[Recorded by Electronic Apparatus]
Wednesday, November 1, 1995
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[English]
The Vice-Chairman (Mr. Comuzzi): Good afternoon, ladies and gentlemen.
This is the Standing Committee on Transport. We are considering Bill C-101, the Canada Transportation Act.
On behalf of the members of the committee, I welcome some outstanding Canadians from west of Thunder Bay. I would like to welcome the Honourable Glen Findlay, Minister of Highways and Transportation for the Province of Saskatchewan, and his deputy minister, Mr. Andrew Horosko.
Hon. Glen M. Findlay (Minister of Highways and Transportation, Government of Manitoba): Actually, it's Manitoba.
The Vice-Chairman (Mr. Comuzzi): Oh, they got it wrong. You look like a good Manitoban, though.
So I would imagine the ones I have listed here from Manitoba are really from Saskatchewan. Is that correct?
Mr. Findlay: Maybe we would like to leave it that way.
The Vice-Chairman (Mr. Comuzzi): So we have the Honourable Andy Renaud, minister, and Bernie Churko, the deputy minister, from Saskatchewan. Am I correct there?
Mr. Bernie Churko (Assistant Deputy Minister, Policy Programs Division, Department of Highways and Transportation, Government of Saskatchewan): I'm actually the assistant deputy minister.
The Vice-Chairman (Mr. Comuzzi): Sorry, the assistant deputy minister.
There was too much referendum celebrating, I guess.
There's only one province left, with the exception of British Columbia, so I'll have to get this right. Welcome, the Honourable Stephen West, the Minister of Transportation and Utilities, and Tom Brown, executive director of the policy development branch. Is that correct? Well, that's three out of six.
Welcome, gentlemen. I understand you've made representations, but each of the hon. members would like to make their own presentation, and they would then be open to questions in general from the members of the committee. Would that meet with your approval?
Mr. Findlay: Yes.
The Vice-Chairman (Mr. Comuzzi): Mr. Findlay, let me just say a special word of welcome. This is very important today. So, Mr. Findlay, I'll turn the floor over to you.
Mr. Findlay: Mr. Renaud will speak first, then myself, and then Mr. West - that's sort of the batting order - and the deputies will hit clean-up.
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Hon. Andy Renaud (Minister of Highways and Transportation, Government of Manitoba): First, I want to thank the members of the committee for this opportunity to appear today and to share our views on this important piece of legislation.
Today I will be confining my remarks to the rail industry as it pertains to transportation in Canada. I would like to begin by stating that this legislation is much more than simply a restructuring of the rail industry in Canada. This legislation and the ripple effects that will result from it can be expected to alter fundamentally the way in which farmers, shippers, and manufacturers will operate in the future.
Shippers in the prairie provinces are major users of Canada's rail system. Each year, approximately 80 million tonnes of product, most of which are bulk commodities, such as grain, coal, sulphur, potash, etc., leave the prairies by rail on their way to customers in domestic, transborder, and international markets. Prairie shippers provide CN and CP Rail with approximately 50% of their originating tonnage and contribute almost the same proportion in revenue.
Saskatchewan and our neighbouring provinces of Alberta and Manitoba share common concerns about this legislation, because we believe this bill shifts the balance of power unfairly to the advantage of the railways relative to shippers and farmers.
Canada needs legislation that encourages sound economic practices and encourages competition. We are asking the federal government to allow for a fair and reasonable level of competition and choice in the rail transportation industry. We want a set of rules that will ensure that the competitive marketplace sets the price that is charged for rail transportation.
Competition is the only way to prevent monopoly price practices.
Equally important, competition will ensure that at least some of the cost savings that the railroads will obtain from this bill will pass on to farmers and shippers.
The concept of our changes is not new. The federal government has demonstrated frequently that establishing competition where none naturally exists in the market is in the best interest of the Canadian economy.
The federal government has shown a willingness to take measures to create competition. In telecommunications, the federal government and the CRTC have established rules allowing one company to use the infrastructure of another. In fact, it was CNCP Telecommunications in the early 1980s that was the driving force behind this idea.
If shared infrastructure can be used to create competition in the telecommunications field, then why not apply those same principles to the railroad industry?
I also want to state very clearly to the members of this committee that we also want and need a healthy railroad industry. When I talk about a healthy rail industry, I am talking about two competitive, successful railways operating from sea to sea. I am not talking about two carriers realizing excessive profits at the expense of farmers and shippers. What I am saying is that to have a healthy rail industry you must have a healthy shipper industry.
The new federal regulations must balance the needs of railways for less regulation and the need of shippers for a more competitive service.
Saskatchewan is a major user of the Canadian railway system, generating more than 30 million tonnes of freight each year.
There are more than 60,000 farmers in Saskatchewan who have a direct stake in the content of this bill. Farmers pay the cost of shipping themselves. These costs are deducted directly from the delivery price. If freight rates go up by even 5% as a result of the lack of competition, it costs Saskatchewan farmers $50 million to $60 million, and they can't pass that cost on. They are at the bottom of the chain.
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While our grain is our largest single shipping commodity, we also ship potash, coal, sodium sulphate, alfalfa dehy, oilseed, forest products, and many others by rail. Because of the markets for these products being generally offshore or in the U.S., the majority of these commodities are already captive to the rail mode of transportation. You cannot economically truck wheat over 1,000 miles to the coast.
In addition to being captive to rail as the only logical mode of transportation, many regions of Saskatchewan are doubly captive because they are served by only one railroad. The consequence of this captivity is a degree of market power for the railroads. Increasing their market power allows them to set rates well in excess of their costs.
The new CTA legislation must not weaken competitive-access and shipper-relief provisions contained in the 1987 NTA. Although seldom used, these provisions bring a degree of business discipline to the table when shippers and railways negotiate contracts. By moving to the proposed CTA from the NTA 1987, we may be taking a step backward.
Every shipper needs competitive access to at least two railways. Where true competition does exist, our national railways have successfully demonstrated their ability to compete. On the other hand, when competition doesn't exist, railways have charged rates far in excess of costs. To overcome farmers' and shippers' legitimate concerns about being trapped in the latter situation, they need to be served by two railroads or to have regulatory protection to negotiate as if they are served by two competitors.
Farmers and shippers located on the short-line railways will frequently be captive to CN or CP. To eliminate this disadvantage, we recommend that competitive-access and shipper-relief provisions include that the limited running rights contained in the 1987 NTA be extended to shippers served by short lines. This provision is needed for the protection of short lines as well as for the protection of the shippers and farmers that use the short lines. They need some mechanism to ensure they are not captive; they have a choice.
Revision of this legislation is also needed to ensure shippers are not restricted in acting to preserve branch lines. In Saskatchewan there are 3,600 miles of grain-dependent branch lines. Conveyance of these lines to short lines needs to be encouraged, in part by eliminating the disadvantages of captivity to the CN or CP. Legitimate enterprises must be given an opportunity to grow and flourish. Amended conveyance and abandonment provisions will help facilitate these initiatives.
Saskatchewan must have quality rail service and railways that operate with world-class service and efficiency. Railways must continually improve and adapt to modern logistical practices. Competition among the railways will ensure this takes place. I am fully confident Canada's railways can meet this challenge.
Committee members, you have an important responsibility. What you decide will permanently affect this great nation. I ask you to recommend changes to this bill that will support growth and a strong Canadian economy.
The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Renaud.
Mr. Findlay: Mr. Chairman, committee members, it is indeed a pleasure for me to be here from Manitoba.
Marlene, you are a good old Manitoban. It's snowing out there today. Let me tell you, it's more like winter.
I want to comment about the bill at some length. A lot of it is pretty similar to what Mr. Renaud has talked about.
In the broad sense, I think it's fair to say a lot of the activity in Manitoba is associated with the grain industry, the big shippers. But because of changes that have happened with the removal of the WGTA, a dramatic change is happening on the prairies. Five years ago we talked about diversification and value-added industries. Now that the WGTA has gone the impact of change is dramatic.
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I think it's fair to say, before I get into my prepared comments, that the railroads of today hauling large volumes of low-value bulky products will have a hard time finding those loads five years down the road. There'll be intense demand and desire to feed the grain or process the oilseeds of the grains of the special crops there. The railroads in the future will haul much smaller volumes of much higher-value product and hopper cars won't be good enough. They will be hauling higher-value commodities in different kinds of containers. People in the grain elevator business are acknowledging that dramatic change will happen.
As you go through this act, which has a lot of good in it and a lot of opportunity around it, remember that five years down the road we'll be dealing with something so different from what we have dealt with for the last 100 years, in terms of what agriculture produces and requires a transporter to ship.
We deem the economy of Manitoba to be exceedingly export dependent. We need to have people who ship products all over the world, and 30% of our gross provincial product is based on exports and that is growing. The railroad is an essential carrier in that process, and the railroads need to survive. We want them to survive, but unless the shipper survives, one questions the need for the railroad. It's that fundamental.
If we can allow both to survive and compete in harmony - and compete means really keeping your costs down and responding to all the economic signals - both can survive and the province can grow. But if one succeeds and the other fails, we will suffer great harm.
That's my preamble. I just can't help but say: change, change, change. There's going to be more of it, and we must be prepared to adapt our legislation to allow it to happen.
Certainly, many of the products Manitoba exports are high-weight and bulky products such as wheat and ores, whose movement to distant markets is inherently and ideally suited to the rail mode. The total export of tonnage from Manitoba carried by rail is more than four times that by truck. Of the 8.5 million tonnes of goods originating in Manitoba that are transported by rail, over 60% are destined for marine export. These are long hauls. From where we're situated, there isn't a short haul to get to salt water.
As you can see, for many Manitoba shippers trucking is simply not a practical and viable competitive alternative to the rail mode. Transportation costs also account for a large component of the overall delivered price of these products and in some cases represent as much as 45% of the delivery price.
In its overall context, a cost-effective and efficient rail transportation is vital to Manitoba's well-being. In the CTA, the federal government recognizes a need for railways to rationalize their operations. This objective is laudable. The CTA will allow railways to reduce their costs and give them the freedom necessary to manage their operations according to the dictates of the market. As a corollary, the CTA is designed to also promote the development of short lines. While the CTA goes far to meet these two objectives of the railway rationalization and subsequent short-line growth, it misses out on the opportunities to make the national rail industry more dynamic and more market oriented.
While the network efficiencies can be gained by giving the railroads freedom to manage, greater efficiency would be possible if market competition were allowed to flourish in the rail sector, as has been allowed in all the other modes. With trucking competition as a limited option, intermodal competition will be the key to securing shippers' need for cost-effective rail transportation. Unfortunately, CN and CP have historically displayed very little competitive behaviour in the transportation market for inherent rail products.
In the past, with the regulatory and public service burdens upon the railways' backs, open market competition within the industry was difficult and perhaps not expected. But now there are no excuses to not expose the railways to intermodal market forces. Exposed to the dynamics of the market, carriers will be compelled to constantly strive for productivity, rate and service improvements. Efficiencies from competition will then be passed on to shippers in the form of lower rates and enhanced services. From this perspective, the role of government in rail transportation policy should be to facilitate an environment whereby market incentives and solutions are the prime generators of efficiencies.
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Through the CTA, however, members of the committee and the government have a prime opportunity to enhance competition by maintaining and promoting shippers' competitive-access provisions and using short lines as a source of real competition. The CTA, as written, fails to fully meet this objective. Rationalization of short-line growth must be accompanied by efforts to increase the level of competition in the rail industry.
First I'd like to talk about the maintenance of competitive-access provisions. The NTA 1987 was the first major federal initiative to recognize the extent of and forcefully address the non-competitive behaviour of the two national railways. Shipper-competitive-access provisions, such as competitive line rates, final-offer arbitration and expanded interswitching were designed to increase shipper options regarding choice of carrier, rates and services. Competitive-access measures have been successful in that their mere presence has enhanced shippers' bargaining power with railways, leading to rate and service improvements.
Unfortunately, we see the CTA as a step backwards. It erodes these two provisions by impeding a shipper's ability to employ competitive-access measures in a timely manner and doesn't clearly extend access to shippers who may find themselves on short lines in the future.
Clearly, in subclause 27(2) - I know you've heard a lot about this - a shipper applying to the agency for relief must demonstrate that he will suffer significant prejudice if the relief is not provided. In clause 34, in addition to the payment of the cost of proceedings, the agency can order a shipper to pay damages to a railway for any loss or delay if it is determined that the matter brought before it is frivolous and vexatious. In clause 113, the requirement that rail rates be compensatory has been replaced by the need for the agent to ensure the rates established are commercially fair and reasonable.
I know you've heard it before, but all three of those terms - significant prejudice, frivolous and vexatious, and fair and reasonable - are ones that aren't defined in the proposed CTA, and that gives us all great concern as to future definition.
Taken together, these measures create a costly and time-consuming administrative barrier for a shipper seeking quick redress from the agency. The undefined nature of these terms will in all likelihood deter many shippers from seeking to employ competitive-access provisions, such as final-offer arbitration. The result will be an erosion of shippers' bargaining power with the railways, a decrease in the level of competition in the railway sector, and an upset in the equilibrium that has been achieved between shippers and railways as a result of NTA 1987. Our comment is that these three terms should be deleted from Bill C-101.
In extending the access to shippers on short lines, clause 132 does not clearly extend competitive access to shippers who may find themselves located on a short line in the future. Competitive-access and shipper-relief provisions should apply to current and future shippers at the point of interchange between a provincial railway and a federal railway.
As a whole, the joint submission recommendations from the three provinces are designed to give shippers a choice of a national railway on which to haul their product. Maintaining these provisions will help create an environment where the two national railways, CN and CP, knowing that a shipper has a choice, may be compelled to act in a genuine competitive manner in setting rates.
Now let's talk about short-line running rights and competition. Even with competitive access provisions, the railways often act as a traditional duopoly. Instead of envisioning short lines as potential sources of competition, the proposed CTA relegates short lines to being feeder systems for the main lines. The view is narrow and short-sighted.
Manitoba proposes extending limited reciprocal running rights for short lines over the connecting main-line railway to the nearest interchange with a competing federal carrier.
The federal government has an opportunity, through short lines, to allow competition in the industry to occur in a natural manner; that is, to use and allow new entrants and operators in the market to form competitive alternatives for shippers to main lines. Running rights will serve this purpose.
Clause 132 retains the ability of the agency to determine if running rights are in the public interest. Federally regulated railways, meaning CN and CP, can currently apply to the agency for running rights on the competitor's lines. Manitoba sees no reason why this provision, in the interest of creating a level playing field amongst all carriers, should not encompass provincial short lines as well. The principle of competitiveness demands that in this instance short lines should be accorded the same market privileges as the federal railways, the right to at least apply to the agency for running rights over other lines.
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As Mr. Renaud has indicated, there is a definitive precedent in the telecommunications industry, an area I also happen to be the minister of, where competitors are allowed, for certain fees, to run their product over the competitors' lines, and it is working reasonably well. Everything is subject to change over time, but the principle exists in the telecom industry.
The third item I would like to bring to the committee's attention is short-line viability. The CTA does not go far enough in fostering a climate for short-line emergence and long-term viability.
Manitoba has concerns that the national railways, in efforts to abandon lines rather than convey them as short lines, may seek to de-market these lines to make them unattractive to prospective buyers. Further, it may be possible for the railways to discourage investors by imposing unreasonable financial and operating conditions.
For these reasons, Manitoba proposes safeguards in the act to ensure that buyers have sufficient time and incentive to buy a line. A railway should be unable to initiate abandonment of a line unless the line has been identified in the three-year plan to be discontinued for a period of 90 days.
Third parties should be able to initiate conveyance procedures at any time if, first, the agency finds that a railway is de-marketing or deferring maintenance on a line, or second, a railway has indicated in its plan that it intends to sell, transfer, lease, or discontinue operations of the line.
The agency should be empowered to arbitrate if the railway and the interested buyer are unable to agree after five months of negotiation.
To ensure that all buyers are accorded consistency of process and information in the negotiations, the railway should submit to the agency procedures to be followed at all times in receiving and evaluation of orders.
In terms of fostering long-term viability to short lines, short lines are usually connected to one main line, giving the federal carrier disproportionate bargaining power in regard to such issues as car supply, revenue sharing and operating agreements.
The running rights alluded to earlier are also supported as a means of giving short lines the bargaining power to negotiate mutually beneficial agreements with main lines. In a manner similar to shippers' ability to access the agency in case of dispute with the railway, the use of the agency to resolve disputes between a short line and the main line should be implemented as a competitive, enhancing and balancing provision.
Running rights and extended use of dispute mechanisms are all about giving short lines, just like shippers, a choice between the two national carriers. Long-term viability requires that government to at least promote conditions that put short lines on a level playing field with the main lines.
The fourth and last item is a short comment that I'd like to make about the role of provincial governments. Provisions in the current federal legislation, NTA, that allow the provincial governments to be heard before the agency as an interested party, have not been incorporated into the CTA, the new act, and this will preclude the participation of the provincial governments in applications that may have brought other implications.
Also, the provisions in the current NTA that allow the provincial governments to access confidential information have not been incorporated into the new CTA. This will certainly impede provincial ability to have meaningful input into agency establishment of grain and interswitching rates.
Manitoba strongly recommends the restoration of these two provisions in the proposed CTA as a means to allow provinces to continue their traditional strong role in the formation of national transportation policy.
Again, I'd like to conclude by remarking on the dramatic change that agriculture is undergoing, and I think all shippers are undergoing, in this competitive global market we live in. Everybody must have a chance to survive and compete. We believe in competition. We believe in the marketplace as the discipline, and we see in Manitoba that we are being cornered a little bit in terms of our distance from salt water and that shippers are facing a big challenge. Our shippers in the future will be less and less big companies and more and more little companies, niche-market companies going after opportunities all over the world.
We're not talking about big railroads versus big shippers; we're talking about big railroads, hopefully smaller railroads, in terms of short lines, and a whole bunch of little shippers that are at a competitive disadvantage if they have to face a wall of process to get resolution of certain factors. That's why we think the NTA has worked and that the CTA has brought many improvements. But we have raised the issues that we feel will prove troublesome for shippers in the future.
Thank you very much.
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The Vice-Chairman (Mr. Comuzzi): Mr. Findlay, I wonder if I could just give you another minute or two to expand on your projections into the next five years with respect to how you see the consolidation or the value-added product in your province and the effect it will have on future railways. I think it is very important to the committee. I don't want to put you on the spot, but if you wouldn't mind giving us an answer -
Mr. Findlay: I'd love to answer this because in real life I'm a farmer, so I've had the experience and education of the farmer in the legislature and through dealing with people in the private sector.
Over the course of history, the WGTA and, to some extent, the Wheat Board promoted the export of raw product to the rest of the world, and the jobs associated with the processing of that raw product were exported. Now that the WGTA is gone - which is good - my costs as a farmer to ship this year in wheat went from $10 a tonne to $33 a tonne and feed barley went from $10 to $45 a tonne. My canola went from $10 to $21. I look at that and say, I can't pay $45 where I used to pay $10; maybe I can pay $21 for a while where I used to pay $10.
There is a whole bunch of private businessmen, and maybe even some people in the town, asking why we ship the raw product, why don't we keep it at home, invest $10 million or $20 million or $40 million and have a processing plant. Then we'll ship a value-added product, lower volume, higher value, to markets all over the world.
Very clearly in Manitoba we've had a lot of industry coming in the last few months to build oilseed crushing plants, french fry processing plants, hog processing plants, and to expand existing ones. Those are the big ones, but a whole bunch of little ones are developing.
I had a grain industry guy come in yesterday and he said that their vision in the next five years is that they won't be exporting any raw grain but they'll just be brokers for these value-added commodities, because they can't afford the transportation costs of the high-bulk products. I know the railroads are challenged to say, if this change happens, how does it affect us?
That's why I say we're going to have a whole bunch of smaller niche markets, smaller shippers wanting to export something. Maybe the railroad is a vehicle to do it, but if the railroad can't supply the prices, efficiency and service that is necessary, the trucking industry will invade the area significantly. More and more of our trade is going south and more is going to the Pacific Rim. So we're going south and west as opposed to traditionally going east.
That's just my perception of where we are going. We've seen a tremendous interest in rural Manitoba in accessing this opportunity or responding to it, and people from outside the country or outside the province are coming to invest. The fact is that this is the place to process. I'm not saying that Saskatchewan and Alberta aren't also facing the same thing, but it's a dramatic change that's going to change the nature of transportation conveyance that we need in the future versus what we've traditionally had in the grain industry. Whether you're talking ore or lumber, maybe some of the same principles apply but not as dramatically, I don't believe, at this point.
That's a one-person concept of where we're at, although I've had a lot fed into me from other people. I think we're heading there and I don't know how we stop that. The question is whether our rail and transportation facilities as a whole are able to serve that kind of industry, that kind of shipper? If those shippers can't survive, the economy is going to shrink out there as opposed to grow, and I think the opportunity to grow is fantastic. Thank you.
The Vice-Chairman (Mr. Comuzzi): Thank you very much. Mr. West.
Hon. Stephen West (Minister, Department of Transportation and Utilities, Government of Alberta): Thank you. Some of this will be repetition, of course, and perhaps we can expand on it a little bit after we get through. I'll try to go through this as quickly as I can, but I want to emphasize along with my colleagues from Manitoba and Saskatchewan the importance of this issue to us as it relates to our industries and to the way of life in each of our provinces economically.
I certainly want to emphasize to you that this proposed legislation is extremely important to Alberta's resource-based economy, particularly as it applies to the rail transportation sector that many of our industries depend on so heavily.
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Alberta's economy depends on trade, and much of our trade takes place in overseas markets. With our land-locked geography and our extensive distance to tidewater, our ability to compete in that highly competitive marketplace depends on the efficiency of our transportation systems.
For Alberta, transportation is the key to trade in the global marketplace, and trade is the engine that drives our economy. Much of our traffic is made up of high-volume bulk commodities, such as coal, grain, sulphur, and chemicals, which must be moved over long distances to market. For these commodities, rail is by far the most effective mode of transport. Indeed, for many commodities it's the only economical means of transportation.
Let me provide you with some facts and figures to substantiate the importance of the rail industry to Alberta. We've taken these from Statistics Canada for 1993.
Of the 57 million tonnes of goods carried by surface transportation systems in Alberta during 1993, 39 million tonnes, or 68%, of the total goods transported were carried by rail. Those 39 million tonnes represent more than one-fifth of the 187 million tonnes of goods carried by CN and CP Rail in 1993, more than any other province in Canada. Nearly $7 billion of Alberta products were transported by rail in 1993, representing nearly one-third of the total value of Canadian rail traffic for interprovincial transport and overseas trade.
Those figures demonstrate Alberta's reliance on the rail sector. Of course what they also demonstrate is that Canada's two national railways obtain a substantial portion of their business from Alberta.
Alberta supports less regulation of railways.
Mr. Chairman, before I provide you with my comments on Bill C-101, I want to advise you that I intend to deal with the principles, not the detailed language and legal provisions, contained in this bill. I'm more interested in results, and the results I'm looking for are a viable rail sector and competitive rail services for our resource-based industries in western Canada.
I also want to assure you unequivocally, as the Government of Alberta representative of these hearings into Bill C-101, that I'm not here today solely as an advocate of Alberta's shippers community. On the contrary, our government has a keen interest in ensuring that the needs of both the railways and the shippers are balanced to the greatest extent possible in the proposed Canada Transportation Act.
It's my firm belief that Alberta and western Canada need a viable, competitive rail system. Railways must have the opportunity to operate as a business with the absolute minimum of regulatory intervention. They must be provided with the freedom to manage their costs, to rationalize their system in order to make it efficient, and to be able to provide competitive services to their customers.
That's why the Government of Alberta supported the federal government's proposal to commercialize CN, to free it from the shackles of government bureaucracy so it can operate on a more business-like basis.
Let me assure you that I'm not a minister who encourages economic regulation of the industry. No, I'm not looking for regulation, but I'm looking for an effective appeal mechanism against the potential misuse of monopoly powers by our national railways.
Of course the way to eliminate the need for any form of economic regulation is to eliminate that monopoly, to ensure that competition is in place so that shippers have choices and can shop around to get the best deal. If we had that situation in Canada's rail sector, then we wouldn't need a Canada Transportation Act. But we don't, and we probably never will, because railways are capital-intensive and natural monopolies, like utility companies, and as it is for the utilities monopolies, some process is needed to prevent railways from taking unfair advantage of their monopoly position.
The need to continue the regulatory appeal provisions in this bill addresses the simple fact that shippers are often at the mercy of the rail monopolies. That reality was recognized and provided for in the National Transportation Act when it was revised in 1987. To the best of my knowledge, nothing much has changed over the past eight years to warrant eliminating these provisions.
Applications to the agency by shippers for relief through competitive access mechanisms, such as interswitching, competitive line rates, and final-offer arbitration, have been used on fewer than twenty occasions since they were introduced in the 1987 legislation. However, although seldom used, they have proven effective as an incentive to get railways and shippers to agree on contract terms. In reality, these mechanisms really do only one thing, and that's to inject a measure of competitiveness into what is essentially a natural monopoly.
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The 1987 legislation has worked well. It has forced the railways to be more efficient and more competitive. Perhaps they still have a long way to go to achieve optimum efficiency, but they would have had very little incentive to restructure and to increase their productivity if they continued to operate as full monopolies - without recourse.
If you support the contention of our national railways that these appeal mechanisms should be diluted or eliminated, what will that achieve? The answer is simple. The railways will be able to charge more for their product because shippers will have a much weaker negotiating position. That's good for the railways, but it doesn't help our industries compete in the global marketplace.
Of course, the basis for the railways' position is that the competitive-access provisions are not required because shippers are not captive to Canadian railways. The ability to truck goods or to route them over U.S. rail systems is cited as an alternative.
While that may be true for some shippers and for some parts of Canada, it's simply not a reality in western Canada. Trucking is not an effective means of transporting heavy, high-volume, bulk commodities over long distances. For these types of commodity, trucking is not an option.
Let me refer you to the document Transport Canada has published to explain the objectives of Bill C-101. On page 7 it points out that CN and CP often do not compete with one another; that some rail traffic, such as coal, is either impossible or impractical to move by truck; and that CN and CP are in a monopoly position in certain areas of the country.
It doesn't take a genius to figure out that these comments by a federal government department are perfectly valid. Just look at the railway map of Alberta and you'll see that CP dominates the southern part of the province, while CN is the only railway in the north. So it is our belief that true natural competition between the major rail carriers does not exist for many industries in Alberta. Without an appropriate appeal mechanism to address the rail monopoly in our province, shippers and Alberta's economy bear the consequences.
Rail and shipper needs must be balanced. We're not prepared to support changes to rail policy at an unfair cost to shippers.
Industry must have access to rail transportation rates that will allow their products to be competitive in distant markets. For some Alberta resource industries such as coal, transportation can represent up to 45% of the delivered price. We cannot allow that reality to be exacerbated by new legislation that has the potential to push these costs even higher, to the point where our industries cannot compete in global markets.
By all means, let's get railway costs down through less regulation so they can compete with U.S. carriers, attract new capital, and be able to make necessary investment in new plants and machinery. But let's not create a catch-22 situation here by enhancing railway profits at the expense of the industrial sectors.
If we're going to encourage railway profitability and competitiveness, let's do it by making the railways more efficient and less bureaucratic, so they can lower their costs. Let's deal with the railways' antiquated labour practices. Let's find ways to reduce their overheads and get their administrative costs under control. Let's help them sell off or simply abandon track that carries a small amount of traffic at big losses. Above all, let's not pretend that preventing some unnecessary shipper applications from going to the National Transport Agency is going to make CN and CP more profitable and make them more competitive.
Although the federal government doesn't talk about a balanced approach to this legislation in its publication, it seems fairly evident from all the language used that that is the intent. We applaud that intent, but we suggest the objective has not been achieved in the version of the bill that is currently before us. Changes are needed, and those changes are specified in the written submission to this committee by the three prairie provinces.
Bill C-101 will set the tone for business dealings between industry and railways for many years to come, so we believe it's important to get this bill right, to achieve a legislative and regulatory environment that is balanced and appropriate, an environment that will allow both railways and their industrial customers to be competitive and to prosper in their respective markets.
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Let me finish my remarks today by summarizing some of the key principles that should be reflected in this bill, as well as the key results that this new legislation should set out to achieve.
First, the need for railways and shippers to be competitive and profitable in their respective markets must be balanced. Neither industry should prosper at the expense of others.
Second, economic regulation of Canada's two national railways should be reduced to the absolute minimum. The only regulation that should exist is that which is needed to prevent misuse of railway monopoly powers.
Third, the current competitive access provisions that were created in 1987 should be continued in order to ensure that shippers have recourse through a fair and impartial tribunal.
The attempts to reduce those provisions and to limit shippers' access to agency relief in this bill are unnecessary and unwarranted. If we had experienced hundreds of frivolous applications to the agency since 1987, then I would be the first to agree with limitations. But we haven't, so why are these limitations in this bill?
I conclude my remarks with this and welcome any questions.
The Vice-Chairman (Mr. Comuzzi): Thank you.
Mr. West, do you want to take another minute or so to address the issue that Mr. Findlay addressed at the end of his remarks with respect to the value-added products that you might have in the province of Alberta and how that would affect the railway industry?
Mr. West: Let me approach it from a different tack. We have the evolution, and I think part of the evolution is because of the Western Grain Transportation Act, coming in. We sense that. But we have a quite diversified agricultural component, as well as many other things going on, whether it's in the petrochemical industry or some of the others.
What we're all feeling - and we're feeling in Alberta, and I'm sensing that as the Minister of Transportation in the short time I've been there - is that we're going to have to bring forth a tremendous amount of resources to build our highway systems. The amount of traffic going into the States and exporting in other directions at the present time by truck traffic is moving at a phenomenal rate.
Some of these products, as I said, can't do that, but, as we move back from the western grain trend, the agricultural products certainly will try to access markets, either close to a rail line at these inland terminals or, with the vote that's coming up, the plebiscite that's being held, an attack that's going on to being able to dual-market the grain products out of the Canadian Wheat Board. We're going to see a tremendous amount start exiting by truck.
It's a double-edged sword. If we could allow the competitiveness of these railways to enhance a position to take some of that off there at the present time, then it would cut back the tremendous resources we're going to have to spend on transportation on our highways.
I was talking to Doug Young - we all were - not long ago on the national highway program. It's not just a myth; it's a reality. It's a tradition in this country that we protect the infrastructure. If the rail system cannot take up some of the slack on these, then we're going to have to pour millions. In fact, the first project I have is a billion dollars on an export highway, as we call it, and that's only the tip of the iceberg if travel starts moving for unusual distances by truck because we can't get access to proper competitive rates on rail.
The railways will feel it too. It's not a veiled threat just because we want some provisions put in a bill. It's reality that we don't want to see our railways put under undue economic pressures either. We want them to succeed.
The five-year period? I don't know what that is, but we are definitely going to see expansion in value-added, if you like, but diversified economies around our resources. There are no ifs or buts about it; it's coming. We're happy about it, but we know that the infrastructure we're going to have to put in place will be tremendous.
We want to keep this railway system viable. We don't want a pure monopoly. We want two of them, for sure, and the avenue open to others if they see it as being economically fit to come in and feed into these systems.
The Vice-Chairman (Mr. Comuzzi): You said that you had a clean-up batter. Who's going to act as Kenny Lofton?
Mr. Taylor (The Battlefords - Meadow Lake): Maybe Mr. Renaud wants to answer.
The Vice-Chairman (Mr. Comuzzi): Sure, I'd like that. I apologize.
.1620
Mr. Renaud: I think the value-added industry is very important to Saskatchewan, especially since the death of the WGTA. I believe what we as governments have to do is try to facilitate having the value-added industry located as close to our producers as possible, but value-added will not take all our commodities. We're still going to have a great deal of bulk commodity that will need to be transported out of the country. We export about 80% of what we produce in the province of Saskatchewan.
There'll be a change in rail in regard to container, but we still need competition. There is absolutely no question about that. The bulk products could inevitably move south, which I think would be a disaster, maybe for our ports and maybe for the infrastructure across Canada, when you look from sea to sea. So I think there are some concerns there.
The changes in agriculture and transportation in Saskatchewan will mean a whole change in the road system and the impacts on roads, not only to the rural municipalities but to the provincial road authorities as well. I think the railways - CN in the north, CP in the south - can have almost full control of what our province will look like in a few years in regard to viable communities and in regard to a road network, so I have some concerns. I think competition there will have some effect on that.
So I guess we look forward to value-added. I think the biggest thing is that our producers want a choice; that is what they look for. Nobody is going to build another railway - I think the minister from Alberta mentioned that the capital cost is just out of the question - so you have the two main-line railways. It's a little different from a trucking company, if you know what I mean. You're not going to see somebody coming in and setting up another rail company, so there has to be some competition between the railroads in order to give our shippers and our farmers some choice in how they want to deliver the products.
The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Renaud.
The wrap-up was coming from Mr. Churko, or was each individual going to give a wrap-up?
Mr. Findlay: I was just kind of teasing.
The Vice-Chairman (Mr. Comuzzi): I see.
Mr. Findlay: I just want to put them on notice that the tough questions are theirs.
The Vice-Chairman (Mr. Comuzzi): Oh, sure. Give the statement and then walk away. Very good. I have to remember that.
Any further comments before we get to the questioning?
Mr. Findlay: Can I just throw another angle on what we've seen?
The Vice-Chairman (Mr. Comuzzi): This is your day. It is very important for us to get your input.
Mr. Findlay: I'm thinking of the rail industry versus the trucking industry, and of course the trucking industry's impact on roads is our viewpoint.
Think of a town in rural Manitoba. If you go back to thirty or forty years ago, almost everything came into that town by rail and everything left the town by rail. Over the course of the last thirty years, if we look at charts of the growth in truck volumes and the decline in rail volumes nationally, this has played out in every rural town. We used to have fuel, fertilizer, new cars and trucks, farm equipment, and even the groceries and the mail coming in by train. Today it's all by truck. There's been an evolution to trucks.
When you get to the large bulk commodities like grain, the costs by truck are prohibitive. Nonetheless, it's still going on. There's still some grain hauled reasonable distances by truck. You'd wonder how they could compete with rail because rail has a tremendous cost advantage. I ask the question why the railways haven't adjusted their costs so that they can really compete with trucks. I don't think they've challenged aggressively enough over the last couple of decades. I think they have a different vision today, yet I can't see how we could allow the railroads to make adjustments by charging higher rates that drive the shippers into difficulty. The railroads have to control costs, just as everybody else has to.
This is not meant as a criticism. It's just an evolutionary process. The degree of monopoly or duopoly that existed there gave them a sense of protection from the reality that is now facing them. That's what's gone on in prairie Manitoba and, I think, prairie western Canada, and the change coming at us in the future, which we've all described, is relatively dramatic. The impact on our roads is going to be phenomenal, because trucks loaded with grain will be going in opposite directions: a bushel chasing a price.
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The Vice-Chairman (Mr. Comuzzi): Mr. Mercier.
[Translation]
Mr. Mercier (Blainville - Deux-Montagnes): I have one question for Mr. Renaud and two for Mr. Findlay.
Mr. Renaud, you said that in Saskatchewan, there are many regions which are served by only one railroad. You also said that, as a consequence, there is a risk for the railways to have a monopolistic power. Finally, you said that in such circumstances, in the regions served by only one company, CP or CN, shippers should be able to negotiate as if the region was served by two competitors. Could you tell us, in practical terms, how they would be able to negotiate as if there were two competitors?
[English]
Mr. Renaud: Thank you for the question.
Under the NTA of 1987 you have competitive access, you have the provision for final-offer arbitration, you have interswitching. Those are some of the things that act as a competitor, so the shipper has some recourse. It's almost like having the choice of two railroads.
Those are the provisions we would like to see stay in the new CTA: the NTA 1987. Under the new CTA there are some wordings such as ``frivolous and vexatious'' and ``fair and reasonable'', and we really don't know what they mean. I think we would be better off just to take out those clauses and leave what we have there now, because it's worked quite well.
[Translation]
Mr. Mercier: Thank you, Mr. Renaud. I have two questions for Mr. Findlay. As a matter of fact, one goes back to what Mr. Renaud was just saying.
Mr. Findlay, you mentioned subclause 27(2), where it says that, to make an application to the NTA, a shipper should be able to demonstrate that he would suffer a prejudice. You regret that the word "prejudice" is not defined and clarified.
According to you, the undefined nature of this term could prevent shippers from seeking the remedies offered through this provision. You feel they should know exactly in which circumstances their application is going to be accepted because they have, in fact, demonstrated that they suffered a prejudice.
Could you give us a definition or, at least, an indication regarding the meaning of the word "prejudice" which you feel would clarify matters sufficiently?
[English]
Mr. Renaud: That's right. The wording under the NTA 1987 is very clear and it works. I think the wording in the new CTA will cause frustration for the shippers. They may not want to react. It may be unclear. It will be very costly and it will be very time-consuming to react to the new CTA. I believe if we leave well enough alone - Why change something that's working?
[Translation]
Mr. Mercier: So, if I understand what you are saying, you feel that the 1987 Act was better as far as the shippers are concerned and to protect their interests. Am I right?
[English]
Mr. Findlay: I would say yes. We see no reason to add this in. As Mr. Renaud has indicated, the NTA 1987 seemed to be working. There seemed to be some level of harmony between shippers and railroads. One would question why we want it changed. What's the motivating force to add this; in other words, change? So our strong recommendation is that subclause 27(2) be deleted.
[Translation]
Mr. Mercier: Thank you. I have an other question for Mr. Findlay.
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You said - and I certainly agree with you - that, when a company plans a branch abandonment, potential buyers should have enough time to express their intentions.
If my memory serves me well, I believe it is 60 days for any buyer and 15 days for each level of government. I totally agree with you that a 15-day period is absolutely not sufficient for a municipality to express its interest.
Do you have any suggestions regarding the time limits you think would be appropriate to allow buyers to express their intentions? What kind of time limits would you prefer?
[English]
Mr. Findlay: What I mentioned in the presentation was ninety days for somebody to make application to set up a short line. As far as government is concerned, Mr. Renault might like to comment. I don't see government getting into the purchase of rail lines.
[Translation]
Mr. Mercier: It could happen.
[English]
Mr. Renaud: I agree with Mr. Findlay that ninety days would be a lot better than the sixty days, on the original end of that. Of course governments still have our highway network to look after, and we're under great financial stress there.
I don't see provinces taking part and purchasing rail lines. I don't think you will see provinces getting involved in that.
[Translation]
Mr. Mercier: Well, it could happen that keeping a line be considered necessary by the government concerned to ensure the expansion of a region, even if this line is no longer efficient and, consequently, could not attract a private buyer.
In many countries, rail transportation is considered as a public utility and, as such, is subsidized by the government. Here, the government could buy back some lines which are considered necessary to ensure the expansion of the region. In these circumstances, it's not impossible that the government might want to buy. What kind of time limit would you consider reasonable? Fifteen days, that's not realistic!
[English]
Mr. Findlay: I can comment. Fundamentally, you may be right technically. But when it comes down to practicality, can we afford to do it? We can't even enter into the discussion. We just don't have the resources, even if you gave us a line for $1, to deal with the upgrading and the maintenance of the line, if it's a loser. We say let the private sector do that. If they can make it economically viable, that's great. If they can't, we can't come in and subsidize it. We're just out of the picture, because we can't even meet our road capital and maintenance costs today.
We're limited by dollars. It's just economically impossible. That's why I say the private sector is the vehicle. They must have an opportunity. If they deem it non-viable, then I can't see that Manitoba can step into the breach. I can't envision it today in the economic circumstances we have to survive in.
[Translation]
Mr. Mercier: However, there is a provision to that effect in the legislation, and even if you feel that buying back a line is not a realistic option for a province, other provinces might be, let's say, less neo-liberal, and might want to buy it back. This is why I asked the question.
[English]
Mr. Findlay: On the time it would take to make a decision, even if everything else were equal, the governments couldn't respond in less than six to nine months. I'll be blunt with you. We couldn't.
The Vice-Chairman (Mr. Comuzzi): That's provincial you're talking about.
Mr. Findlay: Yes, I'm talking about the provincial government, if we had the money -
Philosophically and dollar-wise, it's just not something we could ever envision doing. Although all the right reasons, all the right things, might be presented at the table, at the end of the day we don't have the dollars, if it's not economic. If it is economic, then we say the private sector should do it.
The Vice-Chairman (Mr. Comuzzi): Mr. Chatters.
Mr. Chatters (Athabasca): I'm encouraged by your position on provincial ownership of rail lines. However, I think one of the impacts of this bill will be the creation of a number of provincial short-line railways under the jurisdiction of the provinces.
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Certainly the success of those provincial short lines is part of your responsibility. I would ask for your position on those provincial short lines. Do you have legislation now in place to deal with them or are you planning legislation?
Particularly in Manitoba, on behalf of Jake Hoeppner, I would like to hear your comments on the line to the port of Churchill. Just generally, what is your position on provincial short lines, how do you see them working, and how would the provinces support the creation of them?
Mr. Findlay: Certainly we passed the Manitoba railway act I think two years ago. We have the provision provincially to handle a short-line railway if one should come into existence. We have the legal capability.
Our act has to do with the safety of the operation of the railroad and not a lot else. We never envisioned that we would have any economic activity in that. Short-line operators will be the private sector.
Mr. Chatters: But surely the provincial short line's access to some of the protection that's afforded the national railways here is important to their survival.
What if they don't have access to some of those same safeguards or regulations? I challenged the national rail lines when they came before us on the same idea as yours, which is that they have a long way to go in cost cutting and efficiencies.
They tell me they would be glad to do that, but they've traditionally been so regulated that they have not been allowed to do that. You can't have it both ways.
I hear you people saying to me that you want it both ways. You want to preserve the protection of the shipper. I think that's important. But you want, at the same time, the national rail lines to behave like a private corporation should. It should become more efficient and be able to implement the same efficiencies that the short-line railways seem to be able to do. They tell me they can't do that because they're overregulated.
Mr. Findlay: Could I be so blunt as to say that the two federally regulated railroads are limited in what they can do by labour agreements. One of the avenues of a short line, in order to survive, is that one guy does every job. It creates a lot of cost efficiency in the process. That's the bottom line. It's the method by which you're allowed to operate under law.
We're not asking anybody to take a bath. We don't want anybody to take a bath in the process, whether you're a shipper or a railroad. At the end of the day, if somebody makes a decision and they're not viable for economic reasons, that's their commercial decision.
We don't want to have anybody forced by regulation into a non-competitive position. We think some of the shippers will be forced because extra powers may well be going to the railroads in these sections we referred to.
Shippers need similar rights to what they have today. Short lines need access to be able to haul a load for a shipper on their short line and then access either railroad so there's real competition in those main-line railroads to get that load of commodity and haul it to some distant point.
Short lines, if they're going to be successful, have to have an opportunity to competitively survive. I know the railroads have talked about internal short lines. That might be an option. I haven't seen a lot of definition on how it might happen, but it might be an alternative that will work.
The bottom line is that you maximize the ability to get the costs down so everybody is competitive when they end up in that global marketplace.
Mr. Chatters: The railroads tell us now that they're regulated into an eventual bankruptcy position. Would you not support that?
Mr. Findlay: I have a hard time believing that. I think any of us in the business community say we're headed for bankruptcy. We say we can't get enough income. Stand back and look in the mirror and ask the question: have I really controlled my costs yet?
Success on the bottom line has more to do with controlling costs than on having a higher revenue. I honestly don't think the railroads have been as aggressive in cost control as many other players in the commercial marketplace. I wouldn't say it's their fault. We haven't felt the discipline and the necessary drive to do it.
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Today, I think that discipline is there, and I think your act brings it forward. But your act shouldn't allow them to improve themselves economically at the expense of shippers and, in the broad context, provincial economies.
Mr. Chatters: Your comment on the line to Churchill -
Mr. Findlay: I thought you might get around to that eventually.
Provincially, we're very supportive of the economic opportunity that Churchill could bring in the future. There's no way that we could provincially get involved in subsidies there. But we believe that the Gateway North Marketing Agency, which has come out of the Churchill task force, has put a reasonably legitimate proposal to the federal government about handling the port and the line in the future.
I'll go back to what I said earlier. Operations like this must be able to have a window in the future of commercial viability, otherwise no government at any level can keep things going forever. There has to be commercial viability.
Around Churchill, there's the grain that's going out. Clearly, there are people who advocate that things like peas and canola for Europe could go through there more cost-effectively. Clearly, bringing raw minerals in there to be processed in Manitoba, Saskatchewan or Alberta is an option. The SpacePort is clearly an option for being developed commercially. The final chapter is not written on that. Tourism is active there, and the railway is important for that. Resupplying the Keewatin District is another element. There's a lot of potential economic drivers there to make Churchill and the bay line viable.
My sense is that the window of opportunity is around the corner. But the proposal has come from a group of people in the private sector to the federal government as a result of the fact that the CN privatization initiative is a window of opportunity. I hope the federal government can look at it constructively as a window of opportunity for the future, because we believe it is one.
The Vice-Chairman (Mr. Comuzzi): Mrs. Cowling.
Mrs. Cowling (Dauphin - Swan River): Thank you, Mr. Chairman.
I first of all want to thank those from western Canada who have come before this committee. I know that your presentation is going to help us very much in making a decision.
I want to address the issue about branch lines. I believe Saskatchewan mentioned that it had 3,600 miles of branch lines and it exports about 80% of its product. I'm wondering if Alberta could tell the committee the number of branch lines that it has and its total exports.
That will lead me to my next question with respect to short lines. Railways have argued that reducing fuel and property taxes, as some provincial jurisdictions have done, should improve the viability of the railways and increase the potential for new short lines. Do you have any plans or views on this perspective and on this matter? I believe that's happened in some of the provinces, such as Nova Scotia, Manitoba and B.C. Could you respond to that?
Mr. West: I can't tell you the number of branch lines we have. We have one working short-line railway in Alberta, which is Central Western Railway. I believe they will have to rationalize in order to function in the new order.
As for the railway tax, yes, it has been recommended by one of our task forces to have it removed. I'm not sure it enhances the short-line railway at all. I don't think that's an issue with that. I think it would enhance certain investments and abilities of the two national railways to consolidate some operations in turnaround yards and that sort of thing in Alberta. I think they have said that. I don't know where they stand on others.
We're taking an average of about $25 million a year out of them on that basis, but I don't think it has anything to do with the short-line railway issue. In fact, until the system rationalizes in the next five years - we talk about that but I don't know what it is - there will be 125 elevators closed here in Alberta in a very short time. The terminal building is already on blocks for different companies that are going to expand 50, 75, 100 car spots. I don't know whether we'll go to inland cleaning, but we'll go to solid unit trains, a more efficient, effective system. That all has to take place before a short-line railway in the grain commodities and so on would ever dream of stepping in, because I don't think they could function in the present-day market without a subsidy.
.1645
As it relates to coal and sulphur, that's what we're talking about, if the door is left open for possible unions between the two nationals and shippers, two-thirds of whose product has to go by rail. There's no coal. It's just a no-brainer by trucking. That's out.
So the question to you - if it was on some of the higher commodities, yes, perhaps the fuel tax is an issue, but not on the massive number of branch lines that are associated with grain, and that's where the big branch lines are.
Aren't the majority of your lines grain lines?
Mr. Renaud: Yes.
Mr. West: I have to see a rationalization of the grain companies first. It will affect lots of the small communities, but that's going to take place first. We just have to step back and let it implode, and you're going to see town after town after town lose their branch lines, because their elevators are going to be closed and then the trucks are going to hit the road, and where they access is what we're concerned with.
Mrs. Cowling: With respect to branch lines, are the provinces of Saskatchewan and Alberta prepared to pick up and buy some of those branch lines and lose them on to short lines? Also, Churchill is of course our only prairie port and many people out of Saskatchewan use it. I'd like to hear some comments on Saskatchewan with respect to the port of Churchill as well.
Mr. Renaud: What was the first question again, please?
Mrs. Cowling: It was about rail-line abandonment and moving on to short lines. I'd like to know what your perspective is with respect to the province, whether you might consider buying.
Mr. Renaud: We would be very reluctant, I think, to get into the railway business. It's not saying that in an exceptional circumstance we wouldn't look at a partnership with the private sector or a company or a group of farmers, or whatever, but it's not likely.
Maybe the federal government getting out of this railway business is a prime example. I don't know if government should be there, so I think we have to look at that.
As far as Churchill is concerned, if it's cost-efficient to our producers and it can be economically viable, we are in support of that, and that's why we believe that if in fact the marketing agency can prove that there will be buyers and there will be sellers, who will use the port of Churchill, then certainly we, as a country, should look at it because it is our only prairie port. However, it has to be economically viable, as Manitoba has said, and it has to have the support of the farmers and of sellers and buyers who would in fact use the port.
Mr. West: That was a very cleverly crafted question in order to divide and conquer the foe in front of you. You knew well that we're not going to buy any of these lines when you asked the question. We just sold Northern Alberta Railway, got rid of it, and the answer to you is no. I answered it when I went on and on about branch lines before. We're just getting out of our dance with the philosophy that government could be the be-all and end-all to any industry.
We lost somewhere around $40 billion with that dance, and we've just balanced in a short time and we're going to pay off that dance. So the marketplace is going to start to surface here, and I think that's a dance all the rest of you are going have to come to terms with also.
The Vice-Chairman (Mr. Comuzzi): Mr. Collins.
Mr. Collins (Souris - Moose Mountain): Coming from the west, I find it commendable that three ministers would come with a concerted, unified approach to concerns with regard to transportation.
Coming from Saskatchewan, Mr. Renaud, the southeast part, I'm very interested in knowing how we're going to accommodate as we see these larger elevators come into play, when our road structure is going to hell in a hand basket, to put it mildly. I'm interested because I heard the minister from Alberta suggest that they have a billion dollar program.
.1650
I think we have to take a look at agrifood and those spin-offs. I commend Manitoba and I'm sure the other provinces for that.
What I am concerned about is what we are going to do. I support wholeheartedly what your concerns are with regard to subclauses 27(2) and 34(1) and clause 113, and some of the other aspects that need to be addressed, because they're going to have a hell of an impact for shippers in western Canada. What are we going to do with the road structure? I would like to know from each of you how you are going to address those, because those are going to be major impacters as we change our transportation system.
Mr. Renaud: Thanks, Mr. Collins, I appreciate the question.
We estimate that if in fact one-half of the branch lines go over time - that is, one-half of the 3,600 miles - we could be looking at costs of $30 million to $50 million per year. Of course, our budgets just can't handle that, there's no question about that. The transition fund will help to some degree, depending on how it's given out. It's given out to some help for highways, and certainly for municipal roads. That will help to some degree between municipal roads and highways, but it is certainly not sufficient.
I think of the $140 million in the transition fund, Saskatchewan, with the percentage of branch lines it has, is probably looking at the $80 million mark over a four-year period, so it will not address it. What we have to do is work with rural municipalities. Times are changing. We have to plan better in terms of how we are going to react to road damage - not only rural municipalities and the Department of Highways and Transportation, but in fact the grain companies and the railways, so that we can spend less money more wisely. I guess that's how we in Saskatchewan will react.
That brings me back to the fact that while you as provinces maybe should buy railways, it's just not in the cards. To handle the road damage is going to be a very difficult problem, and then to put another infrastructure on top of that of course is not possible. It's going to be a problem. We're going to have to work with municipalities, with grain companies, with railway companies, and just plan our expenditures better.
The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Collins.
We're running short of time, because these gentlemen have to catch a plane, as I'm advised, at 6 p.m., which means we should allow them out of here by 5 p.m., 5:05 p.m. or 5:10 p.m. Am I correct, gentlemen?
Mr. Findlay: Yes.
The Vice-Chairman (Mr. Comuzzi): One question from Mr. Jackson.
Mr. Jackson (Bruce - Grey): Gentlemen, as ministers of transportation from your respective provinces, you should have a policy of air, road and water transportation systems. Is there not something in your policies - When the trucks use the road, they'll create major deterioration of your road system and they'll also clutter them up. In your own networking there's no allowance at all for trying to work with the railroads or the short-line people?
Mr. Findlay: Maybe I could take a quick kick at it. Very clearly in the transportation area we see the future as being with tremendous intermodalism between road, rail, air and ocean. There has to be intermodalism. There's a lot more planning between the modes in terms of efficient movement of goods, cost-efficient and time-efficient. That is going on.
We're here arguing that railways are a very important integral part of that, and, in terms of dealing with our roads, the more tonnes we can keep on steel as opposed to on road, the better chance we have of meeting the capital and maintenance requirements of keeping those roads up.
I'm like Mr. Renaud. I know our road system is going to suffer deterioration that we can't keep up with in the next number of years, because we're in balanced budget legislation. In Manitoba we spend $100 million per year on capital and $15 million per year on maintenance, but it only scratches the surface in terms of the need and the demand, because the weakest link in the road is the next bridge. We have a lot of roads that are going to be used more in the future. We're going to have grain going in both directions on those roads - maybe double or triple the tonne miles in the province that we saw five years ago, so a dramatic change.
.1655
So if the railroads close down more and more lines without the existence of short lines, more and more will go on the roads that we can't handle. The efficient use of short lines is important to feed grain in the various directions, whether it's going to export or to processing somewhere else in the province; it's critical. So don't let the rails be torn up; let them be economically converted to short lines where and when that's feasible.
The Vice-Chairman (Mr. Comuzzi): Mrs. Terrana.
Mrs. Terrana (Vancouver East): I'm from Vancouver and the port is in my riding, so I get more and more concerned when I hear you say you're going south. We heard that in the United States railways are more expensive than in Canada, so what would your rationale be for going south instead of using our own railways?
Mr. Findlay: Let me quickly say what is happening. Our producers, the owners of the grain, are driven to find the most cost-effective market. We have been shipping east and west for decades, and over the last two to four years more and more of our export grain has been going west than east. But at the same time, we've seen the great economic opportunity to sell our grains in the U.S. The flood in the Mississippi opened the door, because people started to look for grain to buy to replace the loss, particularly of feed grain, and found a high-value commodity at a good price. Now a lot of our grain companies and farmers see better prices down there and want to get the product there.
The Wheat Board has been selling carefully there because it doesn't want to annoy the Americans. You've seen the grain dispute on the border, but there's no question economic opportunity is there for a wide variety of the grain commodities. There's cheaper transportation, so more is going there. But at the same time, more is going through Vancouver from Manitoba than ever before. You're gaining in one sense, but in terms of economic activity in Canada we're going south and hurting ourselves in that respect, but the opportunity is there.
Those are the changing dynamics, and the railroads need to get into the game, and they are, in the north-south haul, because geographically North America is north-south oriented.
Mr. Renaud: You stated it may be more expensive in the United States. I think that's exactly why we're here, because where there is no competition in the United States, it is very expensive, but where there is competition, it's less. I think Mr. Lavigne's question in regard to promoting short lines and counteracting road damage is very important. That's another reason why we're here. If there is the opportunity for short lines to be a choice or to be part of the system, this will certainly help all of us in regard to road damage, so that's very true.
Mrs. Terrana: Can I briefly ask you about successor rights? Yours is one of the provinces that has successor rights, and we keep hearing it stops the selling of short lines.
Mr. Renaud: In Saskatchewan, our short-line legislation is a little different in that it's not an automatic procedure. It has to go before the labour relations board, which has the right to consider what the short line will do and the changing equipment and those kinds of things that would be needed for a short line. We have not had anybody apply to this point. We do have one short line in the province, so I guess we believe the way we have it legislated is fair. It has not been tested at this time.
Mrs. Terrana: Perhaps it's because they don't want to pay the consequences.
The Vice-Chairman (Mr. Comuzzi): Mr. Fontana.
Mr. Fontana (London East): Thank you, Mr. Chairman, and thanks to the ministers for their constructive and useful input into the exercise.
I want to talk a little bit about the concepts. The devil's always in the details, but I think you indicated you want a competitive, affordable, viable railroad industry essentially to make it possible for your shippers and producers to market their goods around the world. Of course, everybody wins under that kind of scenario.
I think you will all understand, however, that the regulations in 1987 were shippers' benefits. Everybody wants the prices to come down in terms of transportation, but that's what Bill C-101 is all about. The costs for the railroads and the regulations for the railroads have been so onerous they haven't been able to get those costs down enough. In fact, if you take a look at what both CP and CN have done over the past five years in terms of manpower and efficiencies, they've gone as far as they can go without taking that further step.
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I want to get to the hub of the issue. Obviously we want to try to create short lines, and you will all need to have mere legislation to allow running rights on your own provincial short lines.
The Vice-Chairman (Mr. Comuzzi): There had better be a question in there, Joe, or you're going to have to get on the airplane with them to ask it.
Mr. Fontana: With respect to reciprocal provincial legislation, are you prepared to work with us to ensure you have the mirror legislation that allows running rights on provincial short lines? I think that's key for interswitching for your shippers' rights.
Secondly, I want to talk to Mr. West because I think I liked what he had to say. The less regulation the better it is, so I would like to put a proposal to you. What if we were to get rid of all the regulations - none exist in the United States - and have final-offer arbitration as the mechanism by which these commercial contracts can be arranged, or grant unfettered running rights to everybody but get rid of all the shippers' rights? You would therefore have competition and the system could work a lot better.
Mr. Renaud: Saskatchewan would certainly be interested in working with you in regard to running rights so everything is the same.
As far as regulations in the United States, I believe there are regulations that protect short lines under the Staggers Act. I would like your comments on that.
We would like fewer regulations as well or no regulations, but until there is true competition you may need some form of regulations to stimulate competition. We're just asking for what was in the NTA 1987, which gave the shippers some protection or sort of acted as if the other railway was right beside this railway and the shipper had a choice. I guess choice is what we're talking about.
If you look at telecommunications, where one company can use the other's infrastructure, I think those kinds of things create competition and can make everybody more efficient. We want a healthy railway, don't get me wrong. We need a healthy railway in Saskatchewan; it's very important to us. Our commodities are bulky and of low value, so we need a railway.
Mr. West: Your question is another loaded shotgun at the table. We have a natural monopoly in this country, as I said in my speech. You can say laissez-faire, which is a nice attempt to deregulate and let it force itself, but the United States has 30 million people. There are only 2.7 million in Alberta, 900,000 plus in Saskatchewan, and I don't know how many in Manitoba. But if you open it up to the marketplace, you don't get more railways. That isn't an issue, so we have to deal with what we've been dealt.
If we study the history of this country, by ways and means we subsidize two national railways. The people of this country built these railways one way or the other, whether through oil rights they took off someplace else or gas or land or whatever we did. As I said, this is a natural monopoly and we want an appeal process, not arbitration. Arbitration in this sort of system won't work.
I like laissez-faire. I'm a great free enterpriser. If you want to do that, if it came right down to it, Alberta would go head to head with anybody. But can the rest of you substantiate that type of marketplace with two railways and the population and density we have? The probability of having a mish-mash of railways like the States is -
The Vice-Chairman (Mr. Comuzzi): Do you want to answer Mr. Fontana's first question and make any comment on it, Mr. Findlay?
Mr. Findlay: I would just say in terms of reciprocal running rights, we would want our legislation to mirror the federal legislation. Nationally, CN and CP can't run on the short lines. They can only handle a certain weight of cars, but provided -
Mr. Fontana: We're talking about shippers' rights on your own provincial running rights or provincial lines.
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Mr. Findlay: I have no problem with reciprocal running rights for anybody, provided it opens up the door to competition and to controlling costs. That's the bottom line. So what we're saying is that should it happen here, our provincial legislation would mirror that opportunity.
Mr. Fontana: This is for Minister Renaud.
Staggers doesn't have any running rights in the United States. Most running rights that exist, though, including the ones in Canada, are commercially negotiated. Of the short lines themselves, with one exception, not one has indicated they want running rights because there is essentially a partnership between main-line and short-line companies. They like that working relationship as opposed to mandated and legislated running rights.
But, Mr. West, you talked about achieving a balance. You're the one who talked about viable, competitive railroads and less regulation. I want to ask you straight out whether or not Bill C-101 is going to do enough for the railways to ensure that we have two railroads at the end of the day. Without any railroads, or even one less railroad, we could have really big problems in this country. Does C-101 satisfy the government's intention of at least wanting to ensure that we do have viable railroads at the end of the day?
Mr. West: With some modification, yes. We've brought through a few modifications, but for the time being I think this will have to be revisited as we see what evolves out of some of the transportation issues in the next decade and what evolves out of some of the negotiations we have ahead of us as provinces and in terms of national interests. But if you modify this so there's some perceived balance for the shippers in the short term in order to get us through, then the answer is yes.
Our shippers come to us as a coalition and say they don't want to be opened up to blunt laissez-faire at the present time. All they're asking is that we give them some balance.
Now, getting back to significant prejudice, just define it. Don't leave it hung up there. What it is, if it's left to interpretational lawyers and people who sit down, is the vagary of it.
The Vice-Chairman (Mr. Comuzzi): Thank you very much. You folks can stay if you would like. We'd love to have you here for another hour because there are enough questions.
Mr. West: Why, is the House out now?
The Vice-Chairman (Mr. Comuzzi): No, but you really do have to go and catch a plane, is that not correct?
Mr. West: Yes.
The Vice-Chairman (Mr. Comuzzi): I appreciate very much your taking the time to come. I didn't have enough time to ask some of the questions that were so important to me. Since your deputies are here, if I just stated the question, would you give us your undertaking to reply to us in the mail, sir?
Mr. Findlay: Yes, go ahead.
The Vice-Chairman (Mr. Comuzzi): First off, we've heard a lot from the railways with respect to how, federally, we tax the railways out of proportion by way of a 4% excise tax and that we don't have enough depreciative allowance for their equipment. The next heavy taxation area, naturally, is in the fuel taxes that each of your provinces exposes the railways to and that make them uncompetitive as a result, plus there is also the municipal taxation level. We'd certainly like your written response with respect to how you can see the taxation issue affecting the cost of getting our freight out of our country.
The second question I would have is: Since two of the three of you own a substantial amount of hopper cars and designated cars, how would you foresee the division of hopper cars owned by the Canadian Wheat Board? Should you just assume control of those cars? Where do you see the designated hopper cars going in this downward move of the railways?
The third question would be a kind of philosophical question inasmuch as transportation policy in Canada for the last hundred-and-some years is concerned. It has always been designed east and west in order to keep this country together. In the last little while, through budgetary constraints and the hell-bent decision to reduce all transportation costs in this country, we see - and we've heard it here today - north-south movements and so on at the expense of the east-west. If you could, just put your thoughts down with respect to how it has a bearing on the future of where we're going in this country. Would you mind doing that for me?
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Mr. Findlay: Yes, I will.
The Vice-Chairman (Mr. Comuzzi): You can send them to the clerk.
Mr. Taylor, I hate to have you sit here through the whole meeting and not get the opportunity to ask one question. I think we could have one minute. Would you mind very much? I apologize for that, sir.
Mr. Taylor: Thank you very much. I will be brief and go right back to the very first question you put to the members about value-added. I think we need an opportunity to clarify the rosy picture that Mr. Findlay painted originally.
Basically, 80% of the raw grain product is exported out of Saskatchewan, which is probably proportionate to the other western provinces. If we double our domestic use, and if we double the value-added product in Saskatchewan in particular, we're still looking at probably exporting 70% of our product. The need for that rail system for the raw product is still essential. Mr. Findlay, and maybe Mr. Renaud from Saskatchewan, could you just clarify this picture for us a little bit in terms of the importance of the rail system for that raw product.
The Vice-Chairman (Mr. Comuzzi): I'm going to ask if the answer to that question could be returned by way of writing in order that they don't miss their planes. Do you mind, or do you want to answer that? If you have time, please answer.
Mr. Findlay: Can I just quickly respond? We're so far from export position - salt water - that we see this changing very dramatically in Manitoba. For instance, in Manitoba we produce 1% of the beef in all of North America. If it got up to 3%, that would be a lot of grain consumption. And the hog industry is growing dramatically in Manitoba, so it's the same idea. We're such a small part of the North American and Pacific Rim markets, but it's endless in terms of the amount of feed grain we can consume and convert into meat. With oilseeds and crushing, we export oil and meal, not the raw oilseeds. There is no question about it. All the initiatives are that good.
We have a region in southeast Manitoba, the Mennonite bible belt, that doesn't export much grain. They've found the magic elixir, if you want to call it that, and it is in diversified agriculture grain. They grow a lot of grain but they don't export, so they don't need a railroad. That principle will work for an awful lot of the prairies in the coming years. It's driven by economics. How can we adapt to that?
We absolutely need the railroad because it's going to haul back and forth. I want the railroad doing that back-and-forth haul, as opposed to trucks. I don't know if they're positioned to do it today, but the legislation shouldn't impede them from being able to do it.
I have a feeling of the future, but I don't have a crystal ball.
The Vice-Chairman (Mr. Comuzzi): Gentlemen, again, thank you very much for coming to Ottawa.
Mr. Findlay: I appreciate the opportunity. It's great to work together.
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The Vice-Chairman (Mr. Comuzzi): Ladies and gentlemen, the next witness is Mr. Blaikie, who needs no introduction.
Do you want to table your report or read it?
Mr. Bill Blaikie, MP (Winnipeg Transcona): Mr. Chairman, thank you very much for the opportunity to present my remarks to the committee today. I do have a copy that the translators might be interested in. When I'm sticking to the text it might be helpful and when I'm not it won't be helpful at all. They asked me for one yesterday but I didn't have one. Today I do.
Mr. Chairman, as I understand it, Bill C-101 is all about bringing the so-called and supposed rationality of the marketplace to all public policy decisions. Along with the privatization of CN, C-101 is part of a broader agenda of deregulating huge flaws of the economic activity in Canada. As I'm sure you know, Mr. Chairman, I come to you and to the committee today as an opponent of this agenda.
As a long-standing opponent of that agenda, I'm reminded as I sit here that I'm the only person here who was a member of the transport committee at the time of the last set of hearings with respect to deregulation, on the legislation that created the National Transportation Agency in the 1987 deregulation. I remember being a member of the committee at that time in 1986 and 1987 and even prior to that. That's by way of history. I think my first meeting in regard to the transport committee was in the fall of 1979.
I want to put my cards on the table. I'm here to quarrel with the idea. I know this bill does not completely and utterly deregulate the transportation system. As Mr. Fontana pointed out in his exchange with the minister, it could go further. Nevertheless, it's the next step of a further deregulation.
As I understand it, one of the goals of the bill is to encourage or make it easier for the railways to abandon rail lines and/or to create short-line railways and then, as I see it, to encourage the easy abandonment of these same short lines if they turn out not to be profitable to their owners.
For the previous witnesses - I share the concerns of the three prairie provinces. Although I don't agree with the goal of creating short lines in the first place, I do share their concerns.
The railways should be prevented from acting in such a way as to make more difficult the short-lining of railways by de-marketing or not maintaining lines that might eventually be short-lined. So if you're going to short lines, I want to say do it well or do it when it needs to be done and don't allow the railways to get in the way of it.
Nevertheless, Mr. Chairman, having said that, I wish to deal with what I call the broader conceptual framework within which the legislation occurs. I begin by saying that rationality, efficiency, profitability and other mottoes of the new market zeitgeist, the spirit of the age, are songs that few in this Parliament have found the power to resist. Anyone who tries to resist them is considered to be a dinosaur, so I come to you today as a self-confessed dinosaur in this regard. There do remain a few of us, a happy few, but I believe there are many more in the country who are not so easily seduced by the blandishments of neo-conservative - and now it's more popularly called neo-liberal - language, and I don't mean that with respect to big ``L'' and big ``C''. It's just the way it's turning out.
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In my presentation today I want to share with the committee the basis of my resistance to this trend by decoding the language of privatization and deregulation. Rationality, efficiency, profitability, are very attractive words; words that ultimately we can all agree should be the basis of sound economic and public policy. So it's not the words that I want to contest, but their meanings and content, especially with respect to such a vital part of our economic infrastructure as the rail industry.
There's a huge difference between what economic rationality is taken to mean and what it could and should mean. Economic rationality should distinguish between profitability for individual investors and economic sustainability for the economy as a whole. Economic rationality should include the crucial principle of environmental sustainability. Economic rationality should embrace the notion of constructive labour relations and appreciation of the economic benefits of a labour market that provides secure, well-paying employment.
Of course, this is not what is usually meant by economic rationality in the prevailing discourse. This is not the meaning of economic rationality that emanates from the computer screens in the financial satraps of Bay Street, Wall Street, Tokyo and Frankfurt. And because this is where shares in CP and now shares in CN are to be bought and sold, it is certainly not the concept of economic rationality that seems to inspire the Canadian transportation policy under Bill C-101.
Bill C-101 hands over the development of Canada's transportation infrastructure to the conception of market rationality, which measures economic viability simplistically through profitability to the investor. Under Bill C-101, any short line that is not profitable in its own right, either to CN or to CP, or to a local operator, can and certainly will be abandoned and the service terminated regardless of other considerations. But profitability is not the only criterion in economic viability, and this is the argument I'm here to make today.
It needs to be pointed out that profitability must be understood in the new context of the financialization of the economy. Investors now have easy access to a plethora of investment vehicles in short-term financial instruments, which offer high rates of return on a very short-term basis. Companies seeking capital for long-term investment in infrastructure, such as short-line railways, must compete in a market geared to short termism and the high rates of return offered by financial instruments. This inflates the cost of capital and raises the threshold where a particular short line could become economically sustainable or not, from an investor point of view.
Short lines that would be economically viable in a financial system with the capacity to provide capital that was patient and reasonable in its expectations for profit will not be viable in our current financial system, based on the extravagant short-term demands of the coupon-clipping bond traders who populate our financial markets; therefore, many communities and local economics will lose an otherwise viable economic asset. Short termism in our financial system and private short lines in our rail system cannot happily co-exist.
A second problem with the complete marketization of rail transport lies in the failure to see that what may not be profitable to an individual investor may be economically sustainable by and economically important to the country, or a community, or a region, for that matter. The operation of a particular short line may not in itself be profitable but may be economically viable if held up to the economic spin-offs provided to a particular community or local economy, or for that matter held up to the cost that will be incurred by others, municipalities, whatever, in the absence of these short-line railways, pursuant to some of the comments that were made by the ministers of transport who just appeared before you.
Economic viability could be achieved by the intelligent use - dare I say it, Mr. Chairman, here is where I show my dinosaur colours - of subsidy by which the community as a whole shares the cost that enables the economy as a whole to benefit. But ``subsidy'' is a dirty word these days. The financial markets sheltered by the subsidies of our deposit insurance regime and the inevitable public bail-outs of financial institutions, such as was the case in the recent Mexico crisis - these same subsidized people cry foul whenever governments subsidize economic activity that brings benefits to communities and local economies, but they are silent about the way they themselves are subsidized by the public purse.
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I want to argue that there is still the need for the intelligent use of subsidy to protect railway infrastructure and to protect short lines, if that be the policy, in order to keep alive the idea of economic viability as it pertains to the well-being of local communities, regions, etc. I contend that Bill C-101 will make this unlikely and improbable. Some would argue it will make it impossible. I don't know the bill in its detail well enough to contend it will make it absolutely impossible, but certainly the trend is in the opposite direction.
Another uneconomic consequence of the total marketization of our rail infrastructure will be the inevitable unpredictability of service. If we can learn anything from the deregulation of the American airline industry, we learn that with infrastructure thrown into the sink-or-swim environment of the marketplace, some services will indeed sink and others will swim. A particular short line may change hands repeatedly, going in and out of business over time. The resulting unpredictability of service makes it very hard not only for shippers to make decisions but for other investors, who may be interested in making an investment in a local community but are deterred by the unpredictability of transportation services.
This applies not just at the local level but at the national level as well. There is no guarantee, either in this bill or in the CN privatization legislation, that Canada will retain a trans-Canada rail network. The only assurance offered for the retention of a trans-Canada rail network is the market, or what I would call the fickle play of market forces.
This insecurity is bound to harm the local economic development of the regions of the country where rail infrastructure plays a pivotal role in regional economies, such as northern Ontario, the Maritimes and the city of Winnipeg.
In short, the reliance on profitability as the only criterion for the provision of rail infrastructure is not economically viable in the bigger and, I would contend, better sense of the notion.
There is nothing in Bill C-101 that assures us of the capacity, the intention or the certainty of public intervention to preserve an economically viable service, using ``viable'' now in the larger sense of the word, where an operator finds it is not profitable enough, in the smaller sense of the word ``viable'', to do so.
Economic viability must not only go beyond profitability; it must include the notion of environmental sustainability. All governments love to use the language of sustainable development and of the need to see the environment as an essential part of any economic decision. So goes the rhetoric. But there is nothing in Bill C-101 that requires an environmental audit of the consequences of rail-line abandonment.
I remember well - Mr. Chairman, you may have been there in the House of Commons - when the VIA cuts were announced in the fall of 1989. Then Prime Minister Mulroney had just come back from a big conference at which he'd had his picture taken with Gro Harlem Brundtland, and many things were said about adopting the Brundtland report and about how, from here on in, there would be environmental analysis of all major policy decisions, which was one of the major recommendations of the Brundtland report.
I don't think the current government has repudiated the Brundtland report, but I remember at the time the Prime Minister was caught a bit off guard when I asked him about it. He said, ``Well, no, there wasn't an environmental audit or an environmental analysis of the VIA cuts''. Later there was an in-house one, which they produced after that question, but to my knowledge, there hasn't been an environmental audit of the consequences of Bill C-101. I submit there should be.
In a larger context, there is nothing about the new regulatory environment that provides public authorities with the ability to shape an environmentally sustainable national transportation strategy, in which the rail industry must obviously play a central role. Bill C-101 focuses on the balance sheets of the railway companies and the shippers but provides no mechanism for an externalized accounting of the impact of line abandonment on roads, on greenhouse gas emissions and on the environment in other ways, not to mention the social impact on communities.
This is all about bookkeeping, in the final analysis. It's a question of which set of books we are keeping. Too often we are caught moving from policy environment to policy environment, going from one small set of books to another small set of books, etc., and we are not keeping the larger set of books in which there is a column for the environment, in which there's a column for the social impact of decisions.
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I find it indisputable that anything that encourages, either intentionally or otherwise, increased use of trucks over rail is, prima facie, environmentally unsound. If the government can produce a study to the contrary, I'd like to see it, but I don't think any such study has been done. So I'd like to register my opposition to this trend on that basis as well.
Finally, economic viability must also include an appreciation of the importance of sound labour relations and the fostering of a labour market that will provide the well-paying employment on which our economic prosperity depends, Mr. Chair. It's fair to say the privatization of CN, and the deregulation of the rail industry as a whole, is shorthand for gutting the ability of unionized workers to preserve the contracts they've bargained for in the past. You just have to talk to any rail worker to know this is what is happening parallel to these developments, and it is not a coincidence.
There's nothing in Bill C-101 that will prevent employers from ignoring existing unions and union contracts as a particular service moves from federal to provincial jurisdiction. The sales pitch that the government and CN have been giving to prospective investors in CN, as well as future short lines, positively rejoices about the way the new regulatory environment will put the unions in exactly the vulnerable place where the financial markets love to see them.
In conclusion, Mr. Chair, I want to note that there is one provision in the government's new transportation regime that flies in the face of the market forces in which it otherwise places so much confidence. This is the provision for the retention of Montreal as the permanent headquarters for a privatized CN. If market forces were left to play, as they are in every other single aspect of the government's plan, CN would most certainly move to western Canada, where it conducts the vast bulk of its business.
This measure would make sense if Bill C-101 were based on a philosophy that held to a view of economic viability that I have set out today, and in which values other than profitability for individual investors played a role. I could then accept that argument. If we're nation building, okay, we're nation building. If we're keeping the peace, okay, we're keeping the peace. If we're doing regional development, fine, we're doing regional development. But that's not the philosophy behind the government's transportation policy now, so I note this one exception.
The kind of policy that I would advocate, and which the government seems to be unwilling to adopt in any other respect, would recognize the value of rail infrastructure not only to Montreal, but to other communities like my own, Transcona, for which the rail industry plays a vital role. But the government has instead said that they believe the market can wreak whatever havoc it may on every Canadian community except one. Well, Mr. Chair, I think making that kind of exception is wrong, and I raise it not to be critical of Montreal, but in order to make my point: If we can see the logic of protecting or isolating certain goals from the marketplace in this one instance, why can't we do that when it comes to building the country?
I was recently given a document by someone from Winnipeg. It showed me a memo that had gone to Kleysen Transport Ltd., which is a big trucking company in Manitoba. It laid out how they were going to begin experimenting with running all their Winnipeg-to-Toronto and Winnipeg-to-Montreal traffic through the United States. It even had the U.S. gas stations at which they were to buy gas and how much they were going to save on fuel by doing this. As I understand it, these trucks carry Canadian mail. Now in the end, Mr. Chair, this is where this deregulation leads us, and I would say that in tandem with the free trade mentality, the country becomes just a place to make money, whether you're a trucking company or an investor or a worker or whatever. Things that were never contemplated ten or fifteen years ago, that would have been beyond the pale, now become acceptable as just doing business.
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I think that in the context of the national unity debate and the debate we are having about this country, it is things like this that are the hidden story of the erosion of people's sense that we are anybody together instead of just a whole lot of individual companies, individual investors, workers, shippers and producers, who are all out to do the very best for ourselves while rejecting as old fashioned any argument that tries to argue from the standpoint of what is better for the overall picture or for the country or for the common good.
Thank you, Mr. Chair.
The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Blaikie.
In the event that this clause wasn't in that act, do you have any idea where you would like to see the head office of CN?
Mr. Blaikie: I have a suggestion. I think Winnipeg would make a fine place for it.
The Vice-Chairman (Mr. Comuzzi): Mr. Chatters.
Mr. Chatters: I really don't have any questions, but I was appreciative of the lesson in socialism that you have presented. As always, I think you have a lot of valid criticisms and a lot of valid points to make. But as always, you forget to tell us how the socialists would balance the books and pay for the vision you have, and that's where your weakness is, where you fall down. You simply rave on about the evils of the markets and of capitalism and want to ignore the economic realities that we find ourselves in today. We have almost $600 billion in debt that has to be made up in a tax regime that is in fact forcing such a trucking company to go through the States because it can get cheaper fuel there. Our fuel is so high here due to a tax regime forced upon Canadians because of the socialist practices of the past. That's about all I can say about that presentation.
The Vice-Chairman (Mr. Comuzzi): Was that a question or just a statement?
Mr. Chatters: It was just a comment.
Mr. Blaikie: Perhaps I can respond to that, Mr. Chair.
The Vice-Chairman (Mr. Comuzzi): All right.
Mr. Blaikie: It seems to me that the deficit, which the member from the Reform party is so concerned about, is a deficit that has developed precisely over the time period in which we have been progressively adopting neo-conservative policies. In the time when we had in Canada the unadulterated socialist policies that the member talks about - I wouldn't call it socialism because I'm sure the Liberals who implemented these policies didn't think they were being socialists. Nevertheless, let's take the member at his word, or at his rhetoric in any event. They weren't alien socialist ways. They were a part of a Canadian tradition that went back far beyond the creation of the NDP or the CCF to the national policy of Sir John A. Macdonald in 1867.
There was a Canadian way of doing things, and that is being changed. I never said anything about the evils of capitalism. I never said ``evil'' and I never said ``capitalism'', but if that's the conclusion you came to, I think you may have been reading me right or reading the situation right.
The fact is that as we have gone through deregulation and privatization and free trade, the revenue basis of governments has disappeared, just as the good paying jobs that used to provide the income tax base by which people could pay for the deficit are disappearing. They are either going south or people are having to accept lower and lower wages.
It's no coincidence that the government can't meet its deficit targets. That's part of the problem, and there are other causes for the deficit, such as interest rates and tax loopholes. We could talk about them for a long time, but I know you don't want to.
The Vice-Chairman (Mr. Comuzzi): Bill, please, we're trying to talk about Bill C-101.
Charles, do you have any questions?
Mr. Hubbard (Miramichi): No.
Mr. Blaikie: It's all connected.
The Vice-Chairman (Mr. Comuzzi): Eventually everything is connected.
Mrs. Cowling, no questions.
Mrs. Terrana, no questions. Every time I don't ask you, you get mad at me for not asking.
Mrs. Terrana: No, that's not true.
The Vice-Chairman (Mr. Comuzzi): Any further questions?
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Thank you very much, gentlemen, for the submission. I have a question, but I'm going to ask you in private because we have a heavy agenda to cover.
Mr. Althouse (Mackenzie): He spoke about the regulations that have been abandoned in this bill. But I think it's fairly clear that there are some very important regulations that will continue after Bill C-101. As for limits to public liability, railways and some of the short lines have been asking for this, as we all know. It's been a continuing thing that railways that inflict damage on the public or on individuals they deal with can only face a certain amount of damage, because the law protects them by limiting the liability. The very fact of creating corporations limits liability.
Do you find it a little unusual that we seem to select the kind of regulations we decide to pick when we decide we're going to deregulate everything?
Mr. Blaikie: I want to make it clear that I don't come here as an uncritical defender of every regulation that ever existed, but as a defender of the notion of regulation. Certainly one of the things I've been critical of in the past is what the member for Mackenzie has been critical of in the past, which is the regulations that have protected the railways in that particular way by limiting their public liability.
I referred earlier, Mr. Chairman, to my first transport committee meeting. It was a committee called as an emergency meeting after the Mississauga rail disaster. Certainly that's one of the areas in which we could see some change in the regulation, as opposed to the abandonment of the notion of regulation.
The Vice-Chairman (Mr. Comuzzi): Mr. Blaikie, thank you.
Mr. Blaikie: Thank you.
The Vice-Chairman (Mr. Comuzzi): I welcome Transport 200 to the table.
Mr. David W. Glastonbury (President, Transport 2000 Canada): My name is David Glastonbury. I'm the national president of Transport 2000 Canada.
We've had a change in the people who are presenting. I'd like to introduce my two confrères. Mr. Robert Evans is the past-president of Transport 2000 Canada. Dr. John Bakker is vice-president, west.
Transport 2000, as you know, represents people from all across the country who are interested in ensuring that Canada has the transportation system that is environmentally, socially and economically sustainable.
We very much appreciate the opportunity to appear before you this afternoon and at this late hour on behalf of our members.
The omnibus bill, which you are currently reviewing, is of such scope and complexity that we at Transport 2000 have concluded that our best contribution today would stem from focusing on only particularly critical elements of it.
Therefore, after tabling a general comment on how we view the implications of the fundamental philosophy of Bill C-101, we propose to concentrate on two specific areas of great concern to our association.
We make no apology for the fact that both of the specific areas we will address in a moment relate to railway matters. It is our position that a healthy and properly directed railway industry can make a much-enhanced contribution to Canada's economic, environmental and social goals. Thus, steps to improve the shaky viability of railway operations are critical.
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I'll turn it over to Mr. Evans.
Mr. Robert Evans (Former President, Transport 2000 Canada): Transport 2000 has consistently said that it would support sensible steps to improve the efficiency of Canada's transportation system. If such a goal can best be accomplished by less government, so be it, but our position comes with a caveat. We have insisted that any streamlining of the regulatory environment must ensure a realistic, ongoing ability to provide appropriate protection of legitimate public and national interests. The Canadian dream cannot be allowed to be totally sacrificed on the altar of private profit.
In Canada, with the exception of the road sector, we seem to be in a great hurry to pass most of the effective control of our transportation structure to the private sector. This contrasts with the situation in a number of the most successful developed countries. We can cite, for example, Germany, Japan and the United States. They have built dynamic private enterprise economies on top of transportation systems that continue to rely on substantial government funding and/or control in the national interest.
I have an article here, which was just passed to me, in which the ICC intervened to retain a rail line in West Virginia that CSX Transportation Inc. wanted to abandon.
Under Bill C-101, as proposed, Canada may be on its way toward a loose patchwork of literally scores of railway companies, some under federal regulation, some under the rules of our various provinces. At Transport 2000 we have a concern that the parts may not add up to a cohesive whole. Most certainly the government must resist pressure from overzealous shippers to take legislative action that would turn the new short lines from feeders for our main-line railways to being in competition with them. The resulting chaos, we suggest, will not serve Canadian interests, including shipper interests.
Let's be perfectly blunt. Transport 2000 fears that barring a more active federal role than what is implied in Bill C-101 as we see it now, perfectly legitimate shareholder interests will drive much planning, support and operation of our private transportation services to the United States.
Why wouldn't our private enterprise transport operators seek least-costly opportunities? Are not those opportunities often likely to be found south of the border? What will the federal government do if Canadian transportation takes the American route? If one judges by the current text of Bill C-101, it seems to us that the answer to the last question is ``rather little or nothing''.
Transportation is a critical piece of the Canadian fabric, yet it appears that we will be increasing our dependence on another country to move our people and goods, even for the movement of traffic between points within our own boundaries.
Let us now take just a minute to explore this general concern further in the specific context of Bill C-101's more efficient process for allowing railways to get rid of rail lines. As we said at the hearings relating to recommendations of the National Transportation Agency Review Commission, Transport 2000 is not opposed to streamlining the abandonment process, but our support in this regard assumes that there will be a continuing ability recognized in the new legislation for the federal government to intervene when the abandonment of a line is deemed contrary to the national interest. We do not see that protection in Bill C-101.
Unfortunately, putting a requirement or mechanism in a piece of legislation may not necessarily guarantee that a government will then be committed to its serious application. But it seems to us that it is better to at least have Bill C-101 enshrine a way for the federal government to always be able to act on behalf of Canadians on rail-line abandonment issues, if and when such intervention is called for.
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Our concern with respect to how Bill C-101 addresses rail-line abandonments relates specifically to the proposed wording of subclause 145(2), which would result in the federal government having no ability to intervene in the public interest when a line to be abandoned is wholly within one province.
The federal government has always had the primary responsibility for railway operations in this country. We suggest that it is highly inappropriate for it to now completely abandon its role of representing the public interest in so many instances. We fear that the provinces will be reluctant to pick up the federal ball and, as a result, action on legitimate public concerns will fall victim to jurisdictional quarrels.
We therefore make the following two suggestions for amendments to Bill C-101: first, that the words ``if the railway line passes through more than one province or outside Canada,'' be deleted from paragraph 145(2)(a); and second that the act contain a provision requiring the minister to review all applications for railway line sale or abandonment for public interest considerations. This should begin when each line is first offered for sale, in order that the federal government will be in the best possible position to react knowledgeably when its own fifteen-day window to purchase at scrap value is opened.
Will Canada have a transcontinental railway in three years? Will there still be a true main-line track to Halifax in the next three or five years? Will there still be a Canadian rail route between central Canada and Winnipeg? Will Vancouver and Montreal still be vibrant ports? Will VIA Rail have the track access it needs?
At Transport 2000, we suggest that under Bill C-101, as it's now proposed, not one person in this room can answer any of those questions.
We would now like to move to our second general area of concern with respect to railway aspects of Bill C-101 and address several matters relating specifically to the provision of rail passenger service in Canada. Under Bill C-101 - and we fear this could happen quickly - VIA and possibly rail commuter services could be faced with a combination of, first, outright abandonment of needed rail lines, and secondly, the increased costs of trying to deal with a plethora of new provincially administered short lines. Of course, VIA is going to have the added complications of dealing with a privatized CN.
In the first regard - that is, abandonment of rail lines - we understand that several passenger services maintained as a result of Order in Council interventions over the last several years are at risk under Bill C-101. We refer to the line through the Lévis rail station, lines between Chandler and Gaspé and lines between Senneterre and Cochrane. Moreover, we expect that other passenger services will lose tracks to run on, including passenger trains on Vancouver Island, and very likely and quite soon, between Montreal and Ottawa.
In terms of passenger train operation over short lines, we are pleased to see the provisions facilitating this. We recognize the potential value of final-offer arbitration for VIA, but we have some reservations. We see nothing in Bill C-101 spelling out guidelines for ensuring fair charging of VIA for its use of freight railway lines, and we see nothing in Bill C-101 offering assurance with respect to VIA's ability to maintain and improve the speed and frequency of its passenger trains. We also see nothing indicating that VIA will have full access to freight railway costing information in support of any application it might make for final-offer arbitration.
Moreover, we are concerned that the very different set of players with whom VIA will have to cooperate in the near term could plunge that corporation into some significant challenges. There are, for example, possible pitfalls if provincial short lines are not regulated in a way that mirrors federal regulation.
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To better ensure that the public interest is appropriately treated when passenger train service is involved, we propose that Bill C-101 be amended to require three things: first, that the federal government permit discontinuance of an intercity passenger train operating over a federally regulated railway line only after public hearings to fully assess environmental, social and economic implications; second, that the federal government purchase at scrap value any federally regulated line that is carrying a scheduled intercity passenger train service and that is proposed for abandonment, with the purpose of conveying same to the company operating the scheduled passenger service; and third, that the federal government spell out guidelines in Bill C-101 for fair access by operators of passenger train services to freight railway lines in terms of charges for the lines, ability to maintain and improve passenger service quality and remedies when problems arise.
Lest someone suggest that our third recommendation would be unworkable, we should point out this is exactly the kind of regulation the American government established with respect to Amtrak.
As we've already said, Transport 2000 welcomes a number of the aspects of Bill C-101 aimed at better securing the future of our freight railways. Perhaps a bit more of the same attention should be directed to VIA.
In summary, we are concerned that certain provisions of Bill C-101 raise serious doubts with regard to whether some elements of Canada's future transportation industry will really act in the best balanced interests of all Canadians. Therefore we have made some recommendations for changes to this legislation that call for a modest augmentation of continuing federal government participation in the planning and operation of our economy's transport system.
We are convinced that the related costs are low, while the enhanced ability of the government to steer transport developments, when necessary, will offer some essential insurance in support of Canadian unity and viability.
Thank you.
The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Evans.
Do your colleagues want to add to your submission?
Mr. Glastonbury: No, we don't at this moment.
The Vice-Chairman (Mr. Comuzzi): Thank you.
[Translation]
Mr. Mercier: I share your concerns. There is practically nothing in the Bill regarding the national interest and, at the end of the day, the railroads are not considered as a public utility. Since everybody thinks that it is normal for governments to maintain our roads, it should be just as normal for a government to contribute to the maintenance of our railroads as a public utility.
You said, and you're right, that in many western countries, railroads are, in fact, a public utility. The Bloc québécois will propose amendments to that effect. Even if we agree with some aspects of the legislation, we don't share the following point of view.
It says in the Bill that if one of the national railways wants to abandon a branch line, the private sector is going to buy it if it can be run efficiently. If nobody believes that this line can be efficient, but if a government, at the federal, provincial or municipal level, considers that this line should be kept in the public interest, it will always be in a position to buy it back. This is the approach taken in the Bill.
You said, and you're right, that even if it has the opportunity to buy such a line back, nothing guarantees that the federal government is going to do it, even if it is in the public interest. The former act provided for public hearings to be organized by the National Transportation Agency to allow interested parties to make representations. This does not exist any longer. Therefore, you're perfectly right when you say that the public interest is not protected by this Bill as it was by the 1987 Act.
You also mentioned that you were concerned because the federal government can not buy back branch lines located within a province. However, the provincial government could do it. I wonder why you have more faith in the federal government than in a province to look after the public interest in such circumstances. As far as I am concerned, it would be the contrary. It depends on the province, but I know one, at least, which would show a lot of concern for the public interest.
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I'd like you to give me your general opinion in answer to my comments. On the practical side, I would appreciate it if you could forward to the committee specific amendments to the sections you want changed. I would like you to tell us which clauses you'd like to delete, and which should be amended and how. I would be a useful addition to your submission which is quite interesting.
Now, tell me why you have more faith in the federal government than in the provinces regarding the protection of the public interest. I am curious to know.
[English]
The Vice-Chairman (Mr. Comuzzi): They may not want to say this in a public forum, but I overheard a theatrical aside in which one of the gentlemen said they don't necessarily trust any government. Maybe that's the adequate answer.
A witness: We have no preference.
The Vice-Chairman (Mr. Comuzzi): You have no preference on who to trust?
You guys go ahead.
[Translation]
Mr. Evans: I'd like to give a serious answer to your question. Governments change and, at some point in time, even the Québec government might change. It's a question of attitude on the part of each government concerned. We see things from the following perspective: basically, the railroads have always been under the federal government's jurisdiction and we don't want that, in some circumstances, it let go of that responsibility.
Mr. Mercier: Are you against interprovincial lines being under provincial jurisdiction, unless they have been recognized as having a general interest for Canada?
Mr. Evans: I won't answer you directly if you think that many short lines will fall under Quebec's jurisdiction. We would then have federal and provincial railroads and it would be necessary to harmonize the federal and provincial regulations. The heart of the matter is that the railway industry should be run more efficiently.
[English]
Mr. Chatters: Again, I don't have any specific questions, because the whole presentation seems more an expression of a philosophy than a treatment of the specifics of the bill. I do have to congratulate you, though; what was referred to by the last witness as an evil word, ``subsidization'', you express as ``a modest augmentation''. That's pretty good.
But if I were to support and request modest augmentation of some mode of passenger movement between Ottawa and Montreal, I would sooner see a modest augmentation of my air fare than of my rail fare, and I could get there in less than an hour.
Mr. Evans: Between Montreal and Ottawa?
Mr. Chatters: Yes.
Mr. Evans: Between Montreal and Ottawa, I'll give you a race sometime, train versus air, starting downtown and ending up downtown.
Mr. Chatters: Point made.
Thank you.
Mr. Hubbard: I have a question on philosophy. You're from Transport 2000.
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When we look at all the modes of transportation that you're involved with in trying to improve our country and our system of transportation, we see airlines whose planes fly across the country and land at airports that somebody owns. We have all the trucking companies whose trucks travel across the country on roads that are owned by provincial governments. We have our seaways and seafaring companies who use ports that are owned by different cities and municipalities. With the railways, we were always fixed in the same rut, whereby the company owns the road.
Has your group ever thought of applying a different system of attitudes towards who owns the rails, who travels along the road, and who pays the taxes on the rights of way and the stations they stop at? We're looking at a bill here - and I know we're committed to a bill that has been introduced in the House - that fixes in time, probably for another generation or more, a concept that was established in this country way back in the 1830s, whereby the company that wants to have a locomotive travel on steel has to own not only the locomotive, but also the roadway. It's very different from any other mode of transportation. It certainly puts our country and our industry in a much different perspective. Do you have any comments on that?
Mr. John J. Bakker (Vice-President - West, Transport 2000): I most certainly have. I wrote to the Prime Minister on that last May, and I have yet to receive a reply. It's unfortunate that if one makes proposals, one doesn't get a reply. I've also made a submission to the task force on CN privatization on the same subject, and I did not get a reply. In fact, it never considered the matter.
The thing we really require, or what would have been much better instead of privatization of CN, is a reorganization of CN into two different companies - one for infrastructure and one for operations - and an invitation for CP to do the same, and then have the infrastructure companies combined into one common utility on which operating companies could operate. That would be VIA, CN, CP, or, in a province, a provincial line. In that case, you would get true competition. You could then also have that joint infrastructure company contract out, with either railways or private enterprise, the construction and maintenance of the track. But what you would need in the first instance is to establish a federal railway network.
What is the federal railway network that we should have in this country? Nothing in Bill C-101 establishes even a network as to what we should have in this country to start off with and to work from to ensure that what is not part of that federal railway network, which would be a common utility as it is for telephones, with the roads, and with airports, would be on the same basis. Fundamentally, all that buses have to pay to operate is the fuel tax, but if a railway passenger train operates, it pays fuel tax, which goes to maintain the roads, because part of it goes to the province and some of it goes to the federal government and disappears in the big pot. I never know what happens after that.
Mr. Collins: I do.
Mr. Bakker: You do. Well, I'm glad somebody does, because I also pay into the big pot.
Mr. Collins: Me too.
Mr. Bakker: Frankly, what we get on top of that is that, as in the case of VIA, they have to pay the railways, which I think is one of the reasons the word ``subsidy'', to which so many object, really would be justified if it paid for the user charge onto the network that the railways have, which would be far more generally available. So we are in need of a totally different financing system of our total transportation network so that shippers will make the right choices between road and rail or, for that matter, between rail and air. Perhaps rail should be used for short distances and air for long distances. They both have their functions, and they should feed each other.
Unfortunately, I cannot see any evidence in the federal government that anybody approaches transportation on a rational basis. It is just historic. It almost seems like this bill was written by the railways and the government is a kind of subsidiary to the railways. I'm very disappointed with the bill, and I'm very disappointed with the government.
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I hope that answers your question, sir.
The Vice-Chairman (Mr. Comuzzi): Do you have another question, Mr. Hubbard?
Mr. Hubbard: No, but I thought that, in terms of perspectives, it should be put into the record that we are dealing with modes that don't compete on even ground.
The Vice-Chairman (Mr. Comuzzi): Mr. Collins.
Mr. Collins: Mr. Chairman, I sat in on some of the hearings with regard to CN privatization, and, to say the least, I'm disappointed that you made a presentation and there was no response back to you. I find that offensive.
Mr. Bakker: So do I, sir.
Mr. Collins: Let me assure you that I don't think we're just waddling through the dark. I think there is a process in place. It's easy to sit back and be introspective when you may not have the full picture of where we're going in this country in terms of debt, deficit, and all those other things.
I think any time you want to say subsidization, all of us get a little nervous, because I think that, over time, that's what has happened. When you didn't know where else to go, you went to government and government would either give you a grant, a handout, or some other prop. That day and age is going by very quickly.
Concerning your question about whether I know where we're going in the next three years, I'm optimistic. I may not be able to provide all the answers, but I do respect the right that you came before us and gave us some thoughts about where we should be directing our efforts in terms of this bill and the whole transportation scheme. I take some umbrage to the suggestion that this government and this committee may not appear to know where we're going. I think we do know where we're going.
I'm concerned that the outcome of this bill is going to be workable, and not in just the short term. It has a long-term reality of addressing the needs of all of us in western Canada, eastern Canada, and throughout. I'm just saying to you that, on the one hand, I'll certainly look into it from my own perspective to know why you may not have had a response from the PM's office and certainly from us on transportation, and I'll get a response to you.
I'm not so sure that, in the short term - Can we, in your opinion, make some changes to Bill C-101, or is there any specific avenue of that bill you might want to give us in terms of a perspective about where the bill is going? Or are you just writing off the bill in total?
Mr. Evans: The official position of Transport 2000 is exactly what's in our paper -
Mr. Collins: Okay.
Mr. Evans: - and the recommendations in there - and there are some recommendations - are the ones we're making. They're made in relation specifically to our reading and our understanding of Bill C-101. We had tried, for example, to get a copy of some of the detailed analysis behind the bill. We did not get that, but we are responding to the bill itself and our understanding of what it says. So we do have some recommendations, and they're the recommendations that are in the paper here.
Mr. Collins: Okay.
The Vice-Chairman (Mr. Comuzzi): Mrs. Terrana.
Mrs. Terrana: Good evening. I too have a lot of concerns with transportation in Canada, but I have to say that you gave us some comparisons in your brief that, in my opinion, are no good. You compare us to Germany, Japan, and the U.S.A. I think the numbers of people and the sizes of the countries are very different.
I was on a VIA Rail train from Montreal to Ottawa yesterday and there were probably 10 people, whereas I was on a train that was going from Tokyo to Osaka a month ago and it was full. So I feel a little uncomfortable with the comparisons that you gave me.
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The other comment I would like to make is that VIA Rail is to be studied. It's not under Bill C-101. As you know, there's just a brief comment on VIA Rail. So your comments are in this brief, and that's good, but you probably have to appear again when VIA Rail will be discussed.
I have two questions. One has to do with the public interest. We have clause 49, which at one point says that ``The Minister may - enter into agreements in support of the national transportation policy''. It's on page 17. There is a clause 49 that talks to the national interest of the railway. So I want to ask whether you don't feel that is sufficient.
Secondly, you seem not to like this bill. So let me ask you what I've asked other groups: Is this bill necessary, or is the NTA of 1987 enough?
Mr. Evans: Let us answer. That's the bill. It's a lot of paper. We made only a couple of suggestions. I don't think you can draw the conclusion that we ``don't like the bill''.
Mrs. Terrana: I didn't. I'm asking you.
Mr. Evans: I'm saying that I don't think you want us to come here and tell you how wonderful you are.
Mrs. Terrana: No, no.
Mr. Evans: Really, I think you want us -
The Vice-Chairman (Mr. Comuzzi): We'd like you to.
Mr. Evans: We're trying to point out certain things.
If you'll permit me, just before I answer you directly, I'd like to mention that the VIA load factor in the corridor is around 70%; it is not 10%. You can ask VIA, but it'll give you that information. The other day I was on a train from Ottawa to Montreal that had 700 people on it, but that's another story.
Mrs. Terrana: That is another story.
Mr. Evans: I want to make a point -
The Vice-Chairman (Mr. Comuzzi): That wasn't Friday.
Mr. Evans: It was, indeed. We were both on that train.
You made a comment. I'm sorry, but I've lost it. What was your -
Mrs. Terrana: The first comment had to do with the comparisons you made; the second one had to do with VIA Rail. I just said that it's going to be studied later. I talked about the public interest - clause 49 in Bill C-101. And do you like the bill? That was my - I understand your criticism. I'm told you have concerns. What I'm asking you is, is Bill C-101 necessary? Are we redundant with it?
Mr. Evans: We have said in Transport 2000 that we are in favour of improving the competitiveness of railways, for a number of reasons. There are a number of things that we think fairly do that, and we support those. But we have said at the same time that the public interest has to be recognized here as a fundamental factor - the public interest, the national interest. So therefore there has to be some kind -
Mrs. Terrana: So would you want clause 49 -
Mr. Evans: We suggest in here a specific mechanism, which is for the federal government to always have the ability to intervene in terms of buying a line at scrap value if that is perceived to be in the national interest. One, we're talking about at scrap value; two, if it's really and truly in the national interest, one might hope that you can then resell it. So we're not talking here about huge deficits, necessarily, but we think there has to be some - We have a fundamental concern - and obviously you've heard it from others and we heard it from the speaker before us - and that is the concern that our communication system is going increasingly north-south as opposed to east-west. With that, one may imagine or fear a lot of loss not only of money, but of jobs, opportunities, and goodness knows what else here.
Mrs. Terrana: That's my concern.
Mr. Evans: We're concerned that there isn't enough control here to step in on behalf of the public interest when this is necessary. We're not suggesting that this is done every day or every week, but we look at this bill and we have a sense that one cannot know what is really going to happen. We concentrated here on the railway side, if you like, but what's going to happen when you put Bill C-101, in effect, with the railways? Will CN remain a national railway, or will it be a railway that runs through the Rockies only? Will CN be divided into a funny kind of railway with a headquarters in Montreal? But that's another story.
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Our concern is this. While we support efficiency, there must be some sort of assurance that appropriate national goals can be protected by the national government when called for.
Mrs. Terrana: Thank you.
Mr. Chatters: I have one more question, Mr. Chairman.
This concept of a national rail network that the government owns but on which anybody can run trains - they contract out the maintenance and the rest of it - is an intriguing one, one that we have looked at and have been curious about. However, we had two national railroads in this country for years and a national dream about how that would work, but that seems to be coming unwound because of the inefficient labour-management regime of the railroads. Now we have short lines operating and making substantial profits where the national railroads can't, because the chief executive officer might run and service the train and all the rest of these things.
How would you see that national rail network operating in order to keep efficiencies comparable to those in the private sector? How would that prevent rental for the trains on that track getting so high that we are in the same situation and can't provide competitive rates for shippers?
Mr. Bakker: First of all, it doesn't have to be government-owned. Bell telephone is not government-owned, yet it is a common carrier for many long distance telephone companies. So if you have an amalgamation of Canadian National and Canadian Pacific infrastructure, I don't think that is necessarily a publicly owned company.
What I say is that we should have efficiency, particularly the efficiency you can obtain when you start with a new structure - that is, you can contract out. If that company did nothing themselves but contracted out, you would get a lot of efficiency because then it goes on competitive bidding. That in itself would reduce your costs.
For example, I have been involved in the transit system in St. Albert, which is north of Edmonton, where everything is done by contract. So while the city owns the buses and the garage, it contracts out the driving, the maintenance and the cleaning. As a result costs were reduced 40% over when it was done by the city of Edmonton, with its overhead. The contracts also had an agreement with the drivers union for the length of the contract, so they were strike proof, and you can do the same thing with an infrastructure company.
So there are numerous opportunities if you set it up right. To say that it has to be government owned, no, but there has to be a mechanism of financing. I find it offensive that the taxation on locomotives on the railways goes to improve the highways. I think some of the taxation that goes into the federal coffers should also be used for other transportation infrastructure in the country. A transportation user tax to finance these things - I wouldn't call that a subsidy, I would call it user-pay. You would get more rational decision-making based on the shippers if people think on a common basis, and the problem is that is not being addressed.
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The Vice-Chairman (Mr. Comuzzi): I'm going to have to cut you off, Mr. Bakker. We've extended your Transport 2000 by over ten minutes because of the interest in your topic.
Thank you for coming to this committee and making your presentation.
Mr. Glastonbury: Thank you, Mr. Chairman.
The Vice-Chairman (Mr. Comuzzi): We have a problem. We have two more groups to make submissions. One is from Saskatchewan and the other one is from Halifax. We don't have a full slate of members present to hear these important submissions. These witnesses have come at considerable expense of time and money in order to make important submissions on Bill C-101.
As we have in the past, we've scheduled too many witnesses today. We must bring some order to this. I think it is unfair to ask the witnesses to make a submission without anybody here to listen and without giving them the time that should be allocated to them.
Mrs. Terrana: Mr. Chairman, because these people have come from so far away, perhaps you should ask them what their thoughts are.
The Vice-Chairman (Mr. Comuzzi): I intend to.
Mrs. Terrana: If they want to be heard tonight, they can stay until about 7:15 p.m. and the rest of the committee can read the transcripts.
Mr. Hubbard: I'm willing to stay until 7:30 p.m.
The Vice-Chairman (Mr. Comuzzi): Mr. Althouse, you're not a member of the committee, but you're welcome to stay.
The alternative would be to put them on first thing tomorrow morning, but someone would have to bear the expenses of their overnight accommodation. Members from the minister's department, do you have that authority? Do we have the resources within the committee?
Mr. Ron Gleim (Director, Division 2, Saskatchewan Association of Rural Municipalities): We have to stay over until tomorrow anyway. We have to be in Toronto Friday morning, so we could probably reschedule our flight and present tomorrow morning.
The Vice-Chairman (Mr. Comuzzi): We have a commitment from the members to stay until 7:30 p.m. Do you mind going ahead?
Mr. Gleim: Bernie knows our comments, so -
Bill C-101 is something like when I went to school and took English 101, but I hope we do better on this.
We appreciate the opportunity to be here today. I'll give you some background, but because we're short of time we'll go through this in a hurry.
The Vice-Chairman (Mr. Comuzzi): Take as much time as you want.
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Mr. Gleim: Okay.
I'll give a brief background of what our association is. The Saskatchewan Association of Rural Municipalities represents the third level of government in Saskatchewan. We represent 235,000 rural residents. Our mandate is to deal with municipal issues, but our membership is pretty well all engaged in the farming profession. We also deal with agricultural and transportation issues at our conventions.
Today our main focus will be on transportation efficiencies and road impact, which I've heard a fair amount about today. The increase in road impact in rural municipalities for the most part is due to the changes in the transportation policy. We certainly believe in an efficient, competitive transportation industry, but at the present time the efficiencies being gained by one sector are passing costs onto another sector.
The federal government, the provincial governments, the railroads and the elevator companies are basically passing on some of their costs to rural municipalities. When rural municipalities pass their costs on, it goes right back to the producer. So the end result is that the producer is going to pay for whatever change is coming down the pipes.
Under the old NTA, the analysis of the branch-line abandonment process only considered costs of the branch lines, but with the proposed elevator consolidation, the branch-line abandonment, the new inland terminals and the incentive rates the railroads are offering the elevator companies, grain is moving hundreds of miles, in some instances, by truck in an attempt to gain efficiencies by the farmer. This has an impact on municipal and provincial highways and roads. Our municipal roads were never designed for the volume of traffic or for the weight that's on them today.
You'll see in appendix A the present elevator consolidation and different categories of branch lines being abandoned today.
In Saskatchewan we have the most extensive road and rail network of all the provinces in Canada, but we also have the most extensive cultivated acres in Canada. We do not think we have any roads we can rip up and not use.
SARM has presented our municipal concerns on road impact to senior levels of government in the past year or so, and in two instances the federal government has recognized the road impact.
One is the transition fund of the WGTA, where they have set aside $140 million for road impact. The other one is the branch-line review committee Marian Robson will be heading, which will take into account road impact costs on the light steel branch lines.
SARM is committed to the least-cost method, whether it be road or rail. It has to make economic sense to keep whichever one we're going to keep. We don't know if we can afford both. But it is important to recognize that the branch-line costs identified in the branch-line review process are the costs of the class-one carriers of CP and CN. As stated earlier, it has been proven in the U.S. that short-line rails can move grain on light-steel, low-volume lines more cheaply than CP or CN can. We think these are the numbers we should be using in the Marian Robson branch-line review process. We should be using the short-line numbers - the alternative - instead of the numbers CP and CN are using now.
We believe short-line rail will be a viable option, but they must be economically viable and they must be given a chance. All stakeholders should have a chance to compare the short-line costs to the alternative, and the alternative is building inland terminals, buying larger trucks and increased road maintenance. They should have these numbers before the line is torn up, to assess whether they wish to operate a short line or build these terminals.
We believe the short-line rail system can provide low freight costs for producers, can complement the class-one carrier and can encourage rate competition between these two carriers. But probably the most important thing is that the new CTA allow for fair revenue divisions and interchange agreements with CP and CN.
.1835
I have two or three comments on the U.S. short lines, and then I'll be done.
Since 1980 there have been 263 new short lines in the U.S., and there are about 450 running there today. They operate about 70,000 kilometres of track that would have been abandoned if short lines hadn't been created. They helped increase the traffic density of the class-one carriers in the U.S. The U.S. short lines account for 25% of the route miles, 11% of the employment, and 9% of the industry revenue.
With this overview and our views on road impact and short-line rails, we would like to offer our specific concerns, comments and recommendations with respect to Bill C-101, the Canada Transportation Act.
Jim.
Mr. Jim Hallick (Director, Division 4, Saskatchewan Association of Rural Municipalities): Thank you, Ron.
Mr. Chair, we have a number of recommendations we would like to bring to your attention.
The first one deals with clause 5. We agree with the intent and the objectives of the act, but we are concerned that perhaps it is not strong enough in the wording, that there will be arbitration because we think in the new regime there's going to be a considerable number of conflicts, and arbitration must be enshrined within the act.
The next section I will deal with is the famous one, subclause 27(1), which has already been mentioned - significant prejudice. We find this, again, a problem with definition and could be prohibitive or preventive for some people using that act. We would ask that this be removed.
The next section we would deal with is subclause 34(1), with the frivolous and vexatious claim and the order, again, of compensation. We feel that this would in fact be if not prohibitive to small shippers, at least intimidating, and would probably limit access to that provision.
Subclause 96(3) and clause 97 define the parameters on which railways may build or abandon. We would ask for a recommendation in this section that would state that a railroad would not be allowed to abandon the property without an independent environmental certificate stating that the land abandoned was in fact environmentally clean.
The next one is clause 127, dealing with confidential contracts. No party may appeal to the agency on a confidential contract unless both parties agree. We see a problem with this section, perhaps from the perspective at least of the smaller shippers, if there's a material change in business affairs or operations. We feel they should have the opportunity to re-enter those negotiations.
On clauses 131 to 137, dealing with competitive line rates, we agree with the concept of competitive line rates and the effect that captivity has on costs. We would like to suggest that the competitive line rates would include whether the movement be within Canada or movement where a port may be in the U.S. We would like some competitive line rates in those instances where the port of choice may be a U.S. port.
Regarding clauses 138 and 139, on joint running rights, we see with rail-line abandonment occurring in Saskatchewan that it will probably happen quite quickly. There will be severe road impacts and the probability that there may be some short lines that can show viability. If they're to show viability, we maintain that they must have joint running rights to the nearest interchange in order to assess some competition into the system between the class-one carriers.
The next section I will deal with is clause 141, the provision for the lines being put into a three-year plan. We agree with this plan, but we have a couple of problems in this area. A sale or a lease cannot be initiated unless the lines are indicated in the three-year plan. It is our contention that if there is the significant indication that a line is being de-marketed or not being maintained, we should be able to approach class-one carriers, begin negotiations, and be able to initiate a proposal for sale. We also feel that when a line is placed on the three-year list that it not be necessary that we have to wait to the end of that list before we can negotiate for the sale of that line.
.1840
Subclause 142(2) deals with the Robson lines, the schedule I lines. We have some concerns here because we feel that, while we're told this probably may not happen, there is the possibility that lines may be added as late as April. That would not give us sufficient time to determine whether or not those lines may be something we want to buy. We would suggest a waiting period after April 30 of perhaps 90 days or so, so that we could assess those lines after all the factors are in and determine whether or not someone might be interested in purchasing those lines before they are in fact scrapped.
The next section, clause 141, provides that a railway will outline the process or procedure it will follow when it offers a line for sale. As was mentioned earlier today, we would want this to be a uniform procedure that would be used on all lines, rather than specific lines where, for example, a railway might not be too anxious to sell and may make it more difficult to purchase. So if the same framework is used in all cases, then we're all playing on a level field.
Clause 145 is the offer to governments. We don't have a problem with this, except in one area, that area being - if the public sector doesn't buy and the federal sector doesn't buy, perhaps the provincial government may indicate interest within the fifteen-day window but not be able to conclude the deal; if it falls apart, after that deal has collapsed, it goes immediately to abandonment and it will not be available to the third level of government.
We would ask that the window remain through the third level of government in the event that the negotiations were not concluded with the provincial government.
The next section I deal with is clause 150, the calculation of the maximum rate structure. We have considerable difficulty with this section and in fact with the formula whereby the figure of $10,000 per mile is used arbitrarily as being identified as the amount that will go back to the producer. We would ask that the formula be changed to an algebraic designation of z minus 90%, or at the very minimum, to $20,000 per mile. We feel that this is very rich compensation to a company that is going to benefit materially by ceasing to provide services.
We could look at just two subdivisions - high-volume subdivisions. One example is CN Brooksby. The volume on that line is 301,000 tonnes, with a length of 51.1 miles and an estimated cost of $21,500 per mile. In this case, $10,000 will go back to the producers and the railways would be paid $11,500, and of course that's in perpetuity.
The other example is CN Cromer subdivision. The volume of that line is 166,000 tonnes; 58.8 miles of grain depend on that line. The estimated cost there is $22,800 per mile, and they gave $10,000 back to the producers and $12,800 back to the railways.
We feel that the hurt factors in this situation are not covered, in that the producers are going to be required to pay more cost for moving their product; the rail infrastructure is going to be severely impacted - millions of dollars in cost. It would seem a fair saw-off if this formula was amended to address some of these costs, because it's almost beyond my imagination how we should be paying that kind of money for someone getting out of business.
.1845
From there I'll go on to clause 155, which concerns review. We agree with your provisions for the review. We would add a couple of other areas that we would like you to look at. Number one, we would review the financial performance of the federal railways. Number two, we would assess the new line conveyance abandonment procedures. Number three, we would assess the provisions affecting the development and viability of short lines.
We have noted another submission that has recommended that the review should include an analysis of the ways in which other grain handling and transportation stakeholders have returned their productivity and efficiency savings back to the farmers, and not only review the railroads.
From a producer's perspective we believe this to be a fair and reasonable recommendation, although to examine how the grain companies have returned their productivity and savings back to the farmers may be difficult in the context of this act, which does not impose regulation or legislation upon those stakeholders.
Those, Mr. Chair, are our recommendations for change.
Mr. Gleim: Just some concluding remarks. I added a few to what you have on the paper here, but I don't think we handed them around, so we're all right.
This act indicates a concern for the viability of the class-one railroads. I guess we think that it should also be necessary to address the viability for producers and shippers.
As of August 1, 1995, producers gained the right to pay for every penny in the transportation and handling system that we have today and will have in the future, whatever may happen.
To give you a couple of numbers, a farmer who seeds a thousand acres today in Saskatchewan will have transportation and handling costs of $45,000, and that just moves his product to market.
The Vice-Chairman (Mr. Comuzzi): What yield per acre would that be?
Mr. Gleim: Twenty-five bushels to the acre.
The Vice-Chairman (Mr. Comuzzi): That's one tonne per acre?
Mr. Gleim: Yes, one tonne. It costs $45 a tonne. That's what deducted off my cheque when I haul a bushel of grain in. And this doesn't include any infrastructure costs. It doesn't include any costs for roads or for bridges, trucks or terminals. That's what the alternative is.
Farmers had to become efficient in the 1980s. Our prices were cut in half and everything else doubled. We're saying that the railroads should become efficient, and they don't become efficient by paying them $12,000 a kilometre to abandon a track that they wanted to abandon 20 years ago. In the producers' mind, 5% of the costs -
The Vice-Chairman (Mr. Comuzzi): They don't become efficient when they pay -
Mr. Gleim: When the government - or when they get paid - The Robson study showed they're going to get paid anything over $10,000 of the savings in perpetuity - forever.
The Vice-Chairman (Mr. Comuzzi): We don't understand that.
Mr. Gleim: We'll explain that at the end, then, okay?
The Vice-Chairman (Mr. Comuzzi): Okay.
Let's go back one step. It costs you how much money per acre given the fact that you get 25 bushels a tonne? Would you go through that equation for us?
Mr. Gleim: It's about $1.30 a bushel.
Mr. Hallick: It's $45 per tonne, and we're taking a tonne as an average production per acre.
Mr. Gleim: So if you see 1,000 acres, it's $45,000 to move that crop to market.
The Vice-Chairman (Mr. Comuzzi): And 1,000 acres yields how many -
Mr. Gleim: You yield 25 bushels of wheat.
The Vice-Chairman (Mr. Comuzzi): You said that was exclusive of any -
Mr. Gleim: That doesn't cover any road costs or bridges or trucking or building new inland terminals.
Mr. Hallick: That places the product at export to port.
Mr. Gleim: That would probably be about a 30-bushel crop, I guess.
What custom truckers are charging today, and with the incentive rate, once it's gone we're going to be paying -
The Vice-Chairman (Mr. Comuzzi): Just a minute. It does not cover road costs. What other costs doesn't it cover?
Mr. Gleim: It doesn't cover roads or bridges. It doesn't cover the new trucks that are needed. When you start hauling 100 miles, your three-tonne isn't going to do the job. Some of the interviews we've had with grain companies - There are going to be 300 inland terminals built in Saskatchewan. We're going to overbuild two to one - a waste of money.
.1850
The Vice-Chairman (Mr. Comuzzi): Let's just relate that to what we're getting for a bushel of wheat. What's the export price?
Mr. Gleim: Today? Well, it's hard to tell.
Mr. Hallick: I delivered a load of durum the other day and I got $4.42 a bushel.
Mr. Gleim: A year ago it would have been half that.
The Vice-Chairman (Mr. Comuzzi): So your cost of transport, everything in, is something around 35%?
Mr. Gleim: It's probably 35%.
Mr. Althouse: - [Inaudible - Editor] - about 55%.
The Vice-Chairman (Mr. Comuzzi): It's getting up to the price of coal.
Mr. Althouse: The year before that it was over that, I think about 70%.
The Vice-Chairman (Mr. Comuzzi): I always said if the shippers want to live off the back of the farmer, they'd better start working like the farmer.
Mr. Gleim: That's what we've been telling them.
If I may continue, when we look at the deficiencies that the railroads are looking at, branch lines actually account for 5% of their costs. In Saskatchewan that's basically all we're hearing. We all know some branch lines are going to go. Forty-nine percent of their costs are labour, and we don't hear anything about that. We're saying if you're going to be efficient, you're going to have to be forced to be efficient. You won't do it on your own, and somebody is going to have to force their hand.
I would just like to close by saying that the CTA in its present form probably wouldn't be acceptable. It is absolutely essential that arbitration be a key principle throughout the act, as shippers and carriers move towards the new environment, because there's no doubt that areas of uncertainty and potential disputes will require arbitration and mediation before they will be resolved.
In conclusion I would just like to thank the Standing Committee on Transport and ask it to carefully consider the recommended amendments that we have proposed. We believe that these amendments will fairly balance the provisions between the shippers and the carriers.
We would like to take this opportunity again to thank you very much for inviting us, and if you have any concerns or questions we'd be pleased to answer them.
The Vice-Chairman (Mr. Comuzzi): Thank you.
Mr. Chatters.
Mr. Chatters: I really have no questions other than to say that I support your position on many of those things. I do question the willingness of the railroads to deal with their inefficiencies and the ability of short-line railroads to profit where our national railroads can't begin to, not only because of the labour but the management regime that they're locked into. I certainly support what you're saying; I think you're right. Many of the same clauses that you've raised are brought up again and again as concerns to the shippers.
The Vice-Chairman (Mr. Comuzzi): Mrs. Terrana.
Mrs. Terrana: Good afternoon. Sorry for seeing you so late.
I have a couple of questions. One has to do with successor rights. I asked the minister if successor rights were an impediment. He feels there is only one line that was sold, and I said well, then it could be an impediment. Do you think that successor rights are an impediment to selling the short lines? You're complaining about labour costs, and you've probably had the discussion before. What are your thoughts about successor rights?
Mr. Gleim: Well, actually, we had talked with RailTex. They came up and I'm not sure whether they looked at any lines or not, but they said if the issue of successor rights isn't addressed, they probably wouldn't look at any lines. In the meantime we have talked with Doug Anguish, the Minister of Labour from Saskatchewan, and we talked with Andy Renaud, and we're setting up a meeting late in the month with the premier to discuss that very issue.
.1855
We've also talked with a number of the unions. There are a couple of unions behind us. They say that if they don't deal with them, the jobs are gone anyway. It's not going to be an easy bridge to cross, but I think there's some light at the end of the tunnel. They see that if they don't address successor rights, short lines will not be any kind of an option in Saskatchewan. I can't see how they can't deal with them.
Mrs. Terrana: My other question has to do with the grain. You seem to be trucking your grain. Do you truck it only to the next elevator, or further? If you truck it further, why do you do it?
Mr. Hallick: It's a matter of economics. I shipped a B train of grain the other day over 200 miles, and I made a little over a dollar a bushel on it because of grading and protein.
Grain is going all over Saskatchewan. So once a B train is loaded, it is absolutely not going to the closest elevator. It is absolutely not happening, and it will not happen. As producers, we don't know where it is going next week. It depends on what a company may put on for incentive rates, on what orders they have to fill, or whatever. There are all types of incentives for moving grain, and it is going everywhere and is going vast distances.
Mr. Gleim: I'll comment on that. In the southwestern part of Saskatchewan, 49 rural municipalities got together to try to plan how they could deal with the changes that are coming.
One of the elevator companies that we interviewed is probably the biggest elevator company in Saskatchewan. They have quite a number of elevators - I'm not sure, but I think it's fifty or so - in that area. What they envision is that there will be no branch lines left. They will keep those elevators to gather grain during harvest, and they will then move the grain by truck to wherever it has to go. We don't know where that grain is going to go, and they don't know where it's going to go.
Even on the main line today, you haul grain to the main line and they'll move it fifty to a hundred-and-some miles by truck to one of their big inland terminals. In the last two years, more grain has been moved by truck than we have ever seen. It's all over the place. There's no rhyme or reason. We're trying to plan where we should go next, but I don't know how we're going to do it.
Mrs. Terrana: Thank you, Mr. Chairman.
The Vice-Chairman (Mr. Comuzzi): Mr. Hubbard.
Mr. Hubbard: Just very briefly, we've heard quite a number of groups from the west today, but it is my understanding that Saskatchewan in particular has the highest excise taxes on fuel for the railways of any province in Canada. We also have concerns in your area about the municipalities and roadways and how they might be affected, probably very much adversely, as a result of transportation on the roads.
I asked a question before in terms of levels of government owning railroad beds. Have any of your groups out there looked, first of all, at the problem of taxation? Second, have you looked at a cooperative venture in terms of owning the railway lines? I don't necessarily mean the running of the railways, but the owning of the lines and the charging of fees for using those lines.
Mr. Gleim: We haven't gone into that in depth, but believe me, there are a lot of producer groups and there are municipalities out there that want to get to the numbers. If we abandon this line, how much grain is going to move down certain roads? Where is it going to go? The problem is that we don't know where it's going. It goes in one direction one day and an incentive rate moves it in another direction another day. We've been talking with Burlington Northern and with Columbia Grain International from the U.S. They're interested in maybe acquiring some of these lines to move the grain south.
The municipalities are interested in whether or not it is going to be cheaper to keep that branch line than it is to repair the roads. I think they may bend to buying a branch line, but I don't think it's their first option. They would definitely like the private sector to do it because it comes right down to the pocketbook if they have to spend $1 million to redesign a road. To upgrade a road to a different standard would cost $80,000 a kilometre. So it may be in a municipality's best interest to buy a branch line.
.1900
Mr. Hubbard: I come from New Brunswick. In Atlantic Canada in particular, the highway is used as the major mode of moving materials. One of the reasons for that is the idea of specialities. We have pulp and paper mills that have different grades of stock. They find putting their things on one truck and shipping them in 40-tonne or 50-tonne loads much more efficient than trying to make up a rail car.
Is a similar problem occurring in the west with your speciality grains, your different grades and so on? Maybe the railways are having to look at this thing as a very difficult situation in terms of how big this traffic is going to be. Is it going to continue with five train loads or five car loads of wheat? Is the speciality crop factor a big concern in your thinking in terms of what the viable means of transportation will be?
Mr. Hallick: I think there is very significant rail movement with the speciality crop sector, especially in Saskatchewan. Volumes in the different types of speciality crops, such as pulses, for example, are sufficiently large.
We heard the summation from the three ministers dealing with some concerns that the volume on the railways is going to drop within the next five years. That may be true in Manitoba, but from a producer's standpoint we don't see it changing that fast in Saskatchewan. I think the timeframe is a lot further down the road. It may be something that is a bit of a paradox, but with the increase in wheat prices there may be a backing off from diversification in the short term because of more viability in the wheat markets. This may in fact slow down any kind of diversification. There is considerable diversification, but I don't think the growth is going to be very imminent in Saskatchewan.
Mr. Gleim: If I could make one comment, you were talking about five car loads of grain. If I could have had the opportunity when Mr. West was here, I sure would have liked to have said something, but maybe I can say it now. He said abandoning the branch lines and building inland terminals is the way to do it, the way to go. But when they do that they're offloading costs somewhere else. What we're saying in rural Saskatchewan is that we have to look at it in the big picture. What we see in Saskatchewan with the branch lines is that if you have five or ten elevators on a branch line, you first have to get the inventory from the farm.
The farmers have all the storage they need in Saskatchewan. We don't need to build inland terminals for storage. We've talked to the Canadian Wheat Board about this. They have said, yes, they can take the inventory on the farm. When the ship is coming in for number 1 CWRS 13.5 grain, they know where every bushel is in the prairies. They can call for that grain and that grain comes into the elevator. Instead of being full of twenty different grades, it's full of number 1 CWRS 13.5 grain. It's loaded onto ten cars at each elevator and it's gone.
We talked with Mr. West outside. We said there can be an incentive rate for that branch line. A train may only go down there twice a month because you're going to have maybe thirty blocks instead of the 200 we have with the way we buy grain today.
We have to change the whole concept of the way in which we buy grain, and farmers have to change the way they sell it. If we could have done this probably four years earlier, I don't think we'd be in the situation we're in today, with branch lines and inland terminals. We've got a system out there that is working and is paid for, but now we're going to rip it up and spend billions of dollars redoing it.
The Vice-Chairman (Mr. Comuzzi): If you're all through, Mr. Hubbard, I'll go to Mr. Althouse.
Mr. Hubbard: Yes.
The Vice-Chairman (Mr. Comuzzi): Thank you.
Mr. Althouse: For the record, you mentioned what it costs to build municipal roads. You said $80,000 per kilometre. I presume that is to biggest-truck standards, is it not?
Mr. Gleim: That would be to upgrade the road to the next level. The level we have today costs probably around $30,000 per kilometre for 75,000 pounds, which is what most of our limits are on our municipal roads. To upgrade to 120,000 pounds means to upgrade the sub-base. To do that, it's simpler to build a new road than it is to rip this one up and start over again. You're better off.
Mr. Althouse: That's since you have twice as much work to do.
Mr. Gleim: That's the predicament we find ourselves in. And by the way, that's still just a gravel road. If you want to put pavement on, you can well more than double that.
Mr. Althouse: For how many months of the year? I know it varies from region to region.
I live in the northeast. Last spring we had six weeks when school buses couldn't even run. Many of us who lived on grid roads had to use horses to get out. The standard is not very high, in other words.
.1905
Mr. Gleim: One of the problems we have out there now with the changing system is that we have so many truckers - what do you call it - for hire? They're there to make money. If the road is just a little bit wet, they're saying to the farmer ``Let's go''. They have a $100,000 truck to pay for and they want to get this grain rolling. They're driving at 60 to 70 miles per hour on gravel roads, and there are lots of them. They're out there to make a dollar.
The Vice-Chairman (Mr. Comuzzi): What do you mean when you say the roads are a little wet?
Mr. Gleim: On a grid road, if it's just a little wet, the last thing you want to do is put a loaded semi on it, because you'll leave ruts maybe two or three inches deep.
The Vice-Chairman (Mr. Comuzzi): Oh, I see.
Mr. Gleim: We've had roads in the northwest where the semis got stuck. They couldn't move. The ruts were deep. That's what was happening.
Mr. Althouse: The oiled roads, Mr. Chairman, get ruts in them a foot deep. Then when it rains, a foot of water is in there. So occasionally the highway department will try to fill that in with more fill. Eventually there may be four or five of those fills and it will stop going in, but nobody's hit that spot yet and we've been doing it for forty years. I don't know when you hit it.
Mr. Chatters: Mr. Chairman, there was a point raised that was very confusing. They promised to come back and explain it later.
Mr. Hallick: As for this formula with the $10,000 in it, we feel this is very rich for someone -
The Vice-Chairman (Mr. Comuzzi): We don't know what you're talking about.
A voice: When they abandon a branch line today -
Mr. Hallick: That's for the freight rate under clause 150.
The Vice-Chairman (Mr. Comuzzi): Of which act?
Mr. Hallick: Of this act, Bill C-101.
The Vice-Chairman (Mr. Comuzzi): Carry us through this. Does anybody understand this?
Mr. Gleim: Our understanding of it is that if the costs are $24,000 a mile, the farmer gets the first $10,000 or it goes back to the producers, and the railroads get the rest after the line is abandoned.
Mr. Hallick: This is in the formula in clause 150.
Mr. David Cuthbertson (Committee Researcher): These are the benefits they get from abandoning the line, right? The reduction in costs is what you're talking about?
Mr. Gleim: Yes. We get $10,000 in reductions of costs, and the rest of the savings and the reduction stays with the railroads.
Mr. Cuthbertson: That's the formula at the present time. When you abandon the line, there is going to be a reductions in costs, which are shared. The benefits of it are shared between the farmers and the railways.
Mr. Hallick: The problem we have is with the proportion of the shares.
The Vice-Chairman (Mr. Comuzzi): Who pays? The railway?
Mr. Cuthbertson: The reduction in costs, the benefit, is factored back into the rate.
The Vice-Chairman (Mr. Comuzzi): That $10,000 goes to the number of customers or residents on that line.
Mr. Gleim: No, it goes to everybody in the Canadian Wheat Board.
Mr. Hallick: The producers or the shippers get less than 50% of the savings from that line; the rest goes back to the railroads. We feel that because the hurt factors are with the shippers in transportation and road costs, the railroads certainly are getting well paid for not providing a service. I could compare that to me leasing a building from you for business. You say you can't afford to have me there anymore, but you can continue to pay 60% of the lease in perpetuity.
The Vice-Chairman (Mr. Comuzzi): Who pays that $25,000?
Mr. Hallick: The government.
Mr. Gleim: It comes out of the freight rate, I would presume.
Mr. Hallick: It comes out of the freight rate.
Mr. Gleim: Instead of the freight rate going down, it only goes down $10,000. The other $12,500 stays in forever.
Mr. Hallick: They benefit from the freight rate system.
The Vice-Chairman (Mr. Comuzzi): I won't delay you, but thanks for drawing that to our attention. I've just asked David Christopher to produce a memo for us to explain it in greater detail.
Any other questions? I have one. How many small farmers in Saskatchewan would make around $45,000 to $50,000 a year?
Mr. Hallick: Are you asking about gross or net?
The Vice-Chairman (Mr. Comuzzi): At the end of the day, how much do you put in your jeans?
.1910
Mr. Hallick: I think every farmer in Saskatchewan in the last five years has been below the poverty level. The net return was $20,000 or less.
Mr. Gleim: If I could give you an example, I'm half and half: half grain and half cattle. Say I ever make an extra penny out of grain. What happened is that fertilizer prices went from $330 a tonne to $450 a tonne, so I didn't fertilize this year. I should have, but I got burnt two years in a row: one with frost and one with hail. You take your lumps and you make your decisions.
If the price of wheat goes up, it will be a benefit for the short term while it's up there. But in the last five years, as Jim says, there's been no money in grain. If you've got everything paid for and don't owe any money, that's one thing, but if you owe money, like most of us -
The Vice-Chairman (Mr. Comuzzi): Here's the point of the question I'm trying to get at: How does an individual farmer's standard of living compare to that of an individual working on a railway?
Mr. Gleim: I've got three kids in my family. They are 10, 13 and 17 years old. The oldest ones can run every piece of machinery on the farm. It's not because that's exactly what I want them to do; it's because we can't afford to hire anybody.
It's that way with just about all the people my age and younger whom I know. I know some 60-year-old guys who didn't owe money 20 years ago, and they are doing quite well. But that's not the generation we're trying to build Bill C-101 for.
As far as comparing ourselves, we have a pretty good mine in the town of Chaplin. The average wage is probably around $40,000. They are better off.
The Vice-Chairman (Mr. Comuzzi): The rail workers?
Mr. Gleim: Yes.
The Vice-Chairman (Mr. Comuzzi): Yet they rely on - If they didn't have the grain to ship - the toil of the farmer - you wouldn't have a railway, would you?
Mr. Gleim: That's right. A lot of it is like governments. Farmers are in deficit financing. They're working on an operating loan. They're working off their depreciation. Fifteen years ago I had $75,000 in the bank for retirement; today I have nothing. It's not because I went out and spent too much money. I did, but I learned my lesson.
The Vice-Chairman (Mr. Comuzzi): If your 17-year-old son was looking for a job, you would hope to hell that he could get on with the railway then.
Mr. Gleim: A lot of them are getting jobs at the grain companies, and that's great.
The Vice-Chairman (Mr. Comuzzi): Is that better than being the farmer?
Mr. Gleim: It is, but the funny thing about it is that they want a farm.
The Vice-Chairman (Mr. Comuzzi): Yes, I understand that. But I wasn't being facetious earlier when I said that somewhere along the line, if you want to live off the back of the farmer, you have to start working like the farmer. There has to be some equity.
Every time we do something with grain, it's always about what it costs to get it to the customer. Look at 35%, which is creeping up to 40%, depending on the price. Sometimes it exceeds that amount, and you're getting the short end of the stick.
I don't want to put words in your mouth, but is that -
Mr. Gleim: We've talked with a lot of the unions. We were at Canada Grains here just last week.
We made some comments. Henry Cancs himself said the average wage out there on the west coast is $100,000 a year, with benefits.
Give me one of those jobs. In fact, if you cut that in half and got rid of them all, every farmer I know would go down there and work.
It's not that easy, because the cost of living in Vancouver is a lot more than what it is here.
The Vice-Chairman (Mr. Comuzzi): Say you get your grain to Mrs. Terrana's port. Then a pilot guides the boat through some channels or something. He makes more than $200,000 a year.
Thank you very much. Thank you, Mr. Hallick. It's very interesting. I want to compliment you. The brief is excellent.
.1915
Welcome, Mr. Gratwick. I overheard you talking to David Cuthbertson a few minutes ago. I apologize for having you on so late. We may not have all the members here, but you decided to go ahead. You told David that you've been to these sessions many times before and that you're willing to proceed. I appreciate that. Mr. Jeans has not been at these sessions as often as you have.
Mr. John Gratwick (Chairman, Halifax-Dartmouth Port Development Commission): I am the chairman of the Halifax-Dartmouth Port Development Commission, which is a creature of the province and the municipalities that surround the port. Our comments today are parochial in the sense that we're looking at Bill C-101 from the point of view of the port of Halifax. That means we will concentrate on the rail aspects of the port, because the port of Halifax cannot exist without a good rail service.
At present Halifax is served by only one railway, so a lot of our concerns focus on our hope that there will still be at least one railway serving Halifax, and second, whether we can have a competitive rail service into Halifax with only one railway serving us.
Our recommendation is that the act should provide for the protection of an essential rail network from abandonment under Division 5, even if it's just the recognition of what might constitute a national rail network, because we hope that if such a network is defined, Halifax will still be included on it. Given the turbulence that's likely to follow both this legislation and the privatization of CN, that future is not at all assured, and there would be some comfort in knowing that there was going to be a rail line to Halifax.
Our next question relates to how one would make a competitive rail service come to Halifax. In spite of the protections listed in Bill C-101, we think something has to go a bit further than that. We can only see getting a truly competitive rail service to Halifax if the rail bed into Halifax is a common user one and is open to competitive carriers to serve the port. Those could be some of the people who are concerned about the port - shipping lines or the port corporation itself - who would like to be able to operate the specialized service that's necessary to serve the port.
.1920
I would like to briefly touch on the attempts within the act to provide some pseudo-competition - the competitive line rate section. There's something about running rights and final-offer arbitration. Halifax almost has its own sections in the act, in both the competitive line rate section and the section on final-offer arbitration. CLRs normally do not apply to intermodal, trailer or container-on-flat-car traffic. It's specifically excluded.
It does not apply anywhere else except where the traffic is either incoming or outgoing rail movement of an import-export traffic. Under those circumstances a competitive line rate application could be made for container traffic, but it still has to meet the other criterion - that the local line is only a single line, where you have a single company. That's the basic requirement for a CLR.
Halifax is the only port in Canada that has service from only one railway, so we assume the combination of these two clauses is aimed at giving some comfort to Halifax. It says final-offer arbitration is not applicable to intermodal traffic - that is, containers or trailers on flat cars - except traffic that moves to a port served by only one railway. Again, Halifax is not named, but it's described so accurately that there's only one port it can apply to. I suppose those two clauses were designed to tell Halifax that it will still have mechanisms to produce a sense of competition.
We have looked in detail at this process, particularly for the CLRs, which at first might be seen as the most likely of these pseudo-competitive mechanisms. As you may know, CLRs are not a common feature of the rail environment. I think there have been only two cases so far, and both of those were American railways. It was for traffic moving to the States. American railways, which do not have to reciprocate in such arrangements, are quite happy to take advantage of our legislation. CN and CP have kept miles away from it, all the way through the present act. They won't do it to each other because that would launch them on an even more downhill path than at present and would serve no purpose.
In practical terms, the CLR has been used by Canadian shippers as a bargaining chip when they negotiate rates with the railway. Whether that has been successful or not is difficult to tell, because bargaining these days results in a confidential rate that is not challengeable or publishable. So one never really knows whether there's been genuine success here, but I think shippers feel they have made some gains by using CLRs as a threat.
The difficulty for Halifax - and we've looked at specific cases where it might be applied in Halifax - is that the prospect of a CLR doesn't offer any cost advantage, but the disadvantage of attempting to pursue one is in terms of the service. CLRs only tackle the question of the price, the rate; they do not tackle the question of the quality of service, and you can't have a competitive service developed by this mechanism.
.1925
Regarding competitive service, I would say as far as the container traffic is concerned, it is equally important for the service to be of high quality and high consistency and regularity, as it is to be the lowest possible price. In fact, it's probably already at a higher price than you could operate a minimal rail container service for, because in fact the shippers require a level of service that is going to cost a little bit more. So this isn't really a useful bargaining chip as far as the customers, the shippers, are concerned for traffic going through Halifax.
To some extent, the same argument applies as far as the final-offer arbitration, which again has rarely if ever been used, even though it has been available for years. It doesn't seem to be a practical mechanism, other than being one that you attempt to use as a mild threat, one the shipper can use against the railways.
If the only thing we are offering is that, we should perhaps say it more clearly. But what we are saying is that neither of those mechanisms are really any good to us. In fact, we think the only answer, as far as Halifax is concerned, is in some way to be able to make competitive rail operators have access to Halifax and to be able to compete one among the other - the existing railway, or railways, and any others that wish to get into the act.
The short-line alternative might be another one that's considered. Our difficulty, again, is that our short line from Halifax is pretty long. In fact, it goes through two provinces; it goes through three provinces to get to Montreal. That would mean putting together three short lines that somehow were able to offer a seamless operation, without transfers. I don't think that's even legal under the present arrangements for short lines. They have to exchange the traffic or in some way shuffle it between them. So again, while short lines clearly have a level of efficiency and local interest, which is very attractive and would be attractive to us, they would certainly -
A short-line operator that was living on the container traffic to and from Halifax would certainly take a very great interest in that traffic and would nurture it and do exactly what we're looking for. But we don't see how under the present arrangements that can be achieved. Quite frankly, I recognize this bill is probably too far gone to make any radical change, and so the idea of a common-user right of way, we feel, is the only possible answer, not only to our problem but I think it's probably the only possible answer in the longer term to the much more significant problems that the railways have looming up.
The most we could perhaps ask for here is two things.
It may be possible to build on the running rights, the joint running rights clause, which really haven't been modified much in Bill C-101 from the old version. At the moment, the way they're written, they only really apply to mutual arrangements between CN and CP when it suits them both to run on each other's tracks. But it's not to be seen as an intrusive running-right process. Of course, because the act only applies to federally regulated railways, it can only apply to CN and CP; it doesn't apply to short-line operators, nor can it. So it might be possible to enlarge that a little bit. I don't have perhaps the legislative background to understand what else you could do to it.
But there is one opportunity in looking towards the future. If this concept of a common-user right of way has any attraction at all, then a home might be found for it in clause 5 of the bill, the purpose clause, because we have lots of warm motherhood statements in there that have been there for years in the last two acts, almost without change, which we don't really pay much attention to. We're paying a little more attention perhaps these days to some of them. But it's a good place to initiate and perhaps suggest ideas, and maybe it's possible to signal that it's what's coming. Coupled with that, it then might be something that could be laid on the doorstep of the proposed review commission that is included in this act. I think it's a five-year review, rather like we did at the end of four years with the current act. I was on that review commission, and I realize that a lot of the things we recommended have now found a home in Bill C-101. For that, I'm grateful.
.1930
I think perhaps the same two-stage process might be applied to look more carefully at this question of something much beyond joint running rights, in fact joint user or common user for some or all parts of the right of way. I wouldn't suggest doing it for the short lines. It would only be applied to the main trunk network.
If I can, I'd like to make one other comment about it, which is perhaps not strictly in relationship to Halifax but a more general point. Looking down the road, I think the real difficulty we are facing as far as the railways in Canada are concerned is the fact that we have not yet come to grips with this dichotomy between the railways and all the other modes of transport, where their infrastructure is not only in most cases provided at less than cost, but in all cases the other modes do not have to include the capital investment in their infrastructure, in their asset base, and therefore the private companies have to show at least some return on assets.
The difficulty is that CN and CP are being asked to run a profitable right of way within the total framework of their operation. Even where we're commercializing - I'm talking about things like the seaway - the most we're talking about is a not-for-profit organization.
We're not suggesting that anything should be set up that should be run - Of course, in most cases - I guess highways are a bit arguable, but the seaway is certainly not - we do not recover by any means, taxes, tolls, charges, or otherwise, anywhere near even the operating costs of this infrastructure, let alone any contribution to their capital costs. Yet the railways have to, or are supposed to, price to not only maintain and develop and grow their infrastructure as the traffic requires, but in their shareholder terms they are expected to make a profit on any investments they make. We're asking an impossibility of them. Their prices are always to be higher because of this.
There's a second problem associated with it. We are now busy pushing and making it much easier in this legislation for them to so-called rationalize - that is, to dispose of pieces of what is to them excess trackage through short-line operators, and so on - but we're also driving them to - Because the only form of competition they really have between the two of them is their two private sets of rights of way, we're going to finish up in this country with two trunk networks owned by the two federal railways, both of which are going to be permanently underutilized. At the moment, our track utilization is something less than half that of the average of the United States, and it's about a quarter or a third of that of the better U.S. railways.
If you look at the railways, their own estimates of how much they're expecting to abandon or dispose of in this next round of abandonments, their utilization - even taking their current traffic levels and ignoring the traffic they may lose by abandonment, it still doesn't come anywhere near the level of utilization that you would have to have for an efficient railway. This is not so much the concern of the railways; I think it's the concern of the country.
I wish I had an easy answer. That's why I suggested that perhaps the thing to do in this legislation is to recognize the problem and neatly refer it to the next review committee. Maybe it's the most we can do this time around.
We've missed a glorious opportunity in the fact that, I guess, the sale of CN will now go ahead sometime this month. It would have been a wonderful opportunity to get half of the job done in one fell swoop, with probably very much less pain than we're going to have once a private owner has it, and it's going to be difficult to wrest the track away from them.
The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Gratwick. Mr. Chatters.
.1935
Mr. Chatters: That was a very interesting presentation. As I said earlier, the idea of this - did you call it a public transit bed?
Mr. Gratwick: A common-user railroad, yes.
Mr. Chatters: The idea of a common user right-of-way is an intriguing idea. It is an idea that we proposed in committee with regard to the privatization of CN. We discussed it briefly, and it was an opportunity that we clearly missed. I still see great problems with it, however.
In today's environment, I can't see a private company that would invest in a rail right-of-way, in a rail bed on which they would be required to provide a level of service, while at the same time having tight regulation of the rate they were allowed to charge people with trains. It doesn't seem feasible to me that a private investor would get into that kind of a situation. The only real way I can see this working is if the government were to retain ownership of the rail bed, but then we run into this problem with the bureaucracy and the inefficiencies that are involved in our railways now.
Mr. Gratwick: I think we would go halfway between what the federal government is doing now with the air infrastructure and what it is planning to do with the marine, with the ports and the seaway. It's going to this non-government, private, not-for-profit corporation. They are doing that with the airports and are proposing it for the seaway in order to move them to local jurisdictions. In other words, what we would be talking about is a body that would be empowered to either collect tolls from the users or that would certainly accept local support if a province or even a municipality said they would like to have a line coming in here and would cover some of these right-of-way costs.
Mr. Chatters: But in what you might call this privatization of the air transport infrastructure, the airports are either going to for-profit individuals and companies or they're going to another form of government. There's nothing else. Either the municipalities are taking over the operation of the airport or for-profit corporations are.
Mr. Gratwick: No, I don't think so. Looking at the model for the ports, which we know is the direction being taken as far as Halifax and the other ports are concerned, they are specifically talking about a not-for-profit corporation set up under the Companies Act. It is a not-for-profit corporation but it will lease the property from the government. It will then add to it or subtract from it. It can raise money, it can build more infrastructure if it wants to, and it will produce its revenue through a process of normal fees on the users.
Mr. Chatters: But what's generally happening is the municipality is the one taking over the operation of the airport.
Mr. Gratwick: Is it? There has been a lot of -
Mr. Chatters: It is doing so through an airport authority, of course, which is the non-profit part, but it's still government.
Mr. Gratwick: There have been a lot of municipal airports. There always have been, and I guess there'll be more now if the federal government gets rid of some more of its smaller airports. But the major airports like the ones that have been done already, such as Vancouver and so on, are in fact not-for-profit corporations.
The Vice-Chairman (Mr. Comuzzi): - [Inaudible - Editor] - Mr. Chatters.
Mr. Chatters: Well, Edmonton would be my -
Mr. Gratwick: You mean the city?
Mr. Chatters: Yes, but it's run by the municipality. It's run by the Edmonton Regional Airport Authority.
Mr. Cuthbertson: The downtown one is.
Mr. Chatters: Yes, they are both run by the regional airport authority.
Mr. Cuthbertson: The international airport is not run by the municipality. The international one is run by an airport authority.
Mr. Chatters: Which is responsible to the municipality.
Mr. Cuthbertson: No.
Mr. Chatters: I may be confused, then, and if I am I would like your -
The Vice-Chairman (Mr. Comuzzi): Because you have two in Edmonton, a better example is the airport in Calgary, which is not-for-profit and is run by a local airport authority on which the municipality has membership, but it does not have exclusive membership. Am I correct? I'll ask somebody back here.
A voice: Yes.
Mr. Chatters: Okay, I apologize for that. I was obviously wrong. But I agree. I think this is an intriguing idea and one that we should be pursuing, but we're still going the wrong way in Canada.
.1940
Mr. Gratwick: There is, of course, another enormous advantage that the railways themselves, of course, could cash in on if they wanted to, even within their own internal operations. For years - ever since we've had regulations in terms of requiring costing data and so on - they have treated the infrastructure as a basic expense that is then averaged and prorated across everything. If you in fact operated the infrastructure intelligently, what you would do is charge a lower fee at times of low usage, and for traffic that required or put a higher demand on the capacity -
A very fast passenger train uses about three times as much time-track capacity as a freight train, and it should be charged accordingly. If a bulk freight train wants to go slowly on weekends or something when nobody else is on the track, they should get a cheap rate. At the moment the infrastructure is not being priced intelligently. It never has been. In fact, I don't think the regulations allow it, because the definition of a compensatory rate, which is still in this act, depends on a costing formula that we designed in 1959 to decide how much the passenger subsidy should be. That's still used for deciding whether a freight movement is legal or not. We're a long way behind.
The Vice-Chairman (Mr. Comuzzi): Mr. Hubbard.
Mr. Hubbard: Mr. Chairman, you want to move to me before you get the members from the west all interested in Mr. Gratwick's analysis. This has a lot of implications for selling those lines out west.
The Vice-Chairman (Mr. Comuzzi): The government ownership tracks are some kind of not-for-profit corporation - pulling the track and -
Mr. Chatters: Yes, I think it's a fascinating idea that has all kinds of good aspects. I haven't heard a lot of bad things about it.
Mr. Hubbard: I was thinking more particularly in terms of how tracks are costed: the one that sits there and is used ten or fifteen times a year as opposed to one that's used twice a day. Probably, when you're looking at the abandonments, this might be a factor.
The port of Halifax is used entirely by CN, and you have a very good relationship with the Canadian National Railway.
Mr. Gratwick: Oh yes. We have a good relationship. That's taken time, but we do have a good relationship with it. However, to some extent on its side, part of that relationship, one has to say, has come about because it's a crown corporation and it wouldn't have had the nerve to leave or perhaps do anything too outrageous to us, even if it had wanted to. In other words, there's been a fair constraint on it as a crown corporation to make sure it provided. It hasn't provided for us as well as it can and as well as it perhaps does.
However, having said that, the innovations that have been required to meet the needs of the port have not come from CN; they've had to come from the provincial government. It put the money in for the double-stack container cars, without which we would not have a service. CN said that the region is so low on its capital priorities list that nothing can come to us. We're lucky to have what we've got.
If you want anything else or if you want any improvements to the service, here's the price. Recently there were some discussions, as you know. CN has built the new tunnel at Sarnia, which can take double-stack container cars and now enables containers to move from Halifax through to the U.S. midwest. We can cut 24 hours, at least, off any alternative routing. This is very attractive.
The Vice-Chairman (Mr. Comuzzi): On that point, we were told - if you would confirm - that you can now get a container car out of Halifax to the midwest in less than 48 hours.
Mr. Gratwick: Theoretically, yes. It doesn't happen every day. It would be silly to pretend it does, but it's perfectly technically possibly. Our difficulty now is that CN is not really keen on this traffic, which has grown 300%, admittedly from a small base, since that tunnel went in. Now the difficulties are capacity elsewhere in CN's system and the handling facilities. It wants to build a new facility at Chicago, but it won't be for a few years yet. So don't encourage any traffic to come through yet, because we're not ready for it. By the way, we would also like some help in building -
.1945
Mr. Hubbard: So you have concerns that if CN is privatized, this level of service - Section 133 seems to indicate that if there is a complaint on service obligations, you may - are you interpreting that in a different -
Mr. Gratwick: Yes, but the service obligations covered under section 133 generally are the physical service. It's like the provision of a car - it says nothing about the performance.
I think a railway would be able to say that if this is what you want and this is the price you're prepared to pay, we can do it. We can't run a small train every day, so we'll have to run a larger train every two days. That would be considered perfectly compatible with that full-service requirement, but it would be a killer in terms of the traffic that we have.
Mr. Hubbard: So your contention is that you can't complain to the agency about a situation like the one you just indicated.
Mr. Gratwick: You can complain, but there are two problems. First, I don't think they would accept that. They would probably have to accept CN's superficially reasonable answer to this - that they can't do special things for everybody and so on. Second, I'm not sure what they could do about it.
Service, unlike price, isn't dictated by a regulatory body. Service comes about because you've got a willing customer and a willing supplier who want to make happy music with each other. That is why the short-line operators are doing so well. They find out what the customer really wants, explain to the customer what they can do, and try to do it a bit better. They're the only game in town for those people, and those people are the only game for that railway. Looking at CN as a large national railway, I'm afraid the concerns of Halifax are not high on its list.
The Vice-Chairman (Mr. Comuzzi): Mr. Gratwick, given your last statement and the move by both CP and CN to have more of their activity in the United States rather than Canada, are you concerned that you rely exclusively on CN?
Mr. Gratwick: Again, with their interests in that area, it's a question of where their next dollar of capital will go. Obviously, they'll go to the areas that will give them the biggest return. They have to do that because that's the way they're designed and that's the tune they're dancing to. There isn't any alternative for them.
The Vice-Chairman (Mr. Comuzzi): Those of us who have been on this committee over the last couple of years have seen that the port of Halifax is doing very well, especially with the container business.
You cut a day off for ships that might go to Boston or New York. You can get these containers to the midwest within 48 hours or 56 hours, which is really 24 hours because you're more advantageous from the port of Halifax. Excluding that day less on the ocean route, your competitors in the ports of Boston and New York have delays in getting containers into the midwest. As I understand it, you're doing much better than you anticipated.
Mr. Gratwick: No, we always anticipate more than we get.
The Vice-Chairman (Mr. Comuzzi): That's common in Nova Scotia.
Mr. Gratwick: At the moment our traffic levels are steadily climbing toward where we were five years ago, but we haven't recovered from the last downturn. Second, the whole container shipping industry worldwide, particularly with the information systems that now control everything, and the sharing and interchanges that the shipping lines themselves are doing - renting, slot sharing and so on - has become incredibly volatile. A container can probably be re-routed twice on its journey across the Atlantic.
.1950
Keep in mind that although our competition is with the U.S. ports, we also serve the U.S. ports to some extent. They have difficulty with the ships that are coming toward them even now. In some places it's impossible to take in a fully loaded ship, so Halifax is a very convenient point to offload a bit and then to top off on the way out. They tolerate us quite well as long as we play that sort of fringe role, but if we try to tackle them head on, they have far more clout with the shipping lines than we do. Second, they get more help from the government and from the local authorities. Their little corps of engineers stands by and dredges for them and things like that.
The Vice-Chairman (Mr. Comuzzi): Do you have any competition from Saint John?
Mr. Gratwick: No, they have a different traffic. They had containers for a while, when some shipping lines found it easy to come from Japan straight into Saint John. Their big problem with container ships - they are all right for bulk products because loading and unloading the ships takes over 24 hours, but a container ship rarely stays more than 12 hours, and they have to catch the tides just right. They can't get in and out.
The Vice-Chairman (Mr. Comuzzi): Yes, I know that. Do you anticipate any competition from the added facilities at Belledune?
Mr. Gratwick: I don't know to what extent that will impact on us. As I say, a great deal of our traffic depends on ships that are going to the United States.
The Vice-Chairman (Mr. Comuzzi): Have you ever thought of getting into the railway business yourself? Have you ever given that consideration?
Mr. Gratwick: Yes, we've talked about this a number of times. Given the restructuring of the ports and turning it into a not-for-profit local authority that would have the financial freedom to do what it wished - we've considered under this common user idea that the port might want to run its own equipment. Shipping lines in the United States often buy their own equipment and get somebody to hook and haul it for them. The same sort of thing could happen, and it might make sense. Once you move to that common user the railway moves from a non-contestable market to a contestable market, and it becomes a much more volatile question. People can enter and exit fairly easily without pain of death and terrible things happening. Once you can get rail into that position, then you have the right conditions for true competition.
The Vice-Chairman (Mr. Comuzzi): Mr. Gratwick and Mr. Jeans, thank you for coming and giving us this valuable information this afternoon. I apologize for the lateness of the hour but it was worth while staying.
Mr. Gratwick: Some of the lateness is my fault. I talk too much.
The Vice-Chairman (Mr. Comuzzi): This meeting is adjourned.