[Recorded by Electronic Apparatus]
Monday, October 16, 1995
.1533 
[English]
The Chairman: Order, please. I like starting on time; it's the practice of most committees. It's written in their own little constitutions that we have an opposition member present before committee work begins in a formal setting. So what I think I'd like to do is begin, at least informally.
Good, now we can begin formally. There's one opposition member present, so we can proceed with formal hearings, consideration of Bill C-101, the Canada Transportation Act.
Our first witness before us today, colleagues, is from the Canadian Industrial Transportation League. Maria Rehner, welcome to the committee. Maria is president of the organization.
Maria, would you like to introduce the people you brought with you today and give us the executive summary of your report.
Ms Maria Rehner (President, Canadian Industrial Transportation League): Yes,Mr. Chairman. Good afternoon. Thank you very much to you and to members of the committee.
The Canadian Industrial Transportation League thanks you for this invitation to be here. We appreciate this time and indeed the opportunity.
I would like to introduce my associates. Mr. Jeff Cowall from Noranda Sales Corporation, who acts as the vice-chairman of the league; and Mr. Brian McGurk from Avenor Inc., the league's rail chairman. My name, of course, is Maria Rehner and I'm president of the Canadian Industrial Transportation League.
.1535
If you will bear with me for about eight or nine minutes, Mr. Chairman, I would like to make an opening statement and I would like to start with a few words about the association.
The Canadian Industrial Transportation League was established in 1916. Initially an organization that was central Canada-based, by 1935 we had members in every province of this country and that is so today. We represent some 400 member companies. They range from Beryl Bowen in Ancaster, Ontario, who has a small business auditing freight bills, to Alcan Aluminium in the east and Weldwood of Canada in the west. And there is a host of companies in between.
The companies we represent generate approximately $100 billion in trade, they employ 150,000 persons, and they have a composite freight bill in the vicinity of $6 billion per year. The CITL is the microcosm of Canada.
Mr. Chairman, members of the committee, some time ago this committee received our written submission. We endorse that submission in every particular, but since the brief was filed we have been apprised that Transport Canada has suggested some technical amendments to the bill. Our comments this afternoon are in reference to the printed bill as we know it. We reserve our right to make further comment and, if necessary indeed, to reappear before this committee when a second edition of Bill C-101 becomes available.
For the third time in as many decades this committee is holding public hearings on rail legislation. This would not be necessary if all were perceived to be well in the realm of rail transport. Obviously it is not.
Rail customers still generate more than 30% of our gross domestic product. The Canada Transportation Act will have a profound impact on the competitiveness of these customers in the international marketplace.
In 1995 the World Competitiveness Report evidences that Canada ranks just 12th amongst its major trading partners. Although Canada's rating remains in the double digits, in fairness we have to say that we have improved over the last few years but we still have a long way to go. Canadian corporations have downsized, have right-sized, have re-engineered themselves to be more competitive. As a nation we have acceded to the notion that competition is the vehicle that can best accomplish our economic goals.
The report that I referenced also recognizes a Canadian asset, an asset that accords us a number three ranking; namely, our infrastructure. Canada's greatest competitive advantage lies in its roads, its railways, its airports and its telecommunication systems.
The Canadian Industrial Transportation League has a dual interest at these hearings: first, to speak boldly in support of an infrastructure that gives Canada a competitive advantage so that we may become the nation of traders that we think we are; but more importantly, we have a fervent desire to see that Canada's overall competitiveness ranking increases so that our member companies will continue to grow, to prosper, and to provide jobs in all parts of this land. The Canada Transportation Act will neither foster the primacy of our infrastructure nor increase our national competitiveness.
This legislation has a fundamental flaw. It introduces unwarranted regulation to the detriment of an existing streamlined regime. Before this bill had a name or a number, the Government of Canada had a vision: rail legislation that would be less intrusive into the business of transportation, that would be simpler in its language and application, and that would promote competition. We are here to say that those goals in the main have not been met.
.1540
Our opposition to this bill, Mr. Chairman, does not make us bellyachers. It does not make us whiners. It evidences a good-faith difference that we have with this government, and we reject these characterizations. Indeed, it pains us that this debate has become so polarized that such monikers are attached to interest groups by public officials.
We have come here with what we believe are legitimate concerns. This committee becomes our last forum for gaining balance in Bill C-101.
This legislation does purport in some clauses to ease the regulatory requirements on railways as they determine to exit the market. The role of the new agency in this process is substantially reduced, and we applaud this action. However, regulation has, within the same legislation, increased. The agency has been given a new mandate, a mandate that in essence is to restrict access to itself.
The CITL has no recollection of a proposed legislative provision that is as perverse as subclause 27(2) of the current bill.
I ask you to witness the slide. I will not read it. It's there for you to see.
This subclause neither streamlines nor reduces regulation. It has the opposite effect. Where once an application to the agency was a one-step process, this provision imposes a two-tier process. The process is made more cumbersome. There will be at least one hearing to determine access and a second hearing on the merits.
Regulation by an allegedly purely quasi-judicial tribunal is increased, not decreased. The clause nowhere speaks to a decision. Nowhere does it speak to guidelines.
The clause does speak of ``significant prejudice''. What does that mean? In truth, I don't know what it means.
Subclause 27(2) presides over this bill like a huge albatross. The competitive access provisions have indeed been included in Bill C-101. The question is, will shippers ever be able to use those provisions, even as leverage, if there is a metaphysical certitude that the agency will never find significant prejudice?
Indeed, the preliminary prospectus for the purchase offer of CN North America, under the heading ``Proposed Regulatory Changes'' - and I have put it up for you on slide 2 - states:
- any application by a shipper for an expansion of interswitching limits or competitive line rate
relief would have to demonstrate that the shipper would suffer significant prejudice if the
Agency did not intervene.
When the marketplace fails to provide a multiplicity of rail carriers competing for traffic, the law must provide the mechanism to create competition, artificial as it might be.
The companies this organization represents do not now, nor have they ever, espoused a desire for regulation or more regulation, but they emphatically support a rail regime that includes elements of managed competition. The Canadian Industrial Transportation League has in its brief identified several areas where, in our opinion, this bill is in desperate need of amendment.
There is no provision as critical as subclause 27(2). If Bill C-101 becomes law with that subclause intact, we are certain that the rail infrastructure, which in part contributes to Canada's number three rating in the competitiveness report, will deteriorate. It will do so because traffic densities will be lost from the network, and my colleagues will gladly speak to that point. If as a nation we lose some of our competitive edge, regardless of how productive our manufacturers and producers become, our competitiveness ranking is doomed to stagnate in those double digits.
.1545
Mr. Chairman and members of this committee, this legislation should be as much for shippers as it is for the railways. If subclause 27(2) renders the legislation unworkable for us, you cannot in good conscience recommend its imposition on the country.
Mr. Chairman, we would be delighted to take any of your questions.
The Chairman: Thanks very much, Ms Rehner.
We'll proceed in the usual manner. Mr. Chatters, do you have a question for the witness? You have 10 minutes.
Mr. Chatters (Athabasca): I don't have a lot of questions at this point but I have a couple of things.
Obviously it's subclause 27(2) that bothers you most about this piece of legislation. You view it as a roadblock, a restriction to access to the tribunal - am I correct in saying that? - and mainly because of the lack of definition of what ``significant prejudice'' is.
A witness: Yes, basically.
Mr. Chatters: So given an added explanation of what that means, would that clarify that and make it more acceptable to you?
Mr. Jeoff Cowall (Vice-Chairman, Canadian Industrial Transportation League): Not really. I think we would prefer that the whole phrase just be removed and that the access to the agency not be restricted at all.
Mr. Chatters: I think that's all for now.
The Chairman: Mr. Nault.
Mr. Nault (Kenora - Rainy River): Welcome to our guests.
First of all, Ms Rehner, you've mentioned that you represent some 400 companies. Can you tell me, of those 400 companies, how many are captive?
Ms Rehner: I'm sorry, Mr. Nault, I couldn't give you a number. But perhaps the two operating people could speak with some definition in respect of commodities.
Mr. Brian McGurk (Railway Chairman, Canadian Industrial Transportation League): I think I can speak on behalf of the pulp and paper industry. The vast majority of pulp and paper shippers tend to be restricted, for practical purposes and geographical reasons, to the rail industry. I think that's fair to say for many resource-based companies. But maybe Mr. Cowall can speak for his aspect of the industry.
Mr. Cowall: Certainly from the mining perspective, it's no secret that mines aren't typically located in Metropolitan Toronto, Montreal, or Vancouver, but that we're in the northern parts of this country. So practically speaking, because of the nature of the commodities we produce, the volumes we need to ship, and the locations of the plants and mines, we're practically rail-captive.
Mr. Nault: Do you mean to tell me that none of the three of you knows what the percentage is, how many are captive and how many aren't?
First of all, I live in northern Ontario and I know how easy it is to figure out whether you're captive or not. Secondly, I'm a railroader by profession, and I can tell you whether you're captive or you're not.
If you're going to represent some 400 companies, you should be able to tell me how many are captive and how many aren't. I think that's very important. You made a statement in the presentation that your sense is that the majority of the people you represent are captive, and you can't say that you think the majority are if you don't have a number.
I'd like to know whether it's 51%, 58%, or 90%. That's important. You said 400 companies. That's a heck of a lot of companies, and if 90% of them are captive, then obviously this competitive process we're talking about is somewhat moot if you're all captive. Then you're dealing with a total monopoly.
If you can't give it to me today, I'd like to know before we get too far down the road, because when you say something to the effect that the majority of the people you represent are captive, quite frankly, I'm having difficulty in believing that. I'd like to have the numbers so I can debate this in a more structured fashion.
.1550
Ms Rehner: Mr. Nault, I said in my opening statement that I represent 400 companies. I never made the statement that all or any percentage thereof were captive. However, I take your point.
There are many companies within our organization that are going to be captive at a particular point and not captive in their total operation. But I undertake, by week's end, to give you a breakdown of those companies that are captive at particular points in their operation. Is that satisfactory?
The Chairman: Do we need a definition of ``captive'' here just to make sure the answer comes back -
Mr. Nault: I think everybody knows what captive means, but if you want to get a definition, sure.
The Chairman: Sometimes we can play with statistics on what captive means. You might not get the answer you want. As long as we understand captive means that the only option that particular shipper has is the railroad; they don't have trucking, they don't have any other mode of transportation other than railroad to move their goods - correct?
Mr. McGurk: Not necessarily. I don't think that's a fair assessment.
The Chairman: That's what I figured. That's why I thought we'd get a definition.
Mr. Nault: If you use their definition, they probably have less than 10% that are captive.
The Chairman: Exactly.
Mr. Nault: There goes that whole theory that the majority of the people they represent are captive.
It would be interesting to know what exactly we're talking about. When we talk about the National Transportation Act, when we talk about ``captive'' in the bill, it deals with no other mode of transportation to get your goods to market. Now, if you're telling me you have no roads and you have a mine out there and there's a railway that goes up to it, then fine, that's captive. But if you can get it out by truck, economically speaking, and make a profit, then there's a different debate.
So we'd like to get this debate sorted out early, because this seems to be the big stickler here, this particular issue of subclause 27(2). We might as well get into it right off the bat, and we could play by the same rules. I want to make sure we're talking the same language from a railroad perspective versus the NTA perspective versus the shippers' perspective. I'd like to know right off the bat.
Mr. McGurk: I think we need to tie that down. I think you're entirely correct, Mr. Nault.
You're very familiar with our facility in Dryden, Ontario.
Mr. Nault: I know them all.
Mr. McGurk: We certainly ship a fair amount of wood pulp out of that operation. Our ability to ship by truck is virtually nil as a consequence of the volume, as a consequence of the economics. So in my definition of the word ``captive'', that mill is captive to one railroad and truly captive to rail.
Mr. Nault: I am quite surprised that you would say that, Brian, because 40% of your goods are shipped out of there by truck.
Mr. McGurk: That's a different commodity, a different type of facility.
Mr. Nault: Okay, that's the debate we're going to have.
Mr. McGurk: That's right.
Mr. Nault: Quite frankly, I've spent a lot of time in these mills, be they pulp and paper or mining. We're going to have this discussion, because I'd also like to find out, when you talk about significant prejudice in this particular subclause 27(2), what your definition of that is. To me, that must be a necessary legal interpretation or something of that matter. We are all going to end up having a discussion of what that means. We'd like to know from you what that means instead of having the scenario where we just remove it and we won't have to have this discussion.
I am not a lawyer; I am just a common layman who used to run on a railway track trying to make a living, and I ended up getting elected by some miracle, I suppose. But now I am trying to find out from your perspective what this is supposed to mean, because I think what significant prejudice means is important to the whole debate. Perhaps you can tell us what that means.
Mr. McGurk: Again, I think you've raised an excellent point in terms of this legislation. The legislation is replete with words and terms that are not defined. Significant prejudice happens to be one of them. ``Rate'' is not defined, nor is ``commercially fair and reasonable''; ``compensatory'', which was defined in the old act, is in this legislation and not defined now. The legislation is awash with terminology that is unclear, and the users of this legislation, like you, Mr. Nault, are average people who try to get their product to marketplace in a competitive manner. We are now faced with legislation that perhaps is much more cumbersome and complex than it really needs to be.
Mr. Nault: What we could do, then, Mr. Chairman, is ask the witnesses to give us their interpretation of what significant prejudice is. That would be a good start. I think we will ask the same question of other witnesses, because there's an argument unfolding already that nobody knows what it means. So maybe we'll define it for you before this is all over, and that might help you - as an amendment, to start off with.
The other issue I would like to deal with - and this is more of a perception I got from your presentation. You suggested that we're worried about the dismantling of the infrastructure. So the first question I have is, do you perceive the railway industry and the railway companies as companies, as private corporations, that should make a profit?
Ms Rehner: One is certainly a private corporation. The other, I understand, will shortly become private.
Mr. Nault: Then you don't have any problem with these corporations making a profit.
Ms Rehner: No.
Mr. Nault: Then you do agree that there has to be a balance in legislation so they can make a profit, and the same goes for the shippers.
.1555
Ms Rehner: Absolutely, sir. I called for balanced legislation in my last statement.
Mr. Nault: So in fact it's more appropriate for me to make the comment that you believe we're here because the railways are not making money and are in financial difficulty because the regime they're working with is not conducive to being successful. Is that a fair statement to make, or are we wasting our time here? Should we just let them carry on the way they are?
Mr. Cowall: I think it's fair to say they should make money like everybody else makes money. I think the legislation that's in place now allows for that to happen. If you leave in this subclause 27(2), it unbalances the equation. I think that would create a problem, and obviously that's why we're here.
We agree that some of the provisions in the new Bill C-101 will help balance because it gives them opportunities to reduce their under-utilized track. We've said to this committee before that we support the abandonment of uneconomic lines.
Mr. Nault: Mr. Chairman, I've one last question. I'm having difficulty following the presentation of the witnesses so far, because one of the concerns they brought up at the very end of their submission was that they were concerned about the reduction of track that will occur under Bill C-101, which of course allows it to.... Well, the statement I heard was that subclause 27(2), because of its restricted access - so the analysis goes by the witnesses - in effect will cause a reduction of track because then there will be the possibility for someone to go to the agency. Is that the rationale behind that? That was at the very end of your submission. Is it in writing or were you just sort of shooting off the hip there when you were...?
Ms Rehner: No. I never shoot off the hip, sir.
Mr. Nault: Read back the last page and a half.
Ms Rehner: Indeed, I will, and I would be happy to explain it:
- There is no provision that is as critical as subsection 27(2). If the proposed Bill C-101 becomes
law with that subsection intact, we are certain that the rail infrastructure, which in part
contributes to Canada's number three world competitiveness rating, will deteriorate.
Mr. Nault: Mr. Chairman, that goes back to the question I asked. On one hand, Mr. Cowall said they're not opposed to track being abandoned if necessary, because in fact there is a debate going on in this country about whether there's too much track and not enough density and there's a need for some rationalization.
Now, I don't think there are too many people in this room who know much about railroads who would disagree with that regarding some locations of the country. On the other hand, though, you're suggesting that subclause 27(2), which is supposedly going to restrict access, would allow for some form of dismantling that you're opposed to.
Ms Rehner: May I explain?
Mr. Nault: Yes. I'd love to have some explanation as to what that means.
Ms Rehner: Subclause 27(2), in the manner in which it currently is written, restricts access to the agency when an application is made on a rate or a service. The consequence of the restriction of access to the agencies is that shippers will not be able to get extended interswitching, will not be able to get competitive line rates, because they will not be able to make the significant prejudice test. In other words, the application will be thrown out at the point of significant prejudice because you do not make the cut.
My colleagues, when they cannot get the extended interswitching or the competitive line rate, will find a different mode whereby to move their traffic, thereby taking the traffic off the rail line and moving it in some other fashion.
.1600
Railways keep their infrastructure intact, and indeed they grow and they prosper by the densities that they move on that network. It's called the revenue per tonne mile. They're not going to have it, because people in our industry will not be held captive if they can find any other way of moving the traffic.
Mr. Nault: Thank you, Mr. Chairman. I don't think I'm any further ahead than I was when I started. It's a long couple of weeks.
The Chairman: Mr. Hubbard, please.
Mr. Hubbard (Miramichi): Mr. Chairman, I'd like to follow up a little bit on this. I heard a lot of statistics at the beginning. It seems your group mentioned that you spend $6 billion each year on transportation.
Ms Rehner: That's right.
Mr. Hubbard: Could you break that $6 billion down by mode? Do you have any -
Ms Rehner: Those numbers are available in my office, sir.
Mr. Hubbard: What percentage of that do you think is by rail?
Ms Rehner: In fact, the $6 billion are rail numbers.
Mr. Hubbard: Those are just the rail numbers, without trucking and without marine?
Ms Rehner: Let me check on that, because in fact the numbers came out of a survey that we just completed and I would like to check to be absolutely sure.
The Chairman: Do we have access to those survey results?
Ms Rehner: Absolutely.
The Chairman: Thank you. That would be great. We look forward to seeing those.
Mr. Hubbard: Now, with your group, and following up on what Mr. Nault has asked, there's a basis of philosophy that we're talking about here in terms of rail, in that 5% of the traffic that occurs in this country is going on 50% of the rail; 50% of the rail is carrying very little traffic. But some of that is probably traffic to remote areas where you are a captive group.
As a group, are you indicating to us that the federal government or provincial government should play a major role in maintaining these lines, or should we let industry and business do it on their own?
Mr. Cowall: We've said in the past, and we'll say it again today, that industry should go it alone. We should not be dependent on federal or provincial governments to maintain rail lines.
What we said before this committee in the past was that we supported the abandonment of lines that could not be made economical. In the first instance, if a line is not economical, we would support a short line rather than abandonment. So we want to continue the service, and I think even the railways want the service to continue, to feed the core. But there is certainly lots of track in this country that is just not used, and there's no point in keeping it.
Mr. Hubbard: I'm glad to hear, then, that as a group you are in favour of the part of the legislation that will enable us to cut back in terms of the subsidies that have been given to rail in the past. Even if you look at CP, you'll find that CP today is not making a lot of money on its rail network. It has many other aspects in terms of its operation. CN, of course, has been a child of our government for a long time.
Thank you, Mr. Chairman.
The Chairman: Mr. Fontana.
Mr. Fontana (London East): Thank you, Mr. Chairman.
I, too, want to continue with the discussions with respect to subclause 27(2). It seems to me there's a misinterpretation of what subclause 27(2) really says.
Your organization has indicated that it's a pre-test that shippers are going to have to satisfy before the agency hears the application. I don't know whether or not anybody from your organization was here; if not, we can provide you with the text of the background to subclause 27(2) by Moya Greene, the assistant deputy minister, with regard to the policy, which indicates that this is not a pre-test at all, that the CTA will hear all applications. Subclause 27(2) and the significant prejudice will be used as a guide to the decision the agency will make, but not as a pre-test as to whether or not your application gets heard with regard to competitive line rates, interswitching, and so on. The agency is compelled to hear the complaint, but it also must take into account in its decision whether or not there is significant prejudice involved.
So I don't understand where you get the impression - and I don't have the clause in front of me - that in fact it is a pre-test to getting the complaint of one of your shippers to the agency at all.
.1605
Ms Rehner: Mr. Fontana, I would be happy to help you with the language of subclause 27(2) as it is currently written. I do not have legal language in front of me with respect to a new subclause 27(2), and therefore all I can do is look at the language that I currently have.
But before we look at the language that we currently have, I would like to perhaps query you on where you think in the legislation there is any clause that compels the agency to do anything with respect to a hearing.
There are two clauses, clauses 30 and 38.
Mr. Fontana: Read clause 29.
Ms Rehner: I would be happy to read clause 29, Mr. Fontana: ``The Agency shall make its decision about a complaint on any application as expeditiously as possible'', and it goes on.
Mr. Fontana: Any complaint.
Ms Rehner: It shall make a decision on any complaint.
Mr. Fontana: Right.
Ms Rehner: But clause 30 says that the agency may hear an application. It need not. That is a discretion that is left to the agency. If the agency determines that it will hear, absolutely, it must render a decision under clause 29, but it need not hear.
Mr. Fontana: Why don't you read subclause 27(2) -
Ms Rehner: I would be delighted to.
Mr. Fontana: - and tell me where you think access is being denied for an application to be heard.
Ms Rehner: It says:
- (2) Where an application is made to the Agency by a shipper in respect of a transportation
rate or service, the Agency may grant the whole or part of the application only if the Agency is
satisfied, in the circumstances of the particular case, that the applicant would suffer significant
prejudice if the relief sought were not otherwise available.
Mr. Fontana: That's how you interpret it.
Ms Rehner: I'm sorry, Mr. Fontana, the clause says it may grant only if -
Mr. Fontana: If you could give me an opportunity...I don't know why you're so combative. I think we're all here to try to make something better of an existing system. So if you would settle down a bit, maybe we can get constructive for a moment.
Ms Rehner: Okay, we'll try.
Mr. Fontana: It says there that ``the Agency may grant the whole or part of the application'', which essentially means that the agency must hear the application. When it talks about ``the circumstances of the particular case'' and ``would suffer significant prejudice'', it means that in the final decision of the agency significant prejudice would have to be present. So the decision is made on the basis of what that significant prejudice is.
I'm sure that in your business...and if you look at what the NTA has done since 1987, I don't believe they have heard an awful lot of.... A lot of these things are all settled before even the agency gets involved.
As you know, there are sometimes vexatious applications for the purposes of using the agency as leverage to get in a better deal with the railroads and so on. So you must admit, therefore, that the government and its agency should be able to distinguish between significant prejudice and a vexatious application that is there only for the purposes of being used by a shipper, the railroad or anyone else for the purposes of leverage. Don't you think the agency should have within its discretion that flexibility of determining what significant prejudice is?
Ms Rehner: Mr. Fontana, I don't think a quasi-judicial tribunal should be given the role to make a determination on the basis of significant prejudice when nobody knows what significant prejudice is. What's more, with all due respect, sir, I must say I disagree with your reading of that clause of the bill. I'm sorry, but we just happen to disagree with the way you view it. Those are not the words -
.1610
Mr. Fontana: Are you suggesting, then, that the agency not be given any powers? If you take away subclause 27(2) - because that's what you're suggesting - what would you put in its place?
Ms Rehner: Why do we have to have anything in its place? I thought the purpose of this legislation was to streamline regulation.
Mr. Fontana: Right.
Ms Rehner: Well, I'm afraid we have some difficulty -
Mr. Fontana: Well, if you're going to suggest streamlining regulations, are you suggesting that the new agency should not have any powers whatsoever? Should they have to adjudicate on any matter related to the legislation, to the regulation of government? If we really want to get efficient, let's not have an agency at all and just let the market forces prevail. Would that suit your association very well?
Ms Rehner: The agency, Mr. Fontana, has powers of a superior court, powers to make regulation, powers with respect to the movement of western grain - which still remains regulated - powers with respect to extended interswitching and the competitive line rates, and still has a role to play in final-offer arbitration. I don't think the agency is there with nothing to do.
But this organization is saying that what you are doing with subclause 27(2) is that a priori when the agency has to deal on a rate or a service matter, the agency must do something first. It must make a significant prejudice determination.
Mr. Fontana: No, you're wrong there. Where does it say that the agency must first determine significant prejudice based on that?
Ms Rehner: Only if.
Mr. Fontana: Where does it say in subclause 27(2) that it must first determine significant prejudice before it hears the application? In fact, it says the reverse.
As I said, I don't know if you had anyone here when the assistant deputy minister was here with regard to drafting this legislation or if you want the legal interpretation of what exactly it means. Do you have your own legal interpretation that that's what that subclause means?
Ms Rehner: Yes, I do, sir.
Mr. Fontana: Then I think you got bad legal representation.
Mr. Cowall: But isn't that part of the problem, that you interpret it one way and we interpret it a different way? I bet if you asked all the people in this room, they would have different interpretations as well, and that's what our concern is.
Mr. Fontana: We will.
The Chairman: This is interesting. Is everyone done asking their questions? One more question, Mr. Chatters.
Mr. Chatters: I have just one follow-up to what one of my colleagues across the table mentioned.
I don't think it's unreasonable to expect someone coming before the agency to have a reasonable case and not to waste the time of the agency, and I think this particular clause is some attempt at doing that. You were asked for your definition of significant prejudice or what perhaps could be used instead of that wording. What would you see that wording being to provide some protection from frivolous application to the agency?
Ms Rehner: Sir, in the first instance, I would say there is already a clause in the legislation, clause 34, that speaks to frivolous and vexatious. So at a very minimum, if this provision is to prevent frivolous and vexatious matters coming before the agency, then I would say, with all due respect, this is double-kill or overkill, or whatever. There already is a clause.
Second, you say ``our definition of significant prejudice''. Let me tell this committee that I practised law for 10 years before I took this job. I practised as a transportation lawyer. I practised indeed on the rail side for a while. I have to tell you that transportation law, and indeed railway law, does not know the term ``significant prejudice''. It is a term unknown to law. We know ``substantial harm'', we know ``undue harm'', but we have never seen ``significant prejudice''.
So since I no longer practise law, I don't think it's my place at this time, off the top of my head, to put a definition to this committee. But indeed, if I'm instructed to do so, I'd be happy to spend some time and put my thinking cap on. This is phraseology unknown to law at this time.
The Chairman: Ms Rehner, I have a proposal: we look at this clause and significant prejudice, etc., and we toss it out altogether, and only for truly captive shippers do we allow them to make opportunity for relief. What do you say to that?
.1615
Ms Rehner: Mr. Chairman, what's a ``truly captive shipper''?
The Chairman: As explained in transportation policy, and that is, a truly captive shipper is a company that has opportunity to ship its goods by only one mode and that is rail...not to allow companies to use any opportunity in a bill to say ``comparatively priced'' between rail and the trucking industry that's next door and use the proposed act as a tool to bring their prices down. I'm talking about a truly captive shipper, one that can use the rail line only because there are no roads, there's no way of getting its goods to market other than rail. That's a truly captive shipper. Now we allow only those individuals to make representation for relief.
What do you say to that proposal?
Ms Rehner: I'd take it under advisement.
The Chairman: Thanks very much, Madam President.
Brian and Jeoff, thanks for coming before our committee. We appreciate the time and your submission.
Colleagues, we call our next witnesses to the table. They are from the Canadian Manufacturers' Association. Brian Collinson is director of transportation.
Welcome, Brian, to the transport committee. I wonder if you could introduce those you've brought with you today.
Mr. Brian Collinson (Director of Transportation, Canadian Manufacturers' Association): Thank you very much, Mr. Chairman. I'd like to introduce Mr. Ted Zier-Vogel to the committee. Mr. Zier-Vogel is the chairman of the Canadian Manufacturers' Association transportation committee and he will be speaking to the executive summary of our presentation.
Mr. Ted Zier-Vogel (Chairman, Transportation Committee, Canadian Manufacturers' Association): Mr. Chairman and hon. members of the Standing Committee on Transport, on behalf of the Canadian Manufacturers' Association, I thank you for the opportunity to address the Standing Committee on Transport on the proposed Canada Transportation Act.
The comments we will make today are all contained in the written submission of the CMA, which you have before you. Because of limitations of time, our comments will be confined to only some of the areas addressed in that written submission. It is our understanding that Transport Canada has suggested several technical amendments to the bill. However, our comments are directed to the bill as it appeared in written form to us.
I would like to begin by giving some explanation of who the CMA collectively is and why we are so strongly motivated to comment on the bill.
The Canadian Manufacturers' Association is concerned with all issues that affect the health and competitiveness of the entire Canadian manufacturing sector. The CMA was created 125 years ago by a special act of Parliament and is Canada's oldest trade organization. We are a national organization, with offices in every province. We are broadly horizontal in our representation of Canadian manufacturers, representing manufacturers from Newfoundland to British Columbia, from the very smallest to the very largest of Canadian multinationals, and representing every sector of manufacturing, from primary resources through micro-electronics. CMA has close to 2,500 member companies, which produce almost 75% of Canada's manufactured output.
CMA asserts that manufacturing is the fundamental engine driving Canadian economic growth. Some 80% of the country's merchandise exports are attributable to the manufacturing sector, and 75% of private sector research and development is conducted by manufacturers. Close to 1.9 million people are employed directly in manufacturing and processing in Canada. Approximately 3 million more have jobs that depend directly or indirectly upon these sectors.
.1620
CMA maintains that the health and competitiveness of the Canadian manufacturing sector are key to the overall future health of the Canadian economy.
Why are we here? CMA is committed to improving the well-being of individual Canadian enterprises, of Canadian business as a whole, and improving the economic well-being of individual Canadians through a general increase in our standard of living. To succeed in these economic goals, it will be necessary to create a transportation environment which enhances the viability and international competitiveness of Canadian industry. Therefore the government must not look at rail regulatory reforms in isolation. It is essential that these issues be examined not only from the perspective of shippers and railways but in the broader context of international trade and competitiveness.
Many of our competitors do not share the vastness of Canadian geography; the trip to the market is comparatively short. For many of our competitors, the transportation component of the cost of goods is a much smaller proportion of the total cost of goods than for an equivalent Canadian competitor.
CMA affirms the value of competition as a source of efficiency and rationalization in the context of the Canadian rail industry and in general. CMA affirms that the Canadian railway industry should be open to the forces of the free market insofar as this is possible without running unacceptable monopolistic risks.
Increased exposure of the Canadian rail sector to free market forces must be accompanied by the recognition that effective enforcement institutions need to be in place to ensure the continued viability and efficiency of the system. No free market system will operate effectively without efficient and potent police and courts.
If any one lesson has branded its imprint on those involved with the Canadian manufacturing sector in recent years, it is that successful enterprises are those which make continuous improvement and innovation the centre of their activity. The same must be true of the transportation sector if the manufacturing sector, which is ever more dependent on export, is to survive. Hence it is essential that the new rail legislation leave the doorway wide open for genuine innovation and for the entry of new players, such as provincial short-line railroads, into the Canadian railway scene.
Before we make specific comments on Bill C-101, let us comment on the creation of wealth and opportunity in Canada. CMA has been highlighting the fact that governments do not create jobs. In fact, even business does not create jobs. Customers create jobs. It is essential that the Canadian rail system have those characteristics which create customers for Canadian goods. The real issue in rail renewal is how to create a regulatory environment that will allow shippers to meet their customers' needs and thus to generate more customers for the ultimate benefit of all Canadians.
With these general comments in mind, we would like to highlight three areas of particular concern to us from our written submission on the CTA. These are shipper access to the Canadian Transportation Agency, running rights for provincial short-line railroads, and final-offer arbitration. Let me start off, then, with shipper access to the agency.
The CMA is concerned about the provisions of the CTA which limit shipper access to the agency. From the CMA's perspective, such barriers can be nothing other than a roadblock to the development of the efficient and continuously improving rail infrastructure which Canadian manufacturers need to survive. Consequently CMA recommends the removal of these provisions of the CTA which inhibit accessibility to the agency.
The most notable roadblock to shipper access is subclause 27(2), stipulating that the agency must find significant prejudice against a shipper before an award can be made in its favour. This requirement adds an additional layer of burden which must be met before a shipper can obtain the relief to which it would otherwise be entitled. This would seem to conflict with the overall legislative purpose, namely to reduce the regulatory burden all parties now confront.
Also, no one in the shipper community has or can have any sense of what ``significant prejudice'' will mean to the agency or how it will be applied. It is frankly begging the question to say, as some have, that the subclause is meant to prevent relief being granted when none is required. Presumably the whole matter the agency will have to decide on is whether relief is required. Therefore this subclause merely creates one more hurdle for shippers, without providing any benefit to anyone.
Similarly, subclause 34(1), which gives the agency the power to levy costs against an applicant whose application the tribunal finds to be frivolous or vexatious, imposes another excessive burden on shippers. The CMA submits that such a subclause leads to legitimate fears on the part of shippers that the railroads will use this subclause to obtain undeserved tactical advantages in disputes. Such a subclause makes it likely that it will become a standard technique to allege that one's opponent's case is frivolous and vexatious. In litigation, this type of clause has the overall effect of increasing the costs of one's opponent. In a battle of attrition, this means the advantage will always be to the party with the deep pockets. In most cases that party will be a federal railroad, not a shipper.
.1625
Clause 113 contains a requirement that a rate or a condition of service must be commercially fair and reasonable. Like subclause 27(2), the clause is meant to apply to the proposed act broadly. Once again, this is a clause that adds another unnecessary and vague level of regulatory burden and that further limits shippers' ability to receive relief from the agency to which they would otherwise be entitled.
For example, in determining a competitive line rate under the proposed new act, the agency will follow the same procedure as is in place today. It is a basic tenet of administrative law that in doing so the agency is expected to follow the dictates of fairness and reasonableness. If the agency follows the CLR procedure in a fair and reasonable manner, what additional value is added by a subclause stipulating that the result must be commercially reasonable?
Subsection 40(3) of the current NTA enables the agency to make ex parte interim injunctions. CMA regrets the removal of this subsection from the proposed CTA. The importance of interim injunctions in railway-shipper disputes cannot be overstated. Without the potential for interim relief, there is a danger that situations of egregious injustice, capable of doing permanent damage to shippers, will persist for long periods of time before permanent relief is granted by the agency, which apparently will have less time and resources to examine complaints.
It is necessary that interim relief be available on an ex parte basis. Otherwise, if the injured party is required to give notice to the opposite party, the opposite party may delay the hearing of the interim motion, with resulting damage to the injured party, or may have the chance to cancel its wrongdoing. Leaving the subsection in the act still leaves the agency free to determine whether to grant such relief in any particular instance.
Now let me move on to running rights.
Of all the concerns expressed by its members on the issue of rail renewal, CMA members have been most vocal on the issue of running rights. Consequently CMA recommends the inclusion in the legislation of a provision enabling provincial short lines to operate on the lines of federal railroads from the point of connection between the short line and the federal railroad to the nearest interchange with another federal railway.
Of course the federal railway in question should receive fair and reasonable compensation for granting these rights, as determined insofar as possible by reference to the marketplace. Although the level of compensation should be contractually determined between the short line and the federal railroad, in the event the two parties could not agree, resort might be had to the Canadian Transportation Agency.
The CMA recommends the removal of the public interest test for the creation of running rights on federal railroads contained in subclause 138(2). It is difficult to determine what, if any, genuine public interest the agency could exercise its powers to protect.
The CMA maintains that the meaning of ``public interest'' as used in this subclause of the bill is hopelessly vague. As a consequence, unnecessary and expensive litigation will likely ensue as a result of conflicting interpretations of whether the orders or conditions imposed by the agency are just and desirable, having regard to the public interest.
About final-offer arbitration, CMA maintains that on the whole FOA is a positive feature of Canadian rail transportation policy and should be maintained. However, the arbitration process itself stands in need of streamlining and improvement. This has largely been accomplished in the changes embodied in clauses 161 to 169 of the bill.
However, CMA is concerned about a potential problem in connection with FOA in the bill. As it now stands, it is unclear whether the subclause 27(2) significant prejudice test would apply in the context of an application for FOA and whether a subclause 27(2) hearing must occur before the making of an FOA award.
It has been suggested to CMA by Transport Canada that the language of subclause 27(2) and clause 162 of the bill make it clear that subclause 27(2) applies only to applications made to the agency and not to a submission of a matter to the agency for referral to an arbitrator for FOA. CMA submits that the distinction between an application and a submission is rather too fine to be practical. There is a very serious danger that if subclause 27(2) applies to FOA, the FOA provisions lose their value as a streamlined and effective means of solving shipper-railway disputes.
.1630
CMA asserts that at bottom this is simply one more reason to remove subclause 27(2) from the bill. Nonetheless, as a fair minimum precaution, CMA recommends that subclause 27(2) of the bill be explicitly excluded from application to FOA.
In conclusion, CMA welcomes the decision by the Minister of Transport to introduce rail renewal legislation at this time. The government has rightly recognized that the regulation of rail transportation in Canada is at an important crossroads and has determined to take decisive action. However, it is important that Parliament realize it is not only rail transportation that is at a crossroads. The entire manufacturing and processing sector, and with it the Canadian economy, is at a similar point of decision.
Canadians have enjoyed a very high standard of living for a very long time, but there is no longer any guarantee of a high standard of living. In a global economy, whether Canadians have or do not have a high standard of living will depend on whether our products are the most economical and of the highest quality, and whether they can be delivered to market in a more efficient, timely, and economical manner than the products of our competitors. Only a clear-sighted and decisive course of action will enable the type of competitive rail transport needed to enable domestic and international commerce to survive and flourish. It is shippers, manufacturers, processors, and others who have generated employment and prosperity for Canadians.
Mr. Chairman, CMA urges Parliament create a legislative environment that does not compromise Canada's future merely for the purpose of solving short-term problems.
Thank you. We look forward to your questions.
The Chairman: Thank you, Mr. Zier-Vogel, for your submission.
On your question of whether subclause 27(2) applies to final-offer arbitration, I asked that very question of the assistant deputy minister back on October 5, and her answer to me was that subclause 27(2) applies only to agency decisions. It does not apply to final-offer arbitration. FOA is not a decision of the agency.
I don't know if that's of any help or it clarifies that particular matter.
Mr. Zier-Vogel: In that case I would expect it wouldn't be a difficult thing for Transport Canada to agree to a clause that just spells out exactly what you said.
The Chairman: The fact is that it's a decision of a third party that the railway and the shipper agree to. It's not an agency decision in the first place, so why would you have legislation on something that's not even at the discretion of the agency to make the decision about?
Anyway, we'll go to questions. Mr. Chatters.
Mr. Chatters: As I followed your presentation, it appeared to me you are generally supportive of what the bill's trying to do but have problems with vague interpretations and lack of definition in a number of areas, including subclause 27(2). Is that correct?
Mr. Zier-Vogel: That is correct. We support the intent behind the legislation, so far as it works, to make it easier for railroads to dispose of lines that make no sense for them. We think that is appropriate. I guess what we are concerned about is that there is a fuzziness in some of the definitions and some barriers appear to us to be raised that make it very difficult for me, for example, as a shipper to recommend to my company that we ever go to the agency.
We have thought of it twice, by the way. This is just historically. We've had two situations in which we were a little nervous. We never had to go, but one of those situations didn't get resolved until the president of the particular railroad got involved. It turned out he didn't know what some of his people were doing and he solved the problem immediately. But short of his intervention, we would have sought recourse to the NTA. Under this legislation, I'm not sure we ever would.
Mr. Chatters: Under subclause 27(2), has it been your experience that there is a need to restrict access to the agency, that in fact there were...I hesitate to use the word ``frivolous'', but it's in the bill. That seems to me to be the intent of subclause 27(2). Do you favour the removal of that subclause completely, or would you agree there is some need for that protection there?
.1635
Mr. Zier-Vogel: I'm not sure, vis-à-vis the ``frivolous'' thought, that you need subclause 27(2), because the ``frivolous'' clause is there to begin with. It's not clear to me that the NTA has been subject to many frivolous and vexatious petitions. I'm just not aware of it. So clearly I can't comment.
If the NTA or if the government feels that the NTA has been subject to that, then it has already solved that problem with the ``frivolous and vexatious'' clause. I'm not sure what is added by using subclause 27(2).
Mr. Chatters: You favour just the removal of subclause 27(2), rather than a definition of what it means.
Mr. Zier-Vogel: Yes.
Mr. Fontana: Thank you very much for your submission.
Before getting into some of the details that you've indicated - and we obviously have to do a lot of explaining on subclause 27(2), because your concerns were raised by the previous interveners also - let me touch on some of the questions.
As a manufacturing association that believes in the free enterprise system and the marketplace, you talked a lot about customers. Obviously the customers of your manufacturers want the best possible products at the least possible price. You compete with American manufacturers every day, and in fact you have to export most of your stuff to the United States.
In trying to come up with a new transportation regime whose purpose obviously is to reduce the costs of transportation, ultimately through efficiencies and through deregulation for the railroads and the creation of short lines, the bottom line is that your association, the manufacturers, will hopefully have to pay less for transportation, and hence your customers will be much more satisfied and we will be able to compete.
So I want you to think about our regime vis-à-vis the United States, with whom you have to compete, those manufacturers, who have absolutely nothing in their act such as running rights, competitive line rates, FOAs, and so on. They have none of that.
The marketplace is there and obviously works well. Every time we insert a regulation or a protection of some form.... I agree that since 1987 a lot of these things have worked, but I want to know your position in terms of competitiveness, because every time we have to insert some sort of regulation to protect either the shipper or the railroad and not let the marketplace determine what is right, you lose, because the Americans can do it for far less.
So I would like to know, from a competitiveness argument, in looking after your customers as you say you want to, what we can do in this bill to lower the costs of everyone, including the customers, as these relate to the transportation of goods.
Mr. Zier-Vogel: My sense is that you have probably done substantially that already, because Parliament got involved with settling the rail dispute in March.
It will be remembered that much of the costs that the railroads have been working under are costs that they brought on themselves and finally had to resort to Parliament to solve.
All the other companies - such as mine, such as other companies in the CMA, such as any company, one assumes, in Canada - have gone through that process, through the marketplace, say since 1988. Unfortunately, the Canadian railroads have not and have only just embarked on doing that because of the specific labour circumstances in which they found themselves. The U.S. railroads have not been under such a difficulty and have been able to make their changes much faster than the Canadian railroads have.
I'm not aware of what the cost is to the railroads of, for example, all the CLRs that have been granted since 1988. I'm also not aware of what may be described as the hidden cost of just the fact that the CLR mechanism exists for Canadian shippers.
I don't know about that, but I surely can say that Canadian railroads are now able to do the things that U.S. railroads have been able to do for some time and are actively pursuing that. My sense is that as a consequence the Canadian railroads will be in much better financial shape than they ever have been before.
.1640
I would also note that while one could say that times have been tough, the fact that, for example, CPR is undergoing a pretty drastic reorganization of its management staff now suggests that maybe all was not well in the past. Otherwise why would they undertake it? That then begs the question, why didn't it happen many years ago? I don't know. I can't say.
Mr. Fontana: Let me ask you about short lines. You seem to be very supportive of the creation of short lines as a way of perhaps giving better service to your association and hence to the customer, but you want us to grant full short-line running rights to provincial carriers. Now, I believe there's only one short line operator in this country, or two, that are in fact demanding full running rights. Everybody else seems to tell us to keep out of that business, because they can do it through the marketplace and by dealing with the main lines.
Conversely, the other side of the equation is that if we make it very difficult for the creation of short lines, hence make it very difficult for the main railroads to divest themselves of these non-economic short lines, they won't do it. Therefore we don't create short lines if in fact we impose...even though I don't think we constitutionally can impose federal law on provincial short lines anyway. But that's a legal question.
But by itself, if I were to ask you if you would rather we had the creation of short lines and we did not give running rights or we were not able to create short lines at all...because that's what it might come down to. It's an either/or situation.
Mr. Zier-Vogel: At times I wonder about that. It seems to me short lines are created only when a railroad's cost structure has got out of hand for it and it can't supply service to a particular line because of the amount of traffic that's on it. If everybody were making $2 an hour it wouldn't be an issue and we wouldn't even be talking about this. In fact, people are making whatever they're making, and the railroads have found that for whatever reasons certain lines don't make a lot of sense for them to run, only because of their cost structure.
The choices for the railroads are probably a few. One is to set up an internal short line. As you know, that exists - in a few places, I suspect.
Another is to sell the line, to sell it for whatever the present value is of the future stream of cashflows from that line. That happens, I'm sure. I don't know the specifics in Canada, but I'm aware that is a way of doing it.
The third option is to do a deal with someone and give the person a lease or a mortgage or whatever and keep them very closely aligned with the mother railroad, so that all that traffic goes on the mother railroad. I think what we're trying to say is that in the situation where it appears the mother railroad just can't afford to operate on a piece of track because of its cost structure, there's nothing at all wrong with allowing a short line to exist - just selling the company, selling the line, but allowing the short line to run on the tracks.
You'll notice we have said in here there should be a payment for running on the mother track, if you will, and that should be a fair and equitable payment. We're not saying it should be free. We're not saying they should be able to run wherever they want. We're rather restricting that. We can't imagine that would hurt shippers on the other end of that line, because while they are now captive to the short line, it is perhaps very much more in the interests of that short line to look after that shipper.
Mr. Fontana: Thank you for that. I'm sure you also realize, though.... I guess when it comes down to it, that's why I was asking whether or not we ought to let the marketplace deal with.... There are hundreds of running-rights agreements now, and they are not imposed by legislation but happened voluntarily. So obviously the system is working well.
You said you haven't had to go to the NTA. We hope nobody ever has to go to the CTA. In fact, in 99% of the cases everything gets resolved by both parties. In a lot of cases the threat of the CTA is the leverage that facilitates the negotiations for moving positively.
Are your customers or your associate members telling us we ought to take the running rights for short lines and put them into legislation when in fact the marketplace does seem to work, notwithstanding some of the comments I made about the Constitution and provincial jurisdiction and so on?
Mr. Zier-Vogel: As I understand it, there are running rights now, but they are only for federal railroads; nothing is in place yet between federally and provincially regulated railroads.
.1645
Mr. Fontana: Sure there is.
Mr. Zier-Vogel: On running rights?
Mr. Fontana: Sure.
Mr. Zier-Vogel: Okay. I have to apologize. I am not aware of it.
Mr. Fontana: Of course.
Mr. Hubbard: With your association, in terms of the various modes of transportation, do you have any facts and figures on how much money is spent annually and what factor railways are in terms of that expenditure - 10%, 20%, 30%?
Mr. Collinson: I am afraid I don't have those figures with me at this time. However, I will give you the undertaking of the CMA to make our best efforts to give you those figures within the next few days.
Mr. Hubbard: So they would be available?
Mr. Collinson: I believe we can certainly give you estimates that will be reasonably accurate.
Mr. Hubbard: In your presentation, on page 2, you talk about the Canadian nation, the Canadian manufacturers being able to compete internationally and nationally in terms of their products, yet I hear that in terms of railroads, which have been subsidized by Canadian governments probably since 1867, you feel that we've reached a stage in our history when we can say: go it on your own; work, or don't work, in terms of the marketplace.
Is that your philosophy on railroading?
Mr. Zier-Vogel: Yes, for sure.
Mr. Hubbard: So our government should get out of subsidizing and assisting railways and trying to keep lines open in various regions and areas for the national or regional interests.
Mr. Zier-Vogel: I think what we would argue is that the effort by Canada to sell CN is appropriate. It has made for a completely different railroad compared to what it used to be.
As to whether certain lines should be supported by different levels of government, I can't comment. Surely that depends on the specific conditions or circumstances that surround the line.
Mr. Hubbard: In terms of the agency, I imagine your association has an administrative structure. If some manufacturer in some part of the country feels he's being discriminated against in terms of the legislation or in terms of the regulations, is there an agency or a committee or a group within your association that would help that industry or that manufacturer? Or is he on his own in terms of the legal and other entanglements that he would have in approaching this agency?
Mr. Zier-Vogel: Do you mean approaching the CTA?
Mr. Hubbard: Yes.
Mr. Collinson: Certainly, in terms of an advocacy role, the CMA would actively advocate and support in any way it could regarding particular entanglements that the individual might have or particular difficulties that a particular firm might have in the relationship with the agency.
In some cases, but only very rare ones, the CMA has been directly involved in some sort of administrative law application to attempt to bring about changes at that level with the agency. In that regard, I am afraid that shippers in this country are still very much on their own.
Mr. Hubbard: What you're telling us, then, is that certain small manufacturers could be very adversely affected by a set of regulations that would have an agency without the financial background and assistance to approach our government on it.
Mr. Collinson: Yes, sir. It could be a matter of life or death for smaller members.
Mr. Nault: I want to touch on the issue of short-line railroads to see if I can get a sense.
My understanding is that in fact short lines can have running rights. All they have to do is get a federal charter, to be a federal railroad. What is stopping members of your association from getting a federal charter and then they'll have their running rights? What seems to be the problem with that?
Mr. Zier-Vogel: They are not in the business of running small railroads.
Mr. Nault: If you are suggesting that there's no ability to get a charter or to get the running rights, when in fact there already is, would you not then think it would also be prudent to give the provinces the ability to dictate if they want not to allow them to have running rights? You have it both ways now: you can go federal and get running rights or you can go provincial and not have running rights. So you've got the best of both worlds there.
My understanding is that everybody wants to go provincial because they get away from successor rights, obviously, which are reducing -
Mr. Fontana: Not in Ontario.
Mr. Nault: Not in Ontario, but shortly, I hear.
.1650
But my point is that in essence you really have what you want already. It's in law. It exists in the old act. It's going to be in the proposed new act. So there shouldn't be any concern. If you really want to get into the business of competing with the big guys, then go federal. But if you don't and you want to play around in the small league, then stay on the provincial scene and just negotiate with the main lines to supply products to their main lines to ship to the market.
What do you think of that argument? That's factually what's there now.
Mr. Zier-Vogel: I'm not aware of many provincially run short lines that have federal charters. Are you?
Mr. Nault: No, because they haven't applied. But I hear one will be applying. It has been somewhat complicated; but I also hear we are going to make that quite easy as well. It was a little more difficult to apply in the good old days, but now we're going to change that.
Mr. Zier-Vogel: With the CTA?
Mr. Nault: Sure, you can get a charter.
Mr. Zier-Vogel: To the extent that it occurs, then the provisions of reciprocal running rights apply between federal railroads. I understand that. I'm not aware of many situations in which it is being used, other than, say, between CN and CP or some of the class I railroads in the United States. I have no sense at all for what the bargaining power is between the two railroads or for what the raison d'être would be for the major carrier to allow running rights for a provincially operated, federally chartered short line. So I can't comment. I don't know.
Mr. Nault: One of the main federally chartered railways is VIA Rail. It runs all the time on CN and CP. It seems to get along very well with making agreements, and it runs on their track.
What you're suggesting, and I guess what I'm suggesting, is that we think of short lines as little pieces of track, 60 or 100 kilometres long, but what happens if some fellow from the States comes along and buys up a whole pile of short lines and all of a sudden becomes a regional railway, and then all of a sudden he or she wants to get into the business of competing with the other two main railways and then goes for a federal charter? That option is there now. You don't have any problem with that?
Mr. Zier-Vogel: If the option is there now and it's under federal rules, we're not concerned about that, because it exists. There are reciprocal running rights.
Mr. Nault: There is one thing I'm somewhat curious about, though. For the manufacturing association to say this is perfectly acceptable is like saying I'm going to get into the business of making goods, but I want to use your factory.
That's the same kind of argument you're laying on the table for us. CN and CP own those tracks...more or less; it could be argued that may not be the case. But let's argue, for the sake of argument, that CP, as a private company, owns that track. You're suggesting that even though it is a private corporation, it should let other companies use its track, at a reasonable rate. Would they have to go to the agency to find out what that reasonable rate would be?
Mr. Zier-Vogel: Or agree among themselves. But why is that any different from between Bell and Unitel, and why is that any different from the natural gas or oil pipeline situation in Alberta, where there are small lines hooking up little wells into the major pipeline gathering networks? It happens there too.
Mr. Nault: There isn't. But it seems to me they already have the ability. All they have to do is to go federal and get a federal charter.
Mr. Zier-Vogel: I don't know the ins and outs of being, say, a 60-mile railroad with a federal charter in some province. I'm nervous about commenting on that, because I'm in uncharted waters. I just don't know. I can't comment.
Mr. Nault: Okay. The other issue I wanted to touch on is this whole issue of fee for service. You seem to be very upset about the issue of having to pay if you go to the agency with some frivolous application, when in fact we all know what your position is on our debt and our deficit. Why don't we just go straight to a user fee? You guys are all big players here. These shippers are not small potatoes in most cases. They're very capable of paying their own way. You just mentioned that the railways are well off, so they're capable of paying their own way. Why don't we put it as a total fee for service; take the ``frivolous'' out of there and whoever comes to the agency will pay the cost, so the taxpayer doesn't have to pay for it?
.1655
Mr. Zier-Vogel: In terms of other things, that might in fact come around the corner. One can think of, say, what the coast guard is doing with ice-breaking, if one wants to take that kind of view, and say, of course they're doing it now for ice-breaking, or they're going to, so why wouldn't this be the next step? Whatever.
Our perspective is that if we feel wronged by some situation, then we have to sit around as commercial men and make a decision about where to put our efforts. Our efforts are then focused on the actual event: what's the problem, and what's the recourse? The recourse is something, say, that the agency has the power to do. Then we say, by the way, if they agree with you there, then you also have to show them that whatever the problem is it is going to cause you significant prejudice. Then someone says, well, what's that?
Hopefully, by then we will have some idea of what it is and what the case law on that is. Until that happens, the answer has to be that we're not sure.
Then the question would be why we should go through all of this if we have to go through this hoop-jumping process but we haven't the faintest idea of what hoops we have to jump through. Then we say, by the way, the solution also has to be commercially fair and reasonable, not just fair and reasonable. Again the question is what that means, and the answer is that we're not sure.
The last thing is what is the definition, where is the boundary drawn between ``frivolous and vexatious'' and something for which you get an award? Could ``frivolous and vexatious'' be that you're right on the CLR, but you failed the significant prejudice test? I don't know. I don't know where that line is drawn. That is the thing that bothers us probably more than anything else.
We understand the nature of ``frivolous and vexatious'', because we bump into it as well, as you know, in commercial affairs.
The Chairman: Are the CMA and other shippers so insecure? We talk about Canadian free market forces that you're looking for, and at page 3 you talk about increased exposure of the Canadian rail sector to free market forces. You talk about commercialization and your support of the creation of short lines, and your submission speaks of competitiveness and free market forces, etc.
If you have a shipper and a railroad operator and you people come to terms on how much it's going to cost to move your commodity down the track, then I don't understand why you can't say, well, we have enough confidence to know that if we can't get together on this thing, we'll go to the government. They'll look after making sure that there's a final offer or arbitration on the issue of how much it's going to cost to ship that good.
Instead, we do away with interswitching, with CLRs, with shipper relief, and with all that other stuff.
Therefore, we alleviate your worries about subclause 27(2) and any other clause that is troubling the shippers today, and we go to straight competitiveness in the marketplace between the shipper and the railroad. Then we're there to make sure, with the CTA, that if there's a situation or a problem, it will be looked after in an FOA.
Mr. Zier-Vogel: If that's the case, then why would the CTA be structured in such a way as it is now? Why wouldn't it just -
The Chairman: Because the CTA is trying to find a balance between what you want and what the railroad wants.
What we're trying to say is that if we want to bring down the amount of regulation we've got on railroads, etc., then we just say, look, let's just get rid of all this nonsense and let you guys argue or negotiate with the railroad, and if you have a problem we'll go to FOA. End of story.
Mr. Collinson: For any free market system or anything that approximates a free market system to function, the CMA would maintain that you need a proper system of courts, a proper system of law that can be enforced by the people who have the power to enforce it. That's necessary within any context of anything that remotely approximates free enterprise. To dismantle the structure totally would be to create a situation in which that was no longer possible.
.1700
The Chairman: Maybe from your point of view you would have.
You would have the opportunity of the court. The court would be the CTA. You would have the opportunity to use police. You would have the CTA deciding through FOA whether your deal was fair or not fair - end of story; no definitions of ``frivolous'' or ``vexatious'' or subclause 27(2). Boil it down to its most common denominator and let's move on and do business.
Mr. Zier-Vogel: Then why wasn't just that very thing introduced? Why put all -
The Chairman: Would you as a shipper be in favour of that proposal?
Mr. Zier-Vogel: No. I have very great difficulty understanding what is wrong with the NTA provisions right now. Why put the barriers up?
Mr. Fontana: In fact we're stripping the NTA.
The Chairman: Well, we're trying to. As you in your own report say, let's get rid of some of these regulations that bog the system down, that create problems between the shippers and government. Let's get rid of all that stuff. Let's get down to some competitiveness here between the shippers and the railroads, etc.
Anyway.... This is an argument. Obviously you don't want to get that slim when it comes to weighty legislation.
We have three more witnesses, Joe. You have thirty seconds.
Mr. Fontana: We're here because this is the first time in eight years to restructure something completely. Therefore if you like the suggestion of stripping down all that in the new CTA and having just one provision, final-offer arbitration, as the ultimate arbitration and mediation for all the issues, that is what I think the chairman was asking about, rather than creating more and more bureaucracy and regulation.
Let me ask you one more question. You obviously realize, or you must, that railroads are important to this country and important to your association, big time. It's a serious situation in this country. For people to suggest the railroads are big guys and they can afford this and that.... The fact is that neither of them is in very good financial shape. We know that and you should know that. How important is railroad to this country and to your association, and what should this committee, and hence the government, be doing to ensure that at the end of the day we have a viable railroad industry in this country?
Mr. Zier-Vogel: Yes, it's important. Yes, the difficulties have been caused not by shippers and not by government but by the kinds of cost regimes the railroads got rid of only this year.
Mr. Fontana: Forget about blaming. I just want to put the thing together so we have viable railroads in the country. Not unless you want truckers to do everything. They are coming up next, anyway.
Mr. Zier-Vogel: I would say keep the NTA as it is, add in the provisions for getting rid of lines they want to abandon, and you will do just fine.
The Chairman: Just fine by the shipper.
I have to cut this off, because we are already almost an hour behind. Gentlemen, thank you very much for your submission to the committee.
But if you can support that kind of a notion, let's pare down this legislation and make it simple. KISS - Keep It Simple...Stan.
Thank you, gentlemen.
Colleagues, we welcome to the table next, from the Canadian Trucking Association, Mr. Gilles Bélanger, president, and Mr. Graham Cooper, director of government affairs.
Gentlemen, welcome. We look forward to your submission.
Mr. Gilles Bélanger (President, Canadian Trucking Association): Mr. Chairman, distinguished members of the committee, we wish to thank the committee for allowing us this opportunity to appear and comment on the proposed Canada Transportation Act.
Since 1937 the Canadian Trucking Association, which, by the way, is often addressed as the ``CTA'', has been the recognized voice of the trucking industry on national and international issues. The association's direct motor carrier membership, combined with its affiliation with seven provincial and regional trucking associations, enables it to represent over 2,000 for-hire carriers at the national level.
.1705
I guess our comments and concerns are addressing more what's not in the bill than what is in it.
Basically, the bill no longer deals with trucking. That's a concern to us and is basically what we're going to talk about. The suggestions that we want to make in terms of what the CTA should contain would then have an impact on the MVTA.
The proposed Canada Transportation Act is indeed silent with respect to the federal government's regulatory authority over the trucking industry. However, the summary of the bill, contained at page 1a of Bill C-101, states that the bill reforms and modernizes transportation regulation formerly established by the National Transportation Act of 1987 and that it excludes the motor vehicle transport sector from regulation.
In a document entitled simply The Canada Transportation Act, published in June 1995 by Transport Canada to describe the act and to convey a message from the Minister of Transport, additional detail on the issue of regulatory authority is contained at page 10:
- Although legislative provisions allowing for possible federal regulation of motor carriers have
been retained since 1967, they have only been used once. The Canada Transportation Act will
therefore abolish provisions that allow for regulation of extra-provincial bus and trucking
companies and rely instead on the Motor Vehicle Transport Act, which delegates the
responsibility to provincial governments.
However, the text of the Canada Transportation Act is not clear as to the type of regulation the federal government will maintain, nor does it specify the legislation under which this regulatory authority will be exercised.
It's inconceivable that trucking, which represents 45% of the transportation GDP, which represents over $25 billion in the Canadian economy, is not taken into consideration in the national transportation policy of Canada.
The national policy is contained in clause 5 of the bill. Because of the absence of trucking from the bill and the absence of reference to the Motor Vehicle Transport Act, the national transport policy does not apply to trucking.
It is therefore our recommendation that a provision of the Canada Transportation Act be amended to:
- - draw a clear distinction between economic and safety regulations - we don't want to go back
to 1950, with the provinces starting to reregulate trucking on an economic basis, if the federal
government does not provide for what can be regulated or not; that should be in the Canada
Transportation Act;
- - specify that economic regulation is not maintained - so it should be clear in the act;
- - state that the safety regulation of extraprovincial motor carriers, in the form of uniform
national and international compatible standards for entry and performance criteria, is an
ongoing objective of the federal government;
- - and make reference to the Motor Vehicle Transport Act as the legislation under which the
federal government's regulatory authority over safety issues in extraprovincial road
transportation is exercised.
.1710
That has now taken place. The process has gone through. At this point there is basically no economic regulation left. However, MVTA still refers to the licences and how the whole regime existed before deregulation.
That has to be amended. MVTA has to be totally redrafted at this point, and should be redrafted around safety.
We believe MVTA, when it is redrafted, should state clearly that entry into and continuation in extraprovincial truck transportation would be determined solely on the basis of safety fitness criteria as defined in the act. Regulation on the basis of economic criteria, by any jurisdiction, should be specifically prohibited. The definition of safety fitness criteria in the act should encompass the national safety code for motor carriers, specifically the standard and compliance review for safety fitness which determines the safety rating of motor carriers, along with the existing requirements for knowledge of and compliance with the transportation of dangerous goods regulations, compliance with provincial highway safety laws, and the holding of minimum levels of liability insurance.
Through reference to the requirements to comply with the national safety code, the MVTA should specify that the issuance, maintenance, and withdrawal of safety fitness certificates would be regulated in a uniform manner by all provincial jurisdictions. Obviously, all references to operating licences should be eliminated.
Why do I refer to MVTA at this point? It is because with these issues which should be treated in MVTA, they have to be put into position in the CTA by determining what regulation would apply and how.
In the coming months the Canadian Trucking Association will be promoting these and other related changes to MVTA, in discussion with Transport Canada and the Canadian Council of Motor Transport Administrators. It is hoped at the appropriate time the Standing Committee on Transport will support the principal objectives of these recommendations, namely the elimination of all forms of economic regulation of the motor carrier industry and the uniform application of highway safety standards in all jurisdictions.
The Chairman: Thanks, Mr. Bélanger, for your submission.
Your submission lacks one thing, and that is some suggested amendments. Would you be prepared to work up some suggested amendments and file them with this committee so we can have a look at them?
Mr. Bélanger: Yes, sir.
The Chairman: Thanks. We'd appreciate that.
Mr. Chatters.
Mr. Chatters: I'm surprised. I don't think we will very often have groups coming before the committee complaining because they were left out of legislation. You should be thankful, perhaps, you are. Maybe it's because of this that the truck transport industry has been able to compete with the rail industry in this country in spite of the much lower ability to move large amounts of material at a single time. The trucking industry competes very well with the railroad. Maybe that's because of less regulation.
Outside of this bill, I think what you're looking for is a federal-provincial agreement between the Minister of Transport and provincial ministers of highways to come up with a uniform regulation across Canada dealing with safety, insurance, and licensing. My impression is that is a different issue from what we're dealing with in Bill C-101.
Mr. Bélanger: We remember the horrors of the 1950s, when we were not in the then-equivalent to the CTA. We were not regulated at all by the federal government. Each province was doing whatever it wanted to do to the industry. There was no national industry. There was a pile of little regional trucking industries across Canada, but no national industry.
.1715
The court decisions of the 1950s that forced the federal government into action on the regulation began to put some order into the system.
To correct you on one of your statements, we are not looking for regulation. We want the federal government and the CTA to ensure that there's not going to be economic regulation by the provinces tomorrow because it was left out of the CTA. That's what we want to ensure. We don't want any regulation. We just want to make sure that the Canadian Transportation Act is going to say that trucking is going to stay deregulated.
Mr. Chatters: I'm not sure if I agree with the way in which you are going about that, but at least I understand better why you're here.
Mr. Fontana: It's nice to see you, Gilles.
I think I understand where you're coming from, but I get the impression that you want an honourable mention in the CTA so that nobody will be able to fool around with you down the road.
As you know, the federal government has essentially delegated the authority for the trucking industry to the provinces, save and except the Motor Vehicle Transport Act that presently exists.
So you are telling us that we can do it in two ways. First, some amendments need to be done to the MVTA. That's for another day; we're not dealing with it at this point in time.
With regard to Bill C-101, you are suggesting that there should be some mention of the relationship that exists between the federal and provincial governments with regard to the deregulation of the trucking industry.
Mr. Bélanger: First, where I have a problem is the Canada Transportation Act states what our national transportation policy is, but deals with three modes.
Mr. Fontana: That's right.
Mr. Bélanger: So the national transportation policy in Canada is a rail, an air, and a maritime transportation policy. There's nothing on trucks, which represent 45% of transportation GDP. It's double the second-largest sector in importance.
The national policy is what allows everybody to interpret actions and regulations in all sorts of things in that sector.
Let's say that the national policy says that it is pro-deregulation and Bill C-101 is. That doesn't apply to trucking. So tomorrow morning, when the act has been adopted, a province - Ontario, Quebec - turns around and reregulates trucking as it was pre-1987. We are back into economic regulation by default. Then we're going to go back to the Supreme Court of Canada and say, would you tell these guys that they can't do that.
The Chairman: Just as a point of clarification - you talk about Ontario or Quebec, etc. - we don't have any constitutional right to trucking within the province anyway.
Mr. Bélanger: No.
The Chairman: Ours is only interprovincial.
Mr. Bélanger: I'm talking strictly about extraprovincial carriers, which transport 70% of all goods transported in Canada. Although the actual movement may be interprovincial, the carriers that carry it are extraprovincials and are under the jurisdiction of the federal government.
Mr. Fontana: Gilles, you've raised a really interesting question. The minister has given us the opportunity to look at all aspects before second reading. You've raised a particular issue, and we'll get an answer for you because that's a very important point.
Mr. Bélanger: The question is, the Government of Canada has not delegated its authority to the provinces because it cannot do that under the Constitution. Basically, because it got caught with its pants down in 1954, the government overnight threw together an act called the Motor Vehicle Transport Act, telling the provinces: continue to do what you were doing in terms of licensing carriers with our blessing, and do it to extraprovincial carriers in the same way as you do it for your local carriers.
.1720
But now we no longer have licences. What are we going to tell the provinces tomorrow about how to regulate trucking?
Mr. Fontana: To be fair - and I could be mistaken - there is nothing in the 1987 NTA act that mentions trucking either.
Mr. Bélanger: Yes, there is. In 1987 the act said the Government of Canada is responsible for, or has jurisdiction over, the five modes: rail, air, marine, pipeline, and trucking; here is how we're going to exercise our jurisdiction in air, in rail, etc. When it got to trucking, it said: for those not exempted, they are going to be dealt with in accordance with MVTA. So it was captured in the act and that reference provided that we are able to interpret -
Mr. Fontana: That's what you're asking for. Okay.
Mr. Bélanger: We were able to interpret the national policy in relation to carriers in that way.
Mr. Fontana: Good point.
The Chairman: Thanks, Gilles. We'll look forward to receiving your suggested amendments. The committee will have a look at them, and we'll see if there's something applicable in them to be included in the CTA.
Mr. Nault: Before we get too far down the road with amendments, could we also get the department to give us an explanation for why this reference of the trucking industry was not in there?
The Chairman: Sure.
Mr. Nault: If it's in the back one, either I haven't read it or I haven't seen it.
The Chairman: No, I haven't seen it either.
Mr. Nault: It must be in about five or six of those briefing books somewhere.
The Chairman: We'll find it for you and tell you what page it's on.
Now we'd like to invite to the table, from the Mining Association of Canada, Robert J. Keyes; no relation to Chairman Keyes. It's even spelled the same.
You didn't know Keyes was a Polish name, did you?
An hon. member: Mr. Chairman, we all fell out of the same tree.
The Chairman: Robert J. Keyes is vice-president of economic affairs from the Mining Association of Canada.
Mr. Keyes, welcome to the committee. You are joined by another gentleman, John Murphy, manager of transportation. We look forward to your presentation.
Mr. Robert J. Keyes (Vice-President, Economic Affairs, Mining Association of Canada): Thank you very much. We are very pleased to appear before the committee today. Transportation is a vitally important issue for the mining industry.
As the chairman said, I have with me Mr. John Murphy, who is manager of transportation for COMINCO in Vancouver. He also represents the Mining Association of British Columbia.
You have a copy of our brief. I am not going to go through it in detail. I'll just open with a few brief comments.
First of all, the association is the national association of the Canadian mining industry, with our members engaged in mineral exploration, mining, smelting, refining, and semi-fabrication. Our members account for the majority of Canada's output of metals and major industrial materials.
Bill C-101 is a critical piece of legislation for us, and I think for Canada. The Canadian economy is one of the most transport-intensive in the world. Our small population, large land mass, and heavy dependence on international trade make our transportation system more critical to our economic well-being than perhaps transportation is in many other nations.
I think the views of our industry are particularly critical, for the following reasons.
Minerals and metals generate more than half the revenue freight carried by the railroad system.
.1725
Our industry requires a competitive transportation system to underpin the jobs, the economic base of some 150 communities in this country whose activities and economic base significantly or completely are based on mineral and metal activities.
Minerals and metals comprise 18% of the value of Canada's exports. If we're going to continue that performance, then we have to be competitive, and transportation costs can have a major impact on that competitiveness.
For most mineral products, cost increases, from whatever source, cannot be passed on to customers, because the prices are set in international markets beyond the control of producers. The cyclical nature of the sector has forced mineral producers dramatically to reduce their costs in order to remain competitive. One of our major cost components is transportation, and we require that this vital cost factor will be subject to the same competitive environment and constraints as the mining operations themselves face.
Finally, many operations are located in remote areas of the country. They are serviced by only one railroad. Moreover, there's often no choice between transportation modes. Hence, it's critical that the regulatory regime will ensure a competitive balance between shippers and carriers.
Let me highlight a few of the key concerns.
First, let me state that we support the intent and the thrust of rail reform. Greater efficiency and streamlining of the regulatory system will assist the railroads to provide an efficient and competitive service. However, while Bill C-101 does not appear to remove the competitive access provisions contained in the NTA of 1987, we think the changes proposed effectively gut the original intent and will severely limit the ability of shippers to access regulatory remedies when they are required.
Which are the problem clauses?
The first is subclause 27(2), on the establishment of significant prejudice. This adds a burden not currently in place. We're not sure what it means and how it will work, and we submit that this will not be easily determined.
Subclause 34(1) threatens shippers with costs for frivolous or vexatious complaints. Is this really necessary? Is there a record of abuse that really requires such a threat? This may well be a deterrent to shippers seeking legitimate redress.
Third, section 40.3 of the NTA, which dealt with interim injunctions, has been removed from Bill C-101. The potential for delay in securing redress threatens, perhaps permanently, the competitiveness of shippers.
Fourth, clause 113 specifies that rates and services will be commercially fair and reasonable. How is this to be determined? What is commercially fair and reasonable in the context of this bill? It is not defined in the bill.
Given the track record - no pun intended - of the NTA 1987, we ask if these new barriers are really required. The railroads and their customers have been able to complete many contracts without the need to resort to regulatory remedies, but the competitive access provisions introduced in 1987 were very instrumental in allowing these successful outcomes to be reached.
Our brief has touched on other areas: access and running rights for short lines, concerns over public interest requirements, interswitching and CLRs, and the confidentiality of contracts. In the interest of time, I won't go into these in any detail, but we can certainly respond to questions.
Let me conclude on the following note. Your committee must assess whether the proposed legislation creates a regulatory environment that will provide the necessary balance between shippers and carriers. As shippers, we need the services that the railroads can offer. As carriers, the railroads need and want the traffic our products provide. This should be the basis for a partnership.
It's the government's job to ensure that this partnership can flourish in a fair, balanced, and efficient fashion. We think that some elements of the proposed legislation run counter to that goal. We look forward to discussing these issues with you.
Thank you.
The Chairman: Thanks for your presentation, Mr. Keyes.
Mr. Chatters.
Mr. Chatters: It sounds very much as if you have the same concerns as all the witnesses before, that there's a lack of definition in the terms that are being used. You don't generally have a problem with the direction and the things the bill is trying to achieve, but it's again that lack of definition and the fear that the definition will take years to evolve through the courts. Would that be correct?
.1730
Mr. R. Keyes: I would say so. Also, by the time you work through these things you have uncertainty, you have a very rapidly changing competitive environment, and perhaps you don't know where you're going to come out at the end of the day. There's a lot of open-ended interpretation. It is going to take time before shippers know exactly where they stand.
I might ask my colleague to comment on that.
Mr. John Murphy (Mining Association of Canada): I think the provisions we were used to in 1987 were reasonably clear-cut. We understood the capabilities we would have under it. As soon as we start changing words around for no apparent need, then we have no reason to be other than nervous about the prospects.
Mr. Chatters: Neither you nor anyone else to this point has mentioned the existing provision under final-offer arbitration of the requirement for the injured party to come forth with an application before the other party; in other words, giving the other party the advantage of looking at your final offer before making his final offer. Is that not a concern? I'm surprised I haven't heard anything on that.
Mr. Murphy: We were trying to keep the brief as brief as possible. We are certainly aware of a lot of the other concerns shippers have across the country.
I'm aware there is a problem with the final-offer arbitration in the way it's written now. Through final-offer arbitration both parties would submit blindly. This does give the railroads effectively a second kick at this.
It has been around. I don't think it necessarily negates the value of final-offer arbitration. I would also suggest you will see it come up in submissions from various other shippers.
Mr. Nault: Welcome to the committee, gentlemen.
I've been listening this afternoon and now this evening. Obviously the shippers all have the same concern. The difficulty I'm having with this whole issue so far is that there have been relatively few occasions since 1987 when anybody has bothered to use the agency to do their bidding for them and to be the final arbiter or to have it look at an application on unfair procedures by the railroads. My understanding is that there have been fewer than half a dozen.
That obviously means this particular clause of the bill means something different from a process to be used; you're doing fairly well on your own in negotiating with the railroads. It leads me to believe that in fact it's used for leverage by the shippers for reasons other than that the railroads are being unfair. Otherwise we'd have literally hundreds of these processes going to the agency.
Can you tell me whether my intuition...? I'm not a female, so my male intuition might not be as good, but I get this sneaking suspicion the reason why you want it left the way it is is to make sure the railroads play by the shippers' rules and maybe not by what is better for them as a corporation in order for them to be successful. Do you have any comment?
Mr. Murphy: I would suggest not too many nuclear bombs have been dropped in our history either -
Mr. Fontana: One was enough.
Mr. Murphy: - but that hasn't negated their effect.
From personal experience...we went through a process with a fairly major mine we had that was very captive. We went through the process of understanding what we would have to do in order to get a reasonable hearing under the old CTC rules. Suffice it to say at the end of the day we decided we were not up to the process.
.1735
The access provisions in there haven't been used. I think it's a credit to a combination of the legislation, the railroads and the shippers that it has not been necessary to use them. But given the balance of any given shipper, whether it's small or large, relative to the resources of both railroads, you need some kind of final court you can go to to ensure some reasonableness is brought to the table by both sides.
Mr. Nault: Part of your brief deals with clause 138, which suggests that the federal railroad has to pass a public interest test in applying for running rights on another federal railroad. You go on to say this is inconsistent with removal of the public interest test elsewhere in the bill.
Would it be fair to argue that the whole issue of the abilities of shippers to go to the agency to deal with forcing the railroads to continue to supply service is in itself a public interest clause?
Can you imagine what would happen in a major mine - and of course I have a number of mines in my riding, as Bob will tell you - if a rail line ran to it and then all of a sudden the railway decided it wasn't going to ship the goods of that particular mine any longer?
Can you imagine what kind of public outcry there would be from that particular region if it were proven that in fact that mine was still a very successful mine, that a lot of goods were being shipped out of it and that there was no other option available to that particular mine? The member of Parliament from the area and of course the public at large in that region would be very upset with the railroad and would make their views known.
So in fact the reason we haven't gone to the agency on a regular basis is just that very argument that the public interest is out there. People will be willing to voice their opinions. There's no need to have this mechanism or set-up in the way envisioned by you.
I'm just trying to figure out how on the one hand there's a sense that there's a need for public interest, but on the other hand there is a request to have it removed from the act. Going to the agency to deal with your disputes with the railroads is looking after the public interest, in one form or another, from your perspective. Otherwise this is a commercial business enterprise and you'll negotiate as you negotiate with any other organization, potential business, transportation system or what have you.
I'm trying to get a sense of whether you are in favour of or opposed to keeping public interest in the bill.
Mr. Murphy: We were dealing mainly with the inconsistency related to the public interest provision.
The Chairman: I think it was the inconsistency point that struck some of our members, and they were asking why it's not a parallel kind of thing.
Mr. Nault: But my question, relating to that, is on whether your association is in favour of the public interest portions of the bill that relate to the railroads having to meet certain public interest guidelines or processes by regulation, which they do now. Are you in favour of getting them out of there or are you in favour of keeping them?
Mr. Murphy: I don't think I've looked at a lot of the provisions being discussed here in that larger context of public interest that we've been brought up in. I don't see it in quite the same light. I think that, in the commercial aspects of it, we're talking about provisions that will ensure some reasonableness on the part of the carriers to negotiate. I don't think there's a level much below the public interest that we've talked about, going back under the Railway Act. I don't think they're of quite the same scope.
.1740
Mr. Nault: So you don't believe that the railway should have a right to pull its service wherever it feels and believes it's not in its best interest as a corporation?
It's not different from any mining corporation, whether it be Placer Dome, Noranda, or whoever. If they feel that it's not appropriate to build a mine somewhere in northern Ontario, then they pick up and take off and go somewhere else. The government doesn't tell them they can't do that. Quite frankly, we don't stop you from going where you'd like to go.
On the other hand, you're saying to me that we should tell the railroads that they have to keep certain pieces of track whether they make money or not. That's basically what you're suggesting with this agency as it relates to captive shippers.
Am I correct?
Mr. Murphy: I think there are provisions in the legislation for the railroads to abandon or sell off lines that are not economic. We don't have any problems with the provisions that are in there on the process that the railroads can go through if they are not making any money on a piece of line.
Mr. Hubbard: Apparently about half of the total freight revenues in this country come from mining groups. There are four or five big commodities and certain mines are captive at present to one or the other of the railway lines. That has been an accepted fact.
In terms of the remote communities to which Mr. Nault has referred, 150 communities in this country have major investments and major economic activities as a result of the mining industry. How many of those are captive to railways? In other words, how many mining towns might shut down if the railways from that town to the main line were not economically viable?
Mr. R. Keyes: Give me the back of the envelope for the proverbial calculation on that.
Mr. Murphy: Let me mention something while you're formulating that.
Part of the mining association is coal shippers, who are in a category wholly different from that of the rest of the mining companies, which are moving everything from concentrate to bar gold on an airline once in a while.
I think there is true captivity when you're talking about people who have to move millions of tonnes out of a particular origin.
You then get into a secondary category - and Mr. Nault's constituents probably fall into it - where the economic efficiency that they're able to bring to that particular cost component of their whole operation might not be as great as it could be, and that is eventually going to lead to an uneconomic state for whatever project we're talking about.
Mr. Hubbard: I understand from your response that when all the mining communities across this country - and I guess there's a meeting in Ottawa this week of a number of them.... No particular communities come to your mind that are saying to you, ``Represent us before that committee'', and we're really concerned if that should happen.
My community is going to be almost shut down as a result of parts of Bill C-101.
.1745
Mr. R. Keyes: I don't think it's been put that baldly, but what you get into at the end of the day is a question of competitiveness in moving material around. Depending on what the impact is of transportation rates for communities that are moving large volumes of concentrate or product out, that can have a very major impact on the economics of an operation.
I can't stand here and say this community is going to shut down. That's not the issue. The transportation costs are one of a basket of costs people face. It all adds up and goes into the equation. But for some commodities the transportation cost is a very large portion of the delivered cost to port, if you're an exporter, or wherever. When the companies have been making great strides in reducing other costs and improving productivity, the same imperative has to face them from the perspective of transportation costs. It has to be very well controlled.
Mr. Fontana: I have a couple of things. First of all, it's been said that 1987, of course, when a similar review occurred, was the time when the shippers got a big break in deregulation as it applied to the price side of transportation. Obviously you've done some studies. Since 1987, has the price of transportation come down for your commodities?
Mr. Murphy: Yes, it has.
Mr. Fontana: By how much?
Mr. Murphy: I'd have to do it line by line, but 10% to 15% would be a good average, with some selective decreases up to almost 50%.
Mr. Fontana: Obviously the name of the game is to continue the downward trend of reducing costs so you become competitive, because the mining industry in Canada is competing with the mining industry in the United States, South America, wherever mining companies can go and get the best return on their investments. Obviously there is a vested interest in making sure the carriers can provide you with the most efficient, low-cost service, so you can compete and sell your goods to the other customers in the world, or else you don't compete.
Mr. R. Keyes: That's right.
Mr. Fontana: So there are efficiencies to be gained by everyone in reducing the total costs of the product, especially because the mining industry is a big exporter.
On that basis - and this relates to competitiveness too.... You obviously know what they're doing in the United States. Have you talked to mining people in the United States about what the costs of transportation are for them and what kind of regulation or deregulation they have as it relates to railroads? If you look at the U.S. model and compare Canadian railroads with the U.S. railroads, every time you impose a regulation or an impediment on a railroad, obviously that forces costs up relative to American carriers or shippers, which don't have any rights whatsoever in the United States.
I'm trying to get a handle on this. If you have to compete in the marketplace, tell me how you think you're going to be able to compete if the driving force has to be to reduce transportation costs relative to those of the United States carriers?
Mr. Murphy: All mining products are sold at a world price. We don't have any control over what that world price is going to be. If we compete in anything, we compete in seeing who's going to go out of business last, when we can't control our costs.
Mr. R. Keyes: Especially when the metal price cycle since 1987 looks like...that. Transportation costs are down, but metal prices are -
Mr. Fontana: I come from Timmins. I know.
Mr. Murphy: We compete on a worldwide basis. If you want to talk specifically about the U.S., you'll find that.... If I talk about my own case, COMINCO, a goodly number of our raw materials come 2,500 miles just to get processed. When we produce a final product, it goes a minimum of 2,500 miles to get to market.
.1750
In the case of most American mining operations, they are quite regional in their marketplace. Five hundred miles is a long haul for them.
I think you will find that over a broad band of products of mines in the States, the vast majority are handled by trucks because of the distances and the radius of the marketplace they're trying to serve.
Certainly, parallels with the Canadian experience are very difficult to draw. European, Japanese, and other Far Eastern producers are typically at tidewater.
Our average cost of distribution runs around 4¢ to 5¢ a pound. We compete with other producers outside of Canada, selling product in North America, including in Canada, who are able to land product here at a cost of around 2¢ a pound.
Mr. Fontana: Therefore it's obviously in your best interest to build a system that is very competitive and very efficient.
Mr. Murphy: I think it's in our interest to force a system that has the greatest amount of efficiency in it.
Mr. Fontana: And abandonment and all of those things that were in place before and that we are changing now are obviously going to have a positive effect, as well as the short lines, which could have a positive impact for some of your mining people where in fact they want to be served by one particular thing.
I want to address one question in regard to subclause 27(2), because that question has come up over and over again today.
When you define a captive shipper, are you defining it as one railroad or as one mode? I ask this because, in order for us to come up with what significant prejudice might be, we're going to have to determine whether or not we're trying to deal with someone who is truly captive. In my opinion, truly captive might mean one mode, not necessarily only one railroad.
How would you define it - or how should we try to define it, if we're even going to try to do so?
Mr. Murphy: One railroad is certainly the easy definition. One practical mode is certainly a definition that carries the day. I can't remember exactly how it goes, but there was an ICC definition of captivity that captured it quite well.
Mr. Fontana: That's helpful.
Secondly, you talked about subclause 28(2), about the interim injunction. You should know that Bill C-101 has removed just one part of that injunctive stuff, and that's the ex parte one. The rest of it remains intact, as it does in the 1987 act. I don't know if that makes you a little bit happier.
Mr. R. Keyes: I'll have a look at that.
Mr. Fontana: You should know that.
The Chairman: Gentlemen, thank you very much for your presentation to the committee. We have your brief.
.1755
Colleagues, our final witness before us this evening is a representative from Stentor Telecom Policy Inc., Greg van Koughnett, who is vice-president, legal and corporate affairs.
Mr. van Koughnett, welcome to the committee. Please introduce who you brought with you this afternoon and then give your presentation.
Mr. Greg van Koughnett (Vice-President, Legal and Corporate Affairs, Stentor Telecom Policy Inc.): Good afternoon, Mr. Chairman and members of the committee. Thank you very much for the opportunity to make representations to you today. My remarks are not lengthy, but I believe they do address some important public policy issues.
Before I go further, I would like to introduce my associates,
[Translation]
Suzanne Morin, legal counsel with our company, Stentor Telecom Policy Inc.,
[English]
and Mr. Keith Ledingham, regional manager for the Access Network, and for our largest shareholder, Bell Canada.
We are here representing Stentor, the alliance of Canada's major telephone companies. Stentor's members include not only Bell Canada but also AGT, BC Tel, Island Tel, Manitoba Telephone System, Maritime Tel & Tel, Newfoundland Tel, New Brunswick Telephone, NorthwesTel, Québec-Tél, and SaskTel.
[Translation]
The Stentor companies are the largest providers of public telephone service in Canada, accounting for approximately 90 per cent of the nation's telephone access lines.
[English]
Together, the Stentor companies provide local and long-distance services in every province and territory in Canada and employ more than 85,000 people.
While I speak on behalf of Canada's telephone companies, the matters I address today are of concern to all public utilities, including gas, electrical, pipeline, and cable.
For decades, the Stentor companies have been subject to statutory obligations to provide telephone service to Canadians. To meet these responsibilities, the Stentor companies are empowered to place their lines across highways and other public places. The statutory right to cross railway lines has been in the Railway Act since 1903. These rights are essential to providing universal high-quality telephone communications service to Canadians, a service recognized as second to none in the world.
In a general order issued more than a generation ago, the transportation agency of the day set out the conditions under which lines may be placed across a railway line. The upshot is that a plan of the proposed crossing must be submitted to the railway and must be rejected before the matter can be returned to the transportation agency for its adjudication. This rather ponderous process takes a minimum of six months.
The Stentor companies have three issues to present related to Bill C-101. I will briefly outline each issue and suggest what we see as necessary amendments to alleviate these concerns quickly, easily, and at no cost to Canadian taxpayers.
The first issue is the unwillingness of the railways to accept the repeated rulings of the transportation agency concerning charges to utilities when their facilities cross railway tracks and rights-of-way. The policy of the National Transportation Agency, or NTA, and its predecessors has always been to allow utilities to cross the tracks of railway companies without any compensation when no damage to railway lands is at issue. Nonetheless, attempts to obtain agreement from the railways to permit telecommunications facilities on rights-of-way without fees have been repeatedly rejected by the railways. The agency has taken the position that it must consider each case individually. But it always determines the issue in exactly the same way.
There are many thousands of telephone company crossings across railway tracks, not to mention those of other utilities. Having to resort to an adjudicative process each time lines cross a railway track is expensive and unnecessary. The agency itself incurs costs in adjudicating on a case-by-case basis, which is a very inefficient use of public dollars. Parties incur costs in applying to the NTA. While adding to the cost of services...the provision of those services to the Canadian public is delayed.
.1800
Our view is that the status quo is unacceptable and outdated public policy.
This first issue is really one of delay. Phone companies are required to provide service to subscribers in a timely manner. This makes it impossible to seek leave from the NTA due to the time involved.
In many instances the phone company simply accepts the railway company's conditions in order to meet its own service obligations to customers. Knowing this to be the case, railways continue to take advantage of the situation. Clause 102 of Bill C-101 would codify provisions similar to those contained in the general order, thereby perpetuating the same unsatisfactory procedure.
Stentor submits that Bill C-101 should be amended to go one step further and codify the well-established rulings of the NTA and its predecessors on the issue of compensation. This amendment would minimize the regulatory burden of the new Canadian Transportation Agency, in keeping with the government's objective to create a new, more streamlined and focused regulatory body.
The second issue I raise concerns the need for utilities to be able to protect their facilities in the case of the sale or discontinuance of a railway line.
Railways have always refused to grant to utilities registrable easements that would run with the land when railway property is sold. The problem arises when a railway sells or subdivides its property. The location of utility facilities may be unknown to purchasers or other parties, such as oil drillers or excavators.
The purpose of registry and land title statutes is to provide a central repository that shows purchasers all interests and uses to which land is put. The refusal of railways to grant registrable easements runs counter to the whole purpose of registry systems, creating a serious public policy issue.
Stentor submits it is critical to utility companies across Canada that Bill C-101 be amended so continued use of railway crossings by utilities is assured in the event a railway abandons its lines or transfers ownership of railway property.
The third and final issue I would like to bring to your attention today relates to the particular liability and indemnification provisions railways demand in their crossing agreements.
The NTA has ruled that a utility should not be made responsible for the railway company's own negligence. Nevertheless railway companies continue to insist upon securing such an indemnity provision from utilities.
Once again this practice leads to repeated applications to the agency. Thus this refusal to abide by past NTA rulings once again results in the waste of public dollars. Our recommendation here is an amendment to Bill C-101 that would once again codify the rulings of the NTA on the issue of indemnification.
Resolving the three issues I have outlined will have substantial financial and operational impacts not only on phone companies but on utilities across the country. Their resolution will also have a positive effect on the ability of these same public utilities to meet their statutory obligations to provide services to Canadians.
Perhaps of even greater significance to this committee, the amendments would take pressure off the public purse by avoiding needless representation to the successor agency to the NTA.
These issues are not complex, nor are our proposed solutions. The problems can be remedied quickly and easily by amendment. The changes will streamline operations for Canadian utilities, will save tax dollars and will have no ill effects on any other aspect of transportation policy in Canada.
.1805
In conclusion, I would just like to reiterate the three crucial amendments to Bill C-101 that we are seeking: first, an amendment to codify the NTA's policy that no compensation is payable to the railway where a crossing causes no damage to railway property; second, an amendment that provides that the rights granted by railways to utility companies run with the land; and third, an amendment to codify the NTA's policy that a utility is not responsible for a railway company's own negligence.
Finally, let me say that Stentor would be pleased to assist in any legislative drafting necessary to implement amendments that would address the issues we have raised here today.
[Translation]
Thank you, Mr. Chairman, for your attention.
[English]
Mr. Chairman, my colleagues and I shall be pleased to respond to any questions that the committee may have on these submissions.
The Chairman: Thank you, Mr. van Koughnett. Maybe you could supply to this committee some exact wording amendments and some suggestions that we could look at and begin to work on.
Mr. van Koughnett: We'd be pleased to, Mr. Chairman. Thank you.
The Chairman: Just as a point of clarification, when you run a line and you hit the tracks and you want to go over or under them, is it a one-time fee? Is it a monthly fee? Is it a yearly fee? Do CN and CP charge you for this?
Mr. van Koughnett: CN and CP. They take the position that they wish to investigate each crossing separately. They want an annual fee and an administrative fee. So there is a one-time fee plus an annual fee.
The Chairman: Do both railways charge you the same amount of money?
Mr. van Koughnett: No, as a matter of fact, they do not. CP charges more.
The Chairman: CP charges more than CN?
Mr. van Koughnett: That's right.
The Chairman: Give us an example of a fee for a cable going underneath a crossing somewhere.
Mr. van Koughnett: The most recent examples in Bell Canada's territory are $500 CN, $700 CP.
The Chairman: That's the administration fee?
Mr. van Koughnett: That's the annual fee.
The Chairman: That's the annual fee for that one line to go underneath the track?
Mr. van Koughnett: Per geographic spot.
The Chairman: So a geographic spot could have 20 lines on it?
Mr. van Koughnett: Yes.
The Chairman: Or a multitude of lines? The government seems to be shortchanging itself here somehow.
To the nasty railroads that are charging all that money for doing this, in this age of negotiation would you be prepared to say, ``Look, if there's got to be a user fee to run that line underneath the track because you're going to have to have somebody stand there and make sure it's a safe procedure that we're doing'', and all that kind of thing -
Mr. van Koughnett: Absolutely. We've always taken the position that we'd be prepared to incur any genuine costs. Indeed, that's totally consistent with the rulings of the NTA, and of the CTC before it. The issue is really one that the railways know very well that they can hold us out to ransom, because we need to provide service as quickly as possible to our customers, but they don't have to, according to past rulings, because the agency has an adjudicative role and a role that therefore requires it to look at each application on an individual basis.
The Chairman: And if it's CN or CP, how far do these geographical areas stretch? Is it so many miles of track?
Mr. van Koughnett: Each crossing is what I meant.
The Chairman: Oh, each crossing is a geographical area?
Mr. van Koughnett: Yes.
The Chairman: Mr. Chatters.
Mr. Chatters: Having had some experience with this line-crossing business, I agree overall with what you're saying. The railroads have been less than cooperative in this whole area.
Where would you see this amendment taking place in this bill?
Mr. van Koughnett: Clause 102, which already goes halfway by codifying what is general order E-11 of the Canadian Transport Commission, which is the general order in question, could go the extra distance to do what the NTA has not felt it's capable of doing, since it sees itself as a specialized court ruling on a case-by-case basis. In other words, clause 102 or clause 103 could follow the codification of general order E-11 by specifying that the policy that has always been pronounced on each individual case by the NTA is enshrined in law for all comers.
.1810
Mr. Chatters: You're referring to a precedent that's been set by rulings in the past but has never been in legislation.
Mr. van Koughnett: That's right.
Our position is when you get an agency that rules over and over again the same way, the time has come to save our dollars, and more importantly taxpayers' dollars, by putting it in the legislation to try to stop the railways from holding us all out to ransom.
Mr. Chatters: Thank you.
Mr. Fontana: I want to be convinced, though, because the telephone companies now pay other utilities and municipalities. When you use Ontario Hydro's poles or a cable company's poles, don't you pay for that privilege now?
Mr. van Koughnett: Cable companies themselves don't have poles. They use ours.
Mr. Fontana: You charge them too, though, don't you?
Mr. van Koughnett: Yes, we do, on a tariff that's set by the CRTC. With hydro we share the poles, generally speaking. There's a different arrangement for each -
Mr. Fontana: I'm just trying to understand the philosophy here. If Stentor wants to charge x number of dollars for another carrier every time someone wants to use their facilities - and these are private corporations now, or at least CN will be, and it is their land, so it's not a question of public land, but of private land - then, just philosophically, why is it that you shouldn't pay but everybody else should pay to use your facilities? I'm trying to understand the consistency here.
Mr. van Koughnett: As a matter of fact, if you go back to before April 1, 1976, the Canadian Transport Commission actually had jurisdiction over both elements - both what we could charge to the embryonic cable companies of the time and what should properly be charged by the railway companies to the telephone companies.
The distinction the CTC brought to bear is probably a good one. The cable companies and probably newer competitors down the road making use of poles, or indeed conduit underneath the streets, as is more often the case, are actually making use of our facilities and they should pay a share. Of course we don't view it as a sufficiently large share, but they should pay a share of maintaining those facilities.
In this case what the CTC ruled, and I think it follows logically, is that we're not actually using the facilities. We go in and do the work ourselves, either burying or putting lines at the height specified by the agency so that the trains can't possibly hit the lines. No work is being done by railway company personnel and no facilities owned by the railway are being engaged.
Mr. Fontana: My point, though, is it's not only railway companies that are charging you. It happens in municipalities. It happens with other utilities. It happens all over the place. The railroads are charging you and in turn you are charging others, right? So either nobody should pay or I suppose everybody should pay.
Would it bother you to pay if in fact you could get the easement you're seeking? Obviously that's tied to land, and if that land were sold to another short line or to a municipality, or if in the abandonment you lost control of it, you would have to enter into some sort of agreement with that new owner anyway, wouldn't you?
Mr. van Koughnett: Yes. Your point is well taken.
The reason we seek no compensation payable is that's what agencies for all of this century have found repeatedly. Their logic has been: since we have a statutory requirement to serve - we have to get to the customers - it's not as though we're asking for a special favour of the railway and there should be a proxy for the marketplace.
If I want to string my clothesline over your back garden, you may think air drying is in the public interest and a solar drier is something you'd like to see, but we can enter into an agreement as to what kind of compensation should take place.
Mr. Fontana: As long as you're drying my clothes I don't have a problem.
Mr. van Koughnett: The reason the agency came at it the other way was that they were saying, here's a body that has a statutory obligation; rather than hold them prey to market forces, they should be able to come in for free.
Let me just answer the other half, though. Indeed, it's quite correct that if what was at stake was simply the dollar amount, then we probably wouldn't be here today. It's the delay that's the problem.
.1815
The railways realize that with the increasing importance of telecommunications and the increasing number of competitors, customers need their services right now. They no longer need it in three days; they need it right now. Therefore the railways can charge what they wish, and they know that the adjudicative process will be used only once in a while when we get annoyed, but more often than not we'll just pay.
Mr. Fontana: You could try the other action, which is to go ahead and do it anyway and then have them bring you to court to see whether or not they will collect their $500 or $700 in small claims court and see how far that argument gets.
Mr. van Koughnett: There are strong precedents for that. Cable companies have been doing that with our facilities for years.
Mr. Fontana: So maybe you should try the same thing.
Mr. Nault: I'm having difficulty in following this. You suggested that the railways have refused to accept the ruling. What do you mean by ``refused''? Do you mean that you go to the agency and it rules in your favour, but then the railways basically thumb their nose at the agency and say that it doesn't really matter what it says, that they are going to do it in their way anyway?
Mr. van Koughnett: [Inaudible - Editor]...to the next crossing. I'm sorry; I didn't mean to suggest that the railways would actually fail to adhere to a specific ruling on a specific crossing - not at all.
In a sense, it's the legislative scheme. I don't want to paint the railways as being too nefarious here, since that would be unfair. The truth is that the legislative scheme has permitted the railways to do what they are currently doing.
Mr. Fontana: Everybody else has done that today.
Mr. van Koughnett: Because the process was set up so that each crossing should be considered as an individual case and go to a quasi-judicial tribunal for adjudication, the railways have taken advantage of that. So every time the agency rules, that's fine for that case. The next time the railway argues, ``Well, we think there might be a case in this instance where there has been some genuine cost incurred by the railway'', or ``Some actual time has been used by railway personnel to help facilitate, so we think this falls outside of the precedent. We want this one to go back to the agency, or you can cough up the bucks we're looking for''.
Mr. Nault: So in fact they're not allowed to codify.
Mr. van Koughnett: The agency is of the view that it cannot codify.
Mr. Nault: Yes, but they have the power to codify now if they want to.
Mr. van Koughnett: I deliberately skirted that question this afternoon, because it is a question of law that I have not adequately researched.
The agency has taken the view that it would be inappropriate to codify, and I would be remiss if I were to argue that it has misconstrued its statute, because I haven't done the work to make that submission to you.
Mr. Nault: Obviously we're all very interested. On a yearly basis, how much does this cost the organization you're representing? How much money is this for the railroads? It must be a fairly large number, because when you think about it, the railways were there before we had power in most cases, so you have to cross the railroads just about everywhere in the country.
Mr. van Koughnett: Yes. I'm afraid that I'm going to have to turn to my friend,Mr. Ledingham, because I have forgotten what the answer to that is.
Mr. Keith Ledingham (General Manager, Access Network, Bell Canada; Stentor Telecom Policy Inc.): Just the Bell Canada number there is in the order of 16,000 crossings, and the annual bill - there are two components - totals about $140,000 to CN and I think between $15,000 and $20,000 to CP. That's the annual rental, plus there are the fees that we pay to cross on an individual basis and the fees that we pay for services that the railways actually provide to us for flagging and safety protection.
Mr. van Koughnett: There are also administrative costs within the company keeping track of the individual crossings. In other words, we have to keep a whole file system for each of these individual crossings. The invoices come in and we pay them and so on. So it's very cumbersome to have this issue dealt with on a crossing-by-crossing basis.
This is exactly parallel, and probably of greater pith and moment to the members of the committee. The agency itself, whether it be the NTA or the new CTA, has the same problem, that it's addressing this matter on a crossing-by-crossing basis. And there are new crossings every year that cause new files to be opened.
.1820
Mr. Nault: That's appropriate, because you're asking, of course, to change the rules, which would necessitate accepting the fact that CN-CP would lose some revenue. That's obvious to us all. So I was interested in knowing just what the cost is.
Obviously there's a difference between when it goes underground and when it goes above ground. I would suggest to you there's probably more interest in charging you and the indemnity problem would become more acute when you're going under the track than when you're going over top of it. Would that not be correct?
Mr. van Koughnett: We had a debate about that earlier this afternoon.
Mr. Ledingham, would you prefer to take a run at that?
Mr. Ledingham: They cause the railway different problems. There's a big safety issue in going under the railway, because if you disturb the bed, you put it at risk. The aerial crossing is always an impediment to them, or could be, in visual effect.
They treat them both as an issue. I don't know which one is more evil.
The aerial one very often doesn't occupy the property at all. There are poles on either side of the right-of-way and it's just the cable that's over the railway.
Mr. Nault: You still have to pay for the cable going over the right-of-way?
Mr. Ledingham: They rent us air.
Mr. Fontana: Are we getting our fair share of that?
Mr. Nault: This is the last question I have.
I'm under the impression that this is as much a CRTC issue as it is a transport issue. I would assume this has been a long-standing issue. Have you ever gone to the CRTC to rule that you have an obligation to supply a certain service, and therefore there should be a ruling that says the railways shall allow you access? Has that ever been done, or is this the first place you've ever come to to air your grievance as it relates to the railways?
Mr. van Koughnett: As a matter of fact, it's funny you should ask that. I was at the CRTC for eleven years, and the complexity of trying to decide between CRTC and CTC, now NTA, jurisdiction was one of my files when I first arrived. It was something they'd always give to the most junior lawyer on the grounds that it was so boring that no one else should have to look at it.
In fact, it did seem that the correct answer was that it lay with the CTC. Just to make sure that was the case and to tidy up a couple of other little related pieces, an Order in Council pursuant to the Public Service Rearrangement and Transfer of Duties Act was passed to shift it all back to the CTC, because there had been a slightly unclean break on April 1, 1976, when Telecom came across from the CTC.
There were no inspectors at all. The CRTC has never had inspectors to take a look at lines, whereas the CTC did, so it all went back to the CTC. That's why I think it's not a CRTC issue.
The Chairman: I'll go maybe one step further. When you go to put that cable underneath the track, you have to go to the NTA. Have you ever considered approaching the NTA and saying ``Why don't we not go to you any more? Why don't we just negotiate directly with the railroads a one-time fee whenever we want to go under the track?''
Mr. van Koughnett: That was actually tried. Although this issue started at the beginning of the century, it continues on. There were two cases this year, one for Bell Canada and one for the City of Edmonton. The agency feels more comfortable dealing with them on a case-by-case basis.
The Chairman: Mr. Ledingham, you're a rep of Bell. If the amendment produced a reasonable one-time charge, for example for the crossing, resulting in some savings to Bell, would, say, telephone bills come down proportionately as a result?
Some hon. members: Oh, oh!
The Chairman: He remains silent.
Mr. Fontana: I've taken so much hell over frivolous and vexatious behaviour, I think you should stop paying it. This new provision in there is going to force the railroads to take you to the CTA, and they're going to throw it out on the basis of and charge them for frivolous and vexatious actions.
Some hon. members: Oh, oh!
Mr. Fontana: That's where it might work.
Mr. Chatters: Does the precedent not now exist for exactly what you're asking for when you deal with municipal roadways? Generally the municipality will allow you to cross or to travel parallel to the road for a one-time charge.
Mr. van Koughnett: As a matter of fact, that one does reside with the CRTC. Municipalities do charge different amounts, and the CRTC occasionally is asked to rule on the amount in order to keep it in check. The model is the same; that is to say, if the parties can't agree, then they can approach the CRTC.
.1825
Mr. Chatters: It's a one-time charge, though?
Mr. van Koughnett: No, it's an annual charge.
Mr. Chatters: It's an ongoing, annual thing as well?
Mr. van Koughnett: It's an ongoing charge.
The Chairman: Thanks, Mr. van Koughnett, for coming before our committee. We appreciate your giving of your time.
Mr. van Koughnett: Thanks very much, Mr. Chairman. We'll work on the amendments.
The Chairman: Ms Morin and Mr. Ledingham, thank you very much.
Colleagues, we shall resume tomorrow morning at 9:30 in the Railway Committee Room.
This meeting stands adjourned.