanisms to ensure that those subsidies will occur. I know that the VIA subsidies are not directly related here, but in terms of passenger rail service in this country, they're directly impacted - not only VIA, but any other passenger rail company that wants to set up in this country. They're captive because they don't have their own infrastructure. They have to buy or lease their own infrastructure from the main lines, or perhaps even short lines now, as more and more are created.

I want to understand how it is possible to ensure that passenger rail service, in whatever form exists today or will exist tomorrow, is going to be protected so that it will have access to main lines, to short lines, or to whatever is going to be required in order to ensure that we shall continue to have passenger rail service. Or is any passenger rail company going to have to essentially negotiate its own deal with everyone if it wants to have that service in place?

Moya, you might want to clarify for the committee members how the abandonment will work, because CN or CP would offer it to a short line, would offer it to a province, would offer it to a municipality, could offer it to private companies. You might want to cover off that mechanism and that process, because it's very important.

Ms Greene: Yes, it is, and we did advert to that.

When the railway company offers for sale the portion of track that VIA might be on, the advertisement must indicate to people that VIA is operating on the service. Therefore the people who are responding to the advertisement have to indicate whether or not they are prepared to take over the service with VIA Rail operating on it.

VIA Rail also has an opportunity to be one of the commercial participants. In fact, in the past VIA Rail has bought small segments of track to operate in its own right. So VIA Rail has an opportunity to participate and become an owner of a segment of track, rather than a renter, which is basically what it is now.

Also, if VIA Rail does not take up that opportunity, or does not win in that opportunity, or does not have sufficient resources to win in that opportunity, the opportunity is there for VIA to negotiate with whoever does win. That's where extending final offer arbitration to VIA is very important.

Mr. Fontana: What if in fact the municipality, because nobody else has picked up, has put in an offer for that line and they are the successful bidder and they have no intention of keeping that line at all operational for anyone or anything but essentially want it for property value, because it happens to make an awful lot of sense in its municipality to convert it just to land? It's absolutely necessary that VIA or any other passenger company need that track in order to ensure a continuance of service from point A to point B. What are they supposed to do if in fact they are not successful?

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Ms Greene: They would call you, because the -

Mr. Fontana: They do.

Ms Greene: Seriously, because before it goes to the municipality, it has to be offered to the federal government or to a provincial government. So if the continuation of VIA Rail service is jeopardized and the federal government feels that is just not in the public interest, then the other levels of government have an opportunity to move at that point so as to protect that public interest.

If on the other hand the line is sold to a private carrier, so it is still operated as a railroad and there is no problem, VIA service is there and for the future final offer arbitration is available to VIA, just as it will be available to commuter short lines. If it gets to a municipality it is only because no private sector operator wanted the line as a line; the federal government decided there was nothing that would cause it, in relation to an interprovincial or international line, to get involved; the province decided there was no interest that would cause it to get involved. Presumably the public interest in rail passenger services is such an interest that might, under the right circumstances, motivate it. And VIA can be a participant in that commercial exercise.

Mr. Fontana: Perhaps you could clarify something. Are you telling me there is a pecking order of offers from, let's say, CN or CP to the federal government -

Ms Greene: Yes.

Mr. Fontana: - and if there are no takers in the federal government it goes -

Ms Greene: Yes, there's a pecking order of offers.

Mr. Fontana: I thought you had indicated that it was an advertisement...that the obligation of the rail company is, first, to put their plan in place, so everybody knows three years in advance what their abandonment plan looks like.

Ms Greene: Yes.

Mr. Fontana: But when it comes to the point of actually wanting to sell off that piece, all they have to do is put an advertisement in place and wait for the players to come to the table.

Ms Greene: That's right.

Mr. Fontana: All the players.

Ms Greene: No, there is a cascading order. It works like this. They put the notice in the newspaper about a segment; that particular segment you are talking about. In sixty days private sector people who want to operate the line reply.

Mr. Fontana: You just said private sector.

Ms Greene: Just let me finish, because then it gets to government. It goes to the private sector first. Then there's the part for continued rail use. Then there's a period of five months to try to negotiate that deal. If there's no deal - that is, nobody in the private sector wants to operate it as a railroad - then it gets offered to the federal government. The federal government has fifteen days to say whether it wants to do anything in relation to that. Then there are an additional fifteen days, if the federal government says no, where it goes to a provincial government. And then it goes to a municipal government. So there is a cascading order.

Mr. Fontana: Where is that located?

Ms Greene: It's in subclause 145(2).

Mr. Fontana: That's good enough.

The Chairman: Mrs. Terrana.

Mrs. Terrana (Vancouver East): First of all, I would like to thank the department, because every time I ask for a briefing or for help, immediately I am given it. Thank you very much for your efficiency and your promptness.

Secondly, I'm still concerned about this aboriginal issue. In British Columbia we have a particular set-up, as you know, and I've been approached by several groups. You say the status quo has been left. Where do we say that? It's surely not in the CN sale. Is it shown anywhere?

Ms Greene: It's right here, Ms Terrana. I'm just looking for the clause. It mimics exactly what has been in the Railway Act, lo, these many years.

Mrs. Terrana: So it is in C-101?

Ms Greene: It's in clause 97.

Mrs. Terrana: I don't have the bill here, but thank you for that. I've already discussed it with Mr. Patenaude, but I think it's important that -

Ms Greene: Clause 97 is exactly what the position has been vis-à-vis the transfer of crown land for literally decades. We've kept it word for word, exactly the way it was.

Mrs. Terrana: Thank you.

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The Chairman: Moya, I thank you and your officials very much. I guess it goes without saying that you will be available to this committee, that if we have a whole segment on grain or something else come forward and we're concerned about something, then we can bring you back for an hour or so, if need be.

Ms Greene: Yes. Thank you very much.

The Chairman: That's a great understanding that we have.

Colleagues, thank you for your participation. Our first set of witnesses will be a week from Monday.

This meeting stands adjourned.