Skip to main content
EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 31, 1995

.1530

[English]

The Chairman: Good afternoon, colleagues. We are resuming consideration of Bill C-101, The Canada Transportation Act. From CP Rail System we welcome Mr. Robert Ritchie, president and chief executive officer and a face familiar to this committee.

Mr. Ritchie, welcome. I wonder if you could introduce the gentleman you have brought with you today and give us your presentation in fifteen minutes or less so we can pursue some questions with CP Rail.

Mr. Robert Ritchie (President and Chief Executive Officer, CP Rail System): Thank you, Mr. Chairman. With me today I have Rick Sallee, our vice-president of marketing and sales, and David Flicker, our vice-president of government and public affairs.

I believe I have the time down below fifteen minutes. Without ado, I will get right into it.

I have just a few comments. When we met last, on CN privatization, I said railway renewal represented a fresh opportunity to establish policies to get it right, to stimulate innovation and make possible a sounder railway industry. Today the CN privatization legislation is done. The first round of work on grain legislation is done. Now we have Bill C-101 to reform various transportation statutes. Done right, it can put the railways on the right track to higher investment, which is the essential underpinning for competitive service and prices. Done wrong, we feel, it will continue the decline.

Transportation laws should not be a matter of being pro-shipper or pro-railway. It is a matter of getting the balance right. That's what this bill is supposed to be all about. If we are getting it right, that would mean meeting shippers' needs, promoting competition, and ensuring successful rail service in Canada.

Shippers obviously are our customers. They face strong pressure in their markets for better prices; pressure on delivery and service. We are all part of that. We survive only if they prosper. We have to share in our customers' circumstances, adjusting our prices to help keep them in their markets. This is a give-and-take relationship that holds for all railways and all shippers, Canadian or American. It is a fact of life and one of the major drivers of the whole interrelationship between railways and their customers, and it cannot be legislated.

As a result, our prices responded to tight customer markets before 1987, and a whole lot more after 1987. But when many of those markets have come back for our customers, we have not seen any recovery in our prices. Shippers have focused on the price trend and have naturally applauded it. Most have not noticed what has happened to railway investment or its relationship to service and price, either now or in the future.

Getting it right for shippers is indeed about price. But any discussion of railway prices must include the sustainability of the services the shippers need. Only a railway industry that is able to invest can deliver that. That balance between today's prices and tomorrow's services is what you have to be concerned with.

Bill C-101 unfortunately does not fix what the NTA review and the passenger royal commission said had to be fixed. It appears we have not had the courage to acknowledge what is clear to independent parties who have studied the matter; that is, that the extraordinary legislation put in place to create competition does not work. It is overkill. It is a universal solution for a very particular problem.

``Captivity'' is an inappropriate term. A great number of shippers served by only one railway, which is essentially today's definition of ``captivity'', have competitive choices. Those choices are among truck, truck-rail, and water and port options. In addition, there is very real market and geographic competition, which has a very real impact on railway rates. Yet the NTA treats all shippers served by one railway as captive, and Bill C-101 continues this myth.

The NTA 1987 was supposed to be about allowing market forces to do their job. It turned out to be about regulating competition - an oxymoron if there ever was one.

.1535

Nowhere else in the world of surface transportation does such regulation occur.

The measure in Bill C-101 taking into account significant prejudice may moderate somewhat the use of such regulation in negotiations, but not where competition is weak and not where there could be prejudice.

Canadian railways will still operate in by far the most regulated transportation sector in North America. As long as regulation can arbitrarily take railway prices below normal market levels, the railway industry faces uncertainty, and investors hate uncertainty. This makes long-term investment in Canadian rail a riskier proposition than it should be.

What does the future hold for Canadian railways? This is a very good question.

In the U.S., rapid consolidation will generate even greater economies overlaid on their more competitive policy environment for rail restructuring and investment, and this is a sobering challenge.

For example, the Union Pacific's workload measured in gross tonne-miles today is bigger than CN and CP combined. After the merger with Southern Pacific, they will be more than twice as big, and there's not just one railway this large, there are two. The Burlington Northern and Sante Fe is now twice as big as CN and CP combined.

We want to be in business as a premier supplier, but if we cannot compete within the North American market we will inevitably become a regional railway at best.

I still cannot find anyone to explain to me why when our rail industry has inherently lower densities than the U.S. industry has, we would also have a regulatory environment that disadvantages Canadian carriers and invites U.S. carriers to take advantage of our rules, to further disadvantage Canadian carriers. This is simply one-way free trade, and it is having its predictable effect.

If future rail services for Canadians are U.S. based, there just won't be a lot to regulate in Canada - and not a lot is regulated in the United States.

I believe we want a viable, Canadian-based railway system. This has been a legitimate dream since we became a nation. I believe it should remain our goal today, and it should transcend artificial short-term reductions in rates.

For CP Rail systems the most pressing challenge today is to try to sustain our capital spending in the face of a declining ability to support it. Since 1987 we have been working harder and getting paid less - a whole lot less, and with little sign that this will level off.

Despite significant effort, we have not been able to bring our costs down as fast as global competition and Canadian transport law have brought down our revenues. The result has been net earnings that are inadequate and a return on investment that is unattractive. We are not earning what it takes to sustain the business. By that most fundamental of measures, we are not viable, even though there may be a modest profit.

Over recent years we have had to pull back on capital spending to what can be generated internally. This is inadequate for basic plant replacement, let alone the improvement and cost reduction that come from upgraded technology.

The bottom line is that for investment to occur, it is imperative that we get our operating ratio down and our profitability up, and not just once in a while.

For our part, we have restructured many of the ways in which we do our work. We've reduced our network and workforce. We've focused on those investments with the highest service and productivity leverage. We underwent a strike earlier this year to achieve a labour cost improvement. A full organizational redesign is now under way.

But we cannot achieve renewal on our own. Government policy helped to create the situation we are in today, and therefore changes are imperative if we are to improve.

Our basic capital requirements in Canada are in the order of $300 million a year. We've been able to justify spending only about $150 million on average since 1989. This has meant deferring all but the most essential work.

Given that, you might be surprised that our capital spending in Canada this year will exceed $500 million.

You may well ask, on what grounds?

It is first a leap of necessity. We cannot keep deferring vital replacement and upgrading if we intend to stay in business. Defer too long and you can't catch up. This is what happened to the Penn Central, and it can happen here.

.1540

Second, it is a leap of faith, largely on our expectation that railway renewal in general, and this bill in particular, will provide a more hospitable climate for rail investment. With this year's capital spending we have gone out on a limb. Will it be justified?

Our plan for the next four years calls for more living on the limb. Surprisingly, we want to do it. We need to do it, and you have a role in whether we can do it.

Today the sum of railway renewal is barely sufficient to support even a modest improvement in railway investment, let alone the jump to over $500 million. Bill C-101 has not moved much from the shipper-advantage end of the pendulum swing that shippers pursued and got in 1987. Balance is not there. It is therefore difficult to understand the basis for the strong shipper reaction to this bill.

In NTA 1987, shippers wanted to see a greater play of market forces. They got that with confidential contracts. Shippers also wanted protection where competitive forces were weak. They got that too, and much more, because it became possible to invoke access to these measures in ways that went beyond the effect of market forces alone.

Moderating this windfall bonus is what the ``significant prejudice'' issue is really about. The provision is intended to ensure shippers with legitimate issues have recourse when there is need for it. That was the original intent of the shipper provisions when they were designed.

If there are concerns about diminished access to the agency, let's try to define that eligibility better. For example, there are concerns that gaining relief could be a two-step process. That's not what the legislation says, but if it needs to be made clear, let's do it. If the notion of harm or prejudice to a shipper's interest is not clear enough, let's ensure the legislation provides adequate guidance for the agency.

As it is, there is precious little ``renewal'' in Bill C-101. The railway renewal effort has flagged. CN privatization, which we supported and still do, has been so enriched as to give a disturbing message about competing railway investment. Grain transportation reform leaves an uncertain outlook for the achievement of efficiencies and railway investment. Level-of-service provisions leave Canadian railways, unlike their competitors, exposed to unpredictable intervention by regulators. Finally, the lack of any recognition that railways need to be financially sustainable means a vital link between attracting capital and providing services is just not there.

There is modest improvement in the bill for the railway industry. A streamlined process for the sale of lines is positive. So is the provision that would provide shippers protection when it is needed, not when it isn't. Taking the hand out of commercial negotiations is one way policy can give a positive signal about railway prospects. It is a signal that investors can respond to. Another way is by facilitating cost reductions, such as the necessary trimming of main-line carriers' networks.

To date the railway renewal agenda is sadly silent on the need for tax and other fiscal reforms. Taxation on railway inputs imposes direct costs on the railways when all parties want, need, and are seeking cost reduction. Because these costs are unrealistically and unsustainably high, there is a lot of potential here for further cost reduction.

Railway renewal overall remains short of the mark. Bill C-101 can be improved. I encourage you to do it.

Thank you very much.

The Chairman: Thank you, Mr. Ritchie, for your presentation. As is usually the practice, CP has canvassed the bill and presented a very clean, solid, and thorough brief. We're not sure who is responsible for this particular brief, but we want to make mention to that individual that they did a heck of a job. We especially appreciate the appendix at the back, where you've outlined your suggested amendments to the bill. That's also very helpful for the committee, so we thank you for that too.

Mr. Ritchie: Thank you. Most of them are in the room and they will be pleased to hear your comments, Mr. Chairman.

The Chairman: Congratulations.

We'll go to questions in the usual manner. Mr. Mercier.

[Translation]

Mr. Mercier (Blainville - Deux-Montagnes): That's very interesting, Mr. Ritchie. I would like you to clarify your position with respect to the kind of evidence of significant prejudice a shipper would have to present in order to seek relief through the National Transportation Agency. How can we make this rather nebulous notion of significant prejudice clearer?

.1545

[English]

Mr. Ritchie: Sir, we believe that it is quite clearly outlined in the bill right now. We also believe that there is a jurisprudence based around the notion of significant prejudice. But my colleague, Mr. Flicker, also has some specific words that I think he could volunteer.

Mr. David W. Flicker (Vice-President, Government and Public Affairs, CP Rail System): We've heard that some shippers believe that the significant prejudice subclause, subclause 27(2), as now drafted requires a two-tiered process, whereby a hurdle on significant prejudice has to be overcome before the case is heard on the merits.

Frankly, we were a bit surprised to hear that, because when you read the provision, that's not what it says. It's clearly a one-stage proceeding where the agency would make its determination after hearing all the circumstances of the case, and that's what the clause provides for.

If further clarification is needed in that regard, one way of addressing it would be simply to insert wording to the effect that the agency would act ``if the Agency is satisfied'' - and here are the added words - ``in the circumstances of the particular case and after considering the application, that the applicant would suffer significant prejudice''.

It's a concern that is a trifle artificial but nonetheless can be very easily addressed through some simple legislative work.

Mr. Gouk (Kootenay West - Revelstoke): With regard to some of your proposed amendments, such as the definition of ``rolling stock'' and, in that same block, where you referred to paragraph 106(1)(a), from your perspective what is the downside of that not being amended as you've requested?

Mr. Ritchie: Since I gave Mr. Flicker all the credit for spelling out the changes, I'll give him the opportunity to answer this question.

Mr. Flicker: Rolling stock comes into it in a couple of ways with respect to both clause 6 and clause 106.

The definitional clause - that is, clause 6 - in the way it's now drafted has a very anomalous and probably unintended effect in that it refers to equipment that is designed for movement on wheels on the rails of a railway, which could include a lot of goods and a lot of vehicles that are not designed for travelling on their own wheels on the railway. So you put something on the back of a flatcar and suddenly it meets this definition.

The thinking behind the amendment of the definition was to ensure that we got it right and that we captured it in the definition. That was what we believed Parliament had intended.

Clause 106 is with respect to the security agreements, and it's in effect to facilitate the financing of equipment not just by CP Rail System but also by CN and all other federally regulated railway companies, whereby they could finance on the basis of rolling stock, as defined. So it would simplify the financing arrangements and make it easier to secure financing for a wider range of railway equipment.

Mr. Gouk: In a similar vein, what would CP Rail get out of subclause 27(2) being in there and what specifically would they lose if that subclause were not there?

Mr. Flicker: That subclause in effect gives us a sense of some hope and understanding on the part of this committee and your colleagues in Parliament. In 1987 the legislation was changed in a very fundamental and dramatic way, and the pendulum was swung very far over to the shippers. It's not CP saying so; it's the minister at the time saying so; it's the debates in Parliament. There was a conscious and deliberate attempt to reformulate the balance between shippers and railway companies.

Subclause 27(2) is a tentative, modest attempt to move the pendulum slightly closer to the centre.

.1550

Mr. Gouk: Could you give me some example of what kinds of specific things you would actually gain, or conversely, what harm it would do for you if that clause weren't there?

Mr. Ritchie: As I said in the opening remarks, the competitive access provisions in NTA 1987 were really designed for when shippers did not have another choice. What we believe subclause 27(2) could do is allow the agency to investigate what choices a shipper has. If the shipper has significant competitive choices - and they may be truck, they may be rail, and they may be truck, rail, and vessel - then that shipper could be found not to be suffering from the negotiating position the railway is in.

Mr. Gouk: About your amendment on subclause 51(3), dealing with the supply of information to the minister, you're suggesting you would not wish to supply it if they had some other source for it. If you have that information pertaining to your own company readily available, I am curious what your rationale would be for not simply supplying it that way, as opposed to having them go through Statistics Canada to pull the information. Again, what are you looking for from that?

Mr. Ritchie: Not all this information is available through Statistics Canada. This information pertains to the era when railways were regulated. We believe we're trying to transcend to an era when railways aren't regulated. This information costs us money to pull together. It is not required, we believe, in the new era. Therefore, we don't think it's necessary.

Mr. Gouk: Moving to your amendment on subclause 129(4), from your point of view, what is the essential difference between the original wording and your proposed amendment on that?

Mr. Flicker: That's on traffic interswitching. The idea, with which we do not have any real quarrel, was that if someone were entitled to interswitching of their traffic before the sale of a line to a short line, then there would be a perpetuation of that right.

Frankly, we've read clause 129 many times. It's difficult to follow the language and to follow the thinking of it. Our language in our version of subclause 129(4) is not intended to have any dramatic difference. It's intended to say things very straightforwardly. If you look at the two provisions side by side, I think you'll agree they essentially say the same thing, but ours says it in a very straight and direct fashion. Our language says:

So again, there's no basic difference of philosophy. It's a question of more straightforward language.

Mr. Gouk: Is that essentially the same feeling or rationale you have about subclause 130(2)?

Mr. Flicker: Yes, sir. Again, the language is designed and drafted to be as straightforward as possible and to say exactly what we want to say there.

Mr. Gouk: On your amendment on clause 97, do you agree the mandatory conditions referred to in clause 97 continue with a sale, a lease, or a transfer? If you sell to someone else, you accept, and it would be appropriately worded and they would be put on notice, that those conditions now are transferred along with the sale of that line; they would not be extinguished by that sale?

Mr. Flicker: I'm sorry, sir. You said clause 97?

Mr. Gouk: Yes, clause 97. I would have to dig to see where it is in your booklet.

Mr. Flicker: It's on page 31, sir.

There's no attempt to change the conditions you are discussing. We've introduced a proviso at the beginning of clause 97 that says:

.1555

Mr. Gouk: On the matter of final offer arbitration, from your perspective is there an advantage - and I am sure you will find one - to the current procedure whereby one side submits its last offer, as it were, in the blind and the other party gets to look at that offer, adjust its offer, and then make its final offer based on that privileged information? What is the purpose of that? How can that sort of thing be justified in your eyes?

Mr. Flicker: I'm not sure I'd call it privileged information.

Mr. Gouk: It is given to you openly in terms of the procedure. It's not slipped to you in a brown envelope.

Mr. Flicker: No, sir.

Mr. Gouk: I'm saying one side gets an advantage that the other doesn't. What's the rationale for that?

Mr. Flicker: I'm not sure it's an advantage. I believe it was done very deliberately and under the advice of the drafters of the legislation who were not trying to do the railways a favour when they were putting final offer arbitration into effect. This is not something we pursued at all.

There are a few reasons for that. First, you should keep in mind a railway can never initiate final offer arbitration. Under the legislation as it now exists, only the shipper can initiate the final offer arbitration. Naturally, if only the shipper can initiate it and start the process rolling, it seems to follow that the railways should be allowed to put in their offer second.

Similarly, that doesn't preclude the shipper from having another kick at the can in the sense that once the railway has put in its offer, the shipper always has the ability to accept the offer or, if it wishes, to withdraw from the final offer arbitration altogether. So the shipper isn't locked into it. The shipper always has the option of starting the final offer arbitration or removing the matter from the final offer arbitration. So in those circumstances the shipper has a lot of advantages moving into the process.

Somebody has to put in the last offer because otherwise you're dealing with this final offer selection process. In a process that is designed to avoid the arbitration itself and reach negotiation, it doesn't make sense to create a situation in which both sides have to go in there with the offer at the same time. It doesn't fit in the logic of that sort of final offer arbitration, or what the authors call final offer selection process. It's perfectly normal in those circumstances - and I think the literature will back this up - that the party who initiates the offer at the final offer arbitration process, who always has the ability to terminate it, doesn't put in the last offer.

Mrs. Sheridan (Saskatoon - Humboldt): My first question goes back to subclause 27(2), which Mr. Mercier put to you. I understood you to say you felt there was some jurisprudence available on the meaning of ``significant prejudice''. I was expecting you to continue with that discussion in response to Mr. Mercier's question.

I'm wondering if you could do that now. How do you see it defined? You are correct in saying there has been an overwhelmingly negative reaction from the shipping community to that term and some of the others that follow in clause 34 and clause 113. But let's just stick to significant prejudice. Does it have any meaning in the world of railways as interpreted by those evil beasts, the lawyers?

Mr. Ritchie: Not being one -

Mrs. Sheridan: You're luckier than I am.

Mr. Ritchie: My esteemed colleague on my left isn't, so I'll let David continue to wax on this one.

Mr. Flicker: I am a lawyer, but please don't tell my mother, or at least I used to practise. I've gone straight now. Significant prejudice.

Mrs. Sheridan: Do you feel it means something?

Mr. Flicker: Sure.

Mrs. Sheridan: What?

.1600

Mr. Flicker: Let me begin by saying it's not the most felicitous wording. It's not the one we would have picked if we were drafting legislation, but the agency and the courts have shown themselves perfectly able to interpret wording of this type.

There is nothing unusual in having terms that have not been previously defined appear in legislation. It happens all the time. It's in the normal course of the process in which our laws are developed and devolved that decisions would clarify the meaning of this provision and any others. That's what the hearing process is for and that's what the courts are for.

There is nothing magic or obscure about this particular provision. But closer to home there is a history of the National Transportation Agency and the courts defining, very amply and with very little difficulty, a very similar provision, which appears in the NTA, 1987 as well, with respect to a similar wording called ``significant harm''. That's also contained, I believe, in the minimum compensatory rate provisions of the NTA, 1987.

It's a matter the courts considered in a case called Upper Lakes Group Inc. and NTA and CNR. The Federal Court of Appeal, through Hugessen, J.A., had no difficulty defining that provision. I can give you the language in which he defined it, but I think it would be more useful to the entire committee if I provided you with the reference later. Again, this is nothing unusual. It has been done before and creates no difficulty whatsoever for the courts and the agency to address it.

If one wants to talk about whether there are other ways in which the wording could be formulated, I'm sure there are many other wordings we could use, and I would be glad to provide you with some templates afterwards. But there may not be any real need to, given the fact that this type of provision is very much in the normal course of business for the agency to deal with.

Mrs. Sheridan: I don't disagree with you that certainly the agency and ultimately the courts can come up with a definition, but I think it strikes fear in the hearts of shippers when they wonder what they will come up with.

I would continue along the same line then. If I understood you correctly, you feel this term ought to be included in a provision like subclause 27(2) because it would deter people from coming forward with all manner of concerns that weren't serious enough. But I would put to you that the shippers would argue there haven't been many of these kinds of complaints before the agency in the past, so why are the legislators taking it upon themselves to add a rather significant hurdle or test - at the least undefined - at this stage of the game when, in fact, history shows there is no need for it?

Mr. Ritchie: We were hoping this would all be in the basket of railway renewal. Independent studies by the NTA and the royal commission found there was some problem with the National Transportation Act, 1987. The drafters of this bill did not put in concepts such as railway adequacy or that people should not have access to legislative competition when you have enough competition there. So we believe these are modest measures to try to promote those concepts within the bill as it now stands.

Mrs. Sheridan: At the conclusion of your remarks you mentioned that Bill C-101 is silent in the area of tax reform. On tax reform, what would you have us do, given that those kinds of concerns and considerations are under provincial jurisdiction? In my province of Saskatchewan - as I remember from the testimony I heard last year about this time - the tax rates imposed by the province are among the highest in Canada as they pertain to railways. Could you expand on that? You slipped that in at the end without much explanation. I was all set to write a provision on reforming tax to stick into the act.

Mr. Ritchie: I'm sorry, I would have spent more time on it.

Mrs. Sheridan: It does cause serious harm to the railways, and I'd like to hear what you'd like us to do about it.

Mr. Ritchie: We didn't spend a lot of time on it because I was conscious of the chair's request to keep this short, and we have taken a lot of your time in the past on fiscal and tax reform.

.1605

What can the federal government do?

First, what we would like them to do is to adjust the capital cost allowance to reflect what we have in the United States. Instead of taking 18 to 20 years to write off equipment, let's take 8 years. We'll buy more equipment that is more efficient, burns less fuel, is more friendly to the environment, and keeps us up with our international competition as a nation.

Second, I think they can show leadership in the excise tax form on fuel. There is a big cut - I think it's 7¢ a litre - that goes to the federal government. All tax studies show that it doesn't make sense to tax inputs in the economy. It hides it, it leads to inefficiencies, and it doesn't let the shipper make real cost-based choices. So we think the federal government should take the leadership and reduce or eliminate the federal excise tax.

Obviously we have a deficit problem, but in the past they have been reluctant to do this because they felt they would create a vacuum and the vacuum would be filled by the provinces.

We went to the provinces, and they have said that in most cases they would not fill it. In fact, we are working with provinces. There has been some progress with the provinces of Quebec and British Columbia. Also, we are in discussions with the provinces of Saskatchewan and Alberta to try to reduce the input taxes that we think burden the economy.

The bottom line is, change the capital cost allowances to make them competitive on a North American basis and show leadership on the fuel taxes.

Mrs. Sheridan: Thank you.

The Chairman: There are a couple of minutes. We can come back if you want. We'll come back. We'll do five minute rounds now, colleagues.

Mr. Gouk, five minutes.

Mr. Gouk: I have one area I wanted to touch on briefly. With regard to the process that you go through when you wish to offer a rail line that you own for sale, it's generally offered and then there's a series of steps depending on the jurisdiction - federal, provincial, municipal. Would you be opposed to the concept of including in those steps some procedure whereby you must offer through your unions an internal short-line operation? Do you see this as a positive step or as a problem for you, and could you just comment on that concept briefly?

Mr. Ritchie: Sir, we believe that the opportunity is there to do it. There is plenty of time under the existing time scales in the commercial negotiation phase for all parties, including unions, to come forward and see if they wish to purchase the line or offer use some commercial arrangement. It need not be purchase, it could be some form of lease, and by nature we would not exclude our unions from that discussion.

Mr. Gouk: Your response, though, still talks about the idea of sale. Are you concerned in a procedure where you simply want to divest yourself of that line, period? Is not continuing to run that line but reforming it as an internal short line a viable option for you, or do you not want to do that because you might potentially close the door on an outright sale of that line?

Mr. Ritchie: I would answer it by first stepping back one step and saying that we see all short lines as a partnership, and we see that if even if they're not related to us by any ownership or employee relationship. We see that relationship coming about either through a sale of the assets, a lease of the assets, or a grant of the assets, whatever we see as a way of making the best business arrangement with that short line.

On internal short lines - and that's almost developed along the lines of a formal matter - we have been working with our unions to determine a protocol or an agreement that would allow us to be more flexible and pay less on certain lines.

We would determine, I think before we took the line forward, whether we wished to go internal short line before any other arrangement. I don't think it would serve us to put it into legislation, because I just don't think it's necessary. But we would work within our own ownership because that's the easiest for us to control. It doesn't require any change to the status quo; we would approach it as another cost-reduction measure. We have not been able to negotiate the internal short-line agreement with our unions yet, but I'm told that were imminently close.

.1610

Mr. Fontana (London East): Thank you, Mr. Ritchie and CP, for submitting your comprehensive proposal and your recommendations. I want to get to a couple of the recommendations, but I have to tell you that I'm in a sort of quandary in terms of trying to deal with the balance. We have shippers who have come here in great numbers to tell us that railroads charge too much, they are using market power, they are denied competition and therefore want to keep everything that they have through the NTA, 1987. In fact, they don't want any erosion of those provisions regarding shippers' rights in Bill C-101.

Nevertheless, we have the railroad companies that will tell us that their situations are grim, that in fact there is competition in the marketplace, that in 1987 it was the shippers' turn, that it should be the railroads' turn this time, and therefore that this committee needs to balance those views.

I don't know whether all that is myth or whether it's fact, but do you and the shippers ever get together to discuss each other's problems so that they have a better understanding of what the railroad companies are all about and so that you have a better understanding of what shippers' needs are? There seems to be a real gulf, a great divide in what we're hearing. The government and this committee want to make sure that we have an efficient, affordable, transportation system that is going to be competitive for the shippers who have to sell their products and the producers, as well as make sure that we have the railroad companies at the end of the day that can deliver those products to market. Who's right?

While you're trying to answer that I wonder if you can tell me.... Part of your provision is to strip away all those shippers' rights since they may not even be required - and shippers believe those to be regulated competition, I suppose, or forced competition because they don't trust the railroads - and look at a new regime that in fact emphasizes competition, because at the end of the day you have to compete with the trucks and the marine, etc., so that the producers and shippers get the best rates.

Could you answer the couple of questions I've raised?

Mr. Ritchie: There are a couple of very large questions in there. On the rates, who's right? I think both parties obviously believe they're right. I think what we need is some very serious, fact-based research that I hope you have. I'm not sure you do.

Mr. Fontana: No.

Mr. Ritchie: You do know that our rates in real terms are 40% below what they were in 1987. You do know that our stock is languishing on the stock market and it's not all due to Unitel. Railroad in Canada is not an attractive investment. You do know that there are a lot of comments on the privatization of CN. That's going to be a tough sale. You do know that there are an awful lot of price increases going on in pulp and paper, because the price of even our own employee newsprint paper has doubled in the last six months.

Those are facts. I can tell you that the shipper as a victim has been around in Canada for quite a while. Certainly, we all understand that they don't want to give up anything they got in 1987. But we do know that the proportion of shippers that are local to one railway carrier originating traffic in Canada is lower than it is in the United States. The proportion of shippers receiving traffic that's terminating is significantly lower in Canada than it is in the United States.

We do know that market competition for the goods is there. Our rates go down to reflect that. We compete with coal mines on the CNR, for example. We fight with them daily.

Mr. Fontana: They both tell us that your prices are the same so there really isn't any competition.

Mr. Ritchie: I don't know what the prices are in the CNR, but I do know what they -

Mr. Fontana: Now you know, there isn't any difference.

Mr. Ritchie: I would hope you don't know because they are confidential. I don't know. If they state that they are the same, then you can probably agree that they're languishing at the bottom, because we have costs that are similar and we operate in the same environment.

.1615

Mr. Fontana: How do we get to ensure that both the shippers and the railroad companies can have it both ways? If Bill C-101 isn't the right balance and it isn't going to do anything for the railroads and hence might be problematic, even though I think you've indicated that the line abandonments, the creation of short lines, all those provisions are going to be very good for the railroad companies and the shippers as well as the short lines and so on....

Which of recommendations 1, 2, 3, and 4 on page 39 of your submission would in fact be necessary in order to get it right this time? Would they be the common carrier provisions? Would they be the level of service provisions? The running rights obviously are something the shippers want, but what is it going to take? Of all those on page 39, which are the most important?

Mr. Ritchie: Just looking at recommendations 1, 2, and 3, those are in order of priority.

Mr. Fontana: Putting something in clause 5 of the bill that financial sustainability of the railroads is a principle - again, that might be a nice thing to say and maybe we can do it. I don't know if just putting it there puts any money in your pocket. That's why I want to get to the nuts and bolts of what it is going to take to get it right in terms of the legislation.

Mr. Ritchie: We've given a lot of specifics through there that we believe would help clarify some of the issues the shippers are concerned about, particularly where they believe that subclause 27(2) and -

Mr. Fontana: I'm not interested in those. I'm talking about the things that are necessary for you.

Mr. Ritchie: To do the bill in the way it stands right now is the way we would recommend it, with the modest changes that we've discussed around here. If you wanted to talk about revenue adequacy, then we would have to rewrite and go right back to day one, and that would be along the lines we're talking about in Staggers in the United States. That is just not on the books. Revenue adequacy, to us, means the way it's defined in the United States.

The Chairman: If I may add a supplementary to the parliamentary secretary's request of you gentlemen here today, you were the ones who put forward that the oxymoron of ``regulated competition'' makes no sense. If regulation is what we're trying to move away from, then what, for example, is your response to the suggestion that has been made in previous meetings that we should do away with some of the shipper provisions that you're concerned with, but strike the balance and reduce the regulations by also doing away with things such as clauses 27, 34, and 113 and get away from regulated competition and let competition truly work - except, of course, for final-offer arbitration, your last bastion of compromise, which you might not ever have to hit or use or implement?

Mr. Ritchie: We have to dwell a bit on what this notion of captivity is. You have a whole basket of law in here that's trying to deal with the issue of competition when we really don't understand it.

I really don't believe that it is definable for every opportunity and for every location and for every shipper.

We have to ask ourselves a question: does the railway dominate the negotiation when there is only one rail carrier? If the answer is yes, then we ask if it prices its services without restraint.

Then it says: does it mean that when there is only one rail carrier serving the customer, that rail carrier ignores all other forms of competition? Those other forms of competition are what I laid out and they are significant. There's market competition. There's modal competition.

.1620

There's also leverage. Some shippers have one local point and then a competitive point. They use that competitive point to lever the local point.

So you have to ask yourself, does the railway carrier have market dominance? If it has market dominance, does it abuse that market dominance? If the answer is yes, then we believe the direction this government is taking to put it into a law of general application, which is competition law, would help and would do the trick. Why should this be any different from any other laws our customers operate under and their customers operate under? We believe those are fundamental principles.

We didn't go that way. We went to specific fixes.

Mrs. Cowling (Dauphin - Swan River): Thank you for your presentation. I have a couple of questions. Being from western Canada, I think the grain industry is an issue...coming from the shippers' perspective as well. Could you tell the committee how much of the revenue side of CP is generated through the movement of grain, and how dependent you are on the grain sector?

Mr. Ritchie: Approximately 25% of our revenues in Canada come from grain. That goes up to almost 30% in the United States. We are extremely dependent on the grain industry. I think you can see that in the revenues. When there's a good grain crop and a good market, the revenues in the railway industry improve.

Mrs. Cowling: Many of the shippers that have come before this committee have indicated that moving grain is quite different from moving other products off the prairies and out of the west, because of the collection, grading, and what not. Do you agree grain should be treated differently from other products?

Mr. Ritchie: It certainly is treated differently now. It's going through a different stream of regulation and deregulation.

I don't believe I'm naive when I say no, eventually it should not be treated differently from other products. It is not treated differently from other products in our business in the United States, and it works. I believe we have to get there in Canada, and the process we're going through right now is taking us toward that. We believe we're going too slowly and we're going to injure our grain farmers, not help them, by trying to pretend railways and governments can be all things and can protect them. We don't believe that's the case. We believe having a mix between regulation and open-market forces is not going to work, and we've made that quite clear.

My friend, Rick, is far more expert on this. He has been dealing with the grain industry.

Mr. Rick A. Sallee (Vice-President, Marketing and Sales, CP Rail System): As a matter of fact, the question of whether we meet with our customers was asked before, and the answer to that is of course we do, and we try to resolve these and talk about the issues. I would hope our customers would give us credit for trying to get to the nub of what the problem is.

Regardless of that, we've had many discussions on grain legislation with Transport Canada. When the minister put out the initial intention on grain, it seemed clear to us the direction was generally towards the market and more competition in grain. That's the way it was framed initially.

I believe the Minister of Agriculture and the Department of Agriculture also had some concerns, as did western Canadian farmers, that because the subsidy was removed farmers would pay immediately and there needed to be a transition period to take us from what is a very regulated system to a market system. I thought that was going to be the intent; we were going to a market system. That has changed to some extent. We're not sure where we're headed past the years 1999 and 2000. That's a concern to investors. I would think it would be a concern to farmers also. What is going to happen? Is it going to be regulated all the time? Should we getting ready for competition?

While many of our customers have said that, and they've said it in spades, I've also heard farmers say, what is important to me, especially right now, is that fortunately grain prices are good, and yes, cost is very important to me, competition is very important to me, but I have to have rail cars and locomotives and want to take advantage of the market the way it is.

.1625

I think that's the type of situation and discussion we've had. We're asking: where are we headed? We can live with a regulated system. We have done that since 1984 and prior to it. We can live with competition, but when we mix the two, I think we get into a situation of uncertainty.

Mrs. Cowling: Mr. Chairman, I have one more. It's with respect to competitive choices. I believe that in your presentation you had mentioned trucking was another choice for competition. There are parts of the west, particularly related to the grains industry, where in fact trucks aren't a choice because of the geographical barriers of the west.

This leads me to my question: can you give us any idea of how much of your rail network you would expect to transfer to short lines? How much of those lines would you expect to discontinue any service on?

Mr. Ritchie: It's very difficult to determine how much would be discontinued and how much would be transferred in one form or another.

Our rail network is currently about 18,500 miles. We're looking in the next couple of years at rationalizing approximately 2,400 miles. When I use the term ``rationalizing'', that's not a nice word for ``abandonment''. It means that we see them being managed in some other form.

The lines we see coming out of the service are mainly the lines that were captured by the Robson process.

Rick, how many miles was that? Do you recall?

Mr. Sallee: It's about 270 miles for CP. I think the total was around 530 miles or something like that.

Mr. Chatters (Athabasca): I was curious, considering that your first priority was the inclusion of the financial sustainability clause and, in clause 54, the inclusion of the ``revenue adequate'' provision.

I have some difficulty with that idea, considering that, in many instances, where parts of your line and CN's line have been taken over by short-line railroads, they have been able to operate quite profitably. I've understood from previous witnesses and the discussion that you have been unable to be profitable in those instances because of a management and labour regime that you're tied into. I have a little trouble invoking a lot of sympathy and a desire to include a ``revenue adequate'' provision in the legislation when others, through efficiencies in management and labour, have been able to be profitable where you haven't. That's one.

The other one that I wanted you to quickly comment on was just out of curiosity. I wondered why you asked for the deletion of clause 48, which is extraordinary disruptions. You asked for Parliament to be allowed the powers, rather than the executive branch. In our parliamentary system, in a majority government situation, the executive branch, which is the Prime Minister and his cabinet, has an unrestricted ability to follow its agenda in spite of the wishes of any opposition in Parliament. I am curious as to why you thought your suggestion is better than what is there now.

Mr. Ritchie: How about if I do the first one and Mr. Flicker does the second one?

First, I think I went on for quite a while about revenue adequacy. What we mean is to have it worked into the whole body of the law, but keep in mind that you cannot charge any more for the service than what competition will allow. That's all we're asking for. Allow us to charge what the competition will allow, both modal and market. Where there is market dominance, have a certain maximum-rate clause, again, like they have in the United States. We're not asking for a guaranteed rate of return like a public utility. We're just asking you to allow us to earn what we can under fair-market competition.

Keep in mind that we do not have the powers a short line has. We're not so genetically deficient that we can't run a railroad, but you saw this spring that we weren't allowed to be on strike, whereas a short line can do this.

.1630

There are certain issues for which we have been ordered back over the 115-year history of our company that you just can't lay at the foot of management. For some of it, you can do that, but I think some of it belongs here too.

It used to be a regulated industry. We have labour relations that reflect that. You can't wave a wand and make it go away. I wish we could. We've tried nobly. I applauded the Minister of Transport for trying to bring a balanced back-to-work legislation to Parliament this spring. I think he did, but it's a journey, and it's going to take us a while to get there.

David, paragraph 48(1)(a).

Mr. Flicker: I don't need to tell you, sir, that this is a rather broad and sweeping provision. Someone said it's like the War Measures Act writ small. It is not the sort of thing one usually sees in Canadian legislation or in keeping with our constitutional system. It's a very broad provision.

Of course we do recognize that there are practicalities in the sense that a majority government does have great sway in Parliament. I don't want to overplay it, but there's still sort of a sacrosanctity in having the matter presented and debated in Parliament. There's an openness, transparency, and visibility for the whole country to see that is lost if you leave that just to the executive. Parliament has, I think, shown over and over again that when circumstances merit and when the need is strong, it can mobilize itself very quickly.

So it comes down essentially to a faith in the deliberations of the House and the Senate. Not that there is any less faith in the Governor in Council, but, under our constitutional system, that's where matters of this type should be decided.

Mr. Chatters: I'm refreshed that there's still that much faith in the public out there in the strength of Parliament.

The Chairman: Thank you.

Mr. Gouk, you wanted a supplementary on that.

Mr. Gouk: This is with regard to ``interchange'' in clause 112. Right now, the way it reads is:

I've had a number of interventions, both here and personally, that were concerned about the situation in which the line of the second railroad is not owned by them, but leased by them. Given the intent and that you have already suggested several wording changes to clarify the intent, will you have an objection to changing the wording from ``of another rail company'' to ``being operated by another rail company''?

Mr. Flicker: With respect, it's not that simple. It's not an either/or situation; it's a question of gradations of control that the occupying railway has on the railway owned by another party.

Frankly, this is not something to which Parliament need necessarily turn its attention. The agency has already done that in case law. In the last couple of years, they had a couple of cases in which railways were running on the lines of another company and seeking inter-switching rights.

In one of them, the answer was no. The railway that was running on the other line didn't have a control over the operation. In another case, the answer was yes. So it's not an either/or situation; it's a question of just the level of the operating powers that the railways have over the line that is owned by another railway company.

It's a situation that has been addressed. I think a review of the case would show that the NTA had been seized with the matter and disposed of it very adequately.

Mrs. Terrana (Vancouver East): Actually, my questions have been asked. I just have a general question that has to do with this new bill.

Do you think that Bill C-101 is necessary or that the NTA of 1987 is adequate?

Mr. Ritchie: Definitely we believe that Bill C-101 is necessary. It is a first, modest step.

Mrs. Terrana: But you have recommendations.

Mr. Ritchie: Yes. You asked us for our recommendations, Madam, and we're taking the liberty to give them to you. We thank you for your forbearance in this matter.

.1635

Mr. Easter (Malpeque): I don't think there's any question that the major problem in this bill is trying to get the balance right between shippers and the railways. As I'm sure you're well aware, there are strong requests from a broad sector of players in the grain industry to delete subclauses 27(2) and 34(1) and clause 113. I think those requests come forward not just from shippers but also from producer organizations and governments. In the discussion today I just want to put on the record that there's another player beyond the people we're talking about here, and it's the one who pays the bill. It's the producer in terms of the grain industry.

There's no more important system in western Canada than that rail infrastructure network to communities, because, as the railways may try to cut back in terms of their efficiencies and the shippers, being the grain companies, may try to rationalize theirs and close down elevators, you find that even communities themselves are affected and become dying communities.

So it's extremely important for us to find the balance.

The problem I have with subclauses 27(2) and 34(1) and clause 113 is there's a belief that the court system will in fact protect the people who have problems with the system. In my former life I had some experience with the court system in terms of challenging the railways, and I've always found the experience to be a negative one in that the railways have a greater capacity of financial and legal resources to protect their interests to the disadvantage of ours.

So in terms of trying to achieve this balance, and recognizing that there is very strong opposition to those clauses in the act and requests for deletions, do you think there's any middle ground? You have a proposal on subclause 27(2). I question if it's much better. Do you think there's any middle ground there to which this committee or the Government of Canada can come in terms of the opposition to those clauses and where you're at on it and, from your perspective, your legitimate concerns?

Mr. Ritchie: You've raised a lot of questions, but we have to keep in mind that grain is dropping into this bill and it is still regulated. So the clauses we're talking about don't apply.

With respect to other shippers, is there a middle ground? No, there is not. We're so revenue inadequate that it's getting to be ludicrous. I believe that the noise, what you're hearing, is pressure tactics to encourage us as a nation to find middle ground. No middle ground is required. These are modest proposals. We are not gutting the shipper provisions. The shippers have more protection than any other shippers in North America with whom they compete.

What's the problem? We don't believe that this is a hurdle to get access to the agency. It is not going to be a big problem in front of the courts. We have proposed wording that we think will alleviate their modest concerns if they're real. I think they want them to be removed, but I don't think that's right. It's not good public policy. The act in 1987 was poor public policy, and let's correct it now. Let's not compromise and throw it out.

Mr. Easter: If you're in the industry or a producer sitting out there, let me go back to a statement the Alberta Wheat Pool made. They were talking about the NTA, which this will be replacing. They said that the NTA:

.1640

From a producer point of view, the key question is whether the railways will perform in a fair and reasonable way in getting that product to the marketplace, to an export position, or into the domestic market, in such a way that farmers themselves can remain competitive. From a producer's point of view, transportation is functional to marketing.

There's a belief out there that you're not going to perform. The experience was there in 1993-94. There was the experience with the WGTA, in which you, the railways, said in 1984 you were going to provide rolling stock, you were going to create jobs, and you didn't do it. There are some bad experiences out there. What's there to make us believe if we go with these amendments to the bill you will in fact perform as required under the bill: rolling stock, allocation of cars, etc.?

Mr. Ritchie: There are the level-of-services provisions in the bill. It's the law that we have to provide the service.

I disagree with the member when he says we did not perform after 1984. I believe we have.

There is a cyclical nature to all agricultural products. I do not believe it would have been good for the farmer who pays the bill to have us cover cars for all eventualities, because it was in his cost base. He would not want that, and that would not be good, efficient transportation. You never, ever can provide a base fleet to cover all the peaks and troughs.

I think we are doing the job. We did provide the jobs in western Canada. We built car-cleaning facilities. We built a locomotive shop in Winnipeg. We built a car shop in Moose Jaw. We built a tunnel. The list goes on and on.

Rick, do you want to add something on the situations as they pertain to grain? I know you're involved with it right now.

Mr. Sallee: I guess I appeared before you before, Mr. Easter, concerning the car shortages that occurred. I really don't want to drag that out again, other than to say I think that did represent unusual circumstances. I don't think it was intentional. We had a North American rail car shortage. But the actions we took.... There was a lot of nervousness for a lot of people because of what was happening, but I think we took positive, strong action. Even though there was a fear that there would be a recurrence of that last fall, it did not occur. I think the industry, the GTA, and others involved recognize that.

We're truly trying to marshal our resources to satisfy producers. The whole trust issue is something the railways are going to have to tackle in a different way, and in a very positive way. As you know, past legislation had producer meetings. Sometimes these meetings are not well attended. In following up, because we knew major change was coming, we've spent close to half a million dollars on advertising to try to educate farmers, with dubious value in terms of whether it gets read and understood.

Maybe the right avenue is to work much more closely with producer leaders, the people who do take the time; the Larry Maguires. There's a whole raft of them out there who do represent, or claim to represent, producers. How do we get a greater trust factor? That may be one way of getting more trust in the system.

The Chairman: Thank you.

Just for the record, I want to assure my honourable colleague who said we mustn't forget about the people who pay the bill, the producers, that last week the committee did get solid representation from representatives of producers, such as the oilseed producers' association, the wheat growers, Mr. Maguire, whom Rick has mentioned, the United Grain Growers, the grains and oilseeds groups, etc.

I just want to assure you, Mr. Easter, that by no means are these producers forgotten; not at this committee, anyway.

.1645

Mrs. Wayne (Saint John): Mr. Ritchie, the line from Saint John to Sherbrooke, when CP owned it, travels through -

Mr. Fontana: [Inaudible - Editor]

Mrs. Wayne: Not that I'm interested in, Joe, as Mr. Ritchie is well aware.

Aren't you lucky that I'm last on the list, Rob, instead of first, the way it used to be?

The route between Saint John and Sherbrooke, which travels through Maine, when you owned it was designated under NTA 1987 as ``deemed wholly in Canada''. As you know, you sold it, and it is now the New Brunswick Southern Railway.

I'm wondering if you have had an opportunity to look at subclause 131(4). I've spoken with some of your people who have been sitting in on these meetings about our concerns, and I'm wondering if you have looked at it, because apparently it is creating a problem for our New Brunswick Southern Railway and they have major concerns about the wording that's here. Have you had an opportunity to look at that?

Mr. Ritchie: Yes, we have, and we think it's a bit of an anomaly in that the wording might not have been meant. You would find no argument from us if it was changed back towards the intent, that it would be considered to be part of the Canadian railway network.

Mr. Nault (Kenora - Rainy River): My first question deals with the issue of short lines and the interest of shippers, it seems. It is not that shippers want to buy railroads or get into the railway industry, but they seem to be very interested in running rights. Can you tell me, from your experience, what would be the interest in the shippers proposing to this committee on a regular basis, throughout every submission we've had, that short lines should have the ability to have running rights? From their perspective, what benefit do you see the shippers gaining from having running rights?

Mr. Ritchie: Their rates obviously would go down. They would have a glorious spring for a year or two as they ran on the main-line carriers. They would deplete the value of the asset, and I can promise you that if there's one thing that drives our board crazy, it's not having control of their assets. They ask why they should put the money up.

A lot of shippers think you've put a railway down 115 years ago and you leave it there. We replace the rails on the Calgary to Vancouver portion about once every five years. They get worn out that quickly. You would not see us replacing those rails if shippers could get access on it. They say, ``But we would pay'', and we would ask, ``How?'' That's where the debate ends. They never come up with how they would pay. An average rate? It doesn't work.

Mr. Nault: The other issue is the one that relates to what Mr. Easter has been talking about. Obviously, there's a perception by many around this table, I'm sure, and across the country that the railways have a public interest role to play. In this bill the government is moving away from that particular idea that the railways, at the expense of their shareholders and their bottom line, have a public interest role. As a Canadian who's interested, of course, in public interest, how do you see the Canadian government dealing with that; for example, on a line that the railway deems to be inappropriate to their operations but someone in the region - Saint John, for instance - decides that they want that railway desperately because it's good for regional development?

How would you see us dealing with that issue as a government and at the same time keeping in mind that the railways are a business like any other and have a right to make a profit and make business decisions? How can we square those two?

As you know, in the debate around this table and across the country, people consider you as a utility to be used for the betterment of Canada, the producer and shipper, but who cares about the shareholder of CP and CN in this case?

I'm trying to square that in my own mind. How would you perceive that as a Canadian we should deal with that, because of the importance of the railway and the railway industry to places such as western Canada, for example?

Mr. Ritchie: It's a concern, and it goes to the point we're all trying to make, which is the balance. Mr. Nault, you mentioned this in the context of short lines.

I believe that the process that's in place, that is visible, gives so much pre-warning to all who might be interested in running a short line and all three levels of government who might be interested in purchasing it outside the normal commercial negotiations if no commercial short line wishes to buy it.

.1650

We believe there's adequate time for those governments to get their house in order to make a purchase at fair market value, which is, in a lot of cases, just the value of the assets. They then can determine if there is a public-interest reason to subsidize that railway operation.

Mr. Nault: My last question deals with the public-interest test on abandonment of particular branch lines, or any track, for that matter. Density, of course, is the big issue for the railways. How much density on a particular line obviously decides the cost analysis you do, and then whether you make a profit or a loss. When you go to the agency for abandonment, is that a different process from the process you would make around the board table, deciding on whether you are going to shed a particular line, or is it the same kind of formula?

The question that seems to be floating around is if you talk specifically about density, there are many lines in this country, if you talk about that specifically, that just would not be viable. In some cases the agency might err on the side of the angels and force you to keep in operation at densities much lower than the average in North America. Quite frankly, we're already much lower than the average in North America across the system. Is that formula different in the boardroom than it is at the agency, or is it very much the same?

Mr. Ritchie: My colleague just said it doesn't apply any more. When the railway wishes to abandon a line, the agency accepts a commercial decision as being valid. I think what the agency says and the law applies is that railways wish to be in the railway business. Railways wish to be a success in the railway business, and railways will make commercial decisions that are in the interest -

Mr. Nault: I am aware of that, Mr. Ritchie. That's not the interest in my question. The interest in the question is that some presenters have been making presentations to the committee that suggest when there's going to be a sale, or more importantly when there's going to be an abandonment of a particular line.... Now that there no longer is the test of the agency, how do communities get involved in the process? How do they find some sort of rationale for your decision if in fact...? What I'm asking you is whether the formula the agency uses is the one we would say to communities they can apply or you have a different formula you would use, based on your own needs.

Mr. Ritchie: There's notification, there's the commercial negotiation section, and then there's the opportunity for three levels of government to buy it. Those governments can certainly participate in the commercial process, where we would be encouraging people to come forward and look at what the commercial situation of the lines is.

The former agency formula was complex, but I think on the whole it did an adequate job. Would it be applicable to every single commercial line we bring forward now? I would say no.

Your question was what can the public do. The public can sit down and negotiate with us if they wish to run that line. Again, you have to accept that we want to be partners, and we would be cutting deals to encourage them to do so.

[Translation]

Mr. Mercier: You're saying that governments can make an offer to purchase a branch line that you're anxious to abandon. Do you think that the current time frames provided for that purpose are adequate? And if the federal and provincial governments decide they do not want to buy that branch line, do you think a 15-day period is really adequate to allow a municipality to make known its intention to purchase the line, given that it generally takes some time to arrange financing?

[English]

Mr. Ritchie: I think that's a valid comment. Let me say that overall we believe the timeframe is adequate. How we divide the timeframe up between the commercial negotiations and the discussions with the three levels of government could be discussed with the committee members. If we haven't made some recommendations, I think we could. That would allow municipalities a little more time but without exceeding the overall timeframe for the process.

.1655

The Chairman: We have a point of order from the parliamentary secretary - a short point of order.

Mr. Fontana: Thank you, Mr. Chairman. I know we're in a hurry.

Mr. Ritchie, at the beginning of your presentation you asked if the committee had done or is doing a study to find out what the individual pricing is, to get into the nitty-gritty of the shippers. Could you provide this committee with some information so that we can do that analysis?

The NTA will be coming here at some time and we'll have some questions for them, but in terms of getting to the facts, could you provide this committee, under confidential cover if it's sensitive, with information not on individual shippers but on classifications of shippers and maybe the costs or the pricing? That might assist this committee in deliberating on this issue.

Mr. Ritchie: Our respect for the process and the institution is the highest, and we'll provide the energy and information that we can. We have some confidential contracts in which we have agreed not to provide that information. Within that limitation and the manpower limitation - I mentioned to the other member that we have been cutting in order to be efficient - we'd be pleased to do so, Mr. Fontana.

Mr. Flicker: We are barred by statute from disclosing. It's an offence against the National Transportation Act to disclose confidential contracts.

Mr. Fontana: Yes, of course.

The Chairman: Mr. Ritchie, thank you very much for your presentation.

Mr. Flicker: Mr. Chairman, Mr. Ritchie asked me to keep track of the taxation figures as we were going through. I just wanted to make sure that you understood that the federal excise tax on fuel is 4¢ a litre.

Mr. Ritchie: Thank you, David. It just feels like 7¢.

Some hon. members: Oh, oh.

The Chairman: Gentlemen, thank you for your presentation. We appreciate your answering our questions.

Bill Blaikie, who will make a presentation at 5:30 p.m., has come early. The bells will be ringing in about one minute for a 5:15 p.m. vote, and he has consented to coming back tomorrow. A slot is open between 5 p.m. and 5:30 p.m., so we will not have to cut into his presentation now, only come back later. I understand that it's a series of votes, which will save us from coming back.

Thanks, Bill. We appreciate that.

So we'll be back tomorrow at 3:30 p.m. and we'll see Mr. Blaikie at 5 p.m. to 5:30 p.m.

This meeting is adjourned.

;