EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, October 18, 1995

.1533

[English]

The Vice-Chairman (Mr. Comuzzi): This is the Standing Committee on Transport, considering Bill C-101. I am pleased to report, ladies and gentlemen, that we have a quorum. I'm also pleased to report that we have no witnesses. You decide which is the good news and the bad news for the day.

We will convene the meeting that we've convened and we will adjourn pending the arrival of some witnesses. How's that, Mr. Clerk?

The Clerk of the Committee: Yes, if you call a recess....

The Vice-Chairman (Mr. Comuzzi): There is a recess. Please reconvene when you see witnesses appearing. The first witness missed his plane, the second witness isn't here and the third witnesses are on their way.

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The Vice-Chairman (Mr. Comuzzi): We'll reconvene, as we have representation from the Baie-Comeau Chamber of Commerce.

Welcome, Mr. Breton. Will you introduce your colleagues, please?

Mr. Pierre Breton (President, Baie-Comeau Chamber of Commerce): With me is Mrs. Anne-Marie Day, director general

[Translation]

of the Chamber of Commerce of Baie-Comeau, and Mr. Yves Meunier, director of communications in the city of Baie-Comeau.

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[English]

The Vice-Chairman (Mr. Comuzzi): The usual process, Mr. Breton, is that you make a submission for anywhere between five and ten minutes and then members of the committee have the opportunity to ask you questions. If that meets with your approval, please go ahead.

Mr. Breton: Thank you very much, Mr. Comuzzi.

[Translation]

I would like to say to you that we are representing here the Regroupement des chambres de commerce régionales du Québec, which earlier, last November, presented a brief to the minister Douglas Young concerning the most unfortunate situation that has developed in Quebec airports.

For the purpose of following up on this effort to restore air fares to acceptable levels, and in the context of bill C-101, we have prepared a brief in which we take a general overview of air transportation as we perceive it in the regions.

I would like to begin by thanking you for your kindness in agreeing to hear us. We represent the chambers of commerce in Gaspé, Sept-Îles, Baie-Comeau, Mont-Joli, Rouyn-Noranda, Val-d'Or, La Baie, Chicoutimi and Jonquière.

The airports within the Quebec catchment area are located within the territories of these chambers of commerce. I did say the airports within the Quebec catchment area.

I would like to point out the initiative we are taking today is meant to be essentially apolitical. We know that in the current political context discussion on the subjects we are going to be raising in the next few days may be harder to initiate.

However, the problem we are presenting to you today is essentially a Canadian problem, from British Columbia to Newfoundland. The study we conducted was limited to Quebec airports, but we know that the air carriers everywhere in Canada have the same pricing policies.

So, if you will allow me, we are going to examine forthwith table 1, which provides an overview of the present situation. Unfortunately, we do not have this table, but it has to do with the percentage variation in air fares, the consumer price index and the number of passengers in Quebec's regional airports.

You can see this table on page 5 of the brief. You will note that the fares have increased since deregulation. Since the air carriers gained control over their pricing policies, fares and taxes have increased by 91% in Canada. The fares themselves have increased by 64%, while consumer prices increased by 16%.

As a result, we can see a 38% decrease in the number of passengers in the regional airports. We should add, to what represents the total passenger flow through the airports we represent, the evolution in vacation discount fares.

We will now go to the second table, at page 8, to see what has happened, in terms of numbers, in the airports we represent. In 1988, 633,700 passengers, arrivals and departures, travelled over the domestic lines in Quebec. In 1994, there were only 394,400, a decrease of 38%.

The National Transportation Agency informs us that this decrease is attributable to a never-ending recession. It is our intention to demonstrate to you today that the recession has absolutely nothing to do with it.

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Before going on to the following table, I have an important comment to make with regard to the first table. You will notice that the vacation discount fare, which appears on the horizontal line-the four squares that are there-has not increased since 1992, the year in which it was inaugurated. There has been no increase in the rate, while all the other fare categories of the air carriers appreciably increased during the same period. Moreover, we are talking about two recent increases of 3%, one in September and the other in June. I emphasize this because it is important; the brief we are presenting to you is based on it.

You all know that Canada has two national carriers who operate as a duopoly. They both have identical fares on the same connections and fly at virtually the same times over those connections. These carriers have identical objectives.

You have before you an advertisement that was made in the Chicoutimi-Bagotville area concerning a special fare of $350 for business people for a return trip to Montreal. But note the limitation. It is necessary to book a reservation at least three days in advance. Furthermore, if you make any changes, there are additional charges. And you have to add to that amount the airport taxes, the GST and the Quebec sales tax.

As to the second fare, $199 for the same distance, Bagotville-Montreal return, it is offered to passengers with a southbound chartered flight who must transfer in Montreal. This applies to any chartered flight. It might be Cubana Airlines. Irrespective of the airline, they give you a deep discount. Why? Because you are going to be leaving the country and you are going to spend your vacation money outside Canada. If you promise to go and spend your money outside Canada, they give you that fare. But if you want to spend your vacation money within Canada, my friends, you are going to pay the full price, plus taxes. They also say in this ad:

Thanks to this fare ($199), your Inter-Canadian ticket allows changes in reservations...

contrary to the other ticket

...at any time and is fully adaptable to the chartered flights timetable. Taxes are extra.

With regard to taxes in the case of the vacation ticket, if you go anywhere outside the country other than to the United States you need not pay either the GST or the QST. It is a gift from the government, perhaps to encourage people to go and spend their money outside Canada. It is hard to understand, and this is what we are going to try to understand.

Table 4, Governmental implications, which is at page 35 of your document, seems somewhat complex.

In this table, you see the words «selective fare structure». This is precisely what we have just been talking about. The selective fare structure deals with the vacation fares, in comparison to the regular fare.

Everywhere in Canada economy fares are calculated according to distance covered, and hardly vary at all. The basic economy fares of the air carriers throughout Canada are identical.

With regard to the passenger fare for domestic final destinations, let us take an example. It now costs $721 for a return trip from Baie-Comeau to Montreal.

A passenger fare from Baie-Comeau with a vacation destination will cost me only $252 return if I promise my carrier that I am going to leave Canada to spend my money.

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That being so, we have asked ourselves why there is this difference between the fares. We have understood that the air carriers' network was part of a comprehensive vertical integration between Canadian passengers and the international tourist industry, an extremely flourishing industry, like the others.

Its special nature lies in the fact that vacation destination passengers-you see an arrow rising toward the tourist industry-spend $16 billion a year outside Canada. This $16 billion represents to a large degree package tours, hotels, travel, restaurants. This is what the air carriers are now interested in.

However, to encourage Canadian travellers to go and spend their dollars outside the country, someone has to pay. That someone is not the government of Canada, but the passengers in the regions.

With your agreement, we are going to take a look at the consequences of these practices. In the table, at the top left, you see the evolution of expenditures outside the country by Canadians since deregulation, and the evolution of the tourist deficit. You will see that, from 1984 to 1988, we are talking more specifically about a tourist deficit.

That deficit rose from $2.1 billion to $2.9 billion, which amounts to $200 million per year. From 1988 to 1993, the deficit rose from $2.9 billion to $7.8 billion, which represents an annual increase in the tourist deficit of $1 billion since the air carriers developed these pricing practices.

I would like to make a small digression. The arrow that goes from the vacation destination passenger to the international tourist industry represents the preferred link for promoting expenditures outside the country by Canadians.

We know that people cross the American border to take vacations closer to home and that the majority of Canadians who spend their money abroad travel by air. That is why the deficit results are linked directly to the air carriers' pricing policies. In a context such as this, the Canadian government has adopted protectionist policies for the benefit of the carriers because of the financial difficulties they have been experiencing.

This behaviour is perfectly understandable, given the number of jobs at stake. The Canadian government has a duty to ensure that there is no significant loss of jobs in these companies.

However, the government's vision has been limited strictly to the area of protection. You see here the protection area: it is the area of interest of the Canadian government. Unfortunately, since the users of the air carriers cannot easily get a hearing from the Canadian government, the decision-makers are relatively or totally unaware of what is happening in the regions, as they are of what is happening on the other side of the international tourist industry.

It is important to note clearly that the consequences of this in the regions are dramatic, not only in terms of airport patronage but in terms of the economic development of the regions, travel by our business people between the major centres and the regions, which is drastically reduced, and travel by the clientele. These pricing effects have resulted in a systematic displacement of the clientele from the business passenger, the domestic passenger who has an interest in developing the Canadian economy, to the vacation passenger.

Since 1988, as the statistics show, the Montreal airport has witnessed a decline of 1 million in its domestic passengers, arrivals and departures, while during this same period there has been an increase of 700,000 in the number of vacationing passengers headed for international destinations.

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This substitution of passengers is also seen in the regions. This leads us to bill C-101 and to the government's involvement. You will observe in the brief that the Regroupement des chambres de commerce régionales du Québec is seeking, in the first place, the establishment of real competition in Canada, as was recommended by the Royal Commission on National Passenger Transportation in Canada and the National Transportation Act Review Commission.

We strongly urge that competition be established and we emphasize that the current situation is catastrophic for the regions. You see the word «subsidies» at the bottom of the table. These are the grants to domestic final destination passengers in Canada and to vacationing passengers who are going to spend their money outside Canada. These subsidies total approximately $780 million.

This document-which is not perfect-essentially repeats the figures presented by the National Transportation Agency. We are told that in 1994, 9,899,000 passengers, arrivals and departures combined, travelled on Canadian domestic flights. Of this number, 5 million, or 55% of all passengers, travelled on the 25 most heavily travelled routes.

We have simply taken the 25 destinations, the number of passengers, the number of miles per connection and the economy fare schedule per connection. We called a travel agency, we subtracted 55% and we were able to establish, by extrapolating for the residual 45%, that Canadians who consistently take the same routes within the country are paying $1.5 billion more per year in travel costs than Canadians who are travelling, still within the country, using the same routes, but toward a final destination outside the country.

To sum up quickly on this question, let us say that 46% of the passengers, who are vacationing passengers, are paying 24% of the total bill for air transportation.

In our view, this situation is most unfortunate. We think that the protectionist options advanced in bill C-101 are contrary to the economic interests of Canada and that our regions are suffering from this situation.

The minister, Douglas Young, in clause 48 of bill C-101, tells us he intends to award survival insurance or eternal life to the two carriers as we know them. This decision is fundamentally unhealthy. As he himself said, in a speech on November 14 in Toronto, protectionism engenders greater protectionism and the costs of this protectionism are enormous for the people in the regions.

When the minister ignores the Competition Act and informs us that he is going to set the rates and flight frequency himself to enable the carriers to survive, this is fundamentally unhealthy for the economy.

I can assure you that in our regions many third-level air carriers have been waiting for years for an opportunity to provide services to the people in the regions. In our opinion, the way of the future is competition and the regional carriers should have an opportunity to gain access to the hub airports that are now essentially controlled by the two national carriers.

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This situation can no longer continue. The pricing practices of the air carriers are pernicious.

The system that we presented to you earlier, which we call the «SSS system» or «super selective siphon» of the Canadian vacation economy, is a dangerous one and creates many problems.

This leads me to the recommendations. The brief is particularly detailed; unfortunately, I do not have much time. We worked hard on it. I cannot present the whole thing to you quickly. However, I will present the recommendations.

First, we recommend that competition be fully established in domestic air transportation, to prevent any dominant position by a carrier or a limited number of carriers in the regional markets.

Second, we recommend that the minister of transport take the necessary steps to reestablish equity in fares for Canadians, more particularly those Canadians who travel for essential reasons within Canada. If this is impossible, we recommend that the Canadian government directly encourage foreign carriers to hold and operate domestic transportation licences in Canada. There is nothing scandalous in this. Wal-Mart is established throughout Canada, as is Sears. American companies are everywhere. They are good partners for Canadians and we think that in air transportation it is essential that they come in to break the duopoly and allow some real competition.

In the United States some carriers pay special attention to the business clientele and offer reduced and attractive rates to business clients, while others are more interested in the vacation clientele.

We also know that the duopoly was broken when the U.S. government observed that seven of the largest U.S. carriers were fixing prices together. As we know, this was settled out of court for $500 million, and today competition exists in the United States. In Canada, unfortunately, the duopoly is protected by the Canadian government. In the present context, it is inconceivable that the Canadian government would act in such a way as to establish some genuine competition. The law does not allow this.

The Competition Act treats as legal the conscious parallelism now used by the air carriers in the prices they charge and the predatory policies used to eliminate potential competitors: look at Air Madeleine in eastern Canada, Nationair or City Express. This conduct is, I repeat, fundamentally unhealthy for our regional economies.

We would also like the minister to allow some mechanism for hearing from user citizens. We think it is not normal that citizens can only express themselves when legislation concerning Canadian air transportation is presented to Parliament. We would like to see the installation of some listening mechanisms equivalent to the mechanisms the minister has for getting input from the air carriers, so that we, too, can inform the decision-makers and our elected representatives of the consequences of their decisions in the regions.

Once competition is established, once the law of supply and demand is in place, the newer dynamic carriers will be able to come into the market and take a genuine interest in Canadian citizens as passengers and not only in their vacation budgets for the purpose of sending them out of the country.

We recommend that the Canadian carriers, in view of the numerous ongoing representations they make to the Transport Committee and the minister concerning their financial problems, be held strictly to a full audit of their domestic operations and that the accounts of the domestic operations be separated from those of their foreign operations, failing which we are liable to misinterpret the situation.

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Finally, we are asking that clause 48 of the bill, which essentially would grant eternal life to the carriers and deprive the regional airports of their clientele, be abolished.

The minister tells us that Parliament is legislating to protect our carriers and establish a stable environment, because it is important that they be in a stable environment. In that context, we don't understand what a stable environment is, since in Baie-Comeau and in all the regions of the country, the carriers have no competition. Indeed, they have none. With the exception of 10 or 12 domestic connections in Canada, over which the charter carriers are travelling, there is no competition. The National Transportation Agency tells us there is fierce competition among the carriers and, to prove it, shows us the reduced fares. Mr. Chairman, the reduced fares are the vacationers' fares, which give the impression that the reductions are fantastic, when in reality there are two fares used in Canada, apart from the vacation fares. The two major fares are the economy fare and the «three days in advance» fare. If you reserve three days in advance you are given a 15% discount.

Those are the two major fares used, apart from the business fare. Reductions for business people, reductions for the people who are developing the country's economy, do not exist. The true reductions are those of the vacationers. It is important to end this myth that there is fierce competition in Canada.

Finally, as I explained to you at the beginning of my presentation, the interminable recession referred to by the National Transportation Agency in its annual reviews is another myth that we do not perceive at all in our regions. If we are in a recession, how is that the expenditures by Canadians outside the country rose from $9 billion to $16 billion? In a country in recession, the citizens stay home!

It is important that competition be established, Mr. Chairman. It is essential.

That was the purpose of our presentation. We have examined virtually all the main points. Unfortunately, we do not have a lot of time in which to present it today. If you have any questions to ask us, we will be happy to respond to them. Thank you.

[English]

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Breton. Your report is very thorough, very complete.

Mr. Breton: Thank you.

The Vice-Chairman (Mr. Comuzzi): Do you have one other piece of information - the amount of sales divided by the two air companies with respect to intra-Canada and international? Do you have that, by any chance?

Mr. Breton: No, we don't. We concentrated essentially on the interior traffic, because that is our problem. As to what's going on outside Canada, it's clear there is real competition outside Canada. We understand that with the open skies agreement, the two Canadian transporters are having more trouble because they're really not used to competition, obviously. They've never known competition in Canada.

The problems they have there were just expressed recently by these two 3% increases in tariffs within three months, coming just three months after the agreement, and I'm really afraid we'll have a lot more coming.

The Vice-Chairman (Mr. Comuzzi): Thank you.

My friend, do you have a question?

[Translation]

Mr. Mercier (Blainville - Deux-Montagnes): Mr. Chairman, I found this brief thoroughly remarkable and very substantial. The questions I have are intended simply to get some confirmations or some complementary information.

Mr. Breton, you say that the reduction in traffic is due to the increase in fares, which is much greater than the increase in inflation.

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However, you say that the recession was not a factor. A priori, one might think that the recession and the increase in fares were both factors. What is your basis for saying that only the increase in fares was a factor, when, generally speaking, consumers have reduced their expenditures during the recession?

Mr. Breton: In the first place, we do not think there was, in Canada, a recession that lasted from 1988 to 1995. Secondly, we know, from the figures I mentioned earlier, that the vacation expenditures of Canadians have increased appreciably over that period. I repeat that the differentiation in prices, what we call the super selective siphon, is the basis of the entire pricing policy of the two Canadian carriers.

They have exactly the same policy and they conduct themselves in exactly the same way. Once you understand the super selective siphon principle of Canadians' expenditures outside the country, you understand that Canadians have an interest in locking arms and organizing to get some real competition and ensure that the economy develops instead of crashing, as is the situation at present.

We represent business people in all regions of Quebec. These people have almost stopped travelling. If you refer to the report of the National Transportation Act Review Commission, you will see that people were blunt about it: We hardly use air transportation any more or we use it less and less, since it is no longer affordable.

What do you do? You stay home. You no longer trade with the major centres. You no longer go to shop in Montreal. You are satisfied with your own little business. You no longer develop links with our major centres. You stay home. Are you going to pay $721 to come from Montreal to Baie-Comeau to do business tomorrow morning, or $975, as we just paid to come here? It is completely ridiculous! At least we could reestablish equity in fares.

We know there are a lot of problems. Just think about the bonus points systems. That costs money. It is very costly. What use are these bonus points? Coming here this morning, I was reading in a magazine: «Bonus points. Go and buy at such a place and you will get $1 per purchase; if you buy with this credit card, you will get one air mile for each dollar you spend on a purchase.»

What is the purpose of this policy? Is it out of good will, simply to please the client, or aren't they really saying: Listen, we want your money and we're going to have it. We'll pay you for the plane ticket. We'll give it to you, the plane ticket. You will have some air miles. You have some money. You are capable of paying for the plane yourself. You are a businessman. You are going to collect your bonus points and your little nest egg for your vacation expenses, you will take it and spend it for nothing. You are going to take the plane for nothing and you will go and spend it outside the country.

Who is advocating that logic? Where is the common sense? It's not in the present situation. We are not promoting the future, in my opinion.

Mr. Mercier: I should say that I might sometimes have the opportunity and the financial possibility of going to Paris, but not to Baie-Comeau.

Mr. Breton: We understand each other very clearly, sir.

Mr. Mercier: I would like you to explain to me why the companies have an interest in promoting transportation to the South, outside of Canada, rather than domestic transportation. If they do so, it is in their interest. Why is it in their interest?

Mr. Breton: Their interest is simple. The air carriers live on commissions or bonuses that are provided to them by the major industries. If you leave here to go to Cuba or Venezuela, you will have your plane ticket, but you will also have, in your package deal, the accommodation, the meals, some perks; instead of paying $200, you will pay $2,000. The carrier will make perhaps 10% on $2,000 instead of 10% on $200. That's the idea, probably.

I can't go much further, but it is clear that the carriers' links with the international industry are enormous. We could have talked about it at length, but that wasn't the purpose of our brief. The purpose of our brief is to say that it has become impossible in the regions, that we must be heard and that the minister must find the means for us to get a hearing. This is the fourth time that we have presented a brief on this subject.

Mr. Mercier: That is very interesting. Are you asking for more competition? Have you evaluated the possible consequences on the labour market of increased competition? Would the consequences be positive or negative?

Mr. Breton: They are very easy to see.

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If competition increases, some major carriers will quite possibly have to split up their undertakings and rethink their operations. It is clear that the million passengers that have been lost in Montreal and probably the 2 million lost in Toronto have reduced the number of jobs in domestic air transport. Those jobs will be reestablished, new companies will be established and ultimately the Canadian airline industry will be a dynamic industry, capable of developing and providing Canadians with the services they are entitled to, and not an industry completely out of step with the reality, for which the only reality is the SSS system. All that interests them is their super selective siphon which is used to go and get as much money as possible from domestic final destination passengers and to give it as much as possible to the passengers who leave Canada and spend their money elsewhere, like the air miles and all those things. Everything is envisaged along those lines.

I am well aware that what I am explaining may seem strange to you. It may be something that has never been presented here. I am well aware of that. It is not easy to change such a thing, and I know that it will not be done today.

[English]

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Mercier. The questions were very good, and the answers were very good, too. The questions were a lot shorter than the answers.

Mr. Gouk.

Mr. Gouk (Kootenay West - Revelstoke): Thank you, Mr. Chairman.

Gentlemen, I'd like to start by making a suggestion to you, not at all as a criticism but as a suggestion. Obviously we like to get the submissions in both official languages, if possible, but there's no requirement on your part to do that.

The Vice-Chairman (Mr. Comuzzi): We've made arrangements to have that translated.

Mr. Gouk: I realize it will get translated, Mr. Chairman.

Where possible, though, if you can't provide it, I believe it would be in your best interests if you could get it in earlier so that we could have it translated. Unfortunately many of us here are unable to work from this document.

Mr. Breton: I understand that very well, Mr. Gouk. The problem here is that we were called last Thursday, and in Baie-Comeau there is no translator available. We passed at least four white nights on this thing just to write it in French. It was finished last night. We would have needed four more days to put it into English.

Mr. Gouk: Sometimes these things can't be done, but I would suggest that where possible -

Mr. Breton: Yes, I understand that very well.

Mr. Gouk: - if you could just get it to us in French so that we have time to translate it...because you will be long gone by the time I may have actually used the document to deal with things.

Mr. Breton: I would be pleased to answer your questions any time.

Mr. Gouk: I've worked not for airlines but in the aviation industry for almost 23 years, and I can tell you for an absolute fact that the traffic has dropped not just in your region but right across Canada.

In the air traffic control system in British Columbia, traffic was busy enough in places like Penticton, Kamloops and Castlegar to require not only that towers be put in but that they be upgraded below the basic grade due to traffic. That was from 1960 through to 1970. By 1990, all of those towers were closed because traffic had dropped off so dramatically.

So in fact, traffic has dropped, and even some of the committees in Parliament are an example of one of the reasons why. Now, instead of the committees flying off at the drop of a hat to visit anybody for just about anything, teleconferencing is used. It is a method used by business people because they're cutting back not only on their air travel but on their general expenses dealing with entertainment of clients, dealing with the way they run their office, the administration of their office, all these factors. Contrary to what you said, most people believe there has in fact been a recession.

I am curious about a couple of things. You mentioned clause 48. I assume you are talking about clause 48 in the legislation. I have trouble relating clause 48 in my book to the concern you have, because clause 48 is primarily, and I believe in fact solely concerned with ministerial intervention in the event of a major disruption of service because of some emergency other than a national strike. But if one is about to fold, that type of thing, where is this of concern as it would affect you?

Mr. Mercier: The whole problem is, first, that there is no definition. What they call perturbations extraordinaires having no definition we can't understand.

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What we understand and what has been lived before is that the minister wants to create a more stable environment for the aerial transporters. To us, the reality of the more stable environment is that the minister doesn't want to see his transporters with financial problems.

What we interpret from this clause is that if there is a problem with Canadian tomorrow and they lack money, we interpret that the minister, one more time, will do the same thing the Minister of Finance did with Bill C-32 in June 1994. He'll say, well, the people in the regions, in Baie-Comeau and Val-d'Or and Penticton and elsewhere, these people are obliged passengers so they will pay for the problems. He will decide tomorrow that instead of having $721 to go between Baie-Comeau and Montreal, up and down, it will be $900 for three months, just the time that these guys will have more money to live. He'll decide that instead of coming four times a day to Baie-Comeau, the plane will come one time a day.

You see the problem? For us it's clear, and he wrote it. He said the politics in international traffic, aerial transport...he said we want to create a more stable environment for our aerial transporters. In our minds, a more stable environment is death, because you cannot be more stable than you are now. There is no competition - same price, same everything. There is no difference between the two transporters except the name. They do the same thing, they pay the same thing, they have the same tariffs, they kill the same people when they bother them - I mean competition.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Breton.

Your time is exhausted, Mr. Gouk.

Mr. Gouk: What kind of time are we going on?

The Vice-Chairman (Mr. Comuzzi): We're going on Eastern Standard.

Mr. Gouk: That's probably why the mistake, then, because it's still daylight savings time.

The Vice-Chairman (Mr. Comuzzi): I'm going to have to ask the members on the Liberal side to refrain from questioning, if I may. Our scheduling is confused today. I hope you don't blame the chairman for the scheduling.

Mr. Hubbard (Miramichi): We will.

The Vice-Chairman (Mr. Comuzzi): Feel free to blame the chairman.

We have another group that has to catch a 5 p.m. plane, who I'm sure you'll want to hear from. Then the group that was supposed to show up at 3:30 p.m. will be heard after the 4:30 p.m. group.

I don't want to cut you short, but I think we have the message very loud and clear as to what you want to say, Mr. Breton, with your colleagues. I would like you to come back when this discussion will be entertained in another forum. I've always been of the opinion that we in Canada, whatever province we're from, have to look at what it's costing us to travel within this country compared to what it costs us to travel outside this country. I think you have here a brief that has the foundation and the quality we can build on, and I'd like very much to continue this with you another time. Would you be offended if we did that?

Mr. Breton: We would be pleased to meet you and discuss this subject any time, sir.

The Vice-Chairman (Mr. Comuzzi): Thank you and your colleagues very much.

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The last group of presenters is from the Alliance of Tribal Nations. We welcome Chief Bob Pasco and Chief Wilfred Campbell from the Boothroyd Band. Oh, he's not here? We welcome Chief Herman Philips from the Boston Bar Band. I'm missing someone here. Chief Pasco, do you want to introduce those I haven't been able to introduce?

Chief Bob Pasco (Oregon Jack Creek Band, Alliance of Tribal Nations): Yes. On the far right is Chief Steven Point of Sto:lo Nation. Next to him is Chief David Walkem from Nlaka'pamux Nation. On my left is Mathieu Pasco from Nlaka'pamux Nation and Herman Philips from the Nlaka'pamux Nation. I am Chief Bob Pasco, from Nlaka'pamux Nation.

The Vice-Chairman (Mr. Comuzzi): We understand, Chief, that you're committed to a five o'clock deadline. The normal process is to make a submission, if you wish, and then we'll have the question and answer.

Chief B. Pasco: I guess the way we will proceed is that some of us will be leaving for a flight at 5 o'clock, but Chief Walkem and Chief Steven Point will be remaining to take any questions or whatever.

Mr. Chairman and members of the committee, we are pleased to be here today to make a presentation or submission to you based on some of our concerns as aboriginal people in the province of British Columbia. It all relates to the actions that the government is taking in relation to the privatization of the railroad. We've had a number of meetings here today. We feel that on some fronts there has been some positive movement and that can be discussed a bit later.

What I wanted to do first of all is to introduce the Alliance of Tribal Nations. Basically, we're a group of 36 Indian bands in three separate nations with three different languages and certainly a distinct culture. We reside for the most part right along the river. Our communities are adjacent to the rivers and in most instances the railroad goes through our area. If some of you are aware of the Fraser River and Thompson areas, you're well aware of the geography that the railroad goes through and the kind of complications that arise because of that.

Our main concern is that privatization must not negatively impact us. We've put a paper forward here that deals with Bill C-89, the CN Commercialization Act, and Bill C-101, the Canada Transportation Act. We address these and feel that we would like to have some input in order to minimize the impact against us. The paper also in fact considers and factors into the picture our rights.

Just talking about the history of CN and CP, both these railroads go through our communities, which, as I indicated to you earlier, are adjacent to the river. We have two major railroads that go through there, which have definitely had an impact on our communities. Over the years, in different ways, we've tried to address these. We really feel that it's imperative that a process be put in place that will alleviate some of these grievances we have before any sale goes ahead.

If you're aware of the Fraser Canyon and the kind of area it is, you'll know there's a place there called Hell's Gate, and it's right outside of Herman Philips' back door. You may be aware that there was a major slide back in 1913 and 1914 that had a great impact upon our fishery. When I say ``our fishery'', I mean everyone who participates in the fishery out of the Fraser River has been impacted.

Getting back to some of the historical background issues of dealing with CN, back in the early 1980s there was the idea that the Canadian National Railway was going to double-track. We met with the ministers responsible for that development and with the then-president of the Canadian National Railway to try to get our point across, I guess to get our concerns in place.

.1640

We did come before the various standing committees. Our reception was good. However, at the end of the day the only way we could get any recognition...or anything to say is that the fact is, we ended up in court. We got an injunction against CNR. The case is better known as Pasco and Others v. CN and Others. To this day we have an injunction in place.

In terms of some of the legal issues and developments, as I've indicated, we have grievances. The process outlined at the very beginning, when we had problems with CN on the double-tracking, is that the government stated that some of these issues could be dealt with through specific claims. That has not been the case. That whole process as a specific claims policy just has not worked. After 10 years we're still sitting in the same position in dealing with these things, even though there was a commitment by the government that these things would be resolved. They still haven't been resolved.

We're moving on to another facet in terms of privatization. We really feel that we have to be much more consulted and factored into this whole process; otherwise, it becomes another grievance we have. We think this committee can certainly assist us in that area.

So we have some legal issues and developments I'd like.... Very quickly, you do have a copy of the paper before you. One of the things we have a problem with is the fact that in some instances there are lands not being utilized by either railroad, whether it's CP or CN. We're having problems getting that property back. Even though there's a case in place that defines that issue, the government still does not...and that is the Kruger case.

I guess the other thing we're looking at in this whole thing is the Indian taxation where there's already a judgment that affirms the powers of the aboriginal communities to be able to tax.

So these are some of the issues that should be dealt with before the privatization goes ahead. In other words, these are the things we're faced with that we're asking you to deal with.

In summary, there are three avenues for legal redress involving CN that we are actively pursuing. I just want to highlight these. They're in the document.

One, the interim injunction preventing CN's double-tracking project is still in place. That lawsuit, in which we seek a permanent injunction and declarations concerning our aboriginal and reserve rights, is pending.

Second, a number of alliance bands are also currently involved in litigation with CN about whether the rights of way remain part of the reserves for taxation purposes.

Third, specific claims are filed against Canada, arising from the original taking of our lands by CN. Through all of this CN is well aware of our legal claims.

So these are some of the issues we're faced with. We're trying to pursue some positive end in terms of our grievances.

On the proposed sale of CN, the outstanding issues between Indian people and CN must be addressed before the proposed sale occurs. Any prospective buyer of shares needs to be aware that Indian people vigorously oppose the commercialization of CN until these issues are addressed.

The prospectus draft, which is to be circulated among potential share purchasers, must disclose our claims. In other words, our concerns should be factored into the cost of doing business. It's better that it be done at the front as opposed to at a later point; I guess that's what we're trying to address.

We fear that the sale of CN could potentially interfere with constitutionally entrenched aboriginal rights. As confirmed by the Supreme Court of Canada, the relationship between aboriginal people and the Crown is fiduciary in nature. Accordingly, before any further steps are taken to privatize CN, the Crown has an obligation to consult with Indian people and take steps to ensure that our interests and the rights of way are protected and our long-standing grievances are resolved.

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To be absolutely clear, the alliance is not opposed to the sale of CN for opposition's sake. I just want to bring you back to the time when the double-tracking was happening. We made the statement very clear that we were not opposed to the double-tracking. This country needed it for the purpose of the betterment of the economy of this country, and we were for it. However, we wanted to ensure that our rights were being dealt with.

I think this is the same thing here. We're faced with a sort of parallel situation.

The alliance is opposed to our rights being trammelled. The alliance opposes the fact that neither the government nor CN consulted with our people. Neither has the government taken any positive steps to ensure our rights are protected.

Up until recently, we've had no consultation. We've made an effort to come out here. In fact, it was the Minister of Indian Affairs and Northern Development who suggested we come here. That was a positive move, and we thank you for allowing us to be here.

In recognition of the Crown's fiduciary obligation to first nations, and in particular in the management and protection of our reserve lands, prior to the transfer of CN to private interests we must have Parliament's assurances on these principal issues: that our interests in the rights of way within our reserves will be protected; that our jurisdiction over the rights of way be preserved; that our claims arising from the original wrongful takings of reserve lands by CN and associated impacts to our lands, communities and fisheries be resolved; and that there will be no abrogation or derogation from our aboriginal rights protected in the Constitution Act, 1982.

The government should be required to amend the Indian Act as well as the current CN legislation - if necessary - to clear up the problems created by the manner in which rights of way were taken through reserve lands.

The Indian Act amendment to the section dealing with land taken for public purposes should read, in section 35:

(5) Any taking or using reserve land or any interest therein, pursuant to this section, shall be deemed not to have extinguished the band's interest in such lands and the band's jurisdiction over such lands may continue to be exercised in a manner not inconsistent with the use of the land by a province, authority or corporation referred to in subsection (1).

The CN legislation could state that there will be no interference with or derogation from our legal rights and interests.

Finally, the government must commit itself to working with us to create a special commission that has the mandate to settle all outstanding claims of first nations against CN and the Crown.

In summary and conclusion, history is sadly repeating itself if first nation rights are again disregarded over enthusiasm for the progress of the railway. Questions about the continuing rights of first nations with respect to the rights of way that pass through our reserves as well as our claims against CN must be resolved before any change in the ownership of CN. Legislation concerning CN must be expressly without prejudice to the existing rights and interests of aboriginal people. This committee should recommend that the legislation to privatize CN not be acted upon until our concerns have been adequately addressed. In this submission we have provided concrete suggestions as to how this can be done.

What we've done here is to prepare the submission as a way of trying to address some of our concerns. We know that at this point the wheels are in motion to privatize. We met with member of Parliament Joe Fontana. That was a very positive meeting in terms of trying to address some of these things. We really appreciated having that meeting before we came in here.

I think it's important that this committee on transport look earnestly at what we've proposed here. We feel that in this presentation there's something that can help alleviate some of the concerns we've had and that have been ongoing. We do have that injunction. I don't know how that fits in terms of the sale of CN when there is a grievance of that nature against the company. It would seem to us it would be a positive move to deal with that, or to have some way to deal with that, before the shares are assessed a value. Without it, those shares certainly will not be the true picture.

Thank you.

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The Vice-Chairman (Mr. Comuzzi): Chief Pasco, with your permission.... Yes, Mr. Mercier.

[Translation]

Mr. Mercier: Mr. Chairman, this is very interesting, but it seems to me that the whole of this presentation concerns C-89 rather than C-101. So I have no questions.

[English]

The Vice-Chairman (Mr. Comuzzi): Mr. Gouk, out of fairness, because of the way we had to handle the last group, can I go to my Liberal -

Mr. Gouk: As long as you stay on Eastern Standard time.

The Vice-Chairman (Mr. Comuzzi): The reason I want to get to Mr. Nault on this issue is that he asked this very question to Mr. Tellier yesterday.

Mr. Nault (Kenora - Rainy River): Mr. Chairman, just to bring the witnesses up to speed and maybe the rest of the committee, the reason I asked the very question as it relates to aboriginal people and CN going through reserves is that the same scenario is unfolding in northern Ontario through Treaty 3. It is exactly the same scenario that has been laid before us by the witnesses this afternoon.

I'd like to ask a few questions. Before I do that, I'd like to mention that Mr. Tellier basically did give us an undertaking and an explanation of the issue as to whether, if a particular piece of track was abandoned or sold to short lines, in fact that...well, if it was abandoned and not used for railway purposes, whether it would revert back to the Crown. He assured us at this committee that it would revert back to the first nation communities. That's one issue that has been brought to my attention by the communities I represent in northern Ontario.

The other issue is the argument of fiduciary responsibility, whether it's owned by the Crown, in this case a crown corporation, or a private interest. That takes me to your presentation, on page 2, ``History of CP/CN Railways' Use of Reserves'' and Hell's Gate in 1913-14. Obviously, for those of us who followed the history of CN, CN was a private corporation in 1913-14. In fact, it became a crown corporation, if I'm not mistaken, in 1922 and onward.

My question to the witnesses would be this: if the legislation that allowed CN to build a railway over reserve lands before it was a crown corporation - it was in private hands at that time - the legislation obviously allowed private companies to build railroads.... So the argument you're putting, that CN shouldn't be sold to private enterprise.... The question I would have is this: what's the difference between what's taking place now and what took place when they originally built the railway through the reserves and it was in private hands?

The only reason we have CN now is that it was a combination of a number of bankrupt companies that the government felt should not be let go. It then created a crown corporation around all these bankrupt companies and CN was formed. So in 1913-14, this track you talk about, Hell's Gate...I'm not familiar with which company it was, but it must have been a private corporation because we didn't own any railway in 1913-14.

The Vice-Chairman (Mr. Comuzzi): In the interest of accuracy, CN was formed in 1919. It was a precursor to one of the four bankrupt railways that formed CN in 1919 - which one, we're not sure. Can anybody enlighten us?

Mr. Nault: I don't know either, Joe. I'm going way back. It's before my time. You might have been around then, but some of us weren't.

Would the witnesses agree with me that no matter who owns CN, the fiduciary responsibility for dealing with the wrongdoing still lies with the Crown? In fact, through specific land claims policy and other avenues, whether it be a special claims task force of some sort, it would necessitate the government having to deal with the effects of that railway going through your lands. That's the question I'm asking, Chief, because it seems to me that if it was a private corporation before and it's a private corporation now, we're still dealing with the same issue: whose fiduciary responsibility it is to deal with the wrongdoing that took place.

Chief B. Pasco: I appreciate the question; however, I'm not a lawyer and I'm not going to try to answer that question. I will leave it up to Steven to do so.

Mr. Nault: Neither am I, so you and I are on the same wavelength here.

Chief Steven Point (Skowkale Band, Alliance of Tribal Nations): All right, I'll be the expert.

.1655

The fiduciary obligation arises out of the Constitution, obviously. When the Crown took over the private assets, I would assume it took on the liabilities of the company.

The fiduciary obligation of the Crown now is because it owns this corporation. It owns all of its shares. Once it divests its ownership and sells the shares to private owners, obviously we're going to have the difficulty of having to deal with a different landlord, a different owner, for one thing. Dealing with the Crown is a lot simpler. You're all here, we can come and talk to you, and we know who you are. Once ownership goes out into the private market, we have a different game altogether.

The legal question then arises as to whether or not the fiduciary obligation even continues once ownership passes at that point. Our problem with the treaty process in the province of British Columbia is that private interests, private property, and third-party interests have become politically the subject of discussion, and first nations in British Columbia have taken the position that third-party interests would not be subject to negotiations.

Now if all of a sudden this piece of real estate falls off the negotiation table because fiduciary obligations end with ownership transfers, we're left holding the bag and all the grievances we've been trying to bring to light since the twin tracking case ten years ago.

We're not going to be left holding the bag again. If we go to court on this particular issue and the judge asks us what we did about it when the title of this company transferred, we'll be able to say that we came and talked to you about it. We'll be able to say that we stood up and we claimed that we have a right to this property as the landlord is changing. We stood up and said that you have an obligation to aboriginal peoples because you come through our traditional territory, a territory whose aboriginal rights, now recognized in the B.C. Court of Appeal, have not been extinguished.

Our specific claims in relation to the reserve lands that have been established by governments like yours have not been addressed. There are outstanding grievances, as we indicate in this paper, that have not been addressed and that must be addressed. Everything from rights-of-way to trammelling through graveyards to destruction of fishing sites are outstanding grievances that must be addressed. We're not prepared to face a new owner in order to try to get these kinds of issues.

I appreciate the fact that CN will likely be under the same management, but we also have the legal problem that right now the federal government owns these shares. The federal government, as I understand it, appoints the directors.

What we say is that before this takes place, I think there's an opportunity to address Bill C-101. Let's take a look at clauses 97 and 98, which deal with lands. Let's see if we can beef it up to ensure that our aboriginal interests are not once again ignored in this process.

Let's take a look at CN's prospectus and see whether or not we can go beyond a simple promise from today's president that they're going to revert that land back to us. Let's take a look at the memorandum of understanding between CN and the Department of Transport and see if we can actually have a paragraph in there as well that gives us some comfort in relation to our rights.

We're not the only ones who are affected by this; it happened that whenever the commission came through to find land to build this railway on, they went to the reserve commission and took lands from aboriginal peoples. We have a huge interest here, and that's why this fiduciary obligation is an essential question. I'm glad you raised it.

Mr. Nault: Can I ask another question, Mr. Chairman?

The Vice-Chairman (Mr. Comuzzi): Can I come back to you? It's Mr. Gouk's turn, and we're under the pressures of time.

Mr. Gouk: I think I'll be fairly brief.

Chief Pasco, I have a couple of things. First of all, Mr. Mercier here is correct in that most of the things you're addressing are relative to Bill C-89, and Bill C-89 has already passed. We can't make changes in the act, because it's already done. But I recognize where your concern is coming from.

Could you clarify something for me? You said that you have no problem with the concept of having double track if it's needed for the infrastructure and so on. You just want to make sure you're dealt with fairly. Can you give me, very quickly, what specific resolutions you're looking for?

.1700

You've mentioned in here that if the land is no longer required for the railroad, you want to ensure it's returned to the Indian nations from which it was taken. Beyond that, what types of remedies are you looking for in the interim?

Chief B. Pasco: I don't know. Dave or Steven, you may want to answer.

Chief David Walkem (Cook's Ferry Band, Alliance of Tribal Nations): We have three categories of issues that need to be dealt with: rights issues, which can be dealt with in the legislative aspect; specific claims, for want of a better term, which is what I think you're addressing here; and ongoing operations.

Mr. Tellier has given us his commitment. We believe that's something they can do to deal with the maintenance issue. I think we're going to be able to work that out.

We've had in place a process, through the Indian Specific Claims Commission, for the last ten years. It has resulted in some 270 claims being put forward, which is something at the rate of 60 a year. Only 40 have been dealt with, so the system just isn't working.

Some of the specifics in here are things like what happens when they go through our graveyards or if they split us. Every one of my reserves on the Thompson River is split, if not in half, in some way between some of the flat land down by the river and the rest of the land. We have access problems. CN has liens or whatever on the land as to how we can irrigate it and use it.

So there are a lot of these. They went through the reserves. It's very telling when you look at the right-of-way maps of CN. They'll be this wide when they come up to reserve boundary. When they go through the reserve boundary, they almost double in width. When they get to the other end of the reserve boundary, they shrink down. So it's those kinds of issues that we need to deal with on a very specific basis, if that's what you're asking.

Mr. Gouk: I think so. I'm trying to find out what you're looking for that we can in fact address with this particular piece of legislation.

Some of things we can deal with. Clause 97 doesn't state it clearly, but it is the portion of the bill that we would possibly look to change if we wanted to give assurance that the land would revert back to you in the event that it was no longer required.

That would take a little bit of background work on my part before I'm completely comfortable with suggesting those changes, but there is a potential for remedy there, and there does seem to be some justification for your claim on that basis. So that deals with that specific part.

Consider things like access. I don't know the number off the top of my head, but there is an act, or a portion in here that deals with access specifically when they have split lands, in terms of giving you access at your request. I have some clarifications I need to get from the railways on that, but primarily I think that one could be dealt with.

There are some other areas in here that I'm not entirely sure of. They do need some investigation, but probably not by this specific body. This concerns things like why they widened it out as soon as they got to the reserve and then went back down again. What is their justification for that width in the first place? That probably would have to be dealt with through a different group from this particular committee, certainly at this time.

Chief B. Pasco: I think one of the things that the committee can do is look at where it can have an impact, knowing what our concerns are. What can this committee do to recommend to this government to alleviate some of the problems, find a solution, and help. I think that's the kind of thing we're looking for. I don't know if that's the mandate of this committee, but certainly we have some real grave issues that we feel have to be dealt with.

Mrs. Terrana (Vancouver East): Thank you for coming. I'm from Vancouver. I represent Vancouver East, where there is a large aboriginal community, as you know.

I've been representing Minister Irwin at the treaty negotiating advisory committee, which made me also very much wanted by the aboriginals who have grievances. In fact, your group came to discuss it with me too, because they knew I was on the transportation committee and because of this connection with this treaty negotiation advisory committee.

.1705

I just wanted to make a few points here. First, when the minister came to this table before you, I personally asked what kind of assurances aboriginal people had under this bill. Unfortunately, I think you should have started earlier with the bill on the sale of CN. That would have been probably more proper than doing it at this one.

But now we are at this stage. I was one of those who asked what you should do. What you are doing now was suggested to me too.

Clauses 97 and 98 in this bill talk about crown lands. You know that because Steve is a lawyer, so he has seen that.

The other thing is the land settlement we are going through in British Columbia. That is another way for you to tackle the situation. With a settlement, these lands will also be settled. They are part of crown land, right? So you are in negotiation right now. I think that will also bring fruit.

The last thing I want to say has to do with CN. Yesterday Paul Tellier came here. I asked him about the situation with aboriginal people in British Columbia. He told me that he met with you.

Chief B. Pasco: Yes.

Mrs. Terrana: He also told me that he put one of his vice-presidents at your disposal as a liaison. I asked to see him. In fact, I asked to meet with him to find out what's going on.

I think this is at least a step toward trying to settle this. Again, one of the issues in British Columbia right now is our trying to settle the land claims with the aboriginal people. Are you negotiating with the treaty negotiating advisory committee or are you out of negotiations?

Chief B. Pasco: The Sto:lo have started, but the Nl'aka'pamux haven't.

Mrs. Terrana: So you are going through the process and the six steps?

Chief B. Pasco: The Shuswap haven't started either.

Mrs. Terrana: I don't remember who was negotiating.

Chief Point: It's really important to note something here. This confusion is coming up again in your statements. The land that CN owns in British Columbia of course was transferred at the time of Confederation through the bilateral agreements between Canada and the Province of British Columbia.

I understand it is not crown land. In fact, it won't be dealt with through the treaty process because of that. We still have claims against the federal government for damages and the underlying title question because of the existing aboriginal right now that's been recognized in the Delgamuukw case.

I think we're very much interested in - I'm answering the other member's question here - a process in which our grievances can and ought to be dealt with in all fairness by this government before it sells these shares and before this goes private.

Aboriginal peoples have had long-term grievances with this country that I know are complicated and difficult to resolve, but the government has a chance in this particular instance to deal with specific issues related to specific individual first nations that I think are resolvable and can go a long way to creating the much-needed goodwill in our province.

Mr. Nault: I just wanted to ask the witnesses again if they would agree that, no matter what happens to this railway, there is an understanding at this table by all of us that the Crown has the fiduciary responsibility to deal with the wrongdoing of the past and that's it's been recognized.

Whether, in fact, a third party owns it or doesn't own it, or whether the government owns it or not, the issue is that when the line was put through, certain pieces of reserves were given to third-party interests. Therefore, that fiduciary responsibility to set that grievance right still remains. Is that not factually correct? In my mind, it is correct.

Therefore, it doesn't make any difference if we're talking about CP Rail, which is a private corporation, going through reserve land or CN Rail, which is Crown-owned and will become private or whatever. It's still a fiduciary responsibility of the Crown to deal through the specific land claims policy.

.1710

What you're suggesting to us is that the specific land claims policy is so slow that we'll all be long gone before we ever get these issues resolved unless there is a separate process or a renewed political will to deal with these issues by putting more resources into the specific land claims policy. I think that's the real issue why specific land claims move so slowly, because there is no money in the policy.

Chief Point: You're misunderstanding one thing, though, and I want to clarify that. The specific claims process certainly is slow, but this issue is relevant, because by the time we get to that slow process, what you're doing here by transferring the title will have had an impact on that claim.

Mr. Nault: In what way?

Chief Point: I know you feel and your opinion is that the fiduciary obligation is not going to be disturbed. Well, put it in the bill. Put it in the legislation and give us the comfort we're asking for, because ultimately these questions are going to be resolved, probably in the Supreme Court of Canada and not at this kind of a table.

The Vice-Chairman (Mr. Comuzzi): Mr. Fontana.

Mr. Fontana (London East): Mr. Chairman, on a supplementary, if I can, Steven has already indicated clauses 97 and 98, and as I look at them, even though we're not at the clause-by-clause stage of the bill, in fact, the way Bob interprets what he's indicated is in clause 97. It talks about that obligation and that fiduciary...not in that language, but it does talk about the land and the Crown responsibility.

The Vice-Chairman (Mr. Comuzzi): Is this a question or a statement, Mr. Fontana?

Mr. Fontana: Steven did point out clauses 97 and 98 in terms of beefing it up, and I wonder whether or not Steven and his colleagues have suggested amendments as to how we might be able to -

Chief Point: Yes, in fact, I do.

Mr. Fontana: I would like to see them, please.

The Vice-Chairman (Mr. Comuzzi): Chief Point, would you table that with us, please?

Chief Point: Yes, I will.

The Vice-Chairman (Mr. Comuzzi): Mr. Clerk, will you distribute it?

I want to thank all of the chiefs very much. We fit you in, and I know you're pressed for time and have other commitments, but thank you very much for coming and putting your points forward. I'm sure, as you've heard from the questioning around the table, they will be valuably considered.

I'm pleased that you came today, because the very issue of which you speak was brought forward yesterday from, I think, the highest-ranking authority in CNR. He did say he had established some process to try to reconcile the differences. Thank you very much.

Chief B. Pasco: Thank you.

.1715

The Vice-Chairman (Mr. Comuzzi): I would like to invite to the table the next witness, Laurie Beachell from the Council of Canadians with Disabilities.

The following witness, at 5:30 p.m., will be Mr. Clement from the Northern Transportation Company. That will conclude our list of witnesses today, I suspect. We may have a third, but I don't know if they're here yet.

Mr. Beachell and Mr. Norman, welcome. The usual process is a written submission. You can extrapolate from it or do whatever you want.

Mr. Laurie Beachell (National Coordinator, Council of Canadians with Disabilities): Thank you. If we had that authority everywhere, we'd be much happier people.

The Vice-Chairman (Mr. Comuzzi): Well, you have it here. Welcome to the committee.

Mr. Beachell: The Council of Canadians with Disabilities is a national umbrella organization of people with disabilities. Transportation access has been a critical issue for our organization since its inception some 20 years ago. In fact, it was around transportation access that the organization came together.

The council is based in Winnipeg. Its office is in Winnipeg and I am staff. Eric Norman is chair of our transportation committee and he comes from Gander, Newfoundland.

I will highlight components of our written submission and then would be pleased to answer any questions.

As I mentioned, transportation access is probably the most critical issue for our membership in this country, for without access to good transportation systems, all the other issues of access to employment, education, and participation in community life are not reality. So the issue is critical to us, and we take every opportunity we have to bring our concern in this area to the committee or to members of Parliament, to provincial legislatures and to municipal governments, as well as to the carriers in the industry.

With this review within the declaration section of the bill, we would suggest that there needs to be a stronger commitment to accessibility standards so that in the declaration section the national transportation system meets the highest practicable safety and accessibility standards. We would suggest an amendment to the bill to include that.

We would also suggest that in the bill the word ``undue'' be deleted. The current wording is ``an undue obstacle to the mobility of persons...with disabilities''. Presently that leaves a great deal of interpretation as to what access standards are, and we would like to see a change within that area as well.

Within the declaration section of the bill there also seems to be an orientation that we find somewhat worrisome, a philosophical orientation that says that a low-cost system driven by competition and market forces will naturally result in ``viable and effective transportation services''. For our community that has not been the case.

For our community, unless a public interest has been injected into the system to ensure equitable access for all citizens regardless of disability, we have not seen improvement come forward. Therefore, we would suggest that there is an orientation within the declaration section that is worrisome to our membership.

Transportation access for people with disabilities frankly has not come about easily. It has come about through a long history of complaints, presentations, briefs, etc. We have made progress here in Canada, significant progress in a number of areas, but there are still issues outstanding. It appears that as cost-cutting measures or cost-effective measures come into effect, many of the access standards get downplayed.

.1720

You may have seen recently in Ontario - and I know this is not your responsibility - changes in the accessibility of the Ontario transit system for people with disabilities, particularly for people who do not use wheelchairs. That is of concern to us as well.

You'll find throughout our brief a request for all of the information provided by the National Transportation Agency or the department, or reports to Parliament, to be provided in alternative media. Our organization is not only an organization of persons with a mobility impairment, but is representative of people who are visually impaired or who are deaf or who have mental handicap or psychiatric disability, etc. We are cross-disability in nature and therefore our concerns reach the broad community of people with disability. There will be a number of suggestions within our brief that alternative media provision be required by the regulations and by the act itself.

In the administration part - and this is a very simple matter, but one that continually causes confusion in the community - we'd also suggest that you not rename the National Transportation Agency. It takes a long time in the community for people to understand who is ultimately responsible, who is the regulatory body, who you can deliver complaints to. As long as we change names every three years, I don't think we can expect the system to work as well when people don't know who this is now. We've gone from CTC to NTA and now we would go to CTA. I suggest we pick a name and stick with it for a while, and maybe our community will understand how to use the system.

The regulatory process in Canada also has been very slow in regulating access for people with disabilities. While there have been improvements in air and rail transportation access, and in ferry service particularly, we have not seen it come easily. It has been a result of complaints to the National Transportation Agency or the CTC. It has come as a result of finally getting political will within the department for a policy on disability and access. It has taken significant effort to convince carriers that they should provide access. There are still outstanding issues, and those are some of the things we would like to address more specifically.

We recognize that the bill does not govern interprovincial busing, but it is the cheapest form of transportation in this country; it is the access system that most use for short-term travel; and it is the totally inaccessible system here in Canada for people with disabilities.

In 1954 the federal government gave the provinces licensing authority for interprovincial busing. Since that time we've seen no movement. In the last few years there had been an agreement reached with all provinces for a national standard on accessible interprovincial busing and a regulatory mechanism under the motor vehicle acts of most provinces. This standard was to be moved forward, but we understand that the federal government has withdrawn the regulations. The draft regulations that were issued a year ago are no longer on the table. The minister has said he will not regulate interprovincial busing. He will bring the community and the bus industry together to seek a voluntary solution.

This is not acceptable to our membership and is not a direction we believe will move forward. We suggest that because we have regulation in air, in rail and in ferry systems, we have achieved access. Because we've had no regulation in interprovincial busing, we have achieved no access.

We would ask within this process that the federal government reassert jurisdiction over interprovincial busing. There are reports, numerous of them mentioned within this brief, that support this - reports of the National Transportation Agency and statements by previous ministers of transport in regards to that desire.

In the section on the review of the act, we would also suggest that disabled persons' organizations be included within the review, and that in reviews or tabling of reports there be a section addressing the mobility concerns of persons with disability so that there is a specific reference to this in the act. You'll find that in our submission as well.

.1725

In the United States there have been moves to regulate interprovincial busing and the industry through the Americans With Disabilities Act. We would not wish to move in a direction that has a specific piece of legislation designed for people with disabilities. Our general approach is that all generic systems should be accessible to all Canadians. As transportation is a basic system for all Canadians, it should be accessible to those of us who have disabilities as well.

We are working towards that. There has been progress, but we believe it has to be maintained and promoted, and federal leadership within this area is a critical factor in ensuring access for all Canadians with disabilities.

Some assume that some portions of transportation systems, because of their design, will ultimately be inaccessible. That's what we said twenty years ago about a lot of things around disabilities - that yes, we could design the special programs or the exceptions, etc., but that we could not make everything accessible.

Well, we're doing it. We're doing it in buildings. We're doing it with national and provincial building codes that require new construction to ensure access is there. We believe we can do it in transportation systems, but it requires federal leadership and it requires, within the National Transportation Act, a significant commitment to persons with disabilities.

I would leave it at that, unless Eric has additional comments to make, and we'd be open to questions.

Mr. Eric Norman (Vice-Chair, Council of Canadians with Disabilities): I don't have very much to add to that. The paper is quite comprehensive. The reference to previous studies that have been done over the last ten or twelve years is quite complete. I'm sure you have them at your disposal and you can refer to them as you need to.

I would like to highlight a couple of other points.

One is on a case that's referred to in volume 1 of the Canadian Human Rights Reporter from July 11, 1980, commonly referred to as the Kelly case, in which a disabled person was refused service. The outcome of that case established some principles that have been since reiterated in other cases and that CCD, the Council of Canadians with Disabilities, takes as its basic principles in transportation accessibility.

I'd like to say what they are.

One is self-determination. We want to have the right to self-determination as to our needs, whether an attendant is needed or not and what requirements there are for us.

One person, one fare is a principle towards which we work. A person who requires an attendant to travel should not have to pay two fares or a fare and a half.

Equity of access to all modes of transportation is another, and this would include the remote parts of the country as well as the metropolitan and urban areas. In many parts of Canada the only mode of transportation is by small aircraft, and often neither the aircraft nor the landing strips nor the terminals, if there are terminals, are accessible to that particular population. A person with a disability would have a very difficult time trying to travel in that area.

The fourth principle is dignity of risk - to have the right to accept a risk in travel just as any other traveller does.

These are points that were brought out thirteen to fifteen years ago. We have reiterated them in many forums and have brought them to the attention of various groups. They form the basis on which many of our positions have been established. I just wanted to make sure those were highlighted.

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The reference which Mr. Beachell made to the intercity busing shouldn't be underestimated. I think that has to be underlined. It's one of the most important issues facing disabled travellers today in this country.

Just as in some areas the bush plane or the small aircraft is the only means available for transportation, so too in many parts of the country, because people with disabilities are generally poorer due to lack of opportunity for employment and lack of training and education because of the disability, the cheapest form of transportation for them would be the bus.

Unfortunately, we find that intercity bus transportation is probably the most inaccessible mode of transportation that we have. We find that people who can't afford to own private vehicles, or because of a disability can't drive private vehicles, or can't afford air fares, have to depend on the bus service, which is not accessible - neither the bus nor, in many cases, the terminals or the stops along the way en route, either intercity or interprovincial.

The Vice-Chairman (Mr. Comuzzi): Thank you.

Mr. Mercier.

[Translation]

Mr. Mercier: I will make one comment to begin. I fully agree with Mr. Beachell when he says that there is no valid reason to change the name of the National Transportation Agency. Surely in this period of frugality it is hard to see what interest there would be in junking the Agency's letterhead. I see no reason for that.

As to my question, it is rather a criticism. Mr. Beachell says that the federal government should recover the powers it has surrendered to the provinces so it can legislate in regard to access to trains and buses. Our party, of course, advocates decentralization rather than centralization, and I would like to know why Mr. Beachell does not think that the provinces could themselves, through legislation, take steps that would facilitate access by disabled persons to trains and buses.

[English]

Mr. Beachell: It is possible to do through provincial legislation and it is possible to do it through a regulatory mechanism that is agreed upon by all of the provinces. I understand the philosophic difference you have. I would say that the goal for us is access, and whether that is obtained through federal jurisdiction or through a provincial or pan-provincial agreements we don't care. All we want is access.

The agreements can be reached, but there is a difficulty for interprovincial busing. Suppose I'm a person with a disability and I get on in Quebec City and I travel to Toronto, and I have a problem, when I get off, with the terminal in Toronto. It's a Quebec-based bus line. Do I lodge my complaint with the regulatory mechanism in Quebec? Do I lodge my complaint in Ontario? Do I have to retain legal counsel in both instances to lodge the complaint under the motor vehicle act, or do I have a more user-friendly agency like the National Transportation Agency lodge a complaint with a system across this country?

What happens if I'm travelling across the country and have problems in four or five jurisdictions? Where do I lodge the complaint and who will regulate it? Will we have to have tribunals jointly held from province to province to come up with decisions?

Those are the issues that are of concern to us. If a mechanism can be reached - and we would encourage provincial governments to look at intercity busing within their province and interprovincial busing - if they can come forward with the regulations, we would be pleased to see those. We're not too particular about who does it. We just are particular that it gets done.

The Vice-Chairman (Mr. Comuzzi): Mr. Gouk.

Mr. Gouk: Gentlemen, I have your brief here, but it's going to take a bit of time to go through. What I've been doing with most of them is plotting them against the specific clauses you have some concerns about so that I get some idea of what the overall impact is. I will be doing that with yours, but I obviously haven't had the opportunity to do it yet.

.1735

The other thing is that I have a tendency with questioning, whether it be a shipper, or a rail side, or whatever, to challenge some of the statements. If they're valid, you should be able to defend them.

There are a couple of things I'm interested in. In terms of things like attendants travelling free, I tend to look at this and ask, what if I owned a bus or a plane, and my business is to sell those seats, and all of a sudden I have one less seat to sell but I have no revenue? What if it's an entire convention of people requiring assistance? Suddenly I've lost half of my potential revenue.

I'm being a bit facetious, but by the same token, why should various individuals have to underwrite that cost? I realize it's a hardship on one side, but all it appears we're doing is transferring the hardship to the other side of the equation.

Mr. Norman: I'd like to try to respond to that. I guess we have to look at it from the philosophical point of view that says there is a right to travel, a right to transportation. If that right requires a certain modification to a vehicle, or to a terminal or a bus station, then it's expected that the modification would in time and in due course be made.

If the requirement for free access to transportation is that another person, an attendant, be with the disabled person, then I think that has to be covered as a legitimate cost to the operation of the airline or the bus fleet, or whatever it might be. That cost would have to be worked in in what you might call a cross-subsidy manner so that the overall cost is borne by the tariff fares or the rates that are set for the public generally. I don't see that we would look to the government, either provincial or federal, to subsidize on the basis of having to carry people with disabilities and their attendants.

The other point I'd like to make is that you're not going to get the situation you described where there would be a full, or nearly full, capacity of people with disabilities and their attendants. There are other regulations, other acts that come into play that limit the number of people with disabilities who are permitted to travel by bus, or by train, or by aircraft.

I know with aircraft it's governed by the number of exits. If you have six exits, then that aircraft can carry three people who have disabilities and their attendants, and no more. So you have that kind of limitation, and it's a natural limitation.

Mr. Gouk: I have just one other question, because I know we're a little tight for time. It's with regard to the design of vehicles, buses, aircraft, and so on.

One of the most prevalent aircraft that flies to the smaller communities is the Dash 8 aircraft. There is absolutely no way a wheelchair can get into and down the aisles of that particular aircraft. Would your suggestion be that this type of aircraft has to be modified to the extent that it is wheelchair accessible?

Mr. Norman: I'd like to take that one too. I've just travelled by Dash 8 from Gander to Halifax. I do it fairly regularly. I have no difficulty whatsoever with that type of aircraft.

They have made modifications for boarding, boarding apparatus. In this case I think it's a PAL unit. In other cases it might be another type of unit. There's a standard set for that by CSA. They make use of an aisle chair, so that you can be easily pre-boarded and deplaned.

Mr. Gouk: In terms of wheelchair accessibility, though, I bet you'd be restricted to row one in that case.

Mr. Norman: No.

Mr. Gouk: You can make it down the aisle of a Dash 8 in a wheelchair?

Mr. Norman: With the boarding chair you can go to any aisle.

Mr. Gouk: Okay, that's a special chair they have available.

Mr. Norman: There are specifications for that.

Mr. Fontana: I'm sure Mr. Gouk was being facetious, because knowing the aviation industry and airlines, he knows full well that not all seats are revenue seats. In fact, employees get free seats all the time.

Mr. Gouk: On an as-available basis.

Mr. Fontana: I know you like to challenge our witnesses and make them work for their brief, and therefore I can understand that. But let me get to a serious question here.

The Vice-Chairman (Mr. Comuzzi): Good.

Mr. Gouk: There's no bias on this committee.

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Mr. Fontana: I know you didn't get into the specifics, but under the NTA, or under the new Bill C-101, pretty well everything, essentially the gains and the protections the Council of Canadians with Disabilities was so instrumental in getting in the first place, remain intact. I get the impression that you think there's a weakening of that commitment in Bill C-101, or perhaps that the words or certain nuances may not be as strong as the one in 1987.

I think Transport Canada and the commitment of the minister was such to ensure that there wasn't a lessening of a commitment toward access for people with disabilities. In fact, obviously there was an attempt to try to reinforce our commitment and the amount of work we're doing with bus companies and so on to ensure there's accessibility for all.

I'd just like to get that impression on the table.

Mr. Beachell: I don't believe there's a significant downgrading of disability issues within Bill C-101. The commitment that was there in the previous act remains here. The problems from the previous act remain here; they unduly restrict the mobility.

We would like to see in the declaration a commitment not just to safety but also to accessibility standards. We would like to see a commitment to alternate media. When the minister tables a report with the House on transportation we would like to see that there be specific reference to disability issues.

I would say that in 1995 we're no worse than in 1987, but it's 1995; we would hope there's been improvement in eight years. That's why we're before you again today, as we were before the committee in 1987, and we'll probably be in 2001, but hopefully not saying the same things.

So what we look for is, yes, there's a commitment here and it is recognized that the federal government leadership on transportation issues for people with disabilities in all areas - frankly, other than bus - has been significant. We would like that to continue and to expand.

As the status of disabled people in Canada changes, as we have more buildings accessible, as we have more universities and colleges and schools accessible, and people are getting educations and careers, there will be greater demands upon the system. More people will be leaving their home, participating in their community life hopefully will be members of Parliament, and will be participating across the country, etc., as are some members of Parliament with disabilities.

So I would suggest that what we look for is that continued incremental improvement. We would have been appalled if we'd seen a lessening of the standards. We're looking for an improvement of the standards.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Fontana.

Mr. Nault: Mr. Chairman, I have just one question.

The Vice-Chairman (Mr. Comuzzi): Oh, did I miss you?

Mr. Nault: You always do, but that's okay.

The Vice-Chairman (Mr. Comuzzi): No, I apologize.

Mr. Nault: I just wanted to ask Mr. Norman one question. It relates to the fact that where I live, as a northerner, all we do is travel in little airplanes. It's a very complicated process to have a disabled person, especially in a wheelchair, travel in those planes.

Are you aware of anywhere where they've made some adjustments to that particular process of making planes differently, especially the little ones, that fit disabled people with wheelchairs? What we're doing now, of course, in some of my communities, is carrying the person on. That is not exactly an easy process.

Even though we've put it in the act, I guess the question I'm asking is, do the manufacturers build them that way?

Mr. Norman: I guess what I have to say in response to that, Mr. Chairman, is that there's been very little improvement in that particular situation. If you are a disabled person, mobility impaired or agility impaired, you still have to be carried aboard these aircraft in far too many places in Canada.

We've just recently completed a survey of the use of small aircraft in remote parts of Canada, including along the coast of Labrador and northern parts of the country, the Northwest Territories. We found appalling conditions, situations where ropes and slings were used, situations where two or three men have to manhandle a middle-aged lady to have her board the aircraft, and situations where the mobility device, the wheelchair or the scooter or whatever it might be, has to be left behind, transported in some other fashion or some alternate arrangement has to be made at the destination. The brief answer is that it's a very difficult situation that has not improved to any degree.

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The Vice-Chairman (Mr. Comuzzi): Mr. Norman and Mr Beachell, thank you for coming and making your presentations this afternoon. The report will be given consideration.

Mr. Beachell: Thank you.

The Vice-Chairman (Mr. Comuzzi): I call upon the final presenter.

Nice to see you again. Do you want to introduce your colleagues, Mr. Clement?

Mr. Cameron W. Clement (President, Northern Transportation Company Limited): Yes. Mr. Chairman, thank you for the opportunity to appear today. I am from Hay River in the Northwest Territories. I'm the president and chief operating officer of Northern Transportation Company Limited, or NTCL.

I'd like to introduce the other members of our delegation. With me is Mr. Paul Preville, NTCL's vice-president of business development, and Mr. John Edsforth, an economic consultant to the company.

Mr. Chairman, we presented a brief to the committee, which I believe you all have a copy of, and we will be referring to it throughout our presentation. I have extra copies here should they be required. I also have some brochures on the company that are available to the members of the committee should they like to have a look at them.

Mr. Chairman, we'd like to use some overhead charts to assist us in our presentation.

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This overhead will give you an outline of our presentation this afternoon, in which we're going to discuss a little bit about NTCL, the company background, the operational characteristics of our company, the case for regulation, and our recommendations to this committee.

This is the first time I've appeared before a standing committee. My only previous exposure to this type of forum was watching the Clarence Thomas and Anita Hill hearings on television. I have to tell you, our presentation today is neither as controversial nor as exciting, but to us, believe me, it is just as important.

The northern marine resupply is a very small component of the legislative changes proposed in Bill C-101. However, the effect of repealing all economic regulations of the northern marine resupply could have a significant impact on the long-term viability of NTCL and the aboriginal peoples in the communities we serve.

We felt it was important to appear here today and officially put our concerns on record before this committee. We also felt it was important to inform the committee of what we do, the vital role we play in northern community resupply, and the harsh conditions and environment in which we operate.

Northern Transportation, NTCL, is a northern company. It is 100% beneficially owned by the Inuvialuit of the Western Arctic and the Inuit of of Nunavut. NTCL is a wholly owned subsidiary of NorTerra Inc., which is owned equally by the Inuvialuit Development Corporation and the Nunasi Corporation. In effect, we're 100% owned by the aboriginal people of the Northwest Territories.

We are a marine transportation company that operates a fleet of tugs and barges, not railroads and railcars, along the Mackenzie River system and the Western Arctic coast. We begin in Hay River, which is our main operating area and head office on the south shores of the Great Slave Lake, and travel 1,000 miles by water up the Mackenzie River, traversing four sets of rapids, to reach the Arctic coast. From there we transport east another 1,000 miles to the farthest community we serve, Taloyoak. We also, if occasion demands, proceed west into Alaska 800 miles along the Alaska coast as far as Point Hope. In total, we have 54 ports of call within the Mackenzie and Western Arctic region.

NTCL celebrated 60 years of service to the north in 1994 and was the recipient of the NWT Chamber of Commerce business of the year award.

As this slide illustrates, we began in 1934 on the Mackenzie River, Great Bear Lake. We were a federal crown corporation at that time. In 1957 we expanded our service to service the Western Arctic coast communities. In 1963 we went for the first time to Alaska's north slope in support of the drilling program there. In 1975 we began Keewatin service out of Churchill, Manitoba. From Churchill we service six communities in the Hudson Bay. In 1987 we began an eastern Arctic marshalling service in Montreal to support the eastern Arctic sea lift.

NTCL is a rather unique company, and as such has some unique operating characteristics. I'd like now to refer to the first page of our submission. This is at the bottom of the page, where the unique operating environment is discussed in the report of the National Transportation Act Review Commission, and I quote:

The northern marine operating environment is characterized by a number of elements which make it distinct from other transportation regimes and tend to make marine transportation operations unique.

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The NTA went on to list the unique characteristics of our operations.

We'll talk first of all about the large operating territory. From the map you can see the scope of our operations. It's a very large area with a very small population. Of the 54 communities we serve, Inuvik is the largest, with a population of around 3,000. The smallest is Bathurst Inlet, with a population of 16.

The region also has a sparse road system. Of the 54 ports of call I mentioned earlier, only six are serviced by all-weather roads. Water is the principal supply route to the other 48 sites.

There's a shrinking cargo base in our operating area, but Paul will discuss that later in the presentation.

I'd like to draw your attention to the fact that the north has a very limited and very varied port infrastructure system. You will recall I talked about Inuvik being the biggest community we serve, with a population of 3,000. As you can see, the terminal at Inuvik is quite sophisticated by northern standards, with sheet-piled docks, permanent wharfs, a gravelled yard, a storage area and a protected harbour. It's a very efficient operating area that we serve.

On the other hand, Bathurst Inlet, which has 16 people, gets 99 tonnes of cargo per year. It has no wharf, no facilities and it's completely unprotected. If the weather is bad, we have to sit off with the tug and barge for two or three days, waiting for the weather to allow us to land. But just like the people of Inuvik, the 16 people in Bathurst Inlet find the resupply very important.

I don't have to tell you there's quite a difference in cost per tonne to supply Inuvik as opposed to Bathurst Inlet.

The rest of our delivery sites fit somewhere in between Inuvik and Bathurst Inlet, but the vast majority are at unimproved docks and unprotected beaches.

Last, I want to outline some of the unique challenges we face every day of every year in providing the resupply service in the north.

The first is the short season. Operation on the Mackenzie River is limited to five months. Operation in the Western Arctic is two to two and one-half months. In that period of time our company is tasked with moving all of the resupply cargoes required to sustain these communities until the next season.

On the Mackenzie River we constantly face low water, making it difficult to traverse the four sets of rapids on our quest northbound. In some seasons we face flooding. Once we hit the Arctic, no two seasons are alike. Sometimes it opens up, sometimes is closes off. Sometimes our ships make our deliveries and never return. Every season is an exception. Yet the service we provide is essential for the continued survival of these isolated communities.

I hope in this short time I've been able to give you a brief overview of what we do and where we do it, and I look forward to answering any questions you might have at the conclusion of this presentation.

At this point I'd like to ask Paul Preville to address our concerns with Bill C-101 and our proposed recommendations.

Mr. Paul Preville (Vice-president, Business Development, Northern Transportation Company Limited): Mr. Chairman and members of the committee, I'd like to direct your attention to the slide, which shows how the tonnage has evolved over the last twenty years, since 1975.

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I think first of all, by way of background, I should mention, and perhaps everyone here is aware, that the communities in the north rely on marine transportation for all of their basic goods. By that I mean the fuel oil, the building materials, the vehicles, the snowmobiles, the fishing gear, and a lot of the clothing. At the same time the north relies on air for passengers and for perishable foods.

What the graph is showing us is that in the early part, between 1975 and 1980, you see a business cycle, with the kinds of things businesses generally expect. But from about 1980 onward, we have been very much declining in our tonnage base. Of course, in recent years a lot of this - as you see, there have been sharper declines since 1992 - has really been reduction in government spending, which means reduced construction activity in the north.

In addition to that, there is no oil exploration or mineral development in the Mackenzie-Western Arctic at this time. The effect of that greatly reduced tonnage base is that the revenue, of course, has also declined and there is a corresponding lack of profitability.

The other thing I'd like to mention about the tonnage is that it shows that the market isn't growing and therefore there isn't an opportunity to support growth or more carriers. In fact, what the declining tonnage shows is that existing carriers need to be protected so that they will remain profitable and stay in business.

The slide we put forth here is a slide that demonstrates that regulation under the 1987 National Transportation Act is working. Annually, the National Transportation Agency carries out shipper surveys and publishes the results. We have before us the results for 1993.

Along the x axis on the bottom are a number of items that customers are requested to comment on, from the most important, which is price, to what the customers consider perhaps the least important, which is how loss and damage claims are handled. The left-hand bar in pink colour shows great satisfaction, the middle bar shows acceptable, and the right-hand bar shows respondents thinking that service or the quantifier is poor.

What it really shows is that on the poorer side it ranges from 8% to about 12%, which means that really, in the area of 85% or more, people are satisfied with price, on-time performance, schedule, frequency, flexibility, and loss and damage claims.

Here is an annual opportunity for customers to vent their concerns, and we see that there is a very high level of satisfaction. I think that's enough for the members of the committee and all of us who travel a lot in Canada, but when you live in a little town on the tundra, on the edge of a sea that is frozen for nine months of the year, a good, reliable carrier is important. Of course, that has been preserved through regulation.

I'd like to move on to ask the members to refer to page 4 of our submission to you. At the top of the page we refer again to the National Transportation Act review committee. I'd just like to say that of course this review committee just finished its review and published its report at the beginning of 1993. The information here from the review committee is certainly current and addresses the system as it now operates.

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The review committee said:

We found, however, that the level and type of economic regulation affecting carriers are generally well received by stakeholders in the region.

That table on the screen demonstrates that.

Further, at volume II, page 114 of its report, it says:

In general, the changes in the 1987 legislation have been well received by shippers and carriers in both of the systems

- the other system being Lake Athabasca -

All parties agree that water transportation in these regions should continue to be regulated in order to provide adequate service and to ensure that in the long term, there is sufficient tonnage available. The requirement for long-term stability and carrier profitability is recognized by the parties in both regions, and thus free market competition is not perceived as being in anyone's long-term best interest.

In terms of freight rate increases, a testimonial to the effectiveness of operation in the current regulatory regime is that NTCL did not increase freight rates at all in 1993 or 1994, and this year, in 1995, there was only a small increase of 3% for deck cargo, which cargo category will account for only about 16% of the total cargo handled in the area. The biggest commodity that is carried and the greatest tonnage is the fuel for the communities.

The illustration we want to bring to this committee is, of course, the great dependence on water transportation and the need for someone to be obliged to provide a service. That, of course, is a requirement of regulation. The regulated carrier is required to call and serve those communities. In non-regulation, a carrier would pick the places he would like to serve.

The variable traffic levels and the lack of profitability are, of course, other things that require regulation. Those are extremely important to the preservation of good transportation in the north.

I'd like to refer the committee to page 2 of our submission, which discusses the requirement for economic regulation, and again we quote from page 113 of the review report:

The rationale for economic regulation arose from the almost complete dependence of the isolated communities, located on both the river and lake systems, on water transport services.

Continuing on the next page, I quote further:

The need to ensure adequate services to all communities, including the smaller remote ones,

- such as Bathurst Inlet -

which were less economically attractive to the carriers, resulted in a regulatory philosophy which placed more emphasis on the availability and reliability of scheduled services than on the promotion of a competitive environment. This primary objective of ensuring a satisfactory level of scheduled services to all communities resulted in the licensing of a few scheduled carriers to undertake the resupply function, with licensed carriers being protected from unlicensed operators and operating in a system with a tightly controlled supply of carrier capacity.

These remarks, gentlemen, from the review commission, are remarks of an expert commission put together by the Government of Canada to review how the National Transportation Act was serving the country, and in the case of northern marine resupply it determined that it was being properly served.

There have been periods during which an increased emphasis on competition, and a decreased reliance on entry regulation, have been attempted in the Mackenzie-Western Arctic area. In general, the results have not been satisfactory. Under these regimes, the tendency was for newly licensed carriers to cherry-pick the more profitable traffic movements - such as a community like Inuvik, which has a high tonnage base - and therefore depriving NTCL of profit contributions it had previously been obtaining for these movements.

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The results of such cherry-picking were predictable. NTCL had to either raise the freight rates for the less profitable movements, that is, the higher-cost communities, or suffer financial deterioration, which threatened its ability to continue providing adequate services.

It was these experiences that confirmed the wisdom of tightly controlled entry of competition as contained in the National Transportation Act, 1987, so that all communities in the region could be reliably served without the necessity of exacting prohibitive freight rates from the higher-cost communities.

I guess we could say that under deregulation, for a small community like Bathurst Inlet, with 16 people, probably no carrier would want to go there because of high cost and difficulty of access.

The Vice-Chairman (Mr. Comuzzi): You're at almost 25 minutes in your presentation. You can do whatever you wish, but if you want to entertain some questions and answers you should come to a conclusion soon.

Mr. Preville: That's fine, Mr. Chairman. We want to hit the high points.

As the committee knows better than we, Bill C-101 has a large mandate to reform the rail industry. It has done some tidying up in terms of addressing northern marine resupply and northern air and highway transportation and so on. But we believe tidying up doesn't mean deregulation. We want to recommend that regulation remain in the new act.

I'd like to direct the committee to page 7 of our submission, where we make our recommendations. First, we recommend that Bill C-101 be amended to incorporate therein the legislation contained in the current part V, northern marine resupply services, encompassing sections 209 to section 227 of the National Transportation Act, 1987, with the exception of paragraph 210(2)(b), which NTCL recommends be repealed.

Paragraph 210(2)(b) is really a tidying up, because it addresses the origin of cargoes from everywhere into the regulated area.

The other recommendation we would bring to you is that the final-offer arbitration provisions of Bill C-101 not be extended to apply to northern marine resupply services. The reason for that simply is that we have a tariff that is really a mileage-based tariff, one the market likes and the Government of the Northwest Territories likes. A market-related tariff provides the same relative rate to a small community as to a large one. Under final-offer arbitration that tariff regime could very well go away, because people in the larger communities would search arbitration for lower rates, and that, of course, would disadvantage the smaller ones.

In any event, to summarize, Mr. Chairman, the future of service to Arctic communities is at stake. The north is in your hands. We think Bill C-101, which provides for a review in five years, should include regulation of northern marine resupply, and at the end of five years that is again being reviewed. Really, that's what we're doing now.

So we would ask that this committee move these amendments to Bill C-101. We would welcome your questions.

Thank you.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Preville, Mr. Clement, and Mr. Edsforth for managing the camera.

Mr. Gouk.

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Mr. Gouk: I just wanted to clarify the part of the CTA that you wanted deleted. You said it was paragraph 159(c), but there's a 159(1)(c) and a 159(2)(c). I gather you're saying (1)(c)?

Mr. Preville: I'll just see what we said here. Yes, paragraph 159(1)(c) is correct.

Mr. Gouk: Okay, I just wanted to make sure. That's all.

Thank you, Mr. Chairman.

Mr. Nault: I have just one quick question about the issue of the final-offer arbitration provision of Bill C-101 not being extended to apply to northern marine.

I can understand to a certain extent why you want it to be exempt, but on the other hand there are times when it could be to your benefit. This arbitration works both ways. It can also be that you would apply for arbitration if you felt that someone came into the industry and inadvertently was being a predator and doing you some disservice and harm.

Am I missing the boat here, so to speak? Can you fill me in on why you want to be exempt from arbitration?

Mr. Preville: I guess what we're really saying is that with a regulatory model as now exists under the 1987 act, the industry - and by the industry I mean both the market and the carriers - has a way of addressing its situation. The carriers can propose rate changes, which are subject to an overview by the National Transportation Agency. The clients can also appeal to the agency and have their concerns addressed. So under regulated regime, the utilization of final-offer arbitration becomes less required.

Mr. Nault: If you are deregulated, you would obviously prefer to keep the arbitration provision in there. Let's assume that the part that deals with the deregulation, which is one of the recommendations you asked to have, allowed that particular amendment to apply. Now if both of these amendments don't fly, obviously then you would want to keep a final-offer arbitration, wouldn't you?

Mr. John Edsforth (Economic Consultant, Northern Transportation Company Limited): My understanding of the final-offer arbitration provisions is that final-offer arbitration is activated on an application by a shipper, so it would in essence be a shipper against NT, let's say.

Mr. Nault: Yes, but you are a shipper as well, are you not?

Mr. Edsforth: No, NT is strictly a carrier.

The problem we have with final-offer arbitration is that, as Mr. Preville indicated, we have a mileage-rated rate scale and its existence kind of depends on the rate scale holding up.

If shippers in Inuvik, for example, were able to bring a final-offer arbitration and forced the rates down in Inuvik, because maybe the costs at Inuvik are fairly low relative to the rates, that is going to break down that mileage rate scale, and people in Bathurst Inlet are suddenly going to find themselves paying more. So it will break down that mileage scale. That's our concern with final-offer arbitration.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Nault.

Mr. Nault: I want to go back to that just for a second.

The Vice-Chairman (Mr. Comuzzi): I withdraw my thanks.

Mr. Nault: Under the act, when you go to arbitration, obviously there are two sides: one is the carrier and one is the shipper. Are you suggesting here that in arbitration the shipper always wins? I don't understand this. It seems to me that even if a shipper does take the carrier to arbitration, he may lose because it's frivolous. So why would you be opposed to having it in there as a last resort in order to deal with a dispute of some sort?

Mr. Edsforth: My experience with final-offer arbitration under the existing act, which I think is not terribly different from what it would be under the new legislation, is that first of all shippers are not in the business of raising frivolous applications here. They're pretty serious most of time, and generally it has the impact of forcing a negotiation between the carrier and the shipper, usually resulting in some kind of a compromise before the thing actually goes to arbitration. That has been how it's worked so far, and I think that's how it was intended to work; that was exactly the intent.

.1820

It has worked very well in rail. The problem with it in this context is if NT were forced into the same position and had to, let's say, negotiate something below the mileage scale to settle the arbitration rather than go through the whole process, if that same process should work, then at the lower-cost communities such as Inuvik, you'd probably see some breakdown of the mileage scale as a consequence of the applications coming in.

That would work to the detriment of everybody else, or else NT itself would find itself in financial peril, that not being the case.

Mrs. Cowling (Dauphin - Swan River): My question is with respect to the port of Churchill and the line that goes up to that port. Do you believe that line plays a role in the viability of the north? That line services a lot of my constituents through the movement of grain. You didn't mention anything about the port of Churchill, and I'd like to hear some of your comments on that.

Mr. Clement: As far as the current operation we run in the Keewatin through Churchill goes, yes, rail plays a very important role in the resupply of both fuel and deck cargo, which is the building materials, the automobiles, the groceries, etc., to six communities: Arviat, Whale Cove, Rankin Inlet, Chesterfield Inlet, Baker Lake and Coral Harbour. Our operation is based at the railhead there, so it plays a major role. It's our reason for being there.

Mrs. Cowling: Do you have a dollar figure for what that might be, if you were putting it into that kind of factor with respect to that line?

Mr. Clement: I'm not really sure what you're asking.

Mrs. Cowling: Many people tend to believe that line is not viable - that it doesn't in fact pay for itself. When we talk about a value with respect to the line going into the port of Churchill, the viability of that seems to be very great for the north. I'm wondering if you've factored in a dollar component as to what that line may be worth.

Mr. Edsforth: Certainly it would be possible to find out the number of tonnes that come in by rail. That much could certainly be done. To quantify that to a dollar number, one would want to have a look at the rail rates versus what it would cost to truck it, because trucking would be an option in that case.

We don't have that number on the tips of our tongues. Probably it could be developed.

Mr. Clement: Well, John, just to clarify, I don't think trucking is an option there, because there is no road into Churchill. The figure I do have is we're currently hauling probably anywhere between 32,000 and 33,000 tonnes of resupply material through the port of Churchill and along the rail line annually.

Mrs. Cowling: Thank you.

Mrs. Terrana: I'd like to continue for a second on Churchill. It's not a regulated service, is it? Are you regulated in Churchill?

Mr. Clement: No.

Mrs. Terrana: Who are your customers? Are they pretty well the same as the ones you already serve? Why do you want regulation then in the area where you are now in the north when in fact you are not regulated in Churchill?

Mr. Preville: There's a historical basis, but as you saw from the map, the Keewatin region is a very small market area and the Mackenzie-Western Arctic is a much larger one. It is the market that has traditionally been upset by competitive forces and by carriers having difficulty and going broke. It was the market area that became regulated originally and is still regulated, and we recommend that it continue to be regulated.

Mrs. Terrana: Would you say the area that is regulated is doing better than the area that is not regulated? Can you compare the two or not?

Mr. Preville: I think they're both the same in those terms.

.1825

Mrs. Terrana: My last question has to do with your shipper satisfaction survey. Do you also have a survey on the Keewatin service up in Churchill? Do they do the same thing with your shippers there?

Mr. Preville: The survey we published was done independently by the National Transportation Agency. They did not survey the Keewatin service separately, because it's not within their mandate.

Mrs. Terrana: So that would be the responsibility of the government again and at no cost to you.

Mr. Preville: We do our own customer surveys, and I would say we have the same level of acceptability in the Keewatin as we do in the Mackenzie-Western Arctic region.

Mrs. Terrana: Thank you very much.

The Vice-Chairman (Mr. Comuzzi): Thank you.

Thank you, Mr. Preville, Mr. Clement, and Mr. Edsforth, for coming and making this presentation. The brochure is very enlightening.

As a point, how many people do you service in the areas you cover?

Mr. Clement: If you're looking for only an approximation, I would say we're servicing probably about 22,000 to 25,000 people who are in the region we're in.

The Vice-Chairman (Mr. Comuzzi): Thank you very much for coming. Your recommendations certainly will be given consideration, and we may want to call on you again.

Mr. Preville: Thank you very much.

The Vice-Chairman (Mr. Comuzzi): I'd like to inform the members of the committee that we will now hear our 3:30 p.m. visitors.

Mr. Gouk: Mr. Chairman, on a point of order, I want to be able to put on the record that I'm not going to be able to stay for them.

We have the submission that was just handed out. If there's anything further, I'd like to take it now. But we are running almost an hour behind schedule for a variety of reasons and I have made previous commitments. We are already a half an hour past our original adjournment time, and I simply can't change my other commitments.

The Vice-Chairman (Mr. Comuzzi): I hear what you're saying, Mr. Gouk, and I can't help the change.

Mr. Gouk: I want to make sure that if there's anything further they wish to submit I can get a copy of it now.

The Vice-Chairman (Mr. Comuzzi): I'll make sure that the clerk gets it to you tomorrow. Thank you for staying beyond the regulated time.

I want to welcome Terry Boehm from the National Farmers Union. Welcome. The usual procedure, Mr. Boehm, is that, if you wish, you can give a presentation, read from a presentation, ad lib from a presentation, not make any presentation and just let us ask questions - whatever you feel comfortable with.

Mr. Terry Boehm (Transportation Committee, National Farmers Union): I think I'll ad lib from a presentation.

Also, there is another option I can throw out at the committee in terms of timing. I'm in tomorrow, if it would fit into scheduling.

The Vice-Chairman (Mr. Comuzzi): Tomorrow we have a full slate of witnesses.

Mr. Boehm: Okay, I'll get right to it.

.1830

The Vice-Chairman (Mr. Comuzzi): We're going to go to 7 p.m. or so. Feel free, and be comfortable.

Mr. Boehm: Okay. Thanks very much, and my apologies for disrupting the schedule earlier today.

The Vice-Chairman (Mr. Comuzzi): Was it you or Greenpeace who missed the plane?

Mr. Boehm: It was me.

Bill C-101 is probably in tandem or in coincidence with a few other bills, the privatization of CN, etc., which have probably the most significant changes and have the most important economic ramifications for western Canadian producers and farmers in general.

The first thing I'd like to state is that one of the problems for a grain producer - that's me - is that there really is no alley for producer input in determining how the transportation system will develop or how it will unfold, because a producer is not a shipper, although we pay the costs of shipping. The shippers are the grain-handling companies. That's an important distinction.

We're really being downloaded with the costs of transportation to ensure the viability and the attractiveness of the rail system. Particularly, it appears that the future sale of CN, to make it attractive, is important in a lot of aspects of Bill C-101. After that point we're looking at a fragmentation of the rail network within western Canada.

We're concerned that we've gone from basically a fairly regulated system in the WGTA through two stages, and rapid-fire deregulation, when the WGTA was rescinded; the NTA took over, and now we're looking at the CTA. Each one of them has problems for a producer.

The economy of the west is part and parcel of rail transportation. I'd just like to echo that ensuring the viability of the carrier in many aspects of this bill does not guarantee competition within the system, as Mr. Breton emphasized from Baie-Comeau, in the airline industry. I can parallel that exactly in the rail transport system for western Canadians.

CN and CP are really a duopoly. They know how each other operates. There really isn't much competition for rates. The branch line system is such that, really, the services areas are divided up. They haven't participated in facets of the NTA to any great extent for competitive access, etc. These things are disappearing.

The studies on the effects of Bill C-101 make a lot assumptions that east-west trade will comprise the major volume of the national carriers for transport. They assume that the Grain Commission will still be in place; that hopper car ownership will be available to producers for shipment; and of course, there's a movement within the government to privatize the hopper car fleet, which will lead to, just in an ownership cost at whatever price they're sold - and I'm assuming the railways would look at purchasing hopper cars - an addition to the freight rates of just two to three dollars a tonne.

I want to draw some parallels with the U.S. experience. In the U.S., immediately south of Saskatchewan and Alberta grain shippers in Billings, Montana, are paying a substantial premium over shippers in Alliance, Nebraska, per tonne of grain moved, because they are captive shippers. What we as producers and in the National Farmers Union are afraid of is that things like competitive line access, etc., will only apply to those shippers and/or producers that are close enough to the U.S. border to access U.S. rail lines.

.1835

In terms of competitive line access and rate competition between the two national carriers, that will be non-existent. With the privatization of CN, we see a likely scenario where the eastern portion over time will become an entity, and the western Canadian portion will become an entity. If there is a diversion of shipment to the U.S., of course the fixed costs go up on the railways. What we're afraid of is that those shippers are producers, actually. Shippers - it's irrelevant, because the producer pays the price. Captive areas of the northern prairies and areas where there is not adequate interchange into other systems will be paying for the Canadian system excessively, and there will be pressure to remove the cap on freight rates.

Right now I farm at Allen, Saskatchewan. It's just about the geographical dead centre of Saskatchewan. My freight rate went from $13 per tonne to $33 per tonne on August 1.

The Vice-Chairman (Mr. Comuzzi): Which way?

Mr. Boehm: West to Vancouver.

The Vice-Chairman (Mr. Comuzzi): Maybe look at the eastern....

Mr. Boehm: It's the same thing; we're dead centre.

Depending on the commodity you're shipping, because of the different bushel weights, there are variances, but basically from our point at Allen there are about 100,000 tonnes of grain shipped annually. At $33 per tonne right now, which is 2.6 times what I paid prior to August 1, you're looking at about $3.6 million out of that particular community. That's about $2 million higher than it was a year ago - a significant increase in costs.

The Vice-Chairman (Mr. Comuzzi): Could I just stop you on that, because that's very important to us. You tell us you went from $13 per tonne to $33 per tonne overnight.

Mr. Boehm: Yes.

The Vice-Chairman (Mr. Comuzzi): How much of that $20 was because of the reduction in the grain transportation system payments and so on? Have you got that?

Mr. Boehm: Actually, all of it.

The Vice-Chairman (Mr. Comuzzi): Oh. So really, the price of moving the grain -

Mr. Boehm: It has stayed static.

The Vice-Chairman (Mr. Comuzzi): It stayed static, but the only thing is that the payer is different.

Mr. Boehm: Yes.

The Vice-Chairman (Mr. Comuzzi): Okay. What was the price of that grain you were shipping per bushel?

Mr. Boehm: Right now we're in a buoyant market, and under the Canadian Wheat Board there's a year's lag for the final price determination. But a year ago we were roughly receiving $4 per bushel for top-grade wheat - high-protein wheat. It could be somewhat higher this year. But as little as three years ago I shipped grain at $1.70 per bushel, and it's about 91¢ per bushel right now for me to ship grain. At $1.70, with the old 35¢ per bushel shipment, I was in a loss position. Because of the cyclical nature of commodities such as grain, we'll see that day again. All we need is weather.

The Vice-Chairman (Mr. Comuzzi): Of that $33 per tonne - let me get back to that - how much is the freight per bushel?

Mr. Boehm: It's 91¢.

The Vice-Chairman (Mr. Comuzzi): It's 91¢ of the $33.

Mr. Boehm: Yes.

The Vice-Chairman (Mr. Comuzzi): So it's about 20% of your.... The cost of freight is -

Mr. Boehm: At this point in time. It can be as high as 50%. As sure as I'm sitting here, that will come; it varies.

The Vice-Chairman (Mr. Comuzzi): Everything depends on the price of wheat.

Mr. Boehm: Yes.

.1840

The Vice-Chairman (Mr. Comuzzi): We had people here yesterday saying to us that when the markets in coal or grain or whatever the situation is were depressed, then the railways came to their assistance because it was important that they remain viable.

Are you one of those people they referred to when they said that when the price of grain increased you didn't go back and say maybe we should be getting a little more money for shipping this grain wherever we're shipping it to? That was their problem yesterday.

Mr. Boehm: Actually, no. I've always looked at it as that historically railway profits have followed the volume of the crop produced on the prairies. You can draw a graph and the two go together. At any rate, I feel that it's a large region, it's an important part of the economy of Canada, and not allowing us as producers some mechanism to affect the structure of the infrastructure or the deterioration of that infrastructure....

What's happening is there is a downloading of costs occurring. At my point we're paying $33 a tonne, but that's not the end of it. In April 1996, under Bill C-101, there can be quite a number of branch lines abandoned. So what happens? Distance to a branch line is abandoned, distance to a collection point is increased, road traffic increases, and trucks have to get larger. That's capital cost to me. Local, municipal, and provincial governments and ultimately the residents of the region are going to pay for road reconstruction to support larger vehicles for hauling these greater distances to a grain collection point.

Some will say, well, we'll streamline the rail system and we'll create more economic development. We're going to make it more expensive to produce that grain and ship it out as a bulk, raw commodity in western Canada so processing will take place.

Cargill is putting up a plant near us, a canola crushing plant, and I have no quarrel with processing. There are going to be 50 permanent jobs created. United Grain Growers, which is a relatively small player in the grain elevator system, is closing 100 elevators in the next year. There are at least 2 people working in each of those elevators. Is there a balance there?

To move away from that, I think I've made my point, and I'm sure others before me have made the same point, of road deterioration and restructuring. As a producer, I feel this bill is weighted to ensure the viability of the carrier at our expense without any real consideration for the region that this infrastructure services the economy of Canada as a whole. It's really focused on carriers.

I think the mandate should be larger than that. I think the opportunities for local input into the rebuilding of the infrastructure or the dismantling thereof should be there for those most affected. I don't really see it in this bill.

Even in the provisions for branch lines - the three-year plan, the notification of intent, etc. - as are recommended in the brief, the time period for somebody to put together a short line to take the place.... If an area decides that since roads and highways are going to deteriorate and it's cheaper to put a short line in place, so they invest in the short line and continue to move traffic, it's really dependent on the goodwill of the railways, and the railways are there to make a profit.

.1845

As an example, they can list their plan of what they're going to abandon, but they can demarket these lines. What they can do is create a situation where service is so poor that the grain collection points will in effect close down. Producers won't support them because there are no cars allocated.

Another problem we see with this bill is railcar allocation. Third-party railcar allocation has sort of been a plank of grain transport in the west. There have been publicly supplied cars, and the Canadian Wheat Board undertakes to allocate those cars and draw specific grains for service to ship delivery.

It's quite efficient. We're as efficient as the most efficient railway in the U.S. under the old system. And we're much cheaper. But in the U.S., once the railcars become the property of the railways and/or the shippers - Cargill may run a fleet of railcars of their own or something like that - when market conditions are such that farmers want to move their commodity out, they'll charge a premium of $2 to $7.50 a tonne over and above the prevailing freight rate just to get a railcar, before one bushel has moved.

The Vice-Chairman (Mr. Comuzzi): Say that again, please.

Mr. Boehm: Basically there's a premium charge for railcar access when they're owned privately under the U.S. system. What happens in the U.S. in specific instances is they'll create a specific railcar shortage - a shipment shortage in a particular district.

The Vice-Chairman (Mr. Comuzzi): Who's ``they''?

Mr. Boehm: The rail lines - Burlington Northern, etc. They really service captive shippers. There is no physical railway in place to take over and allocate those cars.

We have a fixed and limited fleet of cars that I feel, under our allocation system, where there's no interest other than moving grain, benefits the economy as a whole most effectively.

The Vice-Chairman (Mr. Comuzzi): I have to ask you a question on that. Are you saying that for all of those designated grain cars we had over in Chicago - a third of our fleet at one time, which we couldn't get back - a U.S. railway was charging a fee of $7.50 on a priority basis to use our cars?

Mr. Boehm: I'm not 100% certain about our cars, but they were doing it on cars.

The Vice-Chairman (Mr. Comuzzi): They were transshipping U.S. wheat to points after the destination of the car. We tracked it. We know where some of those cars are.

Mr. Boehm: Yes, this has occurred.

The Vice-Chairman (Mr. Comuzzi): I went down to Chicago once and saw more CN cars than there were in all the CN yards in Winnipeg, Toronto and Montreal.

Mr. Boehm: There's a connection between CN and Burlington Northern, and Canadian Pacific and the Soo Line I believe are connected.

The Vice-Chairman (Mr. Comuzzi): They charge a $7.50 premium for a grain car?

Mr. Boehm: I can't say it has been done on those cars, but it has been done. Actually, I have another brief here where I cite the specific examples.

The Vice-Chairman (Mr. Comuzzi): I'd like to see it after. I'm interfering too much with what you're saying. I'm sorry.

Mr. Boehm: No, as long as I have the positive reception of the committee here, I appreciate that.

The hopper car question is a big question in determining regional planning. Again I'll use a U.S. example.

.1850

In the state of Maine they will look at a region and at its different modes of transportation. They will look at the stakeholders. Then they will ask questions: if we remove XYZ rail line from here, what's it going to do to the highway system; what's it going to do to this industry over there, which no longer has rail service, etc.?

In Bill C-101, it's all carrier-oriented.

The Vice-Chairman (Mr. Comuzzi): I think we got your message. I'm sure there are some people here with some questions.

Mr. Boehm: I just have a recommendation that goes outside the brief. I'll outline it very quickly.

One of the things we're suggesting is kind of a revival from the Hall commission of 1977: the prairie rail authority for branch lines. This prairie rail authority could lease the branch lines from the main-line carriers. It could contract maintenance of these lines. It could perhaps take ownership of the hopper car fleet and allocate the cars in such a manner as to maximize movement rather than revenue.

I think the net process would be beneficial to the economy as a whole. Plus, it would allow the government to maintain the $900 million they have invested in branch-line rehabilitation rather than just letting it go for salvage costs.

The Vice-Chairman (Mr. Comuzzi): Did you say that was a recommendation from the Hall commission?

Mr. Boehm: Yes, in 1977.

The Vice-Chairman (Mr. Comuzzi): It says the government should retain the branch lines, but particularly retain the hopper car fleet.

Mr. Boehm: No, the hopper car fleet we've added in. Actually, that was one of the big problems at that point in time - cars.

The Vice-Chairman (Mr. Comuzzi): Mr. Mercier.

[Translation]

Mr. Mercier: Mr. Boehm, my party, the Bloc Québécois, supports some of your recommendations and we will be presenting amendments to that effect.

This is the case with your recommendation no 4, which is that a railway company should be able to undertake abandonment proceedings only after a period of at least 90 days. We consider that a 60 day period is completely insufficient and we also think it is insufficient that a public authority has only 15 days in which to propose to purchase a trunk line and to organize public hearings, when the national Agency no longer does so.

We also approve-and we will be proposing an amendment to that effect-your recommendation no 6, which is that sections 166 and 167 of the 1987 Act concerning rail line abandonment be extended.

However, I would like to have an explanation of your recommendation no 8, and I will read it:

8. The NFU recommends that the CTA grant the secondary railway companies operating rights to use the lines of the two major main line carriers.

According to your conception, should this right be in both senses? Should the companies be able to use the CFIL network, the CFILs being what are referred to as secondary railway companies?

[English]

Mr. Boehm: That's kind of a chicken-and-egg question. The whole imperative for the short line to occur would be that the main lines no longer have an interest in operating that bit of line, from my perspective.

On running rights for short lines, what we're concerned about is that a short line is really dependent under the act, etc., on the goodwill of the railway. Should the railway decide - and it's likely to happen - that it's more profitable to allocate railcars on their lines and ship grain and they don't want to revenue-share on the short line, where the short line has an adversarial relationship with its only connection to the main line, common running rates would allow it to access the other rail line for rate arbitration, and so on, competitive line rates. But we would have no problem with the main line running on the short line if the revenue arrangements were shared in both directions, because there is a proportion of revenue sharing that occurs generally when there's a short line related to a main-line carrier.

.1855

The Vice-Chairman (Mr. Comuzzi): Thank you.

Mrs. Terrana: I was on the task force for the rationalization of CN, and we kept hearing that it was so very difficult to go through the process of abandoning or selling the short lines and the branch lines. You comment that it was a better system under the NTA, but we were told over and over again all across the country that it was too cumbersome and too complicated. The railways eventually would not be able to sell and they would not dare put them on the market for that reason, that it was too cumbersome. Give me another reason, because -

Mr. Boehm: Certainly from the railway's perspective that's true.

From a producer's perspective, I'm looking at my costs from the farm gate. I'm not looking at the costs once it's on the rail line, because they're all tied together, and once you start abandoning branch lines my costs go up.

So part of the reason for our concern with the abandonment proceedings is from an economic standpoint, from our cost. But also we're concerned that the railways have the power now to create a demarketing condition where they will basically decide that they can access all the grain from wherever by determining what kind of service they give. The grain has to be moved at some point in time and -

Mrs. Terrana: Again, it's all tied in. It has to do with the fact that the public interest, which is included in Bill C-101, is there.

Again, you have five months before it goes to the various governments. You show some concern here regarding the fact that you only have fifteen days to lobby your government, your municipalities, your region, or whatever. There is five months before this happens, and it goes first to the federal government, then the provincial, and then eventually to the municipality. Don't you think that's enough time? You seem to be a little concerned about all this.

Mr. Boehm: I read the act a number of times. Off the top of my head, I think there are quite a few clauses that allow the circumvention of those particular aspects in branch line abandonment.

One of the biggest ones is that I believe cabinet can approve abandonment for whatever the railways apply for prior to April 1, 1996. Am I not correct?

Mrs. Terrana: I'm not sure. It's such a big bill that I -

Mr. Boehm: It is. It's an omnibus bill and it's -

Mrs. Terrana: I want make one last comment. I think the recommendation you have on page 8, that railways only be permitted to initiate abandonment if the three-year plan has the line listed to be discontinued, is a very good one because that gives you some protection.

Regarding the rest, because of what I heard.... It was not just the railway, by the way; a lot of people came and complained about the cumbersome system we have to rationalize the branch lines.

.1900

Mr. Boehm: That's interesting. This rationalization of branch lines and cumbersome system is an infrastructure in the economy, and Canada, with limited port capacity.... We have nowhere near the port capacity of the U.S. The U.S. ports are running at about 50% of capacity, and their rail lines are servicing them with the same turnaround time - the most efficient railway, Burlington Northern - as we're doing with ports that are actually running at excess capacity.

Obviously, I'm not terribly interested in branch line abandonment. I respect that the rationalization, to a certain extent, will take place. But what I'm afraid of, particularly with Bill C-101, and in tandem the privatization of CN, is that we're going to have a fragmented system. As for the cap on rates, there'll be extreme pressure to maintain what's left of the infrastructure, to remove those caps on rates in the next five years, and I'd like to stay in business.

The Vice-Chairman (Mr. Comuzzi): Mr. Hubbard.

Mr. Hubbard: Thank you, Mr. Chairman.

First of all, to start on that question about staying in business, railways have subsidized industries and grain in this country for generations. What is your attitude in terms of these changes that are occurring? Can the western grain farmers absorb and measure up to a system of user-pay, where there are no subsidies and it's a straight business-type venture that you're dealing with various railway companies?

Mr. Boehm: There are so many outside factors, even the marketing of our commodities. We have the export enhancement program....

You look at user-pay on a transportation system, and we're dependent on all these other factors that are determining our commodity prices. So if you take pure economic theory and remove all of these other variables, okay, maybe that might be possible. But that doesn't exist, and there is no such thing as a completely wide-open market. We have acts, we have contract law, we have -

Mr. Hubbard: But basically in terms of the attitude that the government is getting out of the railway business, and you're losing your subsidies in terms of what went on before with the western grain, can you survive and do you accept the principle that you pay your own way without the government getting involved with it?

Mr. Boehm: No, I don't think a lot of us will survive. The next downturn in commodity prices will guarantee that. It will happen; there is no doubt. I feel there's more to the economy of Canada than the carriers of bulk commodities.

Mr. Hubbard: So, really, you're saying to this committee that you feel and believe that the Government of Canada, or some level of government, will have to subsidize the farming industry in order to make you viable?

Mr. Boehm: Not so.

Mr. Hubbard: Not so?

Mr. Boehm: I was involved in this in the last round when the Crow was changed. Historically, if you go back, as I talked about at the beginning of my presentation, railway profits and grain production have always gone together. Even before the WGTA and the Crow benefit subsidy, CP Rail had their best years when they moved the biggest volume of grain on the rail division.

Railway costing is another thing in the bill that I don't think it quite addresses. I read a little bit about costing in there, but we're talking about costing per se in terms of all the variables you can imagine: cost of capital, and so on.

As a grain producer, I myself have this cost of capital, and it's a legitimate cost. I produce the bushel of wheat, and if I end up with a profit, I kind of hope I'll pay for that over time. But on these branch lines, so-called grain-dependent lines, any other commodity in the costing formula that the railways move down those lines, whether it be potash or whatever, the variable costs - fuel, maintenance, and so on - are attributed towards grain.

That whole costing thing is a real thorny question. The Snavely royal commission dealt with that a number of years ago.

.1905

Mr. Hubbard: So you're saying then that you feel you're at the mercy of one or two big companies that are going to control your destiny?

Mr. Boehm: Absolutely. Really, it's a CN-CP duopoly.

Mr. Hubbard: As shippers, you will have access, indirectly or directly, to the agency if you feel it isn't a fair cross you have to bear.

Mr. Boehm: This is true. However, as a producer, there are some pretty big barriers to access to the agency, such as frivolous and vexatious complaints, and having to pay the cost if it's deemed to be so. That would shy me away relatively quickly. That's one of the reasons why we recommend the removal of that particular clause.

Mr. Hubbard: CN mentioned, I guess it was yesterday, in terms of the majority of farmers in the west, that there are two competing companies that will be at your disposal with about 35 miles of distance, I think it was, between the two companies or the two tracks.

Mr. Boehm: I would say no. I'll mention Mr. Breton's example from Baie-Comeau concerning the airline industry. I couldn't help sitting here and listening to his presentation. The parallels are immense.

I frankly feel that the transportation of a good is one thing, but the whole system that has evolved in western Canada from marketing to handling to transportation to production is very dependent on facets of this act, and I'm afraid that this is being looked at in isolation as just a carrier-transportation issue. It goes way beyond that.

The Vice-Chairman (Mr. Comuzzi): Mr. Boehm, how far are you from the U.S. border?

Mr. Boehm: I'm just outside of Saskatoon. I think it's probably 450 kilometres.

The Vice-Chairman (Mr. Comuzzi): Say you were able to get your grain to a U.S. carrier. Do you have some comparisons?

Mr. Boehm: Yes, I do. Costs are actually higher in the U.S.

The Vice-Chairman (Mr. Comuzzi): Are they?

Mr. Boehm: Yes. There's a myth, even among farmers, that somehow the U.S. system is the epitome of efficiency and that this unbridled competition that exists in the U.S. rail system leads to lower rates. Not so, not even in car turnaround time. Canadians have always had them beaten hands down. There are a lot of myths.

Mrs. Cowling: I just have a very brief question. You mentioned the costs of cars down in the U.S. and that you had some information on that. I'm just wondering if you could table that information for this committee.

Mr. Boehm: Certainly.

Mrs. Cowling: I think that would help us when we're looking at our final draft.

One of the things we're trying to do as the government, of course, is to make a system that is faster and quicker and that will move the grain out of this country.

You mentioned the prairie rail authority under the Hall commission and maintaining those branch lines and the hopper car fleet. I, too, am in the grain industry. My family's still in that industry. We think that if we get into a deregulated regime in which we can force the costs down, then we'd be much better off as grain producers.

Part of that deregulation, of course, is undoing some of the regulation that in fact is in place and perhaps moving away from some of those branch lines that are not viable. What are your thoughts on that?

Mr. Boehm: On the surface, that makes a certain degree of sense. However, say, for instance, that railcars - this is to do with privatization - are sold and operated somewhere. The owners are going to allocate those according to economic considerations. Right now, their only consideration on those hopper cars is to move grain in the Canadian system as fast as it can to port. The Canadian Wheat Board, even on non-board grains, has undertaken the function of car distribution. Their only regard is to maximize this speed. As I mentioned earlier, our ports are operating at excess capacity, yet we're beating the Americans.

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I've always been one to say that this is not the only example in the world; however, I really feel that under the act, and with deregulation, there really isn't the option of creating much of an environment for competition between the two railways in the west. We're really captive.

With deregulation, you see the example in Montana and North Dakota. You have somebody who's shipping 500 miles further and paying a lower rate by $10 a tonne than someone else because they're captive.

In the American system they have a lottery system for grain car allocation. They have one-third of the fleet in place to sort of operate on a day-to-day basis within the system.

Say that under the Canadian Wheat Board we say we need 13.5-protein wheat number 1. We know it has been produced in the east end of Saskatchewan. We're going to allocate a number of cars to that specific area. We're going to put together a train, bring it up to the main line and shoot it over to Vancouver because there's a ship from Turkey or somewhere waiting for it.

Do you know how the cars are allocated in the U.S.? Random numbers. One-third of the fleet is under a random number system. They have a computer that sits there and generates numbers. They'll pop a car here and they'll pop a car there.

The people who want the cars when there's a heated shipping market pay a price for it. If you add the ownership costs of the cars that the railways will have to translate back to me as a producer and the potential for charging for access to those cars, then any net benefit from branch line abandonment is going to be gobbled up like that, as far as I'm concerned.

The Vice-Chair (Mr. Comuzzi): I'd love to sit here for the rest of the evening to hear you, but the members of the committee are insisting I adjourn.

Mr. Boehm: I appreciate your patience.

The Chairman: It's been very interesting. Thank you very much.

The meeting is adjourned.