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EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 19, 1995

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[English]

The Chairman: Order, and good morning, colleagues. We resume consideration of Bill C-101, the Canada Transportation Act.

Just before we do, I want to thank vice-chairman Joe Comuzzi and Charles Hubbard for filling in for me in the chair's position the last couple of days.

I was down to see the American Association of Port Authorities. The association just can't believe how far we've come with the revamping of the marine structure in this country. First of all, they say they can't believe what kind of restructuring is going on and the breakneck speed with which it's proceeding. It's news to them. They're really awestruck. I think we're going to be hearing from a few more of them -

Mr. Gouk (Kootenay West - Revelstoke): You should have told them we didn't have any plans...[Inaudible - Editor]...and we can't figure out what to do about it.

The Chairman: No, we had a very positive message down there. It was very well done. The spokesperson did a hell of a job, too.

At any rate, we want to welcome Ed Abbot, executive secretary of the Canadian Railway Labour Association, and a familiar face to the committee.

Welcome, Ed.

Mr. Gouk, on a point of order.

Mr. Gouk: Further to my request that we call the NTA, I just wanted to ensure that this has been done. I would like to request that they bring specific material to the committee in preparation for what I wish to ask, namely, any cases that have been brought before them since 1987 where if subclause 27(2) had existed it would have changed the outcome of their decision, as well as any cases from 1987 where subclause 34(1) would have been applied had it existed.

The Chairman: I'm not sure, on your first request, anyway, if that's possible. If it had existed would it have made it different? That's pretty hypothetical stuff.

Mr. Gouk: Well, they know what I'm going to ask, so they should come prepared.

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The Chairman: I'll tell you what we'll do. The clerk has made a note of your request and it will be forwarded to the NTA. We'll let them tell you whether it's hypothetical or not, or whether they're going to sit down and do the homework that would need to be done in order to try to facilitate your request.

Mr. Gouk: At least it's made in advance.

The Chairman: The request is made and we'll see what they have to say when they get here.

Mr. Abbot, welcome. I'm sorry for the interruption. If we could have a presentation from you no longer than 15 minutes, then we can get to some questions.

Mr. Edward G. Abbot (Executive Secretary, Canadian Railway Labour Association): Mr. Chairman and members of the committee, good morning. I'm just going to make a few general remarks. I won't take 15 minutes to do that. My submission is very short and the members of the committee have had the submission, so I think it's much more valuable to respond to your questions if you have any.

First I would like to say, Mr. Chairman, that as far as we are concerned, Bill C-101 really does very little from the railway's point of view. All it does as far as the railways are concerned is simply facilitate the easier abandonment of lines and the establishment of short lines. That's about the only positive thing in the bill as far as giving some relief to the cost side of the railways goes.

Our position before Mr. Mazankowski on the Freedom to Move paper and subsequently on the 1987 National Transportation Act before this committee and other places was that we didn't completely oppose deregulation. We knew that was the way the world was going, and obviously we have to ship up or ship out, if you will.

Our position was that in our view, if you were going to get into a deregulated environment and have competition be the governing factor, unfortunately you can't be half pregnant, because competition, being the guiding factor, by definition means it's the survival of the fittest. If you're in that kind of game, then the chips must fall where they may.

But unfortunately in our view we did not believe that the structure of Canada historically could enter that game, particularly with the overwhelming economics of the United States across the border and the Staggers Act of 1980, which really deregulated the railways in that country. We were now a country of 29 million people and getting involved in a North American transportation market with trucking and the class 1 railways who were at least seven years ahead of us. They'd had since 1980 to get on with their act, and our act in 1987 was a shippers act and was acknowledged as such.

The minister said this time it was the railways' turn. As far as we were concerned, the railways' turn is a very short turn at the game.

If anyone thinks that branch line abandonment and the establishment of short-line railways is the answer to the railway's economic problems, then I think they're dreaming in technicolour. We have twelve short-line railways at this point in time, and because of the land mass and the population we have, unlike the United States, there is probably only room for another five or six short-line railways in any case, with the areas we have that are amenable to short-line railways.

Of course in the long term you may well find that these short-line railways will become counter-productive. With the capital intensity of a railway operation, once you have reduced staff and reduced the cost side to maintain your profits, you may well find that safety will be up for grabs because the bottom line will drive the reinvestment in rail and all the rest of it. So in the years to come we may have a few small counter-productive railways that will not serve the purpose that we are dreaming they will. But so be it. That's it on short-line railways.

I must point out to you that short-line railways really are not a progressive, expansive marketing innovation. I don't criticize the railways or the government on this behalf. We don't like it, but the fact of the matter is, short-line railways are simply a method to cut labour costs, because the only advantage an operator of a short-line railway has over a major railway is that they don't have the collective agreements; they have the flexibility to use staff where they want them; and they have the opportunity to get in and out of the game, depending on whether or not they're successful. They have no common carrier obligation; they have no obligation whatsoever. They can come in, make a buck and leave, which in many cases may be the case. So it is a cost-driven innovation.

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The only other thing I would like to say is that the 1987 act and the revision are reliant on the railways cutting costs. A major way to cut costs, and the railways have been doing that, is simply the reduction of employees. Again, that may be the way one has to go. But after reducing some 20,800 employees since 1984, it's a finite way to go. There is a bottom line here to operate a railway. You can't cut employees any more. And we're getting close to that.

Our submission is this: once that is done, what about the revenue side? That's the action that is lacking. The revenue side of the railways since 1984 to 1987 has gone down completely. They are moving more traffic, more tonne miles, and making less money. That doesn't make sense in any business.

Any improvements they have made have been solely on the cost side. Now, the cost side is not infinite. There comes a bottom line there. Capital has to be invested to operate a railway. It's a highly capital-intensive business. You have to upgrade the track.... You're all aware of that aspect of it. CN is in deep debt because of this, and CP is not any healthier. CP obviously will be looking to go other ways. If Canadian Pacific, a true public entity, unlike what CN will be - CN is being privatized, really, with a lot of strings attached, I suppose - decides to go north-south, they'll make a deal with one of the larger railways in the United States.

By the way, they are forming conglomerates. Very soon there will be about three or four major railways down there. We will end up being branch lines of large United States railways in a North American transportation market. If that's the destiny we can't avoid, so be it, but I think we should keep that in mind.

In essence, short-line railways are not the answer to the railways' economic and competitive problems. The revenue side, because of things perhaps out of the control of the federal government.... I'm talking about gasoline taxes and all of the things you've heard from the railways and ourselves over the year; I don't have to repeat them. You have competitive line rates...the United States, they can have competitive line rates in Canada. We can't get the same thing on their railways.

A multitude of regulatory factors make the railways uncompetitive. If they are not removed, the railways will not go out of business but will follow the same format as CNCP Telecommunications. In the 1970s we had a similar situation, with two companies chasing a diminishing commodity, and we know where they are right now. I say that is the destiny of the railways.

That's my remarks, Mr. Chairman.

The Chairman: Thanks very much, Mr. Abbot, for your presentation.

We'll go in the usual order. Jim Gouk, please, for ten minutes.

Mr. Gouk: Good morning, Mr. Abbot. I can buy your concept where you say that short-line railways are not the answer. They're not meant to be the answer, they're meant to be an answer, amongst many other things. In looking at that, I take a little different point of view from your assertion that last time it was the shippers' bill and this is the railways' bill. From my perspective, at least, I'm not here for the good of the railways or the good of the shippers, specifically, but rather the good of the transportation system.

When we talk in terms of short lines, the alternative we have right now is total abandonment of the track. I think where we have total abandonment versus the creation of a short line as an alternative to loss of that line entirely, I would think we're better off. Would you not agree?

Mr. Abbot: Yes.

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Mr. Gouk: Okay.

One of the things you pointed out in your presentation here and that you didn't particularly talk that much about was the taxation concept - property taxes, commodity taxes, as you refer to them, fuel taxes and so on. I agree with that, although I'm not sure there's a place specifically in the bill. I think we need to take that more as an indication from you in support of the concept that this is further work Transport itself has to do after the bill is passed.

Mr. Abbot: I accept that.

Mr. Gouk: I just want to find out the things that you think specifically should be changed directly in this bill, the clauses of this bill that you would like to see a specific change in, and what that change is.

Mr. Abbot: I don't see any specific changes in the bill. As I said before, for example, the Railway Act has been disbanded and incorporated in the bill. But again, talking on the basis of the environment we live in right now, which is competition, etc., which we oppose.... Of course, pragmatically, we have to live with that now. Fine, once you've sold me, you've got me, but be consistent.

Why did we transfer something that goes back to the common law, for Pete's sake, the common carrier concept? That is retained under the Railway Act. Why is that? Why not get rid of that? What's the need for this common carrier position in a free-market, competitive-driven transportation system? If we're going to be honest, well, let's be honest. Why do we have an agency that says in a competitive market with trucking and with the Americans...and we have something on the statute that you can go to an agency and the agency says, ``Thou shalt build this bridge regardless of capital expenditure''?

To have that kept in here when it goes back 100 years, when we weren't in a competitive environment, and now we put it in here.... What are we saying? Are we sucking and blowing at the same time or are we trying to be half pregnant, an impossibility that seems to be a Canadian occupation? You are either going to regulate and have the transport system we had historically, or, as it is now, we're getting into the bottom-line-driven thing; let the chips fall wherever they may. Well, let's not stack the deck against one of the players. It's as simple as that.

Mr. Gouk: Fair enough.

That's it.

The Chairman: Good points.

Mr. Fontana.

Mr. Fontana (London East): Thank you, Mr. Abbot, I appreciate the observations. It's nice to have labour and the railroads on the same side, on this particular issue anyway.

I applaud you for some of the observations, but I want to perhaps ask you about those observations. You've indicated that the competition is very important, how we relate to the American railroad model in terms of regulation and deregulation. I think Mr. Gouk covered off the short line as being an attempt to achieve a balance between outright abandonment and...which I think you have agreed is a positive.

In terms of infrastructure, though - and I know you touched on the observation that as the number of employees in railroads comes down, obviously the question of safety and other things have to be taken into consideration - you do recognize that unfortunately in this country we've overbuilt our infrastructure to the point where most of the traffic we're carrying on those railroads is on about 30% of the infrastructure; therefore, for the railroads to become competitive and more efficient, it's what we deal with that infrastructure....

So I know you're a little nervous about short lines, and I can understand why, but what's the alternative? If you don't agree totally with short lines and abandonment, you understand that we need to find a solution. Do you have one that we might be able to consider?

Mr. Abbot: No, Mr. Fontana, I don't have a solution to that. The Brotherhood of Maintenance of Way Employees, your next witnesses, may well have views on that. My general views are this. There is no question that the infrastructure problem is one that has to be dealt with. We cannot have track with no traffic going over the track and the high cost of maintenance. That luxury we cannot afford. We recognize that fact. If we're going to be competitive, we have to cut costs.

On the other side of the coin.... Again, this is history, and I don't want to go into that, because that's counter-productive today. But these are the situations that led because of how the country evolved, etc., and now we have to correct it in a very short time. It has to be corrected, without question. To be competitive we have to do now all of the things we did not do before. It's a new ball game. We accept that.

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Again, if you take the present situation, even today, if the railways make a contract with a plant.... Obviously, I would assume the railways in that contract will say that they are going to build a siding into my plant, say, to link me to their railway and that they want me to give them a contract for five years, or whatever it may be.

That's fine. The railways build the infrastructure, put it in there, and then after the five years some trucking company opens up a depot very close to it and says, ``Hey, we can undercut you; why don't you move that by truck?''. The shipper now is free, as he should be, to say, ``My contract is ended, I'll go someplace else.''

What happens to the line the railway put in? Will some government come along one day and say maybe the province or someone else will need that, and we'll put a freeze on that line? That kind of situation created the branch-line networks and all the rest of it.

For example - and this has always amazed me over the years - branch lines have been unbelievably regulated in Canada, but nobody has ever regulated the elevators. The elevator is the key to the branch line, because if you don't have an elevator.... The elevator comes first. The railways put in the branch line. They're regulated, historically. The elevator company can shift any time it wants. If the elevator moves, there's no grain. The branch line is put in, yet the government says you can't move that branch line. Why? Because there's one customer way down the God-damned way. But the elevator companies have never been regulated whatsoever. In my view, that was counter-productive. That was the past, but we're in this situation.

One has to look at the grain-handling network. The Canadian railway association made the suggestion some years ago to the CTC.... I mean, I appeared before the Hall inquiry commission, and we found this very clear, this back-hauling, because of the way it grew up. We made the suggestion that they sit down and rationalize between the two railways and get a network. Then we'd have a system to look after the employees affected. It would have rationalized it. It was never done.

Mr. Fontana: Two points, if I could. One, I know you indicated about the Staggers Act and the deregulation environment in the United States, that in 1987 it was the shippers' act. You indicated perhaps at this time it should be the railroads' act. You commented on competitive line rates and all those shippers' rights.

Are you of the opinion, then, that this is unnecessary? Are your workers prepared to work with the railroads to ensure that you can be as competitive as possible if in fact there won't be shippers' rights, so to speak, that in fact it would mean that the labour component in the railroads would have to work a little more closely to ensure that you were competitive with other modes that don't have any regulation whatsoever, namely trucking?

Mr. Abbot: I think the labour movement may be like a tanker trying to turn on a dime; once it turns it's hard to reverse it. We have to face the reality of the situation as it is today. It's of no value to quote all the shibboleths of the past, because they take you nowhere. They may have been right or they may have been wrong, the Government of Canada; the world has accepted a different environment. We'd better adjust to that environment or we'll be out of the game. That's the reality.

So there are steps being taken now within the railways to be far more cooperative. Next week, I think, a few union officers.... Mr. Tellier has set up his equivalent of the Emmy Awards, or whatever you might call it. Next week he's giving a few union officers awards for doing great things in setting up internal railways. So if that's not cooperation.... Anyone who gets a good word from Mr. Tellier is lucky, but an award is magnificent.

Some hon. members: Oh, oh!

Mr. Abbot: So these things are happening, but I'm saying that we're in this game of competition; let's get into the game of competition. I have no problem.

Without looking, I can say right now get rid of all of the thing and let us compete equally - providing you can equalize gasoline taxes and all of these things, which I understand...of provincial. But if we don't get together with the provinces and establish this level playing field - a term I hate to use - then the railways will be in trouble far more they are now.

Obviously they have to rationalize branch lines. Obviously they'll set up short lines where they're available. So be it. If that has to be done, it has to be done.

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My problem is that there are far more things that the railways' future is hinging on than these things. Other things have to be done. I understand these other things are beyond the parameters of this bill, but if they're not done, the railways will go out of business as we know them and we will become branch lines of the United States. In the new world we're looking at, maybe that's not such a bad thing. I don't like it, but if you're going to be bottom-line driven, you have to go where the bottom line drives you, and there are costs, social and otherwise.

The Chairman: Mr. Hubbard, please.

Mr. Hubbard (Miramichi): Thank you, Mr. Chairman.

Mr. Abbot, I'm listening to your arguments, yet on page 2, paragraph 3, it seems like you're saying that it's best for us to delete subclause 27(2).

Mr. Abbot: No, I'm being very cynical and cute there.

In the first paragraph, I'm saying we oppose branch lines in theory, but we've lost the argument. So be it; there's no use fighting that battle. Then I'm saying that logically, since we oppose branch lines, we had better support the getting rid of subclause 27(2), because if you do that there will be no god-damned branch lines. Therefore, we win. It's a very circular argument, but I love to be consistent.

Mr. Hubbard: Your inconsistency is consistent.

Mr. Abbot: No, I'm not. I'm being consistent. I can't say I'm opposed to branch lines and then be against something that will completely destroy them.

So I'm saying you have a choice. If you leave subclause 27(2) in, you can forget about branch lines. So what is your priority, the shipper or the railway? I'm easy. It's your choice.

The Chairman: Okay, Charles. Anyone else? Elsie.

Mrs. Wayne (Saint John): Mr. Abbot, has your association looked at the weight restrictions on the highways for trucking?

I noted when I was in Germany a couple of years ago - and I went specially to look at transportation and some other things - that there they have very strict weight restrictions for truckers. They don't have to rebuild their roads every 7 to 10 years. Everything is put on the rails.

I wonder if your association has ever taken a look at that, and have they any information or research that was done on it that we could use?

Mr. Abbot: Back over time, I've seen lots of documents arguing vis-à-vis the advantages of rail, because you keep the roads clear and the roads are a provincial responsibility. We went through all these arguments so many times, the advantages and the environment and all the rest of it. But we're in a position right now that, after having made all these arguments over the years, that seems to all be gone. We are now in a deregulated competitive environment. So as far as I'm concerned, we have laws protecting public safety, and they're being weakened. Well, fine, so be it.

If that's the name of the game, let the trucks do what they do, let the railways do what they do, let the airports do what they do, and that's called competition. The theory is that out of all this competition, society will be better. I say, let's be gung-ho and god-damned do it. So I'm not interested any more in truck weights, or anything. Let's get into the game.

Mrs. Wayne: Okay.

The Chairman: Joe.

Mr. Fontana: I need to verify one thing, because you have me confused.

When Mr. Hubbard was asking you about subclause 27(2), were you really talking about subclause 27(2), or about running rights as they relate to branch line abandonment?

Subclause 27(2) is the significant prejudice test with regard to -

Mr. Abbot: That's what I understood he was talking about.

Mr. Fontana: Okay, maybe you could explain it to me so that I can understand exactly what you were saying.

Mr. Abbot: In other words, if that is deleted and these running rights are given.... By the way, the 12 short-line railways don't want the running rights; it's the shipper who wants them.

What happens when you do that is you're short-lined then. Instead of being a partner and a feeder to the main line, it becomes a competitor. So now you have the railways competing with someone they've handed a short line over to, and that short-line railway can cut costs and undercut them. So why would they do that?

Mr. Fontana: So the bottom line of your argument is that you believe subclause 27(2) should exist.

Mr. Abbot: Obviously, but I have to be logical if I'm arguing to keep, to get.... Historically, I'm against short-line railways. So to be consistent with that - even though I lost that argument years ago and live with it now, so we're all gung-ho on the same side - if I wanted to destroy short lines and win my original position of years ago, Christ, I'd be arguing for you to take out subclause 27(2).

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The Chairman: Thanks, Mr. Abbot, for your submission to this committee. We appreciate the time you've taken to be here today.

Colleagues, we invite to the table a representative from the Brotherhood of Maintenance of Way Employees, Gary Housch.

We welcome you, sir, to our committee. We look forward to your submission. We hope you will provide us with an executive summary of not more than 15 minutes so that we can have some questions.

Mr. Gary Housch (Vice-President, Brotherhood of Maintenance of Way Employees): Absolutely.

The Chairman: Thank you, sir.

Mr. Housch: Good morning. It's certainly a pleasure to be here. I think your work here is very important. I know you all have some great concerns about the transportation industry.

Historically in Canada we keep looking south of the border for answers in regard to transportation. With the development of the short-line industry in Canada we got very concerned, in 1991 and 1992, when CN sold its Truro to Sydney operation to RailTex. The Senate had an inquiry into that sale. I think its decision was political rather than moral, but be that as it may, its decision was to agree to the sale.

During that time a transportation expert from the United States, a gentleman by the name of Dr. Dempsey, who had quite a bit of experience in the transportation industry in the United States, came up to testify. Although it happened in 1992, I'd just like to read what he said to the Senate inquiry. I think it's very apropos today.

He said:

So I think his feeling is quite clear as to where the United States was heading with deregulation and the success of that.

With regard to the railway industry, he noted that in 1980 the major class 1 railroads employed about 460,000 workers; in 1988 they employed 236,000, for a loss of 222,000 jobs, or 28,000 jobs a year.

Since 1985, in our membership alone, we've lost the equivalent of 50% of our membership on CN and 40% on CP. Yet I continually hear that labour is the problem for which the railways need solutions.

Frankly, I find that somewhat objectionable. We all have employment. We have the dignity of earning a living, of having a mortgage, buying a car, and contributing to society. I think the idea of throwing labour out the window and disregarding their concerns is wrong. I don't think labour is the problem. In fact, I think labour is part of the solution. We've clearly shown that by the numbers of people that.... Obviously, to gain a 100% increase in productivity in our unit in 10 years is nothing to be sneezed at. Yet I continue to hear today that labour is the problem.

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With regard to Bill C-101, the federal government wiped out 95% of its subsidies to the railway industry in the February budget. This bill will in effect wipe out what remains. The WGTA has disappeared as of August 1. We're beginning to see the ramifications of that. There are some very great concerns that we have to look at in this country if we want to have any type of railway system that's viable.

The NTA review commission found that in 1990-91 the subsidy to roads in Canada was $4.6 billion, and that was after deducting fuel taxes and licence fees. Road users paid only 65% of the road system costs.

The Government of Ontario estimates accident costs to be in the range of $9 billion a year. Across Canada, if we were to use those statistics, it would come to $29 billion a year in accident costs.

To put this into perspective, the purpose of Bill C-101 is to save about $0.1 billion in railway costs by deregulating abandonments. It's ironic, because eliminating this will only increase the road costs. There will be a modal shift from rail to truck. Experts have testified that generally speaking, if a shipment starts on rubber it will usually end on rubber and stay on rubber in between, although there have been some improvements in intermodal efficiencies.

According to the Royal Commission on Transportation in Canada, the average tractor trailer in Canada receives a subsidy of $10,000 annually, even after considering user fees of fuel taxes and licence fees.

The government has chosen to embrace cost recovery for the railways but not for trucks, which is the railways' major competition. The competition the railways have today is not among each other but with trucking. They've gone down to 30% market share from 70%. The residual of that has not gone from one railway to the other; it has gone to trucking.

The budget of February 27 did eliminate the maritime freight rate subsidy to trucking, which was about $75 million a year, but that represents less than 2% of the total annual highway subsidy.

With regard to marine transportation - and certainly we're not experts on it, and we'll just make a comment here - the annual subsidies amount to about $1.1 billion. The recovery to government is about 5% of that. Steps are being taken to increase that recovery in the seaway, but there's a lot of pressure now on the seaway - and I'm sure you're aware of it - to eliminate the tolls on that routing.

Competitive access provisions such as final-offer arbitration and competitive line rates have harmed both CN and CP financially. They've made them compete with the U.S. railways, and U.S. railways do not have the same provisions to allow CN and CP to get access to their freight. U.S. railways can charge higher freight rates for their captive shippers and encourage competitive line-rate shippers to use their low rates, using their higher captive shippers to offset those costs.

Under IST, the Intermodal Surface Transportation Efficiencies Act in the United States, the federal government is investing in intermodal projects that benefit freight railroads. Right now they're constructing new rail access to the port of Houston and in truck-rail transfer terminals in Ohio and Maine. The national highway system will designate, in the national interest, roads that lead to intermodal terminals.

Commercial trucking in the United States is also heavily subsidized on the interstate highway systems. They pay only 50% of their costs.

We compared the existing Canadian and U.S. legislation because I continually hear how the U.S. is the answer to our problems and how its solutions are really the way we should go. Indeed, I think that's what the thrust has been in deregulating the transportation industry following the 1980 Staggers Act.

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The Staggers Act has a maximum rate provision for freight railroads, but that maximum rate provision only kicks in if the railway is revenue-adequate. In the United States today, there's only one railway earning return on investment, yet we sit down and say that this is the example we have to follow.

The U.S. had certain goals when in 1980 they deregulated with the Staggers Act. Their railway transportation industry was probably in the same or even worse shape than what ours is in today. It was designed to assist the railways in rehabilitating their system. It did that by ensuring in the legislation that the railways could earn adequate revenues - adequate revenues to continue operations and encourage investment.

I'll just read the goals of the act, because I think it's fairly important. Section 3 of the act says:

The Staggers Act also describes policy objectives ``to encourage fair wages and safe and suitable working conditions of the railroad industry'' and ``to encourage and promote energy conservation'', among others.

The abandonment provisions also in the United States are substantially different from what is proposed in Bill C-101. I am not going to go through them, because they are clearly outlined in our submission, but they are substantially different. I think the public interest test, though, remains in the United States.

That is the same for short-line railways. The public interest test is still there. The fundamental difference between what we're doing in Canada and what was done in the United States is that every railway that has goods that originate or terminate on that line that goes interstate is a federal regulatory concern. It's a part of interstate commerce.

The problem is that in Canada, to break the unions, you have to go to provincial jurisdiction. Believe me, that's the only reason the short-line phenomenon is so espoused; you get to break the unions by doing it. That's the plain and simple fact.

The other thing that's important under U.S. legislation is that they have imposed labour protections under the Railway Labor Act for employees who are adversely affected by a line sale or an abandonment - especially line sales, not necessarily abandonments.

In conclusion, I think we need to look at a sustainable railway system and sustainable development issues. I think we need to tie very carefully into this bill the environmental assessment of an abandonment, what abandoning that piece of track will do. Because it will lead to increased trucking generally.

I think we also need to make better use of the rail structure we have. I recall that when CP had to abandon its Canadian Atlantic Railways operation, for a loss of $18 million, about the same time the Province of New Brunswick was saying they needed to invest $200 million in roads, because the roads were over their capacity. It seemed to me there was a solution there somewhere.

I think one of the mistakes we make in this country is that we tend to think modally rather than as a complete transportation system.

I'll tie up my comments at that point.

The Chairman: Thanks, Mr. Housch. We appreciate your submission.

Mr. Gouk.

Mr. Gouk: I'm just going to pass for now, Mr. Chairman. I might have something later.

Mrs. Sheridan (Saskatoon - Humboldt): I was counting on Mr. Gouk's questions; I'm still making my notes.

The Chairman: I can let Mr. Fontana go first, if you want.

Mrs. Sheridan: Okay.

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Mr. Fontana: Thank you, Mr. Housch. You were making an awful lot of sense to me until you mentioned that the intent behind the creation of short lines was to get rid of unions. That's absolutely ridiculous. Let me tell you - and perhaps these people are some of your unions, too - in northern Quebec, where an internal short line was created by CN -

Mr. Housch: It was created by the union.

Mr. Fontana: Okay, in cooperation, obviously, with CN. That particular model is working really well. So how you can say that the short line is a way to bust unions.... It's absolutely irresponsible.

Secondly, Gary, it's not to understand the constitutional nature of this federation. You know, there are certain transportation issues, such as trucking and internal railroads, that are in fact under provincial jurisdiction; therefore, while it might be nice for the federal government to be able to impose its national will on provincial governments, that's not the nature of our federation.

Most of the observations you made with regard to what we need to do for the railroads, and hence railroad workers, and how we become competitive on a level playing field I agree with totally, that it's a lot more than just Bill C-101. Obviously, and hopefully, this committee's trying to look at transportation in its totality to ensure that we remain very competitive as an exporting country.

You mentioned something, though, that the total impact of Bill C-101 to the railroads is about $.1 billion.

Mr. Housch: In federal subsidies, yes.

Mr. Fontana: I wonder if you could explain to us how you came up with that number.

Mr. Housch: In effect, Bill C-101 is wiping out the subsidies to the passenger transportation on Algoma Central Railway -

Mr. Fontana: No.

Mr. Housch: The Ontario Northland Railway -

Mr. Fontana: No.

Mr. Housch: It's not?

Mr. Fontana: No, you're wrong. Obviously you didn't get the news -

Mr. Housch: Well, it is not wiping it out. The minister may use discretionary funding, but the old act ensured that those railways received funding from the federal government. That is no longer there. The minister has discretionary powers, I agree.

Mr. Fontana: And they will continue, so it's unfair.

Now, do you mean to tell me that the whole value of this Bill C-101 in terms of further deregulation so that railroads become competitive is $100 million? Then why are we doing all this exercise?

Mr. Housch: That's my question too. Frankly, I think Bill C-101 is a reaction in part to look at encouraging, and maybe doing some things for, the railways. I don't think it goes far enough, but I think it's a step.... I think the idea of deregulation is fundamentally wrong. That's my position. But that's -

Mr. Fontana: Excuse me, but you quoted verse and phrase from the Staggers Act, which is probably the act of most deregulation in the history of North America as it relates to railroads. So you argue deregulation is wrong, yet you like to quote verses from the Staggers Act as to why it works and ours doesn't.

Mr. Housch: I would argue that the Staggers Act is deregulation. What we have done, as Mr. Abbot said, is something that's half pregnant. We didn't deregulate. We're still trying to regulate. We still have competitive line-rate provisions, we have binding arbitration -

Mr. Fontana: Okay, that's my point.

Mr. Housch: - all of those things.

Mr. Fontana: Are you arguing that we get rid of all those regulatory rights in Bill C-101?

Mr. Housch: I think it's best put this way: I think there needs to be -

Mr. Fontana: No, no - yes or no. You can't be half pregnant. Tell me yes or no.

Mr. Housch: I don't think that's a yes-or-no question. I think it's very unfair of you to tie me to that.

I think you've asked me about four questions. I'll answer each one of them as best I can.

I think deregulation fundamentally is wrong. There needs to be some fundamental government oversight. Because it may very well be more cost-efficient to abandon a piece of track, but it may in the end cost Canada more to do that.

For example, I'll go to Saskatchewan, where Saskatchewan's facing a supreme challenge with WGTA disappearing, and the consolidation of elevators, where they could be looking at up to $96 million a year in increased road maintenance. So what have we saved, in effect? Perhaps we saved overall, but somebody somewhere may also have to pay. I think we need to look at those things when we make those decisions.

As far as your comment that I was getting irresponsible when I said short lines were to break unions, there are two points. First, you said that constitutionally we have certain parameters. I agree. But I would also point out that prior to 1987 - and indeed it might have even been in the 1987 act, because retroactive legislation was passed after Central Western Railway started operation - railways were for the general advantage of Canada. That was there in the old Railway Act. So constitutionally, railways were a federal government concern. Algoma Central Railway, which is wholly within the province of Ontario, was federally regulated because of that old Railway Act.

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So in order to stop successor rights - and you read it every day in the paper - you have to be able to sell a piece of track that is wholly within a province to another company, thereby bypassing the Canada Labour Code provision of successor rights for the unions on that line. That's what's happened. That's what happened with the Goderich-Exeter Railway Company Ltd., and that's what happened with RailTex. I think it's a safe statement to say this is a way of breaking the union.

I agree with you. I'm very proud of what happened in northern Quebec. We came up with a solution there. I think there are a lot more of those solutions there. But the industry has to have a commitment to that, and it seems to me that they're only coming to it now.

I would also point out that line was up for sale. CN was going to sell it. It was the unions that approached CN and said, let's do something rather than sell this line. Let's wake up and smell the coffee. I think we're all quite proud of that. It was a very difficult, tough process, but we did it. I think there's room for more of that, but we need to look at things a lot more carefully.

I'm a great believer in tripartitism, in seeing interested parties coming together to see what can be done. I think that's something that perhaps needs to be looked at amongst the group. I look at organizations that are like that, with three or four parties involved - maybe the railways, labour, shippers, and government. Maybe there needs to be something done in that regard, even on an ad hoc basis. I think it would benefit all the stakeholders.

The Chairman: Thank you, Mr. Fontana.

Mrs. Sheridan.

Mrs. Sheridan: Thank you. Welcome.

I have to respond to some of the things you've said, because I participated in the task force that looked into the commercialization of CN and I've heard these arguments before. It's clear to me that you are here in a particular role, and you have a certain style of presenting your arguments that suits what you're doing. But I'm not sure it assists the achieving of what I heard you say is one of your goals: making unions part of the solution in what you just finished saying about having the interested parties come together.

I'm from Saskatchewan. I have to challenge you, the same as Mr. Fontana did, in terms of the short-line railways being under provincial jurisdiction, and that this is just a way to break the unions. If you look at Saskatchewan, for instance, the argument that it's under provincial jurisdiction makes no sense because the NDP government there has legislation that in fact prevents that sort of thing from happening. We have heard arguments on the other side that say the provincial legislation is an impediment to further development of short-line railways. I guess the flip side of that is you argue that you can't break the union -

Mr. Housch: Exactly.

Mrs. Sheridan: But that's the difficulty here. When I listen to your presentation, it's so self-centred on the union and on protecting the union members that I think it denies - you know, actions speak louder than words - your spoken goal of bringing interested parties together to come up with a solution that's going to provide for decent transportation throughout this country.

I would put to you that this particular legislation takes us somewhere down the road to getting a national transportation policy that recognizes the fiscal realities, but also recognizes, as you kept saying, that Canada is not the same as the United States. We are not simply fiscally driven. And if you read the declaration in clause 5, I think it's markedly different from the one you quoted to me from the American legislation. It does recognize the importance of regional economic development and of respecting provincial-federal jurisdictions, and those kinds of things.

So what I would like to hear from you is not the self-centred argument from the union, but how the union is going to be part of this solution. What would you do to see that interested parties are coming together, not just to push their own specific agenda but with some down-to-earth, common-sense suggestions that are going to be palatable to as many people as possible in a consensus kind of way?

You have five minutes.

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Mr. Housch: That's a difficult question. I don't know that I could answer it even if you gave me an hour. I think there has to be a will, there has to be a recognition, and I think parties are starting to recognize that perhaps we are in a crisis and something needs to be done. I don't think it's just the railway industry. I think it's transportation in general in Canada. From what I'm hearing about the trucking industry certainly, and based on my little experience with air, I would say there are probably a lot of people who would be very interested in seeing something happen.

How you do it is a very difficult process. Unless government encourages some type of informal or formal arrangement, I don't know that it would ever happen. I think, though, that there are a lot of things most parties would generally agree with. Indeed, probably one of them would be branch line abandonments. Short-sighted abandonments for short-term economics would be an issue that probably could be dealt with quite expeditiously. I believe shippers certainly have a concern in that regard; labour has a concern in that regard; and railways probably have a concern the other way. But perhaps there are solutions that can be found if everybody puts their minds to it.

I think I may have come across a little bit strongly because of where I'm coming from in my roots. But to be honest, I think labour has been very marginalized in the debates today, and perhaps that's why we come out a little more strongly than perhaps we should. We have, however, seen a lot of railway workers - indeed, most of the transportation people have seen this happen to a lot of their people - lose jobs. These are people who want a living, who want the dignity of a job. So my frustration is perhaps coming through here and I apologize sincerely for that.

The Chairman: I think the message is certainly understood, but there was a sort of harshness to your message when you began. Would you not agree, however, that short-lining isn't union-busting, but rather a way of preserving some jobs where there might be none eventually; and that it's not the intention of short-lining to bust the union, but rather that is a result when short-lining occurs. Your message is still delivered. It's just that it's not the intention to union-bust, but rather it's to preserve jobs, although one result can be a dissolved union.

Mr. Housch: I would agree with that statement to a point. It's as Mrs. Sheridan said. In provinces where they have an NDP government - and Ontario is an example -

The Chairman: Was.

Mr. Housch: Exactly - was an example. We heard complete and constant railing about Bill 40 being an impediment to the creation of short lines. If in fact the successor right provision isn't a problem, this is telling me clearly that if corporations are potential buyers of short-lines, it's an issue if there's going to be a union there. They don't want the union there.

The Chairman: I don't want to stretch it out and debate on Bill 40 here, that's for sure.

Mr. Gouk, are you ready.

Mr. Gouk: I could probably wade into that as well, but I think the points have been rehashed fairly well.

I have just a couple things. On your page of proposed amendments, you refer in the text of the one to add a subclause (3) to clause 53, but on the first line in your text you have the estimates of costs under paragraph 1(3). Is that supposed to be 1(c)?

Mr. Housch: Yes, it is. I apologize.

Mr. Gouk: Under the next one, dealing basically with the offerings done for sale or abandonment of a rail line, I take it you would be a much greater supporter of an internal short line than you would be of selling off to create a short line that, as you said, either intentionally or otherwise breaks up the union?

Mr. Housch: Well, absolutely. I think there are solutions to be found within the industry. I think we've shown that. I think we have to work harder at it, and I take part of the responsibility for that. But I also think we need to work harder at it in the industry itself. We have a very mature industry that really doesn't have a lot of room to gain its revenues. The only way the industry could perhaps grow or have an idea of growing is by fracturing. There would then be at least a growth in the short line industry even though there wouldn't be an overall growth in the railway industry.

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Mr. Gouk: You see, I feel one of the problems is that the short lines - you say it's union-busting and that the corporations want to get away from the unions - are very, very short. Because they're so short and are such small operations, they don't have the wherewithal to have this tremendous well of employees who can specialize in particular sectors. The job descriptions and the lines of jobs that individual employees cross are therefore much greater than what they are for a national railway that has this greater pool of specialized labour. I think that's where the urgency is. It isn't specifically to bust. It's in the process of accomplishing this that it invariably ends up doing that.

Clause 145, which you have listed as well, lays out the procedure to be followed in order to show you've gone to the public and have considered all the input from them, and that you've then gone, in sequence, to the federal, and possibly provincial and municipal, governments. Have you considered anything in that process for the railway to show it has attempted to do an internal short line development with the unions before going outside of its own company? Or do you see any need to have such a provision considered?

Mr. Housch: To be honest with you, I never considered it. But it would be a very, very smart thing to do in the legislation. I think that's very astute. Indeed, I think the industry should have a requirement - and indeed labour should have a requirement - to try to work out a deal before starting all of this stuff. That makes a lot of sense and I think it's a very good proposal.

Mr. Gouk: Could I put the onus on you, and on other unions that you undoubtedly discuss things with, to draw up some kind of proposal for that and to forward it back as quickly as possible to me?

Mr. Housch: I would be very happy to do that. That's an excellent idea.

Mr. Gouk: Thank you.

That's it, Mr. Chairman.

The Chairman: Thanks, Mr. Gouk.

Mr. Nault.

Mr. Nault (Kenora - Rainy River): Thank you, Mr. Chairman.

Gary, I've read your brief. I'm having a difficult time figuring out if you're for or against Bill C-101. I think it's important to find out.

From my perspective, of course, I know what a union's mandate is, probably more so than anyone in this room, since I worked for one for a number of years myself. First of all, obviously the mandate is to protect the people that you represent.

Part of the obvious problem in the railway industry in the last ten years has been significant job loss for a number of reasons. You could argue that one of the reasons is that the 1987 bill, which was shipper-oriented, created some significant economic problems for the railroads and the railway industry as a whole, and that these problems drove the issue of trying to deal with labour - and it may have been in an unfair manner - in order to try to make up for those costs because government had some impediments in the way of the railway industry.

My understanding is that what we're trying to do with this bill is to balance it to a point where railways can be profitable, which is of course good for the workers who work on the railway.

In your presentation, you focus on a few areas you don't like. For example, you focus on whether there's a short line or whether there's rail abandonment. Quite frankly, from the union's perspective, I would think it's pretty obvious to us all that you have two choices here. Either we accept some other form of railway industry other than what the major railways have now, which is of course some form of short line, or we accept that if we're going to have a profitable railway industry in Canada they're going to have to abandon a whole pile of track because of the competition they're involved in.

Now, as a union, I say to you again - and it may not be that much different from what Mr. Abbot said - you can't have it both ways. Either you're interested in looking after the employees who work on the railway by giving the railways a chance to be competitive, or you're here as a social activist suggesting that you don't like the way the government is going right-wing or left-wing.

We can't really do much about the provinces' lack of interest in successor rights. Those people are democratically elected. They don't want successor rights in their provinces. There's not a hell of a lot I can do about it. That's probably why they're all going provincial: they don't want to deal with successor rights federally. We already have them, as you well know.

So I'd like to know, from your perspective, whether your union is suggesting that this is a good start, not a good start at all, or totally in the wrong direction. Or perhaps you prefer to keep the NTA 1987 the way it is now situated, which of course in my mind has not been very good for unions as a whole.

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I would like to know if you somewhat support it or don't support it at all. Where exactly do you sit? In the brief I read this morning, you really haven't told us anything about it except where you've said there's a whole lot you wish wouldn't happen.

Mr. Housch: I think you're probably right. We somewhat support Bill C-101. We have some concerns regarding the issues of the environmental impacts of abandonments, of impacts on employment in abandonments and of employment issues on short lines.

We have some concerns about the NTA of 1987, but as for your point about successor rights, the change to the Railway Act wiped out successor rights for unions, with the fact that it was no longer a line sold wholly within the province and was no longer a federal undertaking. Prior to that change it was under the legislative mandate of Canada and it was for the general advantage of Canada. That amendment to the Railway Act removed successor rights from short lines.

Mr. Nault: Yes, that was in 1991 or 1992. The Tories did that.

Mr. Housch: With all due respect for the idea of provincial jurisdiction, it was given by the federal government. At the time the government elected to allow these lines to be under provincial jurisdiction rather than to maintain their legislative authority over them. That's what led to the ability of the railway companies to sell to a short-line operator and not have union successor rights.

Mr. Nault: I'll go back to the original question. Would it be correct to assume that your union in general supports the direction this bill takes to try to make the railway industry successful, more competitive and economically more viable? There are two choices here. We can take the very left-wing socialist approach, which is that we'll buy up all the railways, we'll run them and the taxpayer will subsidize them. That's one choice.

Mr. Housch: That's called CN.

Mr. Nault: Yes, that's called CN.

Some hon. members: Oh, oh!

Mr. Nault: We're trying to change that because the government has no money. We can try to tax you more, but your membership will tell you what they've told me. They say not to try that because they're taxed enough as it is.

I'm sitting here knowing on the one hand what your membership thinks about taxation and on the other hand knowing that CN has been subsidized to the hilt for years and we've paid for it as taxpayers in general. We're trying to change the system so they can be competitive and be successful and so you can continue to be employed.

Are we going in the right direction with Bill C-101 as it relates to that? If we're not, then now is the time to say so. If you prefer, as a union, that we would buy up all that track and run it.... We might as well buy CP as well, because under the present regulations CP is in desperate shape as well. They're not making any money and they'll tell you that. If they're not making any, they'll tell the Government of Canada to buy CP. They'll say never mind selling CN, buy CP, because they can't make a profit out of it because we won't give them the opportunity to be a business.

There's this really interesting argument being made by some of the shippers. I haven't had a chance to talk to them all, but so far I'm of the opinion in listening to the shippers that they don't think the railway is a business at all. They think it's a piece of infrastructure that should be maintained by the Government of Canada and therefore it doesn't matter how much money the railways lose. They think politicians should look after railways. That's one argument.

The other argument I'm trying to make to you is that I think the railways are like the trucking companies and the ships. They should make money and have the right to make money.

I need to know from the working men and women of the railways whether we are going in the right direction. Or do you think we're way off base?

Mr. Housch: I think it's a lot better than the NTA of 1987. It's a step in the right direction. If in fact your intention is to improve the viability of railways through this act, let's put it in there. Let's make it part of the act. If your intention is to respect and encourage the safety and rights of workers, let's put that in the act. If it isn't, then leave it out. But if in fact the intent is to increase the viability of the railways, to encourage growth and to encourage them to keep as much infrastructure as they can, let's put it in part of the act.

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Railways - and indeed, transportation in Canada - are the economic lifeblood of this country. If we don't have a viable and efficient transportation system, whether it's road, rail or air, we're going to suffer economically. And the communities that are going to lose the services they have now are going to suffer economically. I think that's what these shippers are trying to tell you. It is very important that we look at this.

Mr. Nault: Yes.

The Chairman: Mr. Althouse, please.

Mr. Althouse (Mackenzie): There have been some questions where it's assumed that because you're a representative of a union you're only interested in presenting policy to create railroads to permit you and your union members to live. Yet because I'm always last I've had time to read the whole presentation.

Mrs. Wayne: No, I'm last.

Mr. Althouse: Oh, are you last today?

Mrs. Wayne: I'm always last here. Only this committee makes me last.

Some hon. members: Oh, oh!

Mr. Althouse: At any rate, the last third of your presentation, which you alluded to only a little, makes some interesting comparisons with this act and the Staggers Act. Since competition and ability to compete across borders seem to have driven this act, what you present here is very interesting. You say that railways will apparently no longer have works for the general good of Canada as their first priority. You say that will go, and yet the Staggers Act guarantees rehabilitation and financing of the rail system and makes certain railways are part of the interstate commerce system and the maintaining of national defence.

You have raised some concerns here. You appear, therefore, to be viewing this act as anti-nation-building to some degree, when nation-building was the main reason for these railways in the first place.

Does this concern your organization at all? Or are you strictly concerned about jobs, and the fact that if you work for a U.S. railroad or Canadian railway doesn't really matter? Did your union members have any long-term concerns about what becomes of Canada when the infrastructure begins to break down and coast-to-coast service and that sort of thing are no longer required?

Mr. Housch: Under this act - and I don't have a crystal ball - you can very well see where we may become dependent on U.S. carriers to deliver freight in the future. I guess that's the decision we have to make. As Canadians, do we want to have a Canadian transportation structure? There is a quote - and I can't remember it, but I'm going to take a guess at it - that about 70% of east-bound container traffic that comes into Canada from the west coast is routed on U.S. railways.

With the WGTA disappearing, there are now a lot of farm groups, especially in Saskatchewan, wanting to ship grain through the States. The Alberta Wheat Pool is now building an inland terminal in Sweet Grass, Montana, on the Burlington Northern Railway. They plan to truck Canadian grain to that terminal to be shipped on Burlington Northern. That's the other thing we have to look at. What are we going to have left in Canada to operate as an infrastructure?

Mr. Althouse: And isn't it true that part of the incentive for doing that is that terminals at the ends of all of the railways, at the ports, are almost all owned by the U.S. government and are leased at very low rates to users?

Mr. Housch: Right now the freight delivery charges in Canada from Saskatchewan to Vancouver are cheaper than those charged by Burlington Northern even in block car rates from Montana to Seattle. And the only way the difference is made up is on the elevating charges. That's because they're publicly owned infrastructure or owned by grain companies and leased at a very small cost to a third party. Grain companies in the U.S. make money marketing grain, not on elevating it, whereas in Canada we make money elevating grain, not on marketing it.

Mr. Althouse: And in the U.S. the government subsidizes and facilitates the loading and unloading by assisting in owning the terminals and so on.

Mr. Housch: Yes.

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Mr. Althouse: And the intermodal traffic on the waterways, too, is all pretty -

Mr. Housch: Well, the Mississippi River is free. Most of the waterway freight in the United States is very heavily subsidized and indeed controlled by U.S. operators. I don't think a foreign operator can even operate on their inland waterways.

The Chairman: Thanks very much.

Last, but by no means least, Elsie Wayne, please.

Mrs. Wayne: Thank you, Mr. Chairman.

Putting aside the fact that you represent unions, on page 10 of your report you talk about road subsidies, and that is something I have great concern about.

My Liberal friend across the way had stated that the shippers expect the rails to be just a part of infrastructure and paid for. Well, the trucking companies see the roads the same way.

Do you feel that if our committee and the Department of Transport in Ottawa had taken a look at the cost of the road system in Canada, the Trans-Canada Highway from coast to coast, of upgrading it and keeping it versus the cost of keeping a rail system in place, they would have found that it costs more to keep that road system up now because of the tractor trailers and so on that are on the road than keeping a rail system in place?

Mr. Housch: That's a very good question.

In 1993, we had a consultant do a study for us on the external costs of truck compared to train. That considered everything that's hidden. It included, wrote back in, licensing fees and fuel taxes, but it also included WGTA for the railways. It found that to move a tonne kilometre of freight by rail, the average was 51¢, external costs. On truck, it was over 2.5¢ per tonne kilometre.

If you'd like a copy of that study, we have them and I can make one available to you.

Mrs. Wayne: Yes, I would, please.

Mr. Housch: I'll send one to the committee.

Mrs. Wayne: Thank you very much.

The Chairman: Thanks, Mr. Housch. We appreciate your submission to our committee today. It will be considered along with all the others.

Mr. Housch: Thank you.

The Chairman: Colleagues, we welcome from the Algoma Central Railway Communities, Mayor Jean-Marie Blier, from Hearst, Ontario.

Welcome, sir. Would you please introduce those whom you have brought with you today.

Mr. Jean-Marie Blier (Mayor, Hearst, Algoma Central Railway Communities): Thank you, Mr. Chairman.

Good morning, bonjour. Mr. Chairman and members of the standing committee, let me start by introducing our delegation.

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With me is Thérèse Proulx, the deputy reeve of Dubreuilville; Sylvie Fontaine, the administrator of Nord-Aski; and Bruce Strapp, the executive director of the Sault Ste. Marie Economic Development Corporation. My name is Jean-Marie Blier and I am the mayor of Hearst.

We, the representatives of the Algoma Central Railway Communities, are here today to press for the need for an ongoing and transparent process to determine if a rail passenger service is in need of legislative protection and financial support.

We want to thank the committee for giving us the opportunity to make our presentation, and at the same time thank the Minister of Transport for making it clear in his media release on September 29 that while the current bill may not provide a direct mechanism for paying Algoma Central Railway Inc. a subsidy to operate its passenger service, it will use the power under clause 49 of the bill to enter into a contract to subsidize the operation of the ACR passenger service.

[Translation]

Even though it's clear in Bill C-101 that:

It's important to know that this is the same clause of the Railway Act that ensured the survival of the passenger-train services offered by Algoma Central Railway and its successor, Algoma Central Railway Inc. since the first decision was rendered by the Canada Transportation Commission in 1961 (Decision no. R-6751).

Subsequent decisions rendered by the Railway Transport committee in 1977, 1982, 1987 and 1992 have determined that

Mrs. Thérèse Proulx (Deputy Reeve, Dubreuilville, Ontario, Algoma Central Railway Communities): Having determined that, the Agency, under the Act, had to examine different aspects: the real loss entailed by the passenger-train service, the other existing transport services, the probable effect on other carriers if the service were authorized to cease and future needs in transportation for the area as well as the public interest.

It's important to note that the minister, through Bill C-101, is not obliged to hold such review. It is appropriate here to quote an excerpt of the most recent decision handed down by the National Transportation Agency which refers to previous decisions imposing the continuance of the service.

[English]

The most recent decision of the National Transportation Agency reads in part:

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Due process combined with the power to order the continuation of rail passenger service has served the ACR Communities well for the past 34 years.

In 1990, Canada Consulting Cresap updated an earlier socio-economic study of the impact of losing the scheduled rail passenger service. The direct tourism expenditure impact was $5.4 million on board the trains, with an additional $17.5 million spent in the ACR Communities, for a total of $23 million a year. That same study pointed to the interrelationship between the freight and passenger services, and concluded that neither could survive on its own.

Mr. Chairman, members of the committee, in our brief we outline the relative impacts and importance of the scheduled service to our communities. We would encourage you to review those sections, or perhaps you may wish to question us on those impacts at the end of this presentation. We believe that our priority is to convince you of the need to restore due process to the legislation.

[Translation]

Mr. Blier: The minister has indicated he would use clause 49 of Bill C-101 to continue subsidizing Algoma Central Railway Inc. passenger-train service. It's important for us all to understand what this clause says.

The key words are ``The minister may... enter into agreements''. It's clear the clause is permissive and it's up to the minister of the day to decide to enter into an agreement committing the Government of Canada to pay a subsidy to a passenger-train service.

There are no rules to determine the basis on which this subsidy will be paid out, nor its length, nor its amount in dollars or percentage wise nor those factors which should be used to justify it. Although the minister may enter into an agreement he still needs an willing partner.

There's nothing in the bill to force a railway company who wants to get rid of its passenger-train service to continue to run it whether the service is making a profit or a loss. There seems to be a lack of assurances on both sides.

You'll remember that the National Transportation Agency has a list of things it wants to take into consideration: the real loss suffered by the passenger-train service, the other existing services, the probable effect on other carriers if the service were authorized to cease, future transportation needs for the region and, of course, the public interest.

According to Bill C-101, the decision is entirely up to the minister.

[English]

Ms Proulx: As one group of politicians to another, would it not make more political sense to have the matter decided by an arm's length agency, such as the new Canadian Transportation Agency, rather than leaving the minister open either to charges of political favouritism or to the charge of not caring about the people of a region? Is it not better to have a defined set of rules that everyone knows, understands and can work with, instead of open-ended consideration? For the ACR Communities, the existing process has worked well since 1961, and we believe strongly that it should continue.

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Mr. Chairman and members of the committee, on pages 14 and 15 of our brief we have proposed a specific amendment that we believe meets our concern.

Mr. Bruce Strapp (Executive Director, Algoma Central Railway Communities): Before we conclude, I want to draw your attention to a statement released on Wednesday by Algoma Central Railway Inc. It makes it quite clear that ACRI will not continue to provide the scheduled passenger service given the current level of subsidy available. This strengthens our desire to have some legislative protection.

It's important to the economic well-being of our communities that you recognize the continued availability of direct rail passenger subsidy will result in significant return on investment for the federal government. Enough jobs and enough spending exist around the line to return the subsidy in the form of people working and paying taxes.

For our communities it is important to know that we have access to a formal and transparent process and that the minister or the government has the legal authority to do what we request. Certainly, one of the things we recognize is that there are two subsidies in this case, and we want to keep all of them until we can find the ways and means in which to make this a profitable venture.

We thank you once again for the opportunity to make this presentation, and we look forward to your questions.

The Chairman: Thank you.

[Translation]

It's a pleasure to see people representing the communities served by Algoma Central Railway as well as the members for Cochrane - Superior and Algoma.

[English]

I've seen it before. If Mr. St. Denis or Mr. Bélair's community representatives are in Ottawa, St. Denis and Bélair aren't too far behind, so it's good to see in their busy schedules that they make time to be here with us at this committee today. I'm going to reverse the order of questioning for a change, and I'll begin with Mr. St. Denis.

Mr. St. Denis (Algoma): Thank you, Mr. Chairman.

For my part, welcome to Ottawa. For the record, the Sault to Hearst line goes right through what is now the western end of my riding and serves a number of very small communities, including the communities at the north end essentially represented here.

I'm quite appreciative of the point of view that you've expressed in your brief. I don't want to use the expression ``the battle lines are drawn'' but I suppose with the announcement yesterday by the company, Algoma Central Railway Inc., at least we have a line in the sand over which we can now debate.

I would like in my few minutes to ask you to describe to me as best you can how you see the negotiations involving all the stakeholders, and how you see these negotiations working out. The company is proposing possibly a rate increase, possibly a cut in services. Maybe there are other measures that can be taken. Considering that the world is changing, maybe governments have to look at things in different ways, but at the same time we're all interested in maintaining a very important rail service to these communities.

Putting aside what may be certain partisan issues, if we can call them that, or parochial issues, how do you see negotiations involving all the stakeholders working out?

Mr. Strapp: We've had the opportunity to have a meeting with Algoma Central Railway, and they've set up a task force. I think everyone around the table recognizes that the federal government wants to get out of the subsidy game. We know this and are sympathetic to all levels of government trying to get out of the game. We run governments on a local basis and are in the same financial crunch.

I think there is a desire to work together to try to find means and ways to make it viable, and we're looking at a whole series of scenarios in which we're negotiating as communities. We are going to look at the fares and the schedules to try to reduce the costs, so that eventually we won't require both the subsidies from the railway and the federal government, and even in the hopes that there'll be a rate of return on investment for the railway company and we'll still be able to maintain a level of service for the people in the communities.

.1110

Certainly, the first meeting was a very position-oriented meeting. Communities are kind of stuck in the middle and the company is saying they are no longer going to provide a 35% or 40% subsidy to the losses; they don't make money on the subsidy. We know the federal government is going to offer a subsidy, but we are hoping they will protect and keep the railways at the table.

Our concern is if that legislation isn't there to look at ways and means to aim for viability for the passenger rail service, it is very easy for them to walk away from the table. As long as they are contributing in the subsidy, their hearts will be in setting a tone in trying to make it a viable operation.

The other concern is that even after they make it a viable operation - and that is our hope as communities - things won't change in the global situation, that we will be back in the same situation where they can abandon the line quite easily.

So I think that is why we as communities are looking at the importance of keeping legislation in place, keeping at least a timeframe in which communities can react, and being a catalyst in trying to do that.

They are now putting the onus on us communities to, if you notice the last line, look at ``considering financial subsidies from communities''. Well, communities can't do that. The Municipal Act will not allow us to do that in the province. You will know that in the Algoma Central Railway area we are doing quite a bit to create an environment for doing business. The promotion and marketing is something we as communities are doing. We are dedicated, as communities, to work to make this a viable operation.

Mr. St. Denis: Obviously I think one of the main points you have made there is that you feel there needs to be a mechanism to keep the railway at the table, and right now the current legislation provides for that.

I agree with you that we have to look at this in the long term. Hopefully the long-term scenario isn't that it gets worse and worse in terms of cost to the loss but that in fact it gets better. So we have to possibly find a way to keep all the players there, particularly the company, for the short and medium term anyway.

Without being disparaging of the company, is there agreement that the losses they show are in fact the real losses? I have heard different opinions: that the losses are real and that you can play with numbers without being dishonest. There are many honest ways of representing the facts, and I am just wondering if you feel that you can comment on that.

Mr. Blier: It's very difficult to answer that. I think you'd have to put the question directly to Algoma Central Railway Inc. We, the municipalities, haven't asked the company for any financial statement. That's certainly a point we will discuss in the coming months. We understand this is a long-term project, but were not ready to provide 100% service. We want Algoma Central Railway Inc., the municipalities, the stakeholders and the governor general to give us the time we need to prepare for it.

[English]

Mr. St. Denis: I don't want to take all the time, Mr. Chairman. Thank you very much.

The Chairman: Thanks Mr. St. Denis.

Mr. Gouk.

Mr. Gouk: Ladies and gentlemen, good morning.

Right across this country, from British Columbia right in my home town of Castlegar to St. John's on the other side, there are many unused railway passenger stations, because those areas had passenger service and then lost it.

I guess my first question to you, notwithstanding all the good material that you have brought us is, why should taxpayers, through the federal government, subsidize your region, as opposed to all the others that the rail service has gone from?

.1115

[Translation]

Mr. Blier: There are many reasons to support our request. In Northern Ontario, from Hearst to Sault-Sainte-Marie, we already have a passenger-train as well as a freight-train. It's very important for our local economy and for tourism and for people who want to visit and develop their industries.

We think the government should subsidize our rail service because we also pay income tax to the federal government, we live in an area that's very remote from the big urban centres and our mining and forest industries are going through difficult times.

As we don't have access to any other means of transport, the train is very important for us.

[English]

Mr. Gouk: I hear what you're saying, but in terms of the fact that you pay taxes, so do all these other communities - including mine - which I've mentioned have lost service. We also have mining and forestry in our area, and it was a big loss to lose those rail lines out of there.

I'm not trying to knock the fact that you're here doing what you should be doing, which is representing your area. But we have a greater perspective to look at: the tax purse of the Canadian citizen. And if I were to say, yes, we should subsidize you, then I want to know what I say to the taxpayers in all the other areas, such as my own area, that don't have this. I live in a mountainous area. Travel in the wintertime is over pretty serious terrain. It's subject to road closures. But we don't have that rail service any more. We lost that. It wasn't an option.

Now, one of the things you brought up in your brief was the fact that there are offsetting economic factors to the south such as highway costs and all these sorts of things. I would think that's a very realistic approach, but the onus has to be on the region that wants to utilize that to prepare the material, including irrefutable facts and specifics, and go to the minister. I would hope the minister would likely consider that very favourably if your facts are all substantiated. If you can substantiate your facts and they don't listen, then of course you have opposition alternatives to seek that remedy from.

But I think the onus still has to fall on the region, because there are hundreds and thousands of regions across this country. The government cannot do it region by region or on an individual basis at our cost when you have the local facts in your hands. Would you be prepared to put that type of a factual brief together, showing that the net cost to governments is less if they keep that rail line in operation as opposed to closing it down and ending the subsidy?

Mr. Strapp: I think there's another point, too, in regards to our particular situation. It has to do with the number of passengers on that passenger service compared to other communities. These passengers are in a situation where they're very captive to the rail service. Sometimes there are no alternative sources of roads or means and ways to get to their locations.

It's not only just servicing the communities, but some of the businesses that rely upon the rail services. There are approximately 3,000 tourists that go to businesses along the line who only have access to the rail. There are a number of residents who are cottagers or who have camps. The only way they can get in for their recreation and for their quality of life, the only way they are able to go to their camps, is through the rail.

I think in this situation there is a captive number of passengers. I think since 1961 the federal government has looked at that and maybe rationalized why that service has remained compared to what has happened to service in other communities.

In regards to doing studies on the economic impact and the impact on the federal government, certainly we're asked to do this all the time when it comes to rationalizing things and doing that work. There are enough studies that have shown what the economic impact is there.

.1120

The difficulty for us as communities sometimes is to get those specific types of information from the sources of the federal government and provincial government in regard to what sort of taxation may benefit, and for us as communities to try to take on a study like that is sometimes tough.

Mr. Gouk: Have you ever looked into, as a region, going into a form of operation of rail service yourself, insofar as I gather that you don't need thirty or forty cars, but you'd probably utilize three or four, in terms of the regional needs?

By the sound of it, Algoma would like to get out of this, because they're losing money. It's costing them money. They don't have any other passenger line, so they have no needs for those passenger cars. You can buy something called a Brandt conversion for $500,000 that would operate five or six of those passenger cars for the cost of operation of a semi-tractor and work something out with Algoma to go into the business yourself at a relatively low input cost and then have your system. You would own it and operate it.

Mr. Strapp: We're in the transportation game, at least in Sault Ste. Marie with bus transit services, but as communities we haven't been really willing to get into the business of running railways. From experiences at the federal and provincial levels, we're learning what it's like to try to run a business as a government. We've really tried to stay away from that.

Mr. Gouk: Even if you talked to the bus company, though, and worked with them and Algoma to acquire the cars and the running rights, a Brandt conversion isn't much more than the price of a bus. It might be a great new business opportunity.

Mr. Strapp: We could take that idea back, with this task committee, and maybe talk to them about it.

Mr. Gouk: Yes. I'll be happy to talk to you further on that, too.

Mrs. Wayne: I've one of those communities that Mr. Gouk was referring to that had a brand-new train station built three years ago, and now it is sitting there but doesn't have a train. So, Your Worship, I have great sympathy for you, because the government did not take into consideration the needs and the quality of life. The letters that I've received, including the one I got yesterday from a disabled person trying to get back home to Saint John, New Brunswick, would bring tears to your eyes.

So I have great sympathy for you. I truly do. The quality of life has not been taken into consideration in other parts of Canada when they have been removing the train to adjust the bottom line, so you have a lot of work to do.

Have you been looking at this and have you taken it to the Federation of Municipalities to get some support for you? I ask this because I used to sit on that transportation committee. Have they supported your position for the need for your rail passenger service?

[Translation]

Mr. Blier: No, we have not presented this request to the Canadian Federation of Municipalities but we're thinking of doing it in 1996 at the next meeting.

[English]

Mrs. Wayne: I would do it as quickly as possible, in view of the fact that the government is looking -

Mr. Fontana: The FCM is coming next week.

Mrs. Wayne: Yes, the transportation committee of the FCM, the Federation of Municipalities, is coming next week. Perhaps you should be in touch with them before then.

Can you tell me the population of the area that you're representing here today?

[Translation]

Mr. Blier: In the Hearst area, that's a bit more than 10,000 people. For Dubreuilville and Wawa...

Mrs. Proulx: For Wawa, I'm not sure. There are 1,100 people in Dubreuilville. Do you know how many in Wawa, Bruce?

[English]

Mr. Strapp: A round figure for the area of the communities would be 100,000 people.

Mrs. Wayne: About 100,000 people in total that this line covers and looks after.

Mr. Strapp: Yes. The other thing is that it has a tourism component with it in which we have U.S. tourists who use the line. That supports some of the businesses.

Mrs. Wayne: Yes, I had that too.

Mr. Strapp: One of the strategies that Hearst has for the community is to try to get away from dependency on a single industry, and tourism is one of those mandates. Jean-Pierre can comment on that.

.1125

Mrs. Wayne: Yes, I had a conference, and brought in tourists' representatives from the U.S.

At any rate, you're probably in a safer position than I am, because you probably have MPs who are on the side of the government, which might save it for you, darlin'. Otherwise, if it isn't for that reason, you may not.

Anyway, I have sympathy for you, because I sure as hell lost mine in a hurry.

Some hon. members: Oh, oh!

The Chairman: Thank you, Elsie.

Mrs. Wayne: You're welcome, darlin'. That's the way it is.

The Chairman: Elsie, if you want to cross the floor, maybe we could work something out.

Some hon. members: Oh, oh!

The Chairman: Go ahead, Mr. Bélair.

Mr. Bélair (Cochrane - Superior): Mr. Chairman, thank you for allowing me to put a question to my municipal colleagues from Northern Ontario.

In the presentation, the angle of regional development was neglected. We should remember that back home, rail service has always had the mission of ensuring the transport of materials when you have new mines or forests to exploit.

My question is for Mr. Blier. Let's suppose the mine closes down tomorrow morning. What impact will that have on the forestry and mining operations?

Mr. Blier: It would certainly be a disaster for our primary industries. You know, in our area, we have one-town industries. In Hearst and Dubreuilville, it's pulp and paper and in Sault-Sainte-Marie and Wawa it's steel.

Each municipality derives its livelihood from one main resource, but it's important to develop others. As municipality representatives, I think it's our duty to promote tourism and create other forms of economic activity so that our area doesn't depend on one single resource.

Tourism is important for the Sault and Hearst because there are a lot of Americans from Michigan and Wisconsin who come and visit Agawa Canyon. The statistics you will find in the brief show this very well.

On the other hand, as our area is blanketed with snow from six to seven months a year, snowmobiling is a very popular activity for a lot of tourists from southern Ontario, Quebec and everywhere in Canada and the U.S.A. We also have important tourist projects in the areas of hunting and fishing to encourage people to visit our neck of the woods.

Mr. Bélair: Mr. Chairman, everyone has received a copy of the brief and you will see that all along the Algoma Central line, there's a very large number of small communities that would be totally isolated if they lost Algoma's services. On the other hand, if ever new mines were discovered, the owners would have to invest a lot of money to ensure liaison with the main Northern Ontario route.

So I have the following question for Mr. Blier: What would happen if a mine owner refused to work his mine and create the new jobs that we need so badly?

.1130

Mr. Blier: We know that Algoma Central may stop its passenger service. If that's the case, it will certainly affect freight transportation and, as I mentioned earlier, that would be a catastrophe for our regional economy because our industries need that service.

Mr. Bélair: About a month ago, the communities met in Sault-Sainte-Marie to discuss the impact of C-101 on Algoma Central. If I remember correctly, at that meeting, there was talk of what could be done so that the line would remain open even if long-term federal subsidies were up in the air. What efforts do you intend to make to ensure that Algoma's revenues go up, to compensate for the loss of subsidies?

Mr. Blier: The communities want to set up a committee to meet Algoma Central Railway and ask if it's possible to solve the problem, on the condition that they work together. Today, partnership has become very, very important for industry, both private and public.

We're proud of the service we have and we certainly don't want to lose it, because that would be going back a hundred years.

[English]

The Chairman: Thanks, Mr. Blier.

Mrs. Terrana.

[Translation]

Mrs. Terrana (Vancouver East): I have two questions. I'm from the West, from Vancouver, but I still have questions for you. I'd like to know what other means of transportation are available to you and what access you have to them.

Mr. Blier: Our other means of transportation is trucking, but given that trucks use the primary route, sawmills, plywood mills and mines have no access to some places. They therefore have to ship their goods by train.

Mrs. Terrana: So you use this train both for passengers and also for freight.

Mr. Blier: Yes, Madam.

Mrs. Terrana: How many people take this train per year?

[English]

Mr. Strapp: There are 20,000 to 25,000 passengers on that passenger service train.

Mrs. Terrana: Every year?

Mr. Strapp: Yes.

Mrs. Terrana: What's the distance between Hearst and Sault Ste. Marie?

[Translation]

Mr. Blier: Three hundred miles.

Mrs. Terrana: Sixty thousand kilometres?

Mr. Blier: No, 300 miles.

Mrs. Terrana: Ah, miles! Sorry, I was thinking kilometres.

Mr. Blier: It's 580 kilometres.

Mrs. Terrana: Do the municipalities have an action plan for coming to an agreement?

[English]

Mr. Strapp: Right now the communities are participating in a task force that has been set up by the railway company. Some of the tourist lodge operators are participating and some of the cottage associations are now joining us. Some of the residents from the smaller communities are also sitting on the team.

.1135

We are examining means and ways of looking at viability, including fair rates, zones and schedules. We're looking at some of the regulations that might increase the cost for short-line operators, such as the ``two eyes in the head'' unit. What is the definition of that second set of eyes? Does it have to be a full engineer or can it be a trained brakeman or whatever?

We're looking at mechanisms in which the tour train - we've made great strides to make that a viable operation - can maybe use some of the human resources there to help support the passenger service. That would be a commitment by Algoma Central Railway.

We are looking at the whole area because we certainly recognize that the greater volume of passengers we're servicing is very close to Sault Ste. Marie, while only about 2,000 or 3,000 passengers actually go to Hearst. There is a whole community of people living between Hearst and Sault Ste. Marie and we don't really have much information on how many are cottagers, how many are tourists, or how many are actual residents.

We are starting to hear a lot of stories about hockey teams in Dubreuilville using the train to go to Hearst. A family told me how one member broke a leg and couldn't get out because of the weather. They used the passenger rail service to get into Sault Ste. Marie to have the leg set. There are all these human stories. We can talk about the economic viability and all that, but it's almost a cultural....

Mrs. Terrana: How much time do you think you need to put this plan of action together?

Mr. Strapp: We're very demanding.

Mrs. Terrana: How are you very demanding?

Mr. Strapp: With the task force moving forward, we're hoping to investigate the viability or something. One of our concerns as communities is that we need Algoma Central Railway to take this seriously. It's so easy under the regulations that are being proposed for its officials to walk away from the table, whereas if they're contributing to the subsidy, their hearts will be into trying to make it viable also.

Many of the people from Algoma Central Railway live in Sault Ste. Marie and Dubreuilville and want to keep the railway viable. We hope they will work to make it viable, but we are very concerned because we still have a shareholders group that comes from the U.S. and it is much more competitive. Sometimes its members don't take into account the hearts of the communities. That's one of the reasons why we want to keep those players at the table.

Mrs. Terrana: Would you say more people take the train than go by car?

Mr. Strapp: Car transportation is definitely the biggest, but in some of the captive areas some residents can't take their cars. We know of people driving on some of the old forestry logging roads with four-wheel-drive vehicles to get to their cottages or residences, but some people just don't have that means of access.

Mr. Nault: Let's get to the issue of the repealing of the act and the effect it will have on the community. One of the things that strikes my interest in this whole debate is that Algoma Central is obviously being forced to participate in a passenger service, even though it's becoming quite obvious in the discussion we're having that it has no interest in being in the passenger business.

That suggests to me the same argument we've put a number of years now with VIA. When CN and CP ran VIA directly, they were totally incapable of running a good passenger service, obviously because that's not what they did best.

First of all, I think it has been made clear to the folks who are here today and to all of us that the ministry is committed to the subsidy of some $2 million. The argument being put is that it costs $3 million to operate this particular line. I question whether that's factually true, considering we have a company that doesn't want to run a passenger service.

.1140

One of the things this bill is intended to do is give freight railway companies an opportunity to deal with their bottom lines and get more into economic situations where they can make decisions based on what's best for them as corporations. That's a very different debate than the one of passenger service and the socio-economic impacts of not having passenger service, which is what we're talking about this morning.

First of all, I would like to know whether you agree and recognize that Algoma Central doesn't want to be in the passenger business. Second, has your task force looked into getting a passenger railway entrepreneur who wants to get into this business seriously, as they did very successfully in the Rockies? I don't argue for a second that we couldn't be successful in northern Ontario either if we had someone who was interested in running a passenger service.

The real issue we're dealing with here is a reluctance to change how we think and a desire to continue with the same system we have had for a number of years by forcing companies to do things they don't want to do. This bill is intended to stop that. We have forced CN, CP and Algoma Central through Wisconsin Central to do things they believe they are are not good at doing nor want to do; therefore we are obviously not getting a good service.

Based on Reg's argument of regional development - and quite frankly that is a very serious matter in all parts of the country - if the federal government is willing to subsidize a passenger service for regional development reasons to the tune of $2 million, do you not believe the province should be involved in regional development as well, as part of the process?

I find it very peculiar that the new government is getting out of regional development in northern Ontario. It wants the federal government to stay in regional development but doesn't want to be in it itself. So if this is a regional development issue, which it is, then obviously the province should be involved. I also firmly believe the municipalities should be somewhat involved in regional development. That's why they have economic development officers, or so I'm told.

Don't you think it would be appropriate to get the people out of the business who don't want to be in the business and stop forcing them to do things they don't want to do in the first place? Don't you think we should get on with life and get someone who really wants to run your passenger service? It's a long convoluted question, but I think it sort of lays out the framework of what this bill is all about.

Mr. Strapp: In total, I think the communities completely agree with that. I don't think we should have to force any business to do anything. We want to create a healthy business environment in Canada and in our particular area.

We have made some great strides in our area. Three years ago the whole line was going to be abandoned. The ACR, the Canadian company, wanted to get out of the business and had said so a number of times.

The communities got together with the province and were able to bring in a short-line operator, Wisconsin Central, to set up the Canadian company and operate it. We met with Mr. Burkhardt, who was the president of Wisconsin Central Railway.

I think many in this room know the tour train was threatened because Wisconsin Central was not in the tour train business. We sat down with the players around the table and got community partnerships. Sault Ste. Marie definitely has a very strong marketing component where EDC and the city are involved in trying to put tours on that train. That has now become very viable and the company is aggressive now. It knows this is a good business opportunity and it has been good for the region. We want it to have the same attitude with the passenger rail service.

The key is in the timing to protect the communities that are represented here today. In the transition, we know we have to have a viable operation. Whether we can eventually turn it into a viable operation with the ACR company, or whether we have to move to another operator to provide the passenger service, that is our target.

I think the federal government, the municipalities and the companies all have the same vision, but how can we get there? In the meantime, we want to try not to have what we call a disruption of service, because many other communities have lost their service and it's 10 times more difficult to bring that service back in when other people find means and ways in which we can do it. Those businesses will close. The camps and the lodges will shut down. Then if we try to bring back the passenger service they won't be there.

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So continuity is one thing we're concerned with, but I think we're all aiming for the same goals.

Mr. Nault: I'd like to get in just one quick question if I can, before Jean gets to answer that long question I asked.

Does the province subsidize this particular process at all?

Mr. Strapp: No, not at all. I'm not too sure, Bob, exactly what the details were with Wisconsin coming in and how they facilitated the environmental liability of the right-of-way on the land. I think those questions would have to be asked of the Ministry of Northern Development and Mines. They were involved there. There hasn't been a lot of disclosure of information on their participation with that.

[Translation]

Mr. Blier: As taxpayers, we know that Algoma Central - while it still gets a three million dollar annual subsidy - will have to rethink its visibility within communities from Hearst to Sault Ste. Marie. If it isn't aware of the importance of this service to us, we are aware of it.

[English]

The Chairman: Because of time, I have to put an end to the round of questioning now.

I thank the representatives from the Algoma Central Railway Communities for their submission to this committee. Thank you very much for making your way down here.

[Translation]

Mr. Blier: Thank you.

[English]

The Chairman: Moving right along, colleagues, we would ask the Canadian Dehydrators Association to come to the table. We welcome Garry Benoit, executive director from the Canadian Dehydrators Association.

Welcome, Mr. Benoit. We look forward to your submission to this committee. Hopefully you will not be more than 15 minutes so we can ask questions. Thank you.

Mr. Garry F. Benoit (Executive Director, Canadian Dehydrators Association): Thank you, Mr. Chairman, for the opportunity to appear before this committee. My opening comments won't take longer than 15 minutes.

.1150

Earlier we sent in a written submission that I think you all will have had in advance. Also, I circulated, just in point form, some of the key points we're trying to make in our submission.

Mr. Chairman, I'm speaking today on behalf of a great Canadian success story. The Canadian Dehydrators Association represents 80% of Canada's processed alfalfa industry. For several years now, the federal government has pointed to our member plants as models of value-added industry on the prairies. Most of the plants are located in Saskatchewan and Alberta, but there are also plants in Manitoba and eastern Canada.

The industry is critical to small rural communities where plants are located. We provide over 1,000 direct full-time and part-time jobs and many more indirect jobs in service-related industries. The value-added is approximately $75 million per year.

Our plants produce dehydrated alfalfa pellets, sun-cured pellets, regular hay cubes and mini or small cubes. Of this production, 80% is exported, and for western Canada 90% of the production on the prairies is exported. We have steady markets in Japan, Korea, Taiwan, and the U.S., and exports go to about 25 countries each year.

An aggressive market development program is helping us to penetrate new markets. In 1994, exports of 650,000 tonnes had a value of $100 million, which represents an increase of more than 100% over the last decade.

Rightly or wrongly, Canadians are not known for encouraging their successes. Today our members are concerned that their success may be jeopardized by a series of federal measures that fail to recognize the reality in which we operate.

The current reality is as follows. As always, we deal in a highly competitive and highly subsidized and distorted international foodstuffs market. We must be price competitive or we lose sales to stiff foreign competition. Prices of competing by-product feeds continue to be depressed relative to wheat and canola prices, which as you know have increased quite dramatically recently.

Our plants must compete with wheat and canola to get the supply of raw material or the acres that are required to produce the raw material. Our shipping costs to tidewater more than doubled with the removal of the WGTA subsidy this summer. Also, our industry has encountered an increasing number of problems with the railways in getting service and getting our products moved to port position.

Of course, the Western Grain Transportation Act did not allow for demurrage and storage charges. With the end of that act, demurrage and storage charges have already been introduced on our products even though, as small shippers of special commodities, we often bear no responsibility for the cause of the delays in the first place.

In addition to these conditions, we now face the prospect of further federal government legislation changes that could harm our industry. Mr. Chairman, what brings me here today is the draft Canadian Transportation Act, or Bill C-101. Our plants have a major stake in the regulatory environment of the rail industry. Rail costs and poor service can be the difference between a sale being profitable or unprofitable.

Based on our plants' experiences as shippers, we have specific concerns about the way Bill C-101 deals, or fails to deal, with a number of issues critical to our industry. There is no alternative to rail transportation to get our products to market. Effective regulation is therefore essential to allow a balance between the monopoly rail situation and captive shippers.

First, we are concerned with rail line abandonment and short-line railways. We do not condone the forced operation of unprofitable rail lines, but railways can make a line unprofitable through investment choices or by not providing service, and a so-called unprofitable line may be profitable if operated by a low-overhead short-line railway.

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Bill C-101 provides little opportunity, first, for shippers to negotiate continued operation of a so-called unprofitable line at a profitable return to the railways; second, for shippers to operate the line themselves; or third, for having the line purchased by a short-line railway. There's nothing in the bill to facilitate and encourage a main-line railway to sell to a short line.

Operating an unprofitable line at full cost may still be a lower-cost alternative for shippers than relocating processing and storage plants or trucking product to an alternative line. A large processing plant in Saskatchewan took a business decision a few years ago to relocate off a line slated for abandonment in order to be situated on both a heavy steel line and a major highway. The cost was enormous. It was a major set-back that not many plants could absorb.

Another plant on the same line decided to stay put. At present the plant is negotiating with CN to try to maintain rail operations.

We therefore recommend that shippers should be able to negotiate rates above the maximum on lines slated for abandonment. The alternative, which is purchase by a short-line company, should be contemplated in the arbitration process. Abandonment procedures must include the requirement for consultation and some form of arbitration or appeal process.

Running rights for short-line railways are necessary to ensure competition. These rights should extend at least to the interchange point with the railway of choice. Therefore the CDA recommends measures to encourage main-line railways to sell lines that are poorly serviced or slated for abandonment.

Secondly, we are equally concerned about the inadequate level of service regulations. Without proper regulations lines may not be abandoned but may simply not be served. This would keep the unserved lines covered by the overall maximum rate and prevent a competitor short line from entering the market.

Poor rail service may damage our export markets but at the same time have no effect at all on the railway profits. Since many of our shippers are captive to the railways, neither rail volumes nor per-tonne revenues are much affected by poor service. Effective levels of service provision are a must.

Our particular concerns about Bill C-101 include clause 113, subclauses 27(2) and 34(1), and the omission in Bill C-101 of subsection 40(3) of the NTA. We are concerned that the new Canadian transportation agency will be restricted with the inclusion of clause 113, which adds that any order on a rate or a condition of service must be commercially fair or reasonable. The problem is the lack of definition. The definition of ``fair and reasonable'' will differ between shipper and the rail company. This clause was not in the NTA and would add another hurdle to shippers seeking rate or service relief.

We recommend that the level of service provision have clear regulations and penalties attached for non-performance by the railways.

We strongly oppose subclause 27(2) and recommend it be dropped from the bill. It was not in NTA 1987, and it creates a concern for our shippers and the entire grain industry. Subclause 27(2) would limit the Canadian Transportation Agency from granting relief related to a transportation rate or service unless it is satisfied the applicant will suffer ``significant prejudice''. Again, the lack of definition of ``significant prejudice'' creates uncertainty and hands the carriers an extra bargaining chip.

Subclause 34(1) also lacks definition and creates uncertainty that could unduly discourage valid applications.

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A serious omission from Bill C-101 is the lack of any provision for interim orders allowing immediate relief while an application is being heard. Such relief is essential to us, because plants could be jeopardized by a lack of adequate service.

The CDA therefore recommends that subclause 27(2) and clause 34 be removed. Subsection 40(3) of the NTA on interim orders should be included in the new act, and section 113 should be clearly and more narrowly defined.

We believe the maximum rate provision in Bill C-101 falls short of the provisions for a full costing review under the WGTA. It is proposed that maximum rates would be based on current rates, with adjustment for railway inflation. If the index does not reflect western productivity gains, then rate maximums could be well above the real cost of moving the product by rail from the western region.

Shippers should share in productivity gains. Before any decision is made to end rate protection after the year 2000, there must be a careful evaluation of the impacts on shippers of the loss of rate protection.

Our appeal is for an adequate regulatory regime to ensure balance between shipper and railway interests. We are concerned that Bill C-101 weakens shipper protection that was contained in the NTA 1987, even though during the consultations related to the elimination of the Western Grain Transportation Act we were told that we should not be concerned, as the NTA would provide adequate shipper protection, and that it was balanced without these things that have been added.

In recent weeks our plants have already seen the exercise of railway monopoly powers.

First, plants that have invested in multi-car loading facilities in order to achieve cost efficiencies are now having incentive rates reduced by the railways. Shippers now have less incentive to form unit trains, because the railways have changed the rules to require all cars to be going to the same terminal in order to gain the incentive rates.

Also, some plants have been told by the railways that a new weighing charge of $300 to $500 per car will be added to the freight bill. This will require weighing equipment that will cost each plant about $60,000.

These are the major concerns of our members. They are real, and we urge you to take them seriously. They are based on years of experience by our relatively small shippers in dealing with the railways.

I'll be happy to answer any questions you may have.

The Chairman: Thank you very much, Mr. Benoit, for your executive summary of a very thorough report.

We will move to questions. Mr. Gouk, please.

Mr. Gouk: Mr. Benoit, I have gone through your brief previously and recorded the areas of concern, and I am reviewing those. I want to clarify two of them.

The first is your comment with regard to short-line creation and operation. Frankly, I'm having trouble in trying to figure out why any rail company would deliberately turn down a valid offer from a company knowing that they could be undercut on that offer because of the fact that they have to go to the various local and regional governments. If some were offering them $2 million for something that has a $1 million salvage value, why would they turn that offer down, when they then would have to go through the salvage-value offers through the various levels of government?

Mr. Benoit: I'm not sure that I understand your question.

Mr. Gouk: You were expressing concern that there's nothing in the bill that requires them to accept any given offer except under the portion that then goes to the sequentially reducing levels of government. So if some private company that wished to buy it as a short line made an offer that was higher than salvage value, what possible rationale would there be for a rail company to turn that offer down?

Mr. Benoit: In relation to your question, the thrust of what I'm trying to say on short lines is that the main-line railways should be encouraged to get lines to which they don't want to provide service into the hands of short lines. We're encouraging that...and for the bill to facilitate that.

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Mr. Gouk: There are some aspects of this bill I like better than others, but one of the parts I do like is this process of abandonment before we basically, by virtue of regulation, force the rail companies to make their lines financially unfeasible, which meant run them down and everything else, before they went to abandonment in order to prove they qualify. This bill now says no, they can be wonderful lines; if you want to get rid of them, you can put them on the market any time you want, and if you still want to get rid of them but you don't have a buyer, then you can abandon them; that is your option. I think that is one of the more positive aspects of this bill. I'm just trying to find why it is you feel it's the opposite.

Mr. Benoit: We have a plant that's located on a light steel line. It's certainly very concerned with whether or not they will.... They're not in the first round of obvious abandonment. In the case of those lines there's probably been lots of consultation and they should get on with abandoning those lines. But they'll possibly be in future rounds, and they want a real opportunity to make their case.

One of the concerns is that with the three-year plan and that type of thing it looks as if there will be quite a bit of notice and then a short line could come in and pick up the line. In fact that three-year plan can be changed at any time, and I think it amounts to about a sixty-day indication.

What we're seeking here is encouragement, rather than the main lines holding those miles of trackage they're not really providing service to in the equation, maybe because there's a $10,000-per-mile penalty if they're taken out, for whatever the reason.

I think we're in line, Jim, with what you're thinking. We want to see the bill encouraging competition by allowing the short lines in.

Mr. Gouk: One other area I wanted to clarify is subclause 27(2). We've heard from a lot of the shippers that they're concerned this is an impediment to their even getting to the CTA to have their concern heard. We heard from CN the exact opposite, that they are concerned it isn't an impediment, that they want it as a gateway test. If it were amended in such a way that it clearly specified it was not a gateway requirement, that your concerns would be heard by the board and a decision made, that this was one of the avenues of remedy, would that go some way to satisfying your concerns about subclause 27(2)?

Mr. Benoit: I guess ``if it's not broken, don't fix it'' is the way I feel about that, and the way our industry feels about that. I have a list here of what I think are all the disputes filed under the NTA from 1987 until 1994. It's not very long. There's a short paragraph on each, and it's covered in eighteen pages.

Mr. Gouk: That would be good to have. The only thing with things like subclause 27(2) is that sometimes there's a clear wrong on one side or the other; but you're saying if it's not broken, don't fix it, which means get rid of it. We're having the rail lines say, hey, we really need this, so now we have to choose one way or the other. I'm asking whether there is a reasonable compromise you can live with and perhaps the rail lines can live with. They're saying they absolutely want it in there. If you say you absolutely want it out, we have to choose one side or the other. Is there an alternative, that alternative being to ensure it is not a gateway impediment for shipper complaints?

Mr. Benoit: It wasn't in the previous piece of legislation. There didn't seem to be a problem. While our industry wasn't under the NTA, we were under WGTA. Anybody we've talked to who was under NTA feels it's not necessary at all.

I think the answer is just to get rid of it. I guess I don't have any in-between compromise. If I saw the logic of it being there more clearly, possibly I'd think more on that.

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The Chairman: Mrs. Sheridan, please.

Mrs. Sheridan: First, in your list of clauses with which you had difficulty, one was the removal of subsection 40(3) of the National Transportation Act.

Mr. Benoit: No. I believe it was inclusion.

Mrs. Sheridan: No, your difficulty was that it was being removed. Do you want it to be included?

In any event, you were worried about the lack in the new legislation of the power for the agency to make interim orders. Is that right?

This is on page 4 of your executive summary.

Mr. Benoit: Yes.

Mrs. Sheridan: All I would like to say is that I think that problem is resolved, because if you look at subclause 28(2) of the bill, it in fact preserves the agency's power to make interim orders.

Mr. Benoit: Okay.

Mrs. Sheridan: How is that for fast action? You come in; you want it; it's done.

Mr. Benoit: Okay, it's done.

I'll have to go back and study that a little bit, but what we were asking for is that subsection 40(3) of the NTA 1987 seemed to be missing.

Mrs. Sheridan: I don't want to put you on the spot now, but have a look at it, because I think that subclause 28(2) is pretty much what subsection 40(3) is.

Mr. Benoit: Okay.

Mrs. Sheridan: I'm from Saskatchewan. You keep referring to a short-line service for one of your plants. Can you name that?

Mr. Benoit: The plant I'm referring to is on a light steel line. It's at Arborfield. It's a processing plant. It's mid-sized, with probably close to 50,000 tonnes of product per year.

Mrs. Sheridan: That's okay. I just wondered which one you were talking about.

I guess this is a general comment on the presentation you've give us, and I'll let you answer it how you will.

On the one hand, when I look at the thrust of your argument here, you seem to be arguing for less bureaucracy and letting the various players in this mix do their work. You want to ship and the railways want to do railway things. Yet, at the same time as you're saying to minimize bureaucracy and red tape, it seems to me that the specifics of the various requests you're making would in fact simply bring about more red tape. As Mr. Gouk pointed out, some of the suggestions you're making for abandonment seem to increase the level of bureaucracy and guarantee that government will keep its nose in the business of running a railway or shipping goods.

Can you put my mind at ease that in fact there isn't an inconsistency in your argument?

Mr. Benoit: In relation to the clauses that have been put into this draft bill that weren't in the NTA, such as subclause 27(2), the fear of the grain industry is that this in fact will lead to more expense and bureaucracy for it, almost a double round of hearings sort of thing, and will drag things out. I feel that it was clearer and less cumbersome the way it was before.

I guess that abandonment is a serious situation for a plant. It's not like a farmer, who has to load the grain into his truck anyway and if he has to drive an extra 20 or 30 miles or whatever it's not a big deal. For a processing plant that's possibly going to lose its rail line, there's really no alternative.

You're talking about jobs in rural communities, and all we're asking for there is: after the first round of abandonment, there may be lines out there that show up on the list on which there hasn't been adequate consultation; we want to make sure there's a place for the concerned shipper to go in order to have his input on that.

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The Chairman: Thank you.

This is a short one, Mr. Althouse.

Mr. Althouse: In the executive summary we have where level of service provisions are discussed, you speak of the need for just-in-time delivery, particularly in your industry, which basically has only a few grades of product. Your complaint was that the railways are anywhere from 36 hours to two weeks - and I think more - in moving from plant to ship and you can't do just-in-time with that sort of laxness in service.

You raised this as a problem but you didn't seem to have any remedy for it in terms of the legislation. Or do you see it being handled by contracting with the railways themselves?

Mr. Benoit: In a way, this is a level of service matter. Now that our industry can get hit with demurrage -

Mr. Althouse: You can, but the railway doesn't.

Mr. Benoit: Yes, that's right. There has to be a counterbalancing penalty for railways if they don't provide the service and don't get the cars to where they're supposed to be.

In our industry there seems to be a mentality out there that we should be like any other grains. You trundle it out to Vancouver, it goes into an elevator and the ships load it out at the bottom of the elevator.

Our products don't go into storage. There's no logic to that. It's an unnecessary step. I guess there should be counterbalancing forces there to encourage the railways to get on with this type of direct, just-in-time shipment and to coordinate things so they provide the cars when they're needed, not three weeks prior to when they're needed. It might take three weeks rather than 36 hours. That's a problem.

If we're going to be hit with demurrage, we have to get the cars when we want them, we have to get the service, we have to know how long it's going to take, and there have to be penalties if that sort of performance doesn't happen.

Mr. Althouse: You have no amendments proposed here. I know it's very difficult, because I've been looking at doing the same thing. You have to be all over the act, for pages and pages and pages.

Mr. Benoit: I think that really relates to most of the provisions I spoke about concerning subclause 27(2) and the others. If in fact those extra inclusions in this bill, as compared to the NTA of 1987, do act as a discouragement for shippers to use those provisions, because they might be viewed to be frivolous -

Mr. Althouse: And vexatious, or whatever.

Mr. Benoit: - then we have a problem. I think you have to keep those shipper provisions -

Mr. Althouse: Safeguarded.

Mr. Benoit: - as effective as possible.

The Chairman: Mr. Nault, you have a quick question.

Mr. Nault: I do, Mr. Chairman. It relates to the first page and this whole issue of promoting competition.

I'm not quite clear which side of the fence you're on in this issue. You say in your brief, ``Bill C-101 does not place the railways and the shippers in equal bargaining positions.''

Then you go on to say:

Are you telling me that Bill C-101 is still skewed in favour of the shippers, or are you telling me that the railways are in the best position here as it relates to competition? I can't really decide what you mean.

Mr. Benoit: I'm saying the railways are in the best position.

Mr. Nault: Oh, you are. Okay. Do you think we should have more regulations for shippers?

Mr. Benoit: No, not more regulations, but less hurdles or, in other words, the provisions that were working under the old NTA.

The Chairman: Sounds like the old NTA is good enough.

Mr. Benoit: Yes. Why are these extra things in? There didn't seem to be a problem before. There weren't that many cases. So why have these things come into it at the same time grain is going under the NTA? Is there really a problem?

The Chairman: Thanks, Mr. Nault.

Mr. Nault: Thank you.

The Chairman: Mr. Benoit, thank you very much for your submission to the committee. We appreciate it.

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Colleagues, from the Transportation Action Now Inc. is David Baker, project coordinator.

Welcome, Mr. Baker. You could introduce the individuals you've brought with you today and give us your presentation, sir.

Mr. David Baker (Legal Counsel, Transportation Action Now Inc.): Thank you, Mr. Chairman. I'm actually legal counsel to Transportation Action Now. Accompanying me is Sam Savona, who is a board member of this organization. Mr. Savona will introduce the organization and give some background. Then I'll try to focus on the two issues raised in our brief.

Mr. Sam Savona (Board Member, Transportation Action Now Inc.): Ladies and gentlemen, good morning.

We are an organization representing 83 other organizations involving people with disabilities across the province. Our organization deals with member-related issues that concern our population. We've been in existence since 1987. All along we have been advocating for accessible transportation not only throughout the province but throughout the country.

The Chairman: Thank you, Mr. Savona.

Mr. Baker.

Mr. Baker: Mr. Chairman, the two issues we wish to focus on relate to the question of the need for national standards of accessibility for intercity or over-the-road bus.... The second issue, which is not adequately addressed in the brief but we'd like to raise with you, is subclause 37(1), in which there is the requirement that standards developed by what is currently the National Transportation Agency, soon to be the Canadian Transportation Agency, must go before the Governor in Council before they're approved. I will address those issues one at a time.

I think it's fair to say that for seniors and disabled people the number one accessibility issue in the area of transportation in this country concerns over-the-road or intercity bus. Federal jurisdiction in this area concerns interprovincial bus. Under the Motor Vehicle Transport Act jurisdiction for the licensing of interprovincial bus is delegated to the provinces. So the entire jurisdiction in relation to licensing at least is in the hands of the provinces.

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The problem has been that, going back to 1984, when the issue of accessibility has been raised the highway transport boards of the respective provinces have taken the position that they have no jurisdiction to deal with the issue of accessibility, on the basis that that authority has not been delegated to them by the federal government.

In 1974, for example, there was a case before the Ontario Highway Transport Board involving Lew and Jean Blancher - who, by the way, are celebrating their 25th anniversary today. So it was 21 years ago. The newlyweds were trying to use the bus. They were not granted assistance in using it, as they had been upon occasion previously.

They took the matter to the Ontario Highway Transport Board, which said that while it felt great sympathy and was sure that government would do something about this - so we were given authority to deal with it - it didn't have authority at the time. It said that it was sorry, and that was that. That was 21 years ago.

The issue has been raised several times, including by Mr. Savona's organization when the licence transfer took place between Grey Coach in Ontario and Greyhound and the board made a similar ruling, that the issue of accessibility was not before them on a licence transfer. The issue was raised in the context of bus transportation to the airport. Again the Highway Transport Board refused jurisdiction to deal with that issue.

A complaint was filed with the National Transportation Agency in that area and was subsequently resolved by transferring the licence from an operator that was providing inaccessible service to one that was providing accessible service. So we never really got to that issue.

But that isn't the question before us. In all likelihood, the transportation to airports is currently a matter within federal jurisdiction.

My office, in a case on behalf of clients here in Ottawa, brought the issue before the National Transportation Agency, asking it to adjudicate on the issue of accessibility for interprovincial bus service between Ottawa and Hull, which is a matter of federal jurisdiction. The NTA took the position that under the Motor Vehicle Transport Act that issue was delegated out of federal authority and therefore was not covered under their legislation, because of the delegation to the provinces of licensing.

So at this point we have a no man's land where apparently there is no authority in anyone's hands to deal with this issue. We have a means of transportation that is of growing importance, in light of the fact that intercity rail is declining in importance and the cost for air transportation is prohibitive, particularly between smaller communities and for people of low income, such as seniors and disabled people. It is increasingly priced out of their reach. So the only means of transportation is intercity bus, and the only means of transportation in this country that has no accessibility standard at all is intercity bus.

There is a background of some efforts in this area. In 1981 the Obstacles report of the parliamentary committee on disabled and handicapped persons recommended that action should be taken. There was a delegation by the Minister of Transport to the National Transportation Agency in the late 1980s. A report was prepared by the NTA, reaching the conclusion that there was a need for a national standard in this area comparable to that which is set out under the Motor Vehicle Transportation Act in relation to the carriage of dangerous goods. There was a need for a national standard in that area, and the means was found to provide one. The recommendation was that a similar standard should be established under the National Transportation Act. That report was tabled with the government.

A process of consultation between the Department of Transportation and provincial and territorial ministries followed, resulting in an agreement in July 1993 that there would be a national standard. In fact, the national standard itself was agreed to in precise detail. I have it in front of me. So just prior to the last election there was agreement that there would be a national standard and the standard itself was spelled out in considerable detail. No mechanism for the enactment of the standard was addressed.

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One final point is that in 1990 George Bush signed into law the Americans with Disabilities Act, which made provision for the development of accessibility standards for bus south of the border. So the issue has been addressed in that country, and I would say, from my experience in Europe, there are standards that have been developed by the European Commission that address this issue.

We have, therefore, a rather anomalous situation. From the standpoint of disabled people, it is a very difficult situation in that there are no standards. For people such as Mr. Savona, there is essentially no access to an important mode of transportation, one that is generally regarded as an accessible and affordable mode of transportation but is not accessible to persons with disabilities.

We are therefore asking that in the amendment of this act, consideration be given to establishing a mechanism under which national standards could be developed. There has been some question, I gather, as to whether it should be under the Motor Vehicle Transport Act, which would lead to a delegation of responsibility for enforcement of the standard to provincial highway transport boards; or whether it should be under what has until now been referred to as the National Transportation Act, which would lead to enforcement of what will become the Canadian Transportation Agency....

The preference of the disabled community is the latter. That is, it should be put under the jurisdiction of the Canadian Transportation Agency so that one standard could be developed, because generally speaking, provincial highway transport boards do not deal with individual complaints and they do not deal with the enforcement of any standards. They are essentially restricted to licensing issues and deal primarily with transportation providers.

Disabled people have found the enforcement mechanisms with the National Transportation Agency to be user-friendly and helpful to them, to be accessible to them, and they would hope that a similar enforcement mechanism, if not the same enforcement mechanism, should be available. So the request, if you like, on behalf of Transportation Action Now, is that authority given for the CTA to have jurisdiction, under the National Transportation Act, to deal with complaints, and that there be a national standard or provision made authorizing the establishment of a national standard in relation to accessibility for over-the-road bus.

The second issue I can deal with much more briefly, and that is the need for standards generally. Under the National Transportation Act, there is currently a requirement that accessibility standards, which are developed by the National Transportation Agency, go to the PMO, ultimately for approval by the Governor in Council. While it has changed in relation to the sections dealing with standards for disabled persons, subclause 37(1) now provides that a similar process must be followed. That's the subclause that states:

While the NTA has been responsive to individual complaints and has moved forward to the PMO with access standards, nothing has come out at the other end. Years and years go by, decades go by, without any standards in this area. In 1988 Ronald Reagan came out with about 250 pages of air carrier regulations that govern the airline industry. We have virtually no regulations in this country at all to protect persons with disabilities. This is the situation. Without those standards, people are subjected to very difficult situations.

I don't know if we'll have the opportunity to tell you some of the stories about what is in fact going on out there, but at this point, people essentially only have recourse by means of individual complaints. There is certainly a much more effective way of addressing that in advance, and that is by developing standards in consultation with industry, which is the mechanism used in the United States.

In this area, remarkably, we are in a far different situation than are people south of the border. The standards that have been established, and the mechanisms for creating those standards, came out of Republican governments in the 1980s and early 1990s. We're sitting here with a situation where a federal-provincial-territorial committee could agree to a national standard for intercity bus, but more than two years later we still don't have any mechanism for implementing such a national standard.

I think I'll stop there.

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The Chairman: Thank you, Mr. Baker, and thank you, Mr. Savona.

I think we would probably be interested, Mr. Savona, if you could document for us a few cases where there have been difficulties for the disabled to accomplish their goals through means of transportation. Many of us have already received representation from disabled organizations in our ridings on the complications life presents to them, but we'd appreciate it if you would forward to us a document with some examples.

Mr. Savona: If I may, I could give you one. A couple of years ago my cousin's daughter was getting married in Windsor, Ontario, and I wanted to go down there. They only had one train that was accessible but it was leaving at the wrong time of day, so I couldn't get a ride down to Windsor. The difficulty in this story is that the carrier would not allow a person with a disability to travel on their own, but would require someone to go with them. To have another person go would be an added cost. It's that kind of situation that goes on every day.

The Chairman: I don't think there is a person in this room who wouldn't be feeling your frustration, too, Sam. Thanks very much for that information, as well.

Mr. Gouk.

Mr. Gouk: Mr. Baker, do I understand correctly that you feel the Americans have addressed this satisfactorily?

Mr. Baker: Yes, sir, basically they have.

Mr. Gouk: Given that, what type of access is available on busing in the United States that you would like to see in Canada? How does it work?

Mr. Baker: Basically, the process of consultation leading to the busing standard is virtually complete, if not complete - I can't tell you. It was supposed to be completed this year and a national standard was to be developed under the Americans With Disabilities Act to govern intercity bus.

A number of the standards are set out in particular detail in the legislation itself, which was passed in 1990. There have been interim standards, but the formal standard - and the big issue of course is wheelchair access to buses - is being addressed as part of the regulation-making process. The Department of Transportation, the DOT, is responsible, along with the Architectural and Transportation Barriers Compliance Board, for developing standards. The board deals with standards for vehicles; the DOT is responsible for other standards in relation to transportation services.

Mr. Gouk: You say this consultation is just about complete. Have any of the provisions been implemented by the busing companies?

Mr. Baker: There are interim standards, and the standards that were contained in the 1990 legislation have been in place.

Mr. Gouk: That's what I'd like to know. What kind of things are we looking at having the buses do?

Mr. Baker: Frankly, I don't know all the standards, but the big issue I've been looking at has to do with whether or not people in wheelchairs can use buses. It has been going back and forth, but my understanding is that the standard set out in the 1993 Canadian draft reflects the American standard: there is to be a provision for transportation of persons in wheelchairs phased in over a number of years, so that new buses do not have to be purchased, but when new buses are purchased, they would be wheelchair accessible.

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Mr. Gouk: So what you mean is some form of lift?

Mr. Baker: That's right, and that technology is there. It was actually originally developed by Transport Canada.

Mr. Gouk: Do these things have to be done in such a way that they can be operated by the person with a disability? Or can those people be assisted on to the bus through one method or another? Is that an acceptable standard?

Mr. Baker: The two methods are basically a mechanical lift that would be operated by the driver on the bus, or what is called a station-based lift, which means there is essentially a ramped entrance into the bus. The person in the chair is assisted to transfer from the ramped area.

I believe you heard from CCD, the national cross-disability group, yesterday. I believe you will be aware that they have strong feelings on that subject. I'm not sure what they told you, but they feel there should be vehicle lifts in all cases.

What has been accepted in the United States is a functional criterion that there will be access, be it station-based or vehicle-based. That is the standard in the United States, as I understand it.

Mr. Gouk: In the case of an airline, lifts don't always work, particularly with small turbo-prop aircraft, so there's personal assistance with special equipment. Would that be a permissible standard from your organization's point of view?

Mr. Baker: My understanding is that from 1990 onward in the United States, disabled people were entitled to be manually lifted into buses in that way. That's been in place since 1990. There's nothing like that in this country. In other words, that was what Mr. and Mrs. Blancher were asking for back in 1974, but there's still nothing like that now.

Would it be acceptable? That's not the desired solution, for reasons you can understand. That's not what the American standard provides, nor is it what this standard would provide. I believe this standard provided for manual lifting on an interim basis until such a time as the phase-in period, which would be - I don't know if it was ten years or what - based on the life expectancy of the current fleet of buses, was complete. But over a period of years, the new technologies were to be introduced.

Mr. Gouk: I have just one last thing that I'm curious about. Say there are a hundred buses in a particular company's fleet. If this is phased in and they buy three new buses, you have 3 buses that provided the service and 97 that don't. How does the disabled person know when they can take that bus?

Mr. Baker: During the phase-in period, the disabled person is required to call in advance to advise the bus company that they're going to be travelling at such and such a time, usually with about 24 hours' notice. I can't remember what the standards provide on an interim basis, but you do have a phase-in period.

The question is about what the Blanchers asked for back in 1974, but nothing has changed. The point is that as long as we start somewhere.... I think the disabled community has been patient. I think they are prepared to be patient provided they see some light at the end of the tunnel that isn't a VIA Rail train.

The Chairman: Thanks, Mr. Gouk.

Mr. Nault.

Mr. Nault: I have a comment and a question.

If there was in fact total agreement by everybody involved, including the provinces.... On the one hand, I'm a little bit surprised that there was agreement by the provinces. On the other hand, they continue to pass the buck to make standards of their own that are acceptable to the disabled and seniors. That's surprising to me, but I haven't read the material so I'm a little bit at a disadvantage.

On the other hand, we get agreement with all the provinces and the territories. If that's the case, are you aware of any presentations that have been made by the provinces to have us put it in this bill?

Mr. Baker: I talked the provincial representative in Ontario. I know they didn't address it in their brief to you, which is of some disappointment, but at the same time, I know they have continued to be supportive of the creation of a national standard, because that is what I was advised by the policy adviser to the province on that issue. I obviously can't speak for the other provinces, but I have the standard that was approved by the federal-provincial-territorial community with me here today, and I am happy to share it with you.

I think the issue was that it was a federal initiative. I believe the big turning point was that Ontario did become supportive of the creation of national standard. As far as I'm aware that hasn't changed, but we'd certainly appreciate being advised if it has changed. What did change was the fact that the federal initiative seemed to die. The federal initiative seemed to disappear, and we don't have an explanation for that, frankly.

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Mr. Nault: I can't speak for the government, but from my point of view at least, I can tell you that before this committee wraps up I'll find out one way or another what the rationale is as to why this isn't in the bill if in fact we had total agreement by the provinces, the territories, and the feds before the last election. It seems to me that it's a somewhat of a revelation when you find out that somebody totally agreed in this country. That doesn't usually happen. So I'm going to find out for you one way or the other.

The next question I will ask on your behalf is to find out from the minister whether in fact the government has any problem putting this in the bill. There has to be an explanation for that.

Obviously you've outlined for us the age-old problem of passing the buck from one jurisdiction to the other, which doesn't really solve anybody's problems. On the one hand, of course, we transfer these jurisdictions to the provinces, but on the other hand they don't want to make any decisions. They want us to do it.

This reminds me of MNR in the province of Ontario, where we have federal jurisdiction over fisheries. We transferred it to them, but it seems every time you turn around they have a problem with certain things. On behalf of the government, I can certainly give you an undertaking that we'll find out. We don't have those answers in front of us as to why this is the case.

That's the only comment I can make.

The Chairman: Thanks, Mr. Nault.

Mr. Baker: Could I respond briefly, sir?

I just want to say that there have to be national standards. There cannot be separate standards from province to province. You'd have interprovincial problems just as you do with the transportation of dangerous goods. It has to be a national standard.

As far as I was aware, the compromise, if you like, was that the national standard was to be administered provincially. Again, the disabled community's view is that this is not the most desirable solution; however, at this point I think the community would take anything, because this has gone on and on for more than 20 years.

The Chairman: Thank you, Mr. Baker.

Mr. Savona, thanks very much for taking the time to be with us here today and making an effort to be here.

Mr. Baker: Could I make one point that I neglected to make? Under the Canadian Human Rights Act there is authority to make standards equivalent to regulations without the approval of the Governor in Council. I'm suggesting therefore that, at least in the area of accessibility standards for persons with disabilities, subclause 37(1) could likewise be amended to make similar provision as section 22.1 of the Canadian Human Rights Act.

The Chairman: Thanks, Mr. Baker. Thanks again, Mr. Savona.

Colleagues, our last witness today is Denise Hill, the president of the airline division from the Canadian Union of Public Employees. We invite her to join us at the table.

Welcome to our committee. If you could introduce who you've brought with you today, we can begin and hear your presentation. Thanks.

Ms Denise Hill (President, Airline Division, Canadian Union of Public Employees): With me today is Richard Balnis. He's the senior research officer for the Canadian Union of Public Employees.

Thank you for the opportunity to appear before you on Bill C-101. As we explained in our original letter to you of September 1, the airline division of CUPE represents some 8,000 flight attendants of many carriers, including Air Canada, Canadian Airlines, Air Alliance, Air Nova, Air Ontario, Air Transat, Canadian Regional Airlines, First Air, and Inter-Canadien.

Our union has taken a keen interest in the economic regulations shaping our industry, as shown by our submissions and appearances before SCOT when the National Transportation Act of 1987 was first promulgated, on the privatization of Air Canada, the National Transportation Act Review Commission, NTARC, and SCOT's review of NTARC's final report.

Our analysis of Bill C-101 has been made difficult by the lack of a table of concordance and explanatory notes accompanying the legislation, particularly in parts I and II of the legislation, which affect us the most. I'm sure many of you felt the same way when this 120-page legislation appeared on your desks in the dying days of June before the House rose.

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Fortunately we've had the assistance of three Transport Canada officials, who after reading our initial submission volunteered three hours of their time to explain the bill, answer our questions, and highlight the policy initiatives in Bill C-101. I would like to take a moment publicly to thank Ms Valerie Dufour, director of domestic air policy, and two of her staff, Mr. Bernard Labrosse and Mr. Brian Oliver, for their time. While we do not agree with everything they said and our brief today reflects our views and not necessarily theirs, theirs was a job well done and credit should go where credit is due.

To turn to Bill C-101 itself, we appear before you today not as defenders of airline deregulation but as its principal victims. We are joined in this role as victims by many of our employers, the air carriers, and passengers too. What can be said of a government policy that turns its beneficiaries into victims? Let's be blunt. After nearly a decade of airline deregulation in this country this policy has proven to be a failure. Our scheduled airline industry is highly concentrated, with little effective competition and overcapacity.

The two major scheduled carriers lost $2 billion between 1989 and 1993 and are debt-ridden as a result of competitive practices designed to put each other out of business. Despite sharply rising average fares, which have not benefited consumers, the industry continues to be unprofitable on a long-term basis. Air travel has become less convenient for passengers and there has been a decline in service to some regions. Finally, some 16,000 jobs were lost in level 1 and 2 Canadian carriers between 1989 and 1994, including 10,600 jobs at Air Canada and PWA.

Air deregulation relies on free and open competition, but an approach originally aimed to increase competition has in fact led to less competition. Our airline industry today also remains unstable, despite the present apparent truce between Air Canada and Canadian Airlines.

This analysis was presented in three background papers accompanying our initial September 1 submission to you.

In our view, the problems facing our airline industry can be directly traced to the corporate behaviour allowed and fostered by airline deregulation. The absence of regulatory levers has left the federal government powerless to intervene and achieve a fair balance between the forces of competition and the protection of the public interest. With deregulation we have moved from a near monopoly regulated by government in the public interest to an industry dominated by two major participants serving their own private interests.

Clearly, the corporations under deregulation are unable to manage air transportation in the interest of the Canadian people. We therefore welcome the Canada Transportation Act from a minister who had the opportunity to correct the mistakes of the National Transportation Act in 1987, brought in by the previous Tory government.

Unfortunately, Bill C-101 does not repair the damage. If anything, airline deregulation is furthered and the damage is extended. This is unacceptable.

Today we have tabled with you our agenda for smart regulation of the Canadian airline industry. In our view the restoration of stability in the airline industry and the long-term preservation of two viable Canadian-controlled airlines serving the public interest can occur only through smart regulation. Smart regulation must occur in four areas: capacity and routes, fares, air carrier financial fitness and commercial viability, and workers' rights.

Our approach runs counter to what is contained in Bill C-101. We must finally recognize that competition is not an end in itself but is only a tool to achieve the objectives in clause 3 of the bill. When the competition becomes destructive, as SCOT itself admitted in its June 1993 report on NTARC during the height of Canada's airline crisis, when both major carriers were bent on putting each other out of business, ``the key is to regulate better and smarter to harness the market mechanisms in order to provide'' the public's best interest. We believe our agenda does precisely that.

Pages 20 to 24 of our brief in English and pages 22 to 26 in the French version, which we have tabled today, summarize four major conclusions and nineteen recommendations for regulatory change. The rationale for these changes is summarized in my speaking notes on the next three pages, which I will also leave with you today.

Capacity and routes: The relaxation of market entry and exit requirements has allowed the corporations to restructure the airline industry in their own interests. The two major carriers have used destructive pricing practices and capacity as weapons to bring about the financial ruin and elimination of weaker competition. These practices have produced a weakened airline industry and wasted society's resources.

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New regulations are required to achieve the following objectives: managed and fair competition, justification of new capacity, protection for incumbent carriers, and protection of existing service to smaller communities. These public policy objectives can be achieved by regulations that consider the impact new applicants may have on industry stability as part of the initial licensing procedure, that establish a triggered threshold access provision for entry to new routes, and that require justification of complete withdrawal by a carrier from a route.

Fares: Airline pricing on deregulation has produced sharply rising average economy and discount fares for consumers and economic yields for the industry as a whole. The only mechanism permitted to deal with predatory pricing practices is section 50 of the Competition Act, which has proven to be ineffective.

Air carriers should be permitted to set fares within a zone of flexibility established and monitored by a regulatory agency. Our proposed floor and ceiling for fares in line with developments in Europe would curtail suicidal competition, yet would still result in reasonable airfares for consumers. Fares must be set to cover total airline costs and allow the industry to modernize its fleet.

Financial fitness and commercial viability: Airline deregulation has produced tremendous volatility in the scheduled Canadian airline industry. New entrants have undermined the integrity of the national networks linking regions of this country, exposed passengers to greater safety risk, stranded consumers, and exploited their workers with low wages and working conditions as a result of social dumping.

Our regulatory proposals, again based on European requirements, will require incumbent carriers and new entrants to demonstrate their financial fitness and commercial viability as conditions of licensing. A regulatory agency will establish simple but clear economic and financial standards.

Rights of workers. Airline deregulation and privatization have meant lay-offs, job insecurity, poorer working conditions, wage freezes and cuts, and a climate of fear in the workplace. The immediate future holds a prospect of more job losses and a further decline in workers' standards of living. Worker concessions will not save the airline industry in Canada. Instead, we need a new transportation policy that recognizes jobs as a key element. Workers facing job loss need labour-protective provisions and access to training. We also need legislation to keep our jobs in Canada.

Our proposed regulatory initiatives are warranted, reasonable, sound economic and transportation policy. It is action that will benefit the airline industry, consumers, employers and all Canadians. It is an approach that constitutes better legislation and policy than that contained in Bill C-101.

Let me now turn for a few moments to an examination of specific clauses in Bill C-101.

The first category of clauses are those that are seriously flawed and must be deleted or altered significantly by the Standing Committee on Transport.

The role of the new Canadian Transportation Agency: The thrust of Bill C-101 is to strip the new agency of its autonomy and make it a purely administrative body carrying out the explicit policy and directions of the Minister of Transport. These changes can be seen more clearly in several areas, including the disappearance of the legislated public interest test from the act, the loss of the agency's ability to initiate its own inquiries into safety, which is former subsection 35(3) and is replaced by clause 38, and moving the function of the annual review of the industry from the agency to Transport Canada under clauses 51 and 53.

While these changes may make life more easy and convenient for the minister, it will not ensure the development of good transportation policy for all Canadians. When airline deregulation was introduced formally by the Tories in 1987, the move was controversial, to say the least, particularly in the area of safety. With these changes, those who set the policy will now evaluate it, an unsatisfactory state of affairs in our view. For this reason, subsection 35(3) must be restored to the new agency, along with the annual review function, with the commitment of resources to perform these functions in an independent fashion.

The designated area: As we indicated to you in our letter of September 1, 1995, we oppose the deletion of the designated area concept from the legislation. This will deregulate the north. This committee has already dealt with this issue in its June 1993 report on NTARC. This committee found that the agency was not applying the reverse onus test as envisioned by the act and that there were fears that overcapacity is rapidly becoming a serious problem with all of the attendant consequences that occurred in the south.

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Similarly, with the withdrawal of Canadian North, residents in places such as Iqaluit are concerned about loss of service and fare hikes on monopoly direct flights. Given the poor results of airline deregulation in southern Canada, we see no reason to extend it to the north, particularly given the proposed change to section 65 halving the notice period for withdrawing service.

The introduction of clause 48, extraordinary disruptions, represents a desire by a minister to intervene when deregulated transportation markets, including airlines, become dysfunctional and, following their own logic, move to self-destruction. When that happens, the Minister of Transport wants to bang heads in a room beyond the reach of the Competition Act in order to fix the problems of destructive competition.

As the first victims of such market dysfunction, we see the need for clause 48. However, quite frankly, it is too little, too late. It will operate without criteria and is virtually unprecedented on such a scale as a reserve power in any piece of Canadian legislation.

If anything justifies our agenda for smart regulation, it is the fact that clause 48 was introduced in the first place. We either have smart regulation or we live with the folly of our mistakes.

Our second category of clauses are those that in our view are good first steps that must be expanded to make them effective.

Financial fitness tests: We welcome Transport Canada's long-overdue interest and action in the financial fitness of new carriers. The issuance of policy direction under paragraph 86(1)(b) of the act to the agency setting minimum financial requirements for Canada-U.S. transborder operations is a good case in point. These measures will protect consumers and workers from the negative effects of the ``here today, gone tonight'' buccaneer airlines.

Similarly, the addition of subparagraph 62(a)(iv) as a condition of new domestic licences is welcome, because it creates a new test of having to meet prescribed financial requirements.

However, more needs to be done here.

First, subclause 64(1) must be expanded to include the meeting of prescribed financial requirements on an ongoing basis. The European Community's third package of aviation liberalization measures contains a number of such requirements that could be a model for Canada, including the requirement for air carriers to at all times operate at sound economic and high safety levels, which is article 1, and an annual review of the financial and economic situation of air carriers, article 5(4).

Second, the addition of clause 64(3) is welcome to deal with faltering start-up carriers. But we believe this provision must go further in order to deal with the real buccaneers in our industry.

Just as the United States attempted to deal with Frank Lorenzo via H.R. 2461, for example, we must deal with Robert Obadia, a man who the Montreal Gazette of September 28 and 29, 1995 reports is under RCMP investigation for fraudulent disposal of assets to avoid creditors, including 1,300 former employees, and has now been involved in two bankrupt airline operations, Nationair and Astoria.

Borrowing from U.S. legislators, we should prohibit the issuance of licences to any person who has controlled one or more air carriers and has suspended operations more than twice through bankruptcy proceedings.

Now that we understand the intent of section 61 to create a legislative authority to regulate wet leasing arrangements such as code-sharing and block-space deals, we welcome it. Of course the devil is in the details as we await the release of the already drafted regulation in this area.

In the meantime, we need to go a step further to create a legislative ban against cabotage in order to set clear public policy direction for the architects of the new regulation. It is our understanding that article 10(6)(a) of the new open skies Agreement between Canada and the United States was not intended to allow cabotage or quasi-cabotage situations. For the future protection of Canadian industry, such cabotage situations should be outlawed at this time in the new Canada Transportation Act and not just be left to regulations.

In conclusion, thank you again for the opportunity to appear today. We look forward to your questions.

The Chairman: Thank you very much, Denise, for your submission. It was very thorough and your suggestions are noted.

Mr. Gouk.

Mr. Gouk: I don't have any questions at this time. I need some time to go through your suggestions. You seem to have put a lot of work into it, and it's going to take a bit of time to go through it. I have your number, so once I'll have read it, I will be in touch if there are areas that I need to have clarified or explained.

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The Chairman: Mr. Nault.

Mr. Nault: Mr. Chairman, I have just one particular problem. The witnesses have laid out their suggestions in their submission that in northern Canada...and I'm not sure whether they classify the Northwest Territories as ``northern Canada'' and leave those of us who live in northern Ontario or northern Saskatchewan as something different. But I can tell the witnesses from experience in northern Ontario, since we've had deregulation in northern Ontario we've had a tremendous increase in frequency of airline flights, whereas under the regulatory regime before, in just about every case, we were subjected to one flight a day, if we were lucky enough to get one flight a day. Obviously the plane was a little bigger than is the case now.

Of course I am very proud of the fact that we have a regional airline called Bearskin Lake Air Service, which is a very successful airline, operating more planes than practically anybody in any of the northern territories or northern parts of Canada and flying to just about every community.

So I need to know whether or not they're talking about my region of the country, because I've seen just the opposite in what's happened in the last number of years since deregulation took place.

The other issue is that I happen to represent the most aboriginal communities of anybody in Canada. One of the things the aboriginal communities are doing is joining forces to start their own airlines.

The suggestion - and I want you to clarify this - is that they would not be able to enter the market because they may be too predatory or give Bearskin a run for its money. Obviously the first nations I talked to want to give Bearskin a run for its money because they think its prices are too high. They have started their own airline, so far, and are starting to get into the action.

So this whole issue of restricting routes and regions or putting in zones...it sounds to me, if done the wrong way, it could affect a region such as mine, which it seems to be doing very well under deregulation. In a town like Kenora, where we used to have one flight a day under regulation, we're now getting six, seven, eight flights a day. To me that is a benefit. The plane is a lot smaller and uncomfortable, I agree. God only knows, I wish we had a few more with bathrooms on some days. But I go from Kenora to Thunder Bay, and then I get on a bigger plane and away I go.

We wish we had a few larger jets. I'm not arguing that point. But as far as frequency goes, I think that's an improvement.

You're suggesting we restrict access and competition by creating zones. I don't mind the argument of having some sort of requirement to look at the financial abilities of individuals who want to get into the business, because you're right, there are fly-by-nighters, but I happen to be from a region where we've had some success.

Could you comment on those remarks?

Mr. Richard Balnis (Senior Research Officer, Canadian Union of Public Employees): The first question you asked was for the definition of the north. We're using the definition of the designated areas north of 55. That would not include your area. It's the true north. We're not talking of northern Ontario but the definition of designated area in the bill.

On the question of greater service under deregulation, some markets have seen greater frequency and more seats, but there are other markets under deregulation, including areas such as Sault Ste. Marie, Sudbury - a little further south than you're talking about - that have actually seen declines in frequencies and number of seats. So the markets would vary.

For Kenora you've seen an increase. In other markets we looked at...when we made our submission to the NTA act review commission, we put forward evidence that showed in fact routes were losing service and frequency and total volume of seats. So it depends on the market.

About barring someone from entering the market, our proposal is not designed to bar someone from entering the market. We are talking of creating a threshold point. We'll use the example of Bearskin.... I don't know them. Let's call them air carrier X to be safe. If air carrier X is providing poor service at high fares, our proposal will not prevent an innovative aboriginal airline B from coming in and offering the service.

The danger is when you have two or more carriers enter a saturated market. Then they have a zero-sum game, where in effect they try to put each other out of business. We regard that as wasteful and not serving any public policy interest. Sometimes competition can be destructive.

So we're not barring entrepreneurs from coming in and making the airline industry efficient. Airline B would not be barred from coming in and making airline A do its job. But we want to avoid airline A and B killing each other. Then you are left with waste.

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In particular, we represent, for example, the flight attendants of both Air Canada and Canadian Airlines. I can tell you this about those two years when Canadian Airlines was on the verge of destruction. Watching people with 25 or 30 years of seniority about to lose their jobs because the red team and the blue team had decided to kill each other, in our view, was bad transportation policy and a waste of society's resources

We don't want to go back to the old CAB. We don't want to go back to the old CTC. That's why we call it smart regulation. We were triggered by what SCOT said in June 1993, which was that sometimes the market doesn't work. What you must do is regulate smarter. We put forward our proposals to be that smarter regulation.

Mr. Nault: Mr. Chairman, that's the issue I wanted to touch on. I don't have the statistics with me, but it's my impression - maybe it's a perception, so correct me if I'm wrong - that it's very difficult for us to debate regulation of the past versus deregulation now.

Look at the frequency of how many passengers go by air now, as compared with 20 or 30 years ago, when regulation was in its strictest form. I think you would agree that there's a tremendous change and difference in people's attitude about using airlines and the frequency with which they use it.

Therefore, we're talking, quite frankly, about apples and oranges. You can't really go back to the regulatory times of the past and say that it worked a lot better. It's impossible to do that. We're looking at the environment in today.

In the bill, you do suggest that the minister has made some improvements, but you argue that he didn't go far enough. Would that be a fair assessment? Would you like him to go a little further than what he suggested?

Obviously, one of the main issues the minister is concerned about, which he has said publicly on many occasions, is this interest in the two major carriers to do war against each other to the point of one of them having to be put out of its misery, so to speak. He has put an area in a portion of the bill in which you can deal with that in an effective manner.

My sense is that you do agree with that. I get the sense, on the one hand, that you basically agree with the thrust of the bill, but as with all unions or all people, you'd like to see it go a step further and do a few things that, if you were the minister, you would have done your way. Is that a fair assessment of what you have here?

Mr. Balnis: I think you raise a couple of issues. In terms of going back to the past, unions can be accused of just coming to the SCOT and just saying I told you so. I think we've taken the challenge and gone beyond that. We said that it is different. Alfred Kahn, when he introduced U.S. airline deregulation, said that the egg had been scrambled so much that one would never be able to put it back together again. We're saying that's fine, we can't do that, but let's make a better omelette.

That's why we came with our smart-regulation proposal and saying that we're taking up the challenge. We're not going back. Views have changed. The industry has changed. Travellers have changed. But let's make sure we can manage the competition and have fair - not destructive - competition.

In terms of your assessment that we may be saying the minister has gone far enough, no, there are many clauses in Bill C-101 in which he's deregulating more and stripping the power of the agency. We disagree with that.

Consider clause 48, which is his extraordinary disruptions clause. In trying to understand what he was trying to do with that clause, we can understand when a minister is confronted in a newspaper every day with Air Canada killing Canadian Airlines and Canadian Airlines killing Air Canada. We can understand that frustration. He's sitting there with 16,000 employees at one airline and 16,000 at the other phoning and faxing him, and all these things. What's he going to do?

We understand the desperation of clause 48, but we're saying that it's too late then. You have to go back to the fundamentals of the industry and stop the fight in the first place.

As for just having a meeting in a room, it's too late, because they have created themselves to kill each other. We're saying that if they know the rules of the game, that kind of destructive behaviour will be harnessed rather than sort of being at the end.

So we're trying to be responsible, too, and trying to help you. We're not just saying we told you so or that you should go back to 1984. We're trying to say that, given the crisis we have, clause 48 won't work but other measures will work, in our view. That's why we've offered it to you.

We can appreciate that we offered it today and you haven't had a chance to study it. Most of your committee is on other pressing matters.

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Mr. Nault: Railroads, right?

Let me ask you this last question before we wrap up. There is a belief by many in Canada that the reason we're having this battle between Canadian and Air Canada is that in fact this country should only have one airline. The country and the population are too small for two major airlines.

Your suggestion, if I want to follow that to its conclusion by a lot of commentary that people have put forward, is that what you want to do is divide up the possibility of one large corporation coming out on top in the end of this particular private sector battle into two small companies, in fact. So we can say we have two national airlines, but in fact we don't because there just aren't enough people. Now, this is not taking into account the regionals. The regionals will always be there because the big guys don't want to play around in the regions.

What do you make of the comments people have made that the reason this war is going on is that there just isn't enough revenue for two major airlines in this country?

Mr. Balnis: As the union representing employees of both airlines, we have discussed this issue long and hard, and our union's position is that there is room in Canada for two national carriers. However, they can only survive if there is a smart regulation to prevent these wars.

If you believe that you should have one mother carrier in Canada, you will have the worst possible outcome of a transportation policy. You will have gone from Air Canada 15 years ago, which was the regulated dominant carrier, to a dominant carrier, whether it's Air Canada, Canadian, or Mapleflot, which is what ScotiaMcLeod likes to call it, that is now unregulated. It will be able to do whatever it wants, and we don't believe that's a rational public policy outcome.

Mr. Nault: Mr. Chairman, I just want to wrap up with this as a statement.

Quite frankly, there are many countries in Europe, the ones you talk about, that have only one national airline.

Mr. Balnis: I think you've been talking to Air Canada and their charts.

Mr. Nault: No, I don't talk to them. I'm not into airlines, so you have an advantage over me and so does Mr. Gouk.

I tend to agree to a certain extent that we have a very small population and too many planes running around out there, and that's why these fare wars are going on. They're competing for a very limited amount of passenger revenue. That's what they're doing it for. They're not doing it because they want to take each other out.

That's my only point. We can debate this all day, but I know these guys are looking at me kind of strange and saying we haven't eaten all day.

Mr. Balnis: Yes, it's lunch-time.

Just to give you food for thought before you actually get any more food, if the Europeans have one carrier and Canada has two, look at the United States market. Look at the concentration that has developed there with the number of carriers that have gone bankrupt and consolidated. According to the financial analysts I've talked to, by the end of the year USAir, which is a carrier that is many times bigger than Air Canada, is going to be gone. It's going to be merged.

The Chairman: Maybe Northwest is a better airline.

Mr. Gouk, did you have any more follow-up?

Mr. Gouk: No. Thank you.

The Chairman: Thanks, Denise and Richard. It's good to see you again. You're familiar faces here at the committee and we appreciate the time and effort you made to be here and your submission. Thank you.

Ms Hill: Thank you.

Mr. Nault: They're obviously used to being here.

The Chairman: Colleagues, we'll see you next week. The meeting is adjourned.

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