EVIDENCE

[Recorded by Electronic Apparatus]

Monday, November 6, 1995

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[English]

The Chairman: I call this meeting to order.

Good afternoon, colleagues. We are resuming consideration of Bill C-101, the Canada Transportation Act. We begin this afternoon with the representatives from the Western Canadian Shippers' Coalition.

Gentlemen, we look forward to your submission to the committee. We hope it's not more than fifteen minutes so that we can ask questions of you and your organization.

Mr. Robert Renwick (Chairman, Western Canadian Shippers' Coalition): Mr. Chairman, with me is Dick Whittington, from Luscar Ltd. of Edmonton, Alberta; Tom Culham is with Wildwood of Canada of Vancouver, British Columbia; Mr. Kevin Doyle is with Sultran of Calgary, Alberta; and Mr. Jim Foran is from Aikins MacAulay & Thorvaldson of Winnipeg, Manitoba.

I'm Bob Renwick and I'm the chairman of the Western Canadian Shippers' Coaltion. The coalition consists of twelve members, including nine companies and three trade associations that speak for several hundred individual companies throughout western Canada.

At the outset, we wish to indicate that we support much of what is contained in Bill C-101. Of the 283 clauses contained in the proposed legislation, we are concerned with only a handful of provisions. Nonetheless, Mr. Chairman, those few provisions are of extreme importance because they affect the delicate balance crafted by the NTA of 1987, and will impede the development of a competitive railway environment in Canada.

CN and CP have an effective monopoly on transporting much of the resource-based traffic that moves from western Canada. Mr. Chairman, this legislation must be concerned with more than railway viability. It must also be concerned with the effect of a railway monopoly upon our members and their ability to compete in world markets.

Our members are very concerned that certain provisions contained in this legislation are anti-competitive and will roll back the clock to the era that existed before the NTA of 1987, an era characterized by shipper-carrier discord and protracted litigation before the agency and the courts. We do not believe the government wishes to see this happen, and we seek your assistance in recommending changes to Bill C-101 that will promote commercial agreements rather than litigation.

CN and CP derive a significant percentage of their revenues from the resource-based products of western Canada. Our members are the major users of Canadian railways, expending over $3 billion a year on the transportation of minerals, fertilizers, forest products, potash, sulphur, coal, petrochemicals and vegetable oils and meals to markets around the world. Our members transport over 50 million tonnes of product and employ over 140,000 people. Transportation costs represent as much as 50% of the price of our products and have a significant impact on our ability to remain competitive in world markets.

For the majority of the transportation requirements of coalition members, rail transportation is the only economical, feasible way to access Canadian and United States markets and ports for offshore export shipments. Many of our competitors enjoy significant advantages by virtue of their closer proximity to markets and the many transportation alternatives they have available.

Pro-competitive remedies such as extended interswitching, competitive line rates and final offer arbitration provided railway customers with the opportunity to obtain effective recourse in a manner that was well understood by the transportation community. Because of the effectiveness of these provisions they have been rarely used over the past eight years, but instead have stimulated commercial arrangements between shippers and carriers that would not otherwise have been forthcoming.

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It is with grave concern that we view the barriers Bill C-101 will build around access to the Canadian Transportation Agency.

As you are now fully aware, provisions to which we strenuously objected are contained in subclauses 27(2), 34(1) and clause 113 of the proposed legislation. These provisions have been the subject of widespread concern among Canadian shippers for the disruption they will create to the commercial arrangements that have been forged between railways and shippers.

In many respects these barriers are formidable. The requirement that a shipper establish that it will suffer ``significant prejudice if the relief sought were not otherwise available'' is a subjective test that will vary from case to case. The words have not been used in railway legislation to date and will be capable of different interpretations. It will become much more difficult for a shipper to obtain recourse from the agency. What is perhaps most unfortunate is that this provision will promote litigation rather than a commercial settlement of disputes.

The same observation applies with respect to the term ``commercially fair and reasonable'' contained in clause 113 of the legislation. Moreover, to make a shipper liable for damages in the event he initiates a frivolous or vexatious application will deter the filing of valid applications. Even the courts do not engage in such punitive action, relying instead on an award of cost to deal with such conduct. The coalition is unable to understand why these barriers or deterrents are being imposed when so few applications have been made to the agency since 1988, and there's no history of abuse or improper conduct by shippers with respect to these competitive recourse provisions. We urge you to recommend that they be deleted from the bill.

Mr. Chairman, members of the coalition want Canada's railways to be viable, reliable and efficient providers of rail transportation service, but it is essential that viability be achieved through greater efficiencies and increased productivity. It is for this reason that members of the coalition have supported the provisions in Bill C-101 that will enable the railways to sell or abandon rail lines without regulatory intervention, and have supported their efforts to achieve a more competitive and productive workforce. We do not agree, however, that the railways should achieve a better bottom line through increased market power that will allow them to increase freight rates for the transportation of resource-based products in western Canada, thereby making our members less competitive in world markets.

It is axiomatic that competition spurs efficiency. It is for this reason that our members late last year advocated system-wide running rights without the necessity of a public interest test. This measure was strenuously resisted by CN and CP. During our discussions with Transport Canada earlier this year, a much more limited running rights proposal was agreed upon by all parties. It would permit a provincial short-line railway to have access over the line of a federal railway to which it was connected to the first available interchange with another railway company.

We're extremely disappointed that this provision is not contained in the legislation, as it is an important provision for both Canada's emerging short-line railway industry and shippers who will be served by such short lines. We do not accept the position of CN and CP that they require captivity in order to maintain adequate volumes and revenues. This argument is simply not acceptable in today's world marketplace. It is another way of saying that monopoly power is in the best interest of the monopolist. We ask that this limited running rights provision be included in the legislation.

The coalition also urges the standing committee to recommend the inclusion of an injunction provision in Bill C-101 to enable the agency to grant immediate relief against service inadequacies when it is apparent that such relief is required. There's little comfort to a shipper who requires immediate service that his application to the agency may be successful when it is heard two or three months later. By that time it may be too late.

Moreover, it is essential that the definitions of ``interchange'' and ``interswitch'' be altered to permit a shipper to obtain an extended interswitching order when two train services are provided at a connection, irrespective of the ownership of the track on which those train services operate. There is no reason for the railways to resist this proposal, other than to limit competition by technical means.

The requirement to establish ``public interest'' should be deleted from the federal running rights provision. This is inconsistent with the stated objective of Transport Canada and removing public interest considerations from the hands of the agency and into the hands of elected representatives. To leave that provision in the legislation solely as an obstacle to obtaining a running rights order is inconsistent and anti-competitive.

Transport Canada has publicly stated that the legislation will provide interswitching rates and competitive line rates to shippers on short-line railways with respect to the remaining portion of the federal line. This has not been accomplished, and amendments are required to specifically provide that the junction of a federal and provincial railway is an origin or destination for interswitching and CLR purposes.

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At the commencement of your public hearings, Transport Canada filed approximately 40 amendments addressing this matter but also affecting other provisions of the bill. Those amendments, if adopted in whole or in part, could have significant implications for our members. We are extremely concerned that we have not seen those proposed amendments in legislative language, nor are we fully aware of their impact.

Today we seek your concurrence, Mr. Chairman, and the concurrence of your committee, that we be permitted to make a further submission once these amendments are available and we have been given an adequate opportunity to assess the manner in which they will affect our membership.

Mr. Chairman, the amendments we seek today are not extensive. We believe they are essential to promote a more competitive railway environment and thereby facilitate our members in selling resource-based commodities in the world marketplace. As other countries are taking steps to promote more competitive transportation environments, we should not be proceeding in the opposite direction. Railway viability should be stimulated by the enactment of measures that encourage cost reduction and productivity improvements, not by measures that will enhance their monopoly power. The current bill as drafted will not achieve the objectives set out by the government. It will turn the clock back and hand some of our markets to other countries.

Thank you. We are prepared to answer any questions you may have.

Mr. Chairman, may I just say one more thing before you proceed? We have a number of members of the Western Canadian Shippers' Coalition with us today, and with your permission we would like to have them introduce themselves and tell you which companies they are from.

The Chairman: Sure. Go right ahead.

Mr. George Chapell (Member, Western Canadian Shippers' Coalition): I'm George Chapell from Manalta Coal.

Mr. Jack McMunn (Member, Western Canadian Shippers' Coalition): I'm Jack McMunn with Canpotex Limited in Saskatoon.

Mr. Cyril Eckl (Member, Western Canadian Shippers' Coalition): I'm Cyril Eckl from PCS Sales in Saskatoon.

Mr. Rick Lacroix (Member, Western Canadian Shippers' Coalition): I'm Rick Lacroix of PCS Sales.

The Chairman: Thank you.

I'm going to reserve my questions until the end. Mr. Gouk.

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

First I want to go into the ones we seem to hear a lot about - the triumvirate, as it were - subclauses 27(2) and 34(1) and clause 113. Most specifically, I'd like to deal with subclause 27(2).

I would like you to tell me if it would provide you with any relief if subclause 27(2) remained, but it were made clear that it did not apply to final offer arbitration. There have been arguments made that it doesn't. But would it help if that were clear in your mind, and also if it were clear in your mind and in the language of the clause that it was not a gateway barrier but was a remedy after the case had been heard? I realize that may not be everything you're looking for, but would that provide any relief to you at all on that specific clause?

Mr. Tom Culham (Member, Western Canadian Shippers' Coalition): I think the key thing in the three barriers you're talking about - subclauses 27(2) and 34(1) and clause 113 - is that they take us a long way away from where we were under the NTA of 1987. The interswitching, final offer arbitration and CLRs are all provisions that apply and are used individually by members in different ways. Some people are within interswitching, some people might use final offer arbitration, and others might only be able to use CLRs.

To put any kind of barrier in front of these competitive access provisions will take us back towards an anti-competitive situation. That's not something we can accept. I can't see us trading off one for the other or looking for some sort of Hobson's choice. That's what we're concerned about here. You are suggesting that we should be trading one for the other.

Mr. Gouk: No, not necessarily. What I would suggest is that you recognize the position I'm in relative to the numerical values of the various parties. I'm saying that if I wanted subclause 27(2) out - putting aside whether I do or don't - but I couldn't get that, is it worth trying to do anything else with subclause 27(2)? If we don't get it out, does it really matter what it says, or is the fact that it's there the only thing that matters?

Mr. Culham: I think the fact that it's there is a problem and the fact that all of those are there is a problem. I don't know if anybody else wants to add to that.

Mr. Renwick: Does that answer your question?

Mr. Gouk: Yes, pretty much. I just wanted to get your feeling on that matter.

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I'm going to be looking at all of these things. I have a great interest in many of the things you and all other people like yourselves have put in.

I want to make it clear that I am not pro-shipper, pro-producer or pro-rail. I'm pro the Canadian economy and I'm going to try to come up with something that hopefully will make it work that way. I still haven't absolutely made my final decision.

The NTA will be here on Wednesday and I have asked them, with lots of advance notice, to provide evidence that cases since 1987 would have been dealt with differently if these provisions had been there and what their rationale is for needing them. If they cannot produce that, then it certainly would be a very heavy point in your favour. If they produce those things, then I'll have to weigh them on the merits that they present and make the final decision that way.

The last thing I would like to ask before I pass on - and don't take that figuratively over there, guys -

Mr. Nault (Kenora - Rainy River): We'll go to your funeral.

Mr. Gouk: - was with regard to your comments on the outline of the amendments brought forward by the government.

It is the intention at this time that the committee is going to start clause-by-clause reading of the bill a week tomorrow. Those amendments will likely not come back in a legislative form in time for you to study them and make up a report.

I am sure the committee will say that they would like it sent to them - and by all means do so - but I would like a specific copy sent to me. If you would outline, according to the way it is written now, where your concerns lie, could you get that to me so that I could give it consideration before next Tuesday?

The Chairman: Actually, that's very insightful but ill-informed. Unless the member wants to work during the break week, next week, it's probably two weeks tomorrow.

Mr. Gouk: That's why I said I want a copy, because I would be concerned about the forwarding of it during the break.

The Chairman: No, but the clause-by-clause won't proceed until a week later.

Mr. Gouk: Okay, a week. Sorry.

Mr. Culham: I think it would be key that we get the actual amendments as they are proposed in order to comment on them. I'm not sure whether we have them or not.

Mr. Gouk: I don't have them in legislative form and I probably won't see them until the immediate vicinity of when we start the clause-by-clause debate. If you would provide me with some kind of outline as to where you think your concerns might lie - this doesn't have to be ironclad - it would give me something to look at in terms of your point of view when I finally get the legislative copies myself.

Mr. Renwick: That might be difficult, sir. I think we would want to study them ourselves and establish whether there are any that still are of concern.

Mr. Gouk: I can understand your desires, but I'm just pointing out that this is not going to be, in all likelihood. I don't control the agenda of the committee. I probably won't see them myself until possibly even at the time when we start the clause-by-clause debate and vote yea or nay on the various clauses. I'm just suggesting that if you want me to place consideration on where your concerns might lie, then you should point me in a direction, even if you can't give me specifics. It's to your advantage.

Mr. Jim Foran (Counsel, Western Canadian Shippers' Coalition): Mr. Gouk, if I could add to that, we're aware that when the minister appeared on October 4, Transport Canada filed some amendments with the standing committee, not in legislative language but that created an intent to amend quite a number of provisions.

An example of one area we have grave concerns about is according CLRs and interswitching rights to shippers on short lines with respect to the remaining portion of the federal lines. That's something Transport Canada and the minister have indicated from day one as the intent. We look at sections of those 40 amendments that appear to relate to that.

The appendix to our brief reflects a meeting we had with Transport Canada back on August 29 when we made recommendations on how this could be done. Until we see whether or not Transport Canada has come forward with legislative amendments that substantially reflect our amendments in schedule 1 of our brief, it's pretty difficult for us to comment, Mr. Gouk.

That's just one example of a whole series of amendments. Until we see them in legislative language, it's going to be very difficult for us to make meaningful comment.

What we're rather surprised about is that there would be so many amendments coming forward that affect so many provisions of the legislation at this date. We feel that it's not only appropriate but very, very necessary for our members' interests that we have an opportunity to see the legislative language and the way it impacts the bill.

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Mr. Gouk: I understand your concern; it's just that it happens to be out of my control. I'll have to govern myself accordingly.

The Chairman: As a point of clarification before we move on to the next questioner, it is our express desire to request that all members have their suggested amendments to the bill in by one week from this Friday so that the legislators will have Saturday and Sunday, and even Monday, to draft a list of all those amendments and ensure that every member of this committee, including the opposition, has a copy of those amendments. This is so that they have a day or two, Monday and Tuesday, before we go into a Tuesday afternoon clause-by-clause. That's the intention of the committee's work.

Mr. Fontana.

Mr. Fontana (London East): Thank you, Mr. Chairman.

Let me first address, with all due respect to these particular witnesses, the fact that the minister has given us his bill that, before second reading, allows this committee to do its hard work. In fact, the chairman asked that all witnesses submit their briefs with plenty of notice so that when they came here they were prepared to answer some of our questions.

We're going to do the hard work. To suggest that after we make our recommendations and the amendments have been put forward and the amendments that are going to be considered by all parties here, we reopen this up to you, it would mean we would have to open up to 110 witnesses who have already appeared before this committee. That's not the way it works. You put your best case forward today, you look at the amendments that are going to be considered by this committee, and you do what you effectively have been doing for the past three months - lobby like the dickens members of Parliament on all sides of the House for us to consider these things.

Let me get to the issues at hand. I see your recommendations, and perhaps you can get into them with some sort of detail, but first I am very interested in your notion or definition of competition. I would think what the government wants to create is economically viable railroads. They have as much at stake as you do. You want to sell your products to the world and you need them to carry your products, and we need transportation costs that are reflective of the world price of your commodities. So everybody wants exactly the same thing.

I think the railroads, who have come here, have indicated to us that they need you as much as you need them. They need your business and therefore they have to be competitive, because if you're not competitive, they don't get to move your commodities.

I am a little struck by the fact that you would use the word ``monopolistic,'' that you would use the words that in fact the railroads don't treat you and other shippers fairly. I wonder if you could tell me, though, as a starting point, what has happened to your prices for transporting by rail since 1987 and the NTA that was passed in 1987. Have they gone up or down since 1987?

Mr. Kevin Doyle (Member, Western Canadian Shippers' Coalition): Mr. Chairman, I would like to try to answer that question if I may.

Rail prices for our commodity, sulphur, have gone down somewhat since the advent of the act of 1987. For 20 years before that they went steadily upward, and sometimes by very large amounts. They came down somewhat from 1987 for two reasons: first, because of the competitive access provisions in the act, where for the first time the carriers had to sit across the table and bargain seriously with us; and second, because our prices in the international marketplace, where virtually all of our commodity goes, came down by about half. That situation remains today. For most resource commodities, the international market has not been very kind pricewise, and that certainly has had some impact on the rail rates, as has the act of 1987.

Mr. Fontana: Is the same to be said for every other commodity group, or is it just for your group, Mr. Doyle?

Mr. Richard Whittington (Member, Western Canadian Shippers' Coalition): I would like to make a supplementary on that. The same situation has happened in the coal business. The price of coal has come down steadily since 1982. However, up until 1987 the railroads chose to completely ignore the market forces of our product, and we had to absorb the entire loss in price until the NTA of 1987 came into place. In the case of my company, we had to virtually shut down a mine and lay off 350 people. Still, the railroad wouldn't give us even a cent, not one cent in the rail rate.

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What we see with this legislation going forward - which I think is what we're talking about, how this legislation is going to affect us in the future - is that it will in fact turn the clock back. It will make it more difficult for us to have a more reasonable and even-handed negotiation.

Mr. Fontana: Let me ask you then, Mr. Whittington, if there was no flexibility on the part of the railroads as it related to getting a competitive price, did you avail yourself of the provisions under NTA to ensure that you were getting a fair price? As I understand it, only about six or seven times did anybody ever go to the NTA. Therefore, the fact that you said these railroad companies were so bad that they wouldn't give you one penny off would suggest...and yet you didn't go to the NTA. I might be mistaken; maybe you did. Did you go to the NTA?

Mr. Whittington: I think we have a little bit of apples and oranges here, because the comments I'm referring to are pre-1987, which is where we see this new bill taking us.

With regard to what has happened in the intervening time, you're exactly right. There have been only six or seven cases go before the agency, and I guess we're sitting here wondering what all the fuss is about because we only had six or seven issues. Shippers and railroads have negotiated in good faith, and we're just hoping that would continue.

Mr. Fontana: I'm not talking about subclause 27(2), but let me then ask you, in the list of your recommendations, which are the most important?

Obviously this committee has a very important task, which is to balance the needs of the railroads to ensure they're viable...and I'm sure you can appreciate that they are businesses too. They need a return on equity or on capital just like your industries do, and they are not public utilities owned by the government. They are private sector businesses. In fact, CN will be one very shortly, in the next month or so. Therefore, I'm sure you can appreciate as business people that if there is market force abuse under the Competition Act - because we've introduced all kinds of provisions under Bill C-101 - if in fact you are significantly prejudiced in terms of prices or common access provisions, you can go before the NTA.

But in this list of seven recommendations, which are the most important for you to tell us to either get rid of or substantially modify - those that are going to seriously impact upon you? Which are the most significant ones?

Mr. Whittington: I think the key issues to us are the barriers, what we call subclauses 27(2) and 34(1) and clause 113. I think they really will turn the clock back to pre-1987. That's the focal area.

Mr. Fontana: So those are the most important ones to you.

Mr. Whittington: The barriers are absolutely key. All three of them need to be removed from the legislation.

Mr. Fontana: I think you've highlighted running rights as an important feature too. We've only had one provincial short line indicate that it wants running rights. Nobody else in the business seems to believe that's important if we want to achieve the other part of the equation in this bill, which is to promote not abandonment, but transfer, and the creation of short lines.

What incentive will there be for the major railroads to transfer and also to create short lines internally, or to others, if in fact you grant unfettered running rights, which exist nowhere, not even in the United States? Running rights are negotiated in this country; there are 100 running rights provisions now. Under the provisions in the United States, there's no such thing as legislated running rights. Don't you think that's better left to people to negotiate between short lines and main lines? There is a partnership that exists between short lines and main lines, and even the short-line operators themselves don't want running rights.

Mr. Culham: Maybe I can answer the first part of that question, which is why we think short lines should have running rights.

I think it comes from our experience as shippers being located on one railway only. We know what it's like to negotiate with one railway. It's very difficult.

What we're saying is, just as shippers should have the ability to negotiate with the railways and have choice in competition, we think it's important that the short-line railways, which will be carrying our traffic, also have choice and have the ability to negotiate with the carriers. We think that's critical. We think that because the short-line railway industry in Canada is in its early stages, they haven't yet recognized the kinds of difficulties they may get into in terms of their ability to have serious negotiations with the carriers.

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Dick could probably explain our view in terms of the railways' position that by putting running rights in, no short lines will be created.

Mr. Fontana: Do you think a possible resolution of this matter might be to define what a captive shipper is? Is it one railroad? Is it one mode?

As we look at subclause 27(2) and all those other provisions, being able to narrow the definition, look after the captive shipper and let competition deal with the ones that are not truly captive - would that be a way of trying to resolve your problems?

Mr. Doyle: The Americans have been trying for several years to define what a captive shipper is, and I understand that after years of effort they have not succeeded in doing that. They've just managed to have a lot of litigation.

If you look at the experience of the agency over the last several years, anyone with competitive alternatives will not go to the agency. Going to the agency costs a great deal of money and time, and that in itself represents an effective barrier and in a sense defines who is in a captive mode or not.

In answer to an earlier question, we have gone to the agency because we and the railroads had difficulty coming to agreement. I can tell you from personal experience that it does cost a great deal of time and money. That in itself is a significant barrier in terms of defining who may be truly captive.

Mr. Nault: I have a couple of questions. The first question deals with transportation costs.

You stated in your submission that 50% of your costs in the coalition are related to transportation. Can you tell me what percentage of that is trucking versus rail? It would be interesting to know that percentage so that we know what we're talking about in terms of your total transportation costs.

Mr. Whittington: Which segment of the brief was that?

Mr. Nault: It was in the comments made by the gentleman at the beginning. It related to 50% of the costs to the coalition being transportation. I'd like to know the breakdown of that between modes. I'm sure some of these shippers also have access to marine, while some have access to trucking and some have access to rail. I'd like to know the breakdown of that to the total cost of rail transportation.

Mr. Renwick: I think we said ``up to''. It depends on the specific circumstances, the product, the location of origin and the destination. We're not saying that all members of the Western Canadian Shippers' Coalition have that exact number. Of course there are variations. Some products are more attractive to truck competition, but some have no competition except rail and are captive. There's not an easy answer to that question, in my view. It depends -

Mr. Nault: There is an easy answer. If in the next few weeks you could give the committee, as Mr. Gouk asked for on other issues, a breakdown by commodity - which I think you should be able to give us - of what the transportation costs -

Mr. Culham: I can give you the answer for forestry products.

Mr. Nault: That's good, but I'd like to have them for all the commodities in the coalition. It's important to know. It's easy to come into a committee and state that 50% of your costs are transportation, but for some shippers 45% of that transportation cost might be trucking, so we're talking about 5% for an individual shipper.

I'd like to know what they are, but I don't want to get into it today. If you could give me a list of those by commodity, that would be very helpful to the committee in its discussions.

Mr. Whittington: Just to clarify, that 50% is 100% rail.

Mr. Nault: But that's for coal. There's a big difference when you talk about forestry products, sulphur or potash. There are many different scenarios out there.

We certainly would like to get that. You're the experts and we'd like to get a breakdown by commodity. That's not a trade secret, is it?

Mr. Renwick: Can I just clarify your question? Are you asking for the degree of competitiveness of each of those commodities?

Mr. Nault: No. We'll be able to figure that out by your breakdown of transportation costs. If you give me the true transportation cost based on a particular commodity - how much is trucking and how much is rail, per commodity - we'll get a sense of whether your particular industry or commodity is captive.

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That will be very helpful to the debate here because we have this continuous suggestion by the shippers that every one of them is captive. We all know that's not the case, so we need to get a breakdown of that to be able to determine if your arguments warrant some changes.

The Chairman: Mr. Renwick, as leader of the delegation, could you meet with them and get that breakdown and give it to the clerk?

Mr. Renwick: I want to be sure you understand that we can't talk about definitive prices in a situation like this, because most of those are governed by confidential contracts. What we can probably give you is a breakdown of how much of the products of individual members go by rail. We can give you that.

The Chairman: Is that what you're looking for, Bob?

Mr. Nault: No.

The Chairman: Do you want the prices too?

Mr. Nault: That's not much good to me. I need to know your total transportation cost by commodity, and then the cost as it relates to other transportation modes. For example, if 50% of your total for a commodity like forestry products is transportation, how much of that is trucking, how much is rail and how much is marine? We need to know that because there are three modes of transportation. I don't think you're going by airplane - I assume not. I'd like to have the breakdown from the western coalition's perspective. I think that's important to know.

Mr. Renwick: We can offer to try, but as Mr. Culham points out, it is a difficult exercise.

Mr. Nault: It's the only way we can justify your argument that there's a monopoly in the transportation sector in this country, and that monopoly happens to be two railroads. It's a bit of a misnomer, but you're suggesting that two railroads have a monopoly in your industries. In order to prove that and to have a legitimate debate here, you're going to have to tell us what percentage of transportation costs are by those monopolies. To come here and say 50% of your total cost is transportation so this is important - that might not be, because you might be talking to the wrong folks. You might be talking to the province about all the trucking and the costs they're incurring as it relates to your business. I'd like to know what the differences are.

Mr. Renwick: I don't want to seem to be arguing with you, but please realize that much of this information, particularly with regard to rail, is governed by confidential contract, and we can't talk to each other about that. We can try to give you some numbers, but we can't give you definitive costs.

Mr. Nault: Okay.

Mr. Culham: Perhaps the focus in terms of captivity is a difficult one. I think what we're trying to say to you is this: we've been talking about monopoly, etc., but we are the customers. Only the customer can determine whether or not he's in a difficult position with respect to the carrier. I don't think we would be here talking about this kind of stuff if we weren't concerned that we would be in a difficult position.

We had the experience of pre-1987 where carriers were in a very strong market position, and we know what we've had since then. We know the benefits that have accrued. There are situations where producers located next to the U.S. border can truck across the border to a Burlington Northern or something like that. That's true, but there are also cases in the forest products industry where there are producers located far away from any competition -

Mr. Nault: You're leading into my next question.

Mr. Culham: - where trucking does not count.

Mr. Nault: That's fine. All I want is that information. Frankly, I think you can give it to me. Whether you do or don't is your prerogative as a witness.

The next issue I'd like to get into is this issue that prior to 1987 you guys were hard done by. I'd like to see after-tax or before-tax breakdowns of your profits over the last 20 years, because my impression is that you were not hard done by pre-1987.

It is in nobody's interest, including that of the railways, to bankrupt you guys. Richard's statement that the railway killed the coal mine is something I can't accept because it's not in the railway's best interest to shut a business down. They're in the business of shipping your goods to make profits, or so they're supposed to be, I would think. To suggest that the railways would try to put in predatory rates that would do you in is really very difficult to accept at the committee.

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If I could, I'd like to get a breakdown of your commodities and their bottom lines in the last 20 years to prove to us that you had a rough time since, let's say, 1975. That would give us 20 years of all the ups and downs and the troughs that go with it and the economies that take place in forestry and mining and all that goes with it. Of course resource-based industries do have those troughs and those ups and downs.

The Chairman: Okay, we have two requests.

By the way, Tom, I'm not going to ask you to start outlining what the forest products are in that particular case because then we'll have to go around the room, and there just isn't time.

What I would like to do, though, is to have your chairman, Mr. Renwick, undertake to make these two requests possible. Unfortunately we don't have a matter of weeks; we have only a matter of days. So if you could discuss with your other coalition members....

Mr. Nault: One last question?

The Chairman: If it's very short.

Mr. Nault: All I would like to know from the witnesses is whether they agree that the railways in the last 10 years have not recovered their capital costs. Do they agree that this is a factually correct statement - yes or no?

Mr. Doyle: I would like to suggest, sir, that in the business most of us are engaged in, which is the western resource commodity bases, the railroads have been very profitable.

Mr. Nault: That's not the question I asked.

Mr. Doyle: It may be that in other areas they have not recovered their costs, but certainly in the businesses that we represent they have recovered their costs and have been very profitable, by their own admission.

Mr. Nault: Okay, so the answer is not a yes or a no; it's sort of in between somewhere.

I'm asking you if you agree with the statement made by the agency that in the last 10 years the railways have not, as corporations, recovered their capital costs or made enough profit even to recover the capital costs of the equipment and the maintenance of their facilities. Do you agree with that statement or do you totally disagree with it?

Mr. Doyle: It's true that the railroads have built up, because of lack of competition, very high cost structures that have affected their profitability: guaranteed jobs, the highest wages in the transportation sector in Canada, and so on. Those are issues that have affected their profitability.

Mr. Nault: Thank you, Mr. Chairman.

The Chairman: In closing, gentlemen, I think what is obvious is that your organization and others that have come before you who are like-minded aren't going to budge.

Might I suggest that what haunts this bill is the mistrust that exists between the shippers and the railroads. You spoke earlier of amendments that you found to be inconsequential, but in truth you understand that what it does is create an imbalance in the legislation. What you are asking for is all of what you had: interswitching, CLRs, FOA and everything else. But you want to do away with clauses 27, 34, 113 and anything else the railways need to create a balance in the legislation.

In the interests of true competition, true competition, would you be willing to go so far as to not just ask that we amend the bill to remove chunks such as 27, 34 and 113, but go so far as to also say that in the interest of true competition, you'll do away with all those shipper provisions such as interswitching and CLRs, etc., create a true competitive atmosphere, and if there's a problem between the two, you'll go to FOA at the end of the day?

Mr. Culham: I think we come back to what we said earlier. This is really a Hobson's choice. You're suggesting that we give up CLRs and interswitching for a final offer arbitration provision - is that what you're saying?

The Chairman: No. You'd give all that for clauses 27, 34 and 113.

Mr. Culham: But then there are no provisions to get to use anymore.

The Chairman: Ah, true competition, Mr. Culham.

Mr. Culham: That's not true competition.

A voice: That's not true competition.

The Chairman: Not in your definition obviously. We've heard it before.

Mr. Culham: If you have market power, somebody with monopoly power, and there are no competitive access provisions, the outcome is monopoly. It's not competition. An unregulated market is a monopoly, and you're suggesting that we eliminate all the competitive access provisions in the NTA to deliver monopoly power to the railways. That's what you're suggesting; that's true market forces.

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We think the best interest of Canada is to have competition. That's why we're suggesting that the competitive access provisions of the NTA have delivered on that. They have delivered on the concept of competition.

Mr. Fontana: I want to follow up on your question in terms of regulation as opposed to competition. We've been going around the circle here today. That's why my colleague, Mr. Nault, asked you by commodity group to provide....so that we have the exact picture as it relates to competition.

The railroads and others will tell us that in fact there is competition. Yes, there is the exception of a captive shipper, where there is only one railroad and nothing else, or a mine that has only one railroad. But from our understanding....

The chairman is absolutely right that we haven't heard so much mistrust between two partners that are supposed to be working toward the well-being of the Canadian economy. You're not the ultimate customer. The ultimate customer, to us, is the people who buy your goods. So if you can't sell your goods at a competitive price and the railroads can't give you the good price, then nobody benefits. You don't do any good, the railroads aren't in business, and the Canadian economy suffers. So the ultimate customer is whoever buys your goods.

I'm trying to get an understanding here. The chairman offered competition - strip all these regulations and give you an opportunity for real competition, but if there is a problem, FOA. The other offer I have is that we'll give unrestricted running rights to everyone, and we'll take away all the common access provisions and let the system work as it should. What would be wrong with that?

You can't have it all your way, gentlemen. It ain't going to work that way.

Mr. Doyle: Mr. Chairman, what we're proposing is a long way from all our way. We're talking about every plant in western Canada being at some degree of risk by the railroads' ability to sell or abandon -

The Chairman: Mr. Doyle, we've heard it. We've also heard the railways come forward and say that what they're doing is acting on behalf of the railroads that are also speaking for every line and railway worker out there who could lose their job.

Mr. Whittington: Is Mr. Fontana suggesting that we go back to square one, throw this whole thing open and go back to running rights?

Mr. Fontana: We're asking you for constructive input as opposed to just saying, get rid of subclause 27(2), get rid of this, get rid of that, and let's keep the status quo. That's essentially what you're saying. Do you know what? The status quo is not sustainable.

Mr. Culham: One thing we -

Mr. Fontana: You have, because you haven't offered one constructive suggestion.

The Chairman: I'm going to ask Mr. Renwick to wrap up and then we're going to move on to our next witnesses.

Mr. Renwick: I think we have had some interesting questions today. We have some concerns about our ability to supply those answers that were asked for, in the short term. I guess we really do need to stand by the brief we've presented today.

I should say that when we talk about degrees of captivity, when you are in a captive position there's a difference between going out of business tomorrow because the railway slaps you with something you can't live with.... But it's the slippery slope that you go down if you lose the ability to access the agency with honest appeals.

I would like to take you back to the previous legislation, when the western Canadian pulp producers had to take a section 23 action. It took us four years and $15 million in 1978 dollars to get that situation resolved. We don't think the Parliament of Canada should be taking Canadian shippers back to that regime. It was absolutely and totally unfair. What we have now is considerably more fair than that.

We certainly need a healthy railway industry in Canada - there's no question about that - but when we look at the statistics, we find that Canadian railways are in a far better position today than their American counterparts. The American counterparts, however, are more profitable, which tells us that the things that need to be solved on Canadian railways are their cost structures, not their pricing structures. Taking away from us the provisions of the 1987 act leaves us considerably at the mercy of predatory railway pricing.

The Chairman: Chairman Renwick, thank you for your summation. Gentlemen, thank you very much for your submission. We appreciate your coming before the committee.

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Colleagues, we'll invite the representatives of Sultran to come to the table.

We welcome Kevin Doyle, president, and Jim Foran, counsel.

Order, please. We take our conversations out in the hallway, if we like.

Mr. Doyle and Mr. Foran, you were part of the other organization that just presented. I imagine you're doing it from a more focused perspective. I can't see how much different it's going to be. But we'll ask you to go fifteen minutes or less, and then we can ask you some questions.

Mr. Kevin Doyle (President, Sultran Ltd.): Mr. Chairman, thank you very much, and thank you ladies and gentlemen of the committee. I appreciate the opportunity to come here this afternoon and present our views and our concerns about this important legislation.

Sultran Ltd., the company I represent, is a logistics service company owned by the major sulphur producers in Canada. It provides transportation and logistics services for all offshore sulphur from Canada.

Canada currently produces about 7.5 million tonnes of sulphur annually in western Canada and exports to the United States and offshore 90% of all sales. The domestic market for sulphur is very small, at about 0.5 million tonnes per year.

Virtually all sulphur moves by railway to markets in Canada and the United States, and for offshore markets, by the port of Vancouver. Sulphur is captive to the railways. Each of the more than 50 plants in western Canada is served by only one railway, and virtually no sulphur would move without railways because of the long distances to markets, the high annual tonnages, and the relatively low market value for sulphur.

Sultran Ltd. has supported this government's initiatives to address the long-term financial problems of Canada's national railroads. Canada needs financially viable railroads capable of reinvesting in plant and equipment if resource commodity producers and exporters are to be successful in the long run. However, it is equally true that we need very competitive, low-cost railroads if we are to survive in the long run in a very competitive international marketplace.

While Canada is currently the world's third-largest producer of elemental sulphur, the relatively small domestic market for sulphur has made Canada heavily reliant on exports. There are few if any markets for sulphur in which Canada has a clear advantage.

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Canada's main disadvantage in accessing international markets relates to the remoteness of the production of sulphur from tidewater, from 1,000 to 1,600 kilometres. More than any other supplier of sulphur in the world, Canada has a cost structure that is influenced by the cost of rail transportation from the production sites to tidewater terminals. The same is generally true for all Canadian resource commodity producers and exporters.

It is a fact that while western Canadians have been very successful in maintaining important market positions in international markets, prices have not fared so well. Canadian export commodity prices in real dollar terms have been trending downward for more than twenty years. Even in inflated dollars, export prices in this period increased less than inflation, and the rate of increase over the past ten years has slowed down dramatically. This long-term price trend is expected to continue despite upward spikes such as the current boom for some commodities.

I would refer the committee to the price and value statistics that are maintained and published monthly by the Bank of Nova Scotia. These set out in detail these long-term trends to which I refer. This Scotia Bank all-commodity export price index shows in real, non-inflation dollar terms 1995 prices at a slightly lower level than they were in 1972. Even in inflated dollar terms, the all-commodity basket of export prices has increased over the past five years by an average of about 1.5%.

It is because of these trends and the realities we face in the export marketplaces around the world that we view with alarm some of what is proposed in Bill C-101. Unless the legislation is amended to promote the development of a truly competitive railway environment, in which railways and their customers are able to negotiate rates and service agreements on a more equal footing, our country's status as a significant trading nation will be diminished over time rather than promoted.

Until the enactment of the National Transportation Act, 1987, Canada's transportation legislation in many ways protected the railways from the realities of the marketplace and thereby condoned inefficient practices such as granting the highest wages in the transport sector, accepting costly work rules, and offering job guarantees to railway employees that were far beyond those available elsewhere in Canada.

With the enactment of the National Transportation Act, 1987, Canada's railways were required to become more responsive to the impact of markets on their customers. In an effort to remain viable the railways were compelled to undertake significant cost reduction and efficiency-oriented initiatives. It is critical to Canada's economic interest that railways be encouraged to continue these initiatives. Bill C-101, as it is currently drafted, will not do this.

We can support much of what is in Bill C-101. We cannot support provisions that would allow the railways to turn away from cost reduction and focus on revenue generation. Should this be allowed to occur, Canada's competitiveness in export markets will deteriorate and its reputation as a reliable and efficient trading nation will diminish over time.

In western Canada the railways have a natural monopoly, particularly with producers of resource commodities such as sulphur, coal, agricultural products and the like. The 1987 act attempted to create a form of managed competition with the introduction of shipper recourse provisions to address this monopoly problem. To a degree the act succeeded, although both national railroads refused to become involved in competitive line rates.

The 1987 act intended that shipper recourse provisions would cause the railroads and their customers to seriously negotiate, where they did not before in the absence of these provisions and any competition. The 1987 act succeeded admirably in that there have only been a handful of cases involving shipper recourse issues before the National Transportation Agency in the past eight years and many thousands of successful negotiations.

Now in Bill C-101 the government proposes to put fences around the shipper recourse provisions to bar most, and perhaps all, shippers from using them. I refer to subclauses 27(2) and 34(1) and clause 113. These represent serious hurdles subject to extended legal challenges and perhaps the assessment of penalties that will be an effective deterrent to shippers, and will therefore increase the natural monopoly powers of the railroads.

I ask the committee to remove these fences. There is no history that demonstrates their need. Their effect, if left in the proposed act, will be to allow the carriers to turn their focus to increasing freight rates for captive shippers rather than cost reductions. This will work against the long-run economic interests of Canada.

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We support the sale and abandonment provisions of Bill C-101 even though potentially any one of our industry's more than 50 plants might be in jeopardy because of this. We understand that the carriers need to size their plants and trackage to their markets.

We have asked for a modest amendment to promote a competitive rail transportation environment in Canada, which we believe is in Canada's interest. That is a limited running rights provision for short-line carriers. As the bill currently stands, the main-line carriers will be able to totally dictate terms to any short-line carrier. We have asked that in the absence of an agreement with the connecting main-line carrier, a short-line carrier be allowed running rights over the main line to the nearest point of interchange with a competitive carrier. The effect of this provision would be to cause meaningful negotiations between the main-line and short-line carriers in a healthy, competitive environment that supports one of the basic principles of the act.

In conclusion, the railways have significant monopoly power over the resource-based industry of western Canada. Legislation is needed that will give shippers effective, competitive options and direct access to third-party determinations. Provisions that impede such requirements, such as the fences proposed in Bill C-101, are anti-competitive and harmful to Canadian industry. They will detrimentally affect our nation's substantial investment in resource production, our export trade and the employment these activities generate. I ask that the committee consider our modest proposals in that light.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Doyle.

Mr. Guimond, please.

[Translation]

Mr. Guimond (Beauport - Montmorency - Orléans): If I understand correctly, Mr. Doyle, your company is responsible for the transportation of sulphur from two plants in Alberta and B.C. up to the coastal terminals in Vancouver. Is it Roberts Bank?

[English]

Mr. Doyle: No, sir. Sulphur from Alberta and British Columbia goes to two terminal facilities in the main port of Vancouver: Vancouver Wharves and Pacific Coast Terminals.

[Translation]

Mr. Guimond: Yes. If Bill C-101 was passed as proposed, could that affect your competitiveness? In your brief, you refer to the deregulation process in the US but I'm not sure I get your point. Are you afraid of competition? Would it be dangerous for you if the Americans came here to compete for the transportation of sulphur, were Bill C-101 passed as drafted?

[English]

Mr. Doyle: I hope I understand your question correctly. If this bill passes as written, we believe the carriers will focus more on revenue generation from the carriage of our product than on negotiating fair and equitable freight rates. Over time our competitiveness will be diminished. That is true whether we're dealing in offshore markets or shipping sulphur into the United States.

[Translation]

Mr. Guimond: So, here again, Canada's competitiveness could be affected, which means that Canada could loose its third place or some market share.

[English]

Mr. Doyle: Yes, I believe that's exactly what will happen over time.

The Chairman: Thank you, Mr. Guimond.

Mr. Gouk.

Mr. Gouk: Thank you, Mr. Chairman. I just have a couple of areas I wanted to clear up.

You're primarily concerned about access to the NTA, the provision in subclause 27(2) and running rights as a general overview. Is it correct that your concerns lie in those areas?

Mr. Doyle: Yes, sir. Our concerns lie in access to the agency, and we see the three provisions having generally equal impact in restricting that access and the provision of limited running rights, as we proposed.

Mr. Gouk: Then the only other question I had came up before you started your presentation. Your brief refers primarily to subclause 27(2) with regard to the barriers, or what are referred to as barriers to the agency. I wondered why you didn't have subclause 34(1) and clause 113 in there. You did mention it briefly, but you focused on the barrier aspect of subclause 27(2). Could you tell us very briefly what your concerns are on subclause 34(1) and clause 113?

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Mr. Doyle: The concerns are on what might be the interpretation of a frivolous or vexatious complaint. We are also concerned about what a commercially fair and reasonable rate may be and the fact that trying to clarify those may lead to litigation.

In trying to understand and apply those definitions, the lawyers may be the winners rather than the shippers or carriers. There's no definition of either one of those provisions. There's no history of their use previously that would suggest how they might be defined. I think their application will represent very serious and real barriers to shippers.

The Chairman: Bob Nault.

Mr. Nault: On page 7 of your presentation you make a statement that suggests that barriers to shipper relief must be removed. It says: ``Sultran will lose any semblance of bargaining leverage with the railways and the sulphur industry will, over time, be impaired in its efforts to compete in world markets.''

My understanding of that statement is that you're using the regulation as it now exists as bargaining leverage. Can you explain to me in layman's terms how you use that regulatory process of going to the agency as bargaining leverage?

Mr. Doyle: As I understand it, in the 1987 legislation the rules were designed to cause the parties, the railways and the shippers, to sit down at the table and bargain seriously. In the absence of serious bargaining to reach an agreement, there was potential recourse through one of the competitive access provisions. We see the proposals in Bill C-101 as creating fences that limit or eliminate access to those. Therefore, we go back to a period prior to 1987 when the carriers did not sit down and bargain with us seriously.

With the advent of the 1987 act and those competitive access provisions, we found a very dramatic change in the attitude of the rail carriers we dealt with. They sat down with us and they bargained seriously. Over a period of eight years, with one exception, we were able to come to an agreement that both they and we accepted without recourse to the agency. There's no question that the ability to access those provisions had a great deal to do with their willingness to sit down and bargain. Prior to 1987 they did not sit down and bargain seriously.

Mr. Nault: My understanding is that under the legislation that exists today, only the shipper could make a representation to the agency for discrimination or ask the agency to appeal a particular rate by a railway. It can't be done in reverse. Is that correct?

Mr. Doyle: I'm sorry, sir, are you saying prior to 1987?

Mr. Nault: No, prior to this legislation, not Bill C-101. I am talking about the 1987 NTA. In essence, the ability for you to bargain is that only the shipper can go to the NTA for relief or to decide on the kind of relief based on the lack of negotiation or whatever. Right?

Mr. Doyle: Yes.

Mr. Nault: Now, to resolve this issue, if you don't like subclause 27(2), even though you've admitted you don't know what it means.... I find it extremely interesting that it might be good for the shipper, but nonetheless you don't know what it means and therefore you're opposed to it.

I suggest that you do know what it means, at least your definition based on what the lawyers have told you. Otherwise you wouldn't all be coming here en masse saying you're opposed to it, but then saying you don't know what it means. I suggest you do. I'd be interested to know the shippers' definition of subclause 27(2).

Let me clarify this a little more to make it fair. Would it be possible then, if we took out all the words that are there but allowed the railways also to go to the agency for relief from what they would classify as unfair practices of the shipper...? As it sits now, it's the other way around. Only the shipper can apply to the agency. Is that right?

Mr. Doyle: Yes, generally on these provisions -

Mr. Nault: Would you agree then that it would be fair for the railways to do the same?

Mr. Doyle: I'm not aware of any particular limitation the railroads have in that respect, so I can't comment on that, but I like what you're suggesting about taking the words out. I think that's what we're suggesting.

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We fail to understand why the words are there to begin with. There's no history to suggest that there's any need or purpose for those words. We're talking about a handful of applications over a period of eight years. It's a mystery to me why those words were put there. Where is the abuse or the demonstrated need that we suddenly need this great protection? What from?

Mr. Nault: I understand what you're concerned about. Frankly, very few of the shippers or railroads that have come to this committee have been frank with the committee and said what subclause 27(2) really means.

Let me tell you what I think subclause 27(2) means, and you tell me if you disagree with that. Subclause 27(2) tests whether your going to the agency is frivolous, because you have to prove that it is commercially detrimental to your operation. For example, as the legislation sits right now - i.e., before Bill C-101 - if the railways come to you and say they are going to raise your rates 3%, you can go to the agency with that as an unfair and unacceptable rate increase. But under this new definition of ``significantly prejudiced'', a 3% increase to your rates may not be a major impediment to your ability to be effective. By the same token, then, the railways can up their rates.

This argument that your rates are high...the railways in the United States have higher rates than we have in Canada. They're allowed to raise them, and they keep doing so. Is that the concern - that you don't think railways should be allowed to raise the rates? Or is it just that they should go down? If that's the case, I'm surprised shippers even bother to accept the argument that CN should be privatized. You should have gone the other way and said we should buy the whole thing, because you want us to run it as a utility.

Mr. Doyle: I have no definition of subclause 27(2). It has been suggested to me -

Mr. Nault: Some lawyer must have it.

Mr. Doyle: The point is that there's a lot of disagreement about what it does mean, and to me that's the crux of the issue. Why do we need words in there that have no specific spelled-out meaning? No one knows for sure what it means, and I think that's part of the problem. That's the area where it's going to be increasingly contentious. Certainly it represents a test, whatever that may mean, but from my perspective there's no demonstrated need for that test to begin with. We're talking about something like six or eight cases over eight years before the NTA. Where's this requirement for this particular test?

Our rates do represent more than 50% of the value of our product, and I'm talking about rail freight rates now, not trucking. Trucking represents a lot less than 10% of our total transportation cost, and rail rates represent more than 90%. The rail rates on sulphur are extremely profitable. The contribution of long-run variable costs, which includes the cost of capital in the case of railroads, in some cases runs over 100% contribution above long-run variable costs. So they're very profitable by any definition.

The Chairman: I'm not sure who came up with ``frivolous and vexatious'' either. It's more like a billboard for a strip joint than it is for.... What if ``frivolous and vexatious'' was replaced with ``substantial harm'' or something that adds obvious meaning to it? If you couldn't demonstrate substantial harm rather than significant prejudice or -

Mr. Jim Foran (Counsel, Sultran Ltd.): Mr. Keyes, the difficulty there goes back to the last question. When you deal with significant prejudice, commercially fair and reasonable or frivolous and vexatious, the agency has to make a subjective determination based on the facts of each case. It's a subjective determination. It's like the old ``public interest''. They hear the evidence -

The Chairman: What is the problem with that, Mr. Foran?

Mr. Foran: The problem is that you have gone from objective criteria to a subjective determination. For example, let's take competitive line rates under clause 130. The competitive line rate already has a formula in it, and that formula is based on the rates charged for the same or a substantially similar commodity by the originating railway throughout its system. That's its tariff rates that move traffic and that's its confidential contract rates. That guarantees a commercial rate. Why then would you set up subjective criteria to prevent or erode a shipper's access to get a relief that has that type of commercial formula in it? That just doesn't make sense.

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Mr. Fontana: On a point of order, Mr. Chairman, it does not provide a barrier to access. We've gone through this for the past month. I know you pay your lawyers very good money to tell you what you want them to tell you, but the fact is that if you read this thing, our interpretation is that it's not a barrier to access. It is a test on the remedy side, not to get into the NTA and put your case forward, but in determining the remedy, what is wrong. It happens in every other quasi-judicial body that exists in governments at all levels. It's to be able to determine the significant harm, the significant prejudice of the case brought before it - not access to the agency but in determination of the remedy, a test to determine whether or not it's significant.

Mr. Foran: Mr. Fontana, with respect, the provisions of the bill dealing with inquiries, dealing with applications, and dealing with complaints are all permissive. Subclause 27(2) requires that before a relief is given, these criteria have to be met. I think it's -

Mr. Fontana: Before a relief.

Mr. Foran: Before a relief. It's a very open question -

The Chairman: Not before access, before relief.

Mr. Foran: Please - it's a very open question whether the agency will embark on the merits of the case, having the discretion to do so or not, until it decides whether this type of significant prejudice will be -

Mr. Fontana: We'll find that out on Wednesday when they're here.

Mr. Foran: I'll look forward to what they have to say on that, because it isn't open and shut as Transport Canada would have you believe.

The Chairman: Mr. Hubbard, please.

Mr. Hubbard (Miramichi): Mr. Chairman, the message I seem to be getting here is that we have twenty companies for which Sultran looks after the logistics of shipping. The feeling that's being put forward is that they are afraid the railways are going to, shall we say, rip them off after this legislation comes in. You also tell our committee that the railways right now, in terms of the sulphur business, are making a good deal of money from your industry. You seem to be saying that the railways have this wrong with them. Their labour rates are too high; their methods of operations are outdated.

In terms of both railways - there are probably two parts to this - how much of your business is with CP and how much is with CN?

Also with the railroads, if you've gone this far in terms of your industry and we're looking at the commercialization of CN, as an industry are you looking forward to being able to purchase into these railways to get seats on their board and to be able to direct your efforts through joint ownership with other industrial groups across this country?

Mr. Doyle: Our producers struggle to find the capital to invest in the business they know, which is the production of oil and gas and sulphur. To invest in a business they don't know seems rather unlikely. The focus in our world is more and more to try to invest in your core business and leave other businesses to others who know. So I think it unlikely that we will invest in the railways for that reason.

Mr. Hubbard: I am surprised. As a witness, you seemed to indicate to us that you knew the railway business. You knew what was wrong with it, you knew what you were contributing to it, you saw it as a friend or a foe - I'm not sure which. But your evidence seems to show us that you know the railway business.

Mr. Doyle: I've had some 35 years of working with railroads in Canada, so I have some knowledge of the railway business. But it is not the kind of knowledge that our producers would want to make an investment as a basis to proceed.

You indicate that I said that the railways are very profitable in the handling of sulphur. I believe that's a fact beyond question. They make a great deal of money in the carriage of sulphur, often much more than the producer makes.

Mr. Hubbard: When you're talking about your owners, you're talking about Dow Chemical, Home Oil, Husky Oil, Imperial Oil, Chevron, PanCanadian. These are not minor players in the Canadian economy. They're some of the biggest companies we have in Canada, and you're saying they're poor cousins to the railways.

Mr. Doyle: I'm not saying they're poor cousins. I'm saying they struggle for capital. That's the same industry that has laid off about 35,000 people over the past ten years in Alberta and B.C. as they've struggled to come to grips with their costs. They are big companies, but they are also struggling with the marketplaces they deal with. There has been an enormous amount of takeover, all related to the economics of the business.

The Chairman: Mrs. Cowling.

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Mrs. Cowling (Dauphin - Swan River): I'll be very brief, Mr. Chairman. My question is with respect to the overall perspective of Bill C-101. Do you in fact support the overall intention of the bill?

Mr. Doyle: I understand the bill has about 283 provisions. We're talking about three or four provisions we are very concerned about. We're on the record as supporting the general thrust of the legislation with the exception of our concerns. We understand why much of what is in Bill C-101 is required. So I think, in general terms, yes.

Mrs. Cowling: Thank you very much.

Mr. Gouk: I have a supplemental comment to comments made by the parliamentary secretary duet, particularly to the comment made by Mr. Nault that some lawyer must be able to come up with a definition. I would suggest that every lawyer would have come up with an interpretation, and therein lies the problem.

I think it was best put by our witnesses, that we're moving from an objective sort of environment to a subjective environment. I can see that's where the concerns lie. If Mr. Nault thinks all lawyers are going to come up with the same interpretation, then he has had a very, very sheltered life.

The Chairman: So are you going to suggest an amendment about lawyers in this particular...?

Mr. Fontana, a last question.

Mr. Fontana: I wonder if you could share with me whether or not Sultran negotiates with the railway on a plant-by-plant basis, or one price for all plants.

Mr. Doyle: We negotiate on behalf of our producers with the railways on a plant-by-plant basis. We don't, for instance, have a postage-stamp approach to all of our plants. The economics of each plant govern.

Mr. Fontana: Would Sultran, as an organization, transfer product between one point and another, or between railroads, or transfer to serve customers, depending on location or...?

Mr. Doyle: The ownerships in our industry are fairly complex. In some plants we may have anywhere up to ten or more owners in a particular plant, and sometimes there are product trades between producers. But Sultran does not get involved in that. We transport the commodities as directed by our producers to their customers.

Mr. Fontana: Then how much of the business does Sultran handle?

Mr. Doyle: Sultran handles 100% of the offshore export business, which is about 5 million tonnes a year. It varies from year to year according to the marketplace.

The Chairman: Gentlemen, thank you very much for your presentation to the committee. Thank you, Mr. Doyle.

Colleagues, we welcome the Council of Forest Industries and their representatives.

I think Yogi Berra said it once: déjà vu all over again. Messrs. Renwick, Culham, Foran - Mr. Black, welcome.

Mr. Robert Renwick (Logistics Consultant, Council of Forest Industries): We must apologize for the absence of the chairman of the transportation committee of the Council of of Forest Industries, who encountered a personal family problem that prevented him from attending and presenting his brief. I am sitting in today for Mr. Knut Bjorndal of the Weyerhaeuser group in Kamloops, who normally would have presented this brief.

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We appreciate the opportunity of appearing before you this afternoon to express our position with respect to Bill C-101. We do not intend to deal with our written brief which has been filed with the standing committee, but we are prepared to answer any questions you may have with respect to that document.

Before proceeding with a short statement, I would like to introduce our panel: Mr. Jim Black, from MC Forest Products Incorporated, who resides in Vancouver, British Columbia; Mr. Tom Culham of Wildwood of Canada, who also resides in Vancouver; Mr. James Foran, who is our legal counsel and who is with Aikins MacAulay & Thorvaldson in Winnipeg, Manitoba.

My name is Bob Renwick. I am a logistics consultant to the Council of Forest Industries, and I was formerly the vice-president of pulp and paper transportation for Canadian Forest Products Ltd. of Vancouver.

Many of us are familiar with the word ``competitiveness''. We in the forest industry and our counterparts in the resource sector talk a lot about competitiveness. But what is competitiveness, what does it have to do with transportation, and how do we achieve it? To understand this we would step out of the commercial world for a minute and consider our democratic and political processes.

Everyone will agree that one of the central foundations of our democratic political process is choice - the ability to choose a political party or to choose a member of Parliament. Choice is a fundamental right of democracy.

As choice is fundamental in our democratic institutions, so is choice fundamental to the marketplace. We demand and expect to have options as a matter of course in our daily lives. It is so common that we take the benefits for granted. Every one of us would go into shock if there were only one auto maker to choose from, or only one grocery store or only one furniture manufacturer. We take for granted the benefits of choice, like being able to buy the product that most suits our needs, like having competition between suppliers so that they are motivated to offer their products at the best price. Benefits arise from our ability to choose that are only apparent over a period of time. Producers are compelled to be innovative and more productive so that they attract buyers who might otherwise choose another manufacturer's product.

We are dwelling on this because many in the forest industry know both sides of the street. Prior to 1988, many of us experienced the fact of only one railway calling at our door. In this situation, the price and service offered were what the railway was prepared to offer. The people at this table can tell you what that meant. The customer had little to say about price or service because he had no choice. We don't want to go back to that regime, Mr. Chairman.

We're asking for one thing and one thing only: to have some choice in the railway transportation industry. All of our recommendations are directed to that end.

The Council of Forest Industries represents 200 British Columbia and Alberta forest producers that produce on a value basis over 90% of the forest products manufactured in those provinces. This includes solid wood products, plywood, pulp and paper, and some other types of formed boards. Exports last year were approximately $16 billion. The industry has direct employment of approximately 115,400 people and indirectly accounts for approximately one-third of a million jobs in Alberta and British Columbia.

Forest products are sold in highly competitive markets, and transportation costs have a significant impact on the ability of our members to access those markets. Our members rely heavily upon rail transportation and require a competitive rail environment to obtain efficient and cost-effective rail transportation service.

The members of the Council of Forest Industries were strong supporters of the NTA in 1987, which introduced rail competition in Canada. Extended interswitching, competitive line rates, and final offer arbitration provided members of the Council of Forest Industries with new competitive options that enabled them to seek out new markets and better serve existing markets. Above all, these recourse provisions gave our members some degree of bargaining leverage to negotiate rates and service agreements with the railways. Over the past eight years our members have been able to reach agreement with the railways in virtually all instances. We believe the legislation has served our interests, and as a significant resource-based industry, the interests of western Canada.

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Mr. Chairman, we agree with the findings of the Standing Committee on Transport made only two years ago when, after considering the report of the National Transportation Act Review Commission, you stated as follows with respect to the competitive access provisions:

Any endeavour to encumber these provisions with additional requirements and elements of subjectivity will guarantee their non-utilization by shippers....

The NTA, 1987, was an attempt to balance the interests of the shipper and those of the railways through the enactment of these competitive access provisions. We believe, based upon what we heard, that this delicate balance should not be disturbed.

We do not believe there is any valid reason to take a different position today. Our members are accordingly opposed to the provisions contained in Bill C-101, which will alter that balance in favour of monopoly power.

We know that during your public hearings you've heard a great deal about subclauses 27(2), 34(1) and clause 113. Those provisions are all about eliminating our options as shippers. We ask you to see to it that the competitive options given to shippers under NTA, 1987, are not impaired or destroyed by leaving those barriers in the legislation. Let there be no doubt, Mr. Chairman and members of your committee, that subclauses 27(2), 34(1) and clause 113 will eliminate or substantially reduce our choice if they're allowed to remain. We ask you to please not let that happen.

Mr. Chairman, before we leave the barriers, there is one other matter we wish to address. We've heard much of the fact that level of service provisions are being retained in the proposed legislation. We are pleased that this is the case, but wish to point out that these provisions will be substantially impaired if the agency is unable to grant an interim injunction when the shipper is unable to obtain adequate equipment at his facility. Section 43 of the NTA, 1987, provides this power. A similar provision is not contained in Bill C-101.

When a shipper is unable to receive adequate and suitable equipment for the purpose of moving his product, he cannot wait three or four months before he obtains an order from the agency that such service is to be provided. He requires action immediately. The interim injunction empowers the agency to grant such relief on an immediate basis subject to its reconsideration of the matter after hearing the positions of all affected parties. This is vitally important in providing the shipper with some measure of bargaining power in negotiating suitable service arrangements with the railway. We strongly urge you to recommend the inclusion of this provision in the proposed legislation.

The right to choose will be promoted by two further amendments, which should not be controversial. First, the definitions of ``interchange'' and ``interswitch'' should be amended to delete the reference to line ownership and provide that the traffic may be transferred when two train services are provided at a connection, irrespective of the ownership of the track on which those train services operate. We do not believe there is any basis in logic or equity as to why this amendment should not be made.

Second, Transport Canada has repeatedly indicated that the legislation will enable a shipper on a short-line railway to continue to have competitive line rates and extended interswitching on the remaining federal line. We ask you to amend the legislation to specifically provide under CLR and interswitching provisions that the junction of the federal and provincial railway be considered an origin or destination for such purposes. Without that amendment, the stated policy will not be effectively implemented.

Competitiveness will also be significantly improved by a limited running right power for provincial short-line railways. This will enable them to move from the track of the federal line to which they are connected to the next interchange with another federal carrier.

Just as shippers require some measure of bargaining leverage to enable satisfactory commercial arrangements to be concluded, so also do short-line railways require some leverage. We find it distressing that CN and CP should urge upon you a regime that would enable them to sell lines of track, yet at the same time capture the traffic that flows from the track.

When one of our members sells a portion of his business to another company, he fully expects that the purchaser will conduct its operation in competition with the vendor. That is a fact of life in the commercial marketplace. To hold a short-line railway captive to a federal railway to which it is connected is not consistent with the reality of the marketplace, nor is it conducive to a competitive rail transportation environment in Canada. Moreover, it is not conducive to the interest of the short-line railway or the shippers that are served by that railway.

We believe that the limited running rights proposal we recommend is realistic and manageable, and we ask you to recommend its inclusion in the proposed legislation. This should not be treated as a trade-off with level of service provisions. Both level of services and running rights for provincial short-line railways serve a distinct and important purpose. One should not be sacrificed for the other.

Mr. Chairman, it is extremely important that the ``public interest'' as currently included in the federal running rights section be deleted. This test makes it more difficult for running rights orders to be obtained, and it is inconsistent with Transport Canada's pronouncements that the public interest consideration should be dealt with by elected representatives and not by the agency.

We appreciate the opportunity you have provided to us to express our views on Bill C-101 this afternoon. We believe our recommendations promote a competitive railway environment in Canada and will ensure that there is no disruption to the regime under which our members have operated for the past eight years.

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Railway efficiency should be achieved through cost reduction and promotion of greater efficiencies. Bill C-101 will be of substantial assistance to the railways in rationalizing our trackage and in removing bureaucratic and outdated regulations. In conjunction with labour reforms, which are well under way, we are confident that Canada's national railways will become much more profitable.

It is not acceptable to our members to permit profitability to be achieved through an increase of railway monopoly power. It would allow higher freight rates that would prejudicially affect our competitiveness, our investment, and the people we employ.

Canada relies too heavily on export trade to risk our country's competitiveness in world markets by enhancing the railways' monopoly powers. For this reason, the barriers to agency access must be removed from the bill.

We require more competition in Canada, not less. We believe our recommendations for the amendments to Bill C-101 will go a long way toward achieving that goal, and we ask you to recommend that our proposed amendments be implemented.

The Chairman: Thanks, Mr. Renwick. You can relay to Mr. Bjorndal that he should feel some comfort in the fact that you have fulfilled your obligations beautifully. We appreciate the submission made by you and the organization to the committee.

Mr. Gouk.

Mr. Gouk: We've already been over the three things with virtually the same group. I'd just like to touch on clause 138, which deals with running rights for short lines.

I've just gone through this in my own riding. In fact, Slocan Forest Products was involved as the primary shipper on that line. In the past, if the rail lines - and I'm not particularly blaming them for it, because it was the way it was set up - wanted to abandon, they had to show financial hardship in operating those lines. So they would allow the line to deteriorate in terms of maintenance. I'm not saying it was beyond safety standards. The line that has now been officially abandoned for ten months has old rail, old ties, and trees, not weeds, growing between the ties inside the line of the tracks. I would call that very low maintenance.

At the same time, it ``de-marketed'' by writing what we believe to be a very advantageous confidential trucking contract with Slocan Forest Products to a newly built reload centre in Nelson. That means we've lost our rail line in there, and we wanted to look at it for other things.

My concern is that if we put in running rights for short lines, the railroad is going to say, wait a minute, if we sell this to a short line, we could end up getting this provision used against us to require us to allow the person to whom we sold it to carry the goods of our former client - which we would like to handle some other way - over our lines, at rates that may or may not be compensatory and may disrupt our schedule. Instead of giving its former client to its competitor, the railroad might say, let's go back to our old method instead and we'll just let the line run down. We'll demarket the thing, find alternatives, and then we'll put it up for sale when nobody in his right mind would buy it.

How are we going to stop that if we do what you have suggested and put in provisions for running rights for short lines?

Mr. Tom Culham (Member, Council of Forest Industries): Basically you're saying you want to hand a franchise that exists today to the railway in the future. In the example you've given, there's nothing to prevent another trucking company from coming in and serving Slocan Forest Products and supposedly going somewhere else; I don't know where. So there's nothing that prevents competition from entering our marketplaces, and there's nothing that should prevent competition from entering the marketplace of the railway industry.

This is a fact of life in our business, on a day-to-day basis. I go out into the marketplace to sell pulp, and one day the buyer may choose to buy somebody else's product. That's a fact of the marketplace. To suggest we should be handing a franchise, a monopoly power, to the railways just doesn't make sense to us.

Mr. Gouk: Keep in mind, of course, that in this particular case we're talking about CP. We're not talking about a case where there used to be a different railway and now we're putting it under one envelope. It was always under CP, and I would like to have seen a short line operating in there if that had been possible.

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I have just one other point. During the summer I talked with shipper groups and the railroad. I brought up different points of view. One thing the railroad said to me was very interesting. They said the interesting part of this is that short lines don't want this provision. They said not to take their word for it, but go and ask them, so I did. I've only found one unique case where they said they wanted that right. Every other one I've talked to, and I've talked to several, said they didn't want it. So what are you going to do when you have the short lines saying they don't want it?

I like the idea of the new abandonment process because maybe we can save some rail lines that may have been lost. This is one of the things I like about this. There's a whole lot about it I don't like, and things you don't like as well, but this is one that I like. I'm stuck as to how you would deal with this approach that says we may be defeating our attempt to retain these lines, at least operating as short lines, by putting the railroad back in the same mindset they were in under the old abandonment procedure.

Mr. Culham: Just let me say one thing. First of all, we are very supportive of the way the legislation is written as far as abandonment is concerned. We think it's critical that the railways have the ability to get rid of excess plant. So that's a major point we have made. People are talking about us not being positive. But early on in our long discussions with Transport Canada, we were very supportive of the need of the railways to manage their costs and we accept that part of this discussion.

Along with the right to exit the market goes the right to provide entry to the market. We're saying that if you're going to be able to exit the market, somebody else should be able to come into that market and have some ability to negotiate with the ongoing carrier.

I think Jim has some points.

Mr. Jim Black (Member, Council of Forest Industries): I think the important thing is that we're making rules here that are going to be around for a long time. These aren't rules and laws that are just going to last for two or three years. We're talking about a tremendous change in terms of the exiting of lines throughout western and eastern Canada and the opportunity for a number of significant short lines to come to the forefront.

I know in our case, in northern Alberta, the Alberta Pacific Pulp Mill is about a 12-hour turnaround run into Edmonton. In the future, should that become a short line, we certainly don't want our hands tied.

The Chairman: Thanks, Jim. It is not necessarily a long time, Mr. Black. The 1987 act was only around for seven years.

Mr. Black: I know. That's....

The Chairman: Mr. Hubbard.

Mr. Hubbard: Mr. Chairman, this is just a question out of interest. In terms of the various companies you represent and the different mills we might have in western Canada, could you give us an idea of the number of mills totally captive to railway? In other words, railroads are the only method - I am not saying the only viable method - but the only method the mill can use to transport its goods to the nearest market.

Mr. Black: Mr. Renwick is getting some numbers on that.

I would just like to add one thing.

Mr. Hubbard: You could provide us with the numbers or the examples.

Mr. Renwick: It's variable, I must say, Mr. Hubbard. In British Columbia, for example, 76% of the business is captive to rail. That breaks down as follows: in coastal B.C. many mills are not served by either of the railroads but are on water. They are not captive to railway at all. In coastal B.C. there's very roughly 40% rail captivity. When you get into the southern interior of British Columbia, that ranges to 59% according to our statistics. In central and northern B.C., 93% of that business is captive to rail. In Alberta, pulp and paper is 95% captive to one national rail carrier.

Mr. Hubbard: Can I just interrupt for a minute? My definition of captivity is that there are no highways available to that mill.

We have several complaints before the committee. The provinces are saying they're very much concerned with so much heavy material being put on the roadways and with the consequent damages and costs to the provinces and the municipalities. We also find some of the railways coming to us and saying that a mill is located here, but only about 10% of the total transportation costs are being given to the railroads. The other 90% is being given to trucks because trucking is undercutting the railway costs. Really the railroads are only there to be competitive, to give a bottom line figure for which the mills and the industry can compete in terms of getting their trucking costs down.

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Now, in terms of shippers, what really are you talking about in terms of captivity? Second, as shippers are you concerned about the costs of trucking and whether or not trucking costs are being borne by the general public - these are the car people or the people who have automobiles - on the roads, the provinces and municipalities? Your industry is really not paying the true costs of trucking.

Can you comment on those? The first is captivity; the second is the true costs of trucking.

Mr. Renwick: If we can back up just a little bit, Mr. Hubbard, we were trying to explain the captivity situation. We are talking about true captivity, because many of the mills are in isolated areas. They may have access to a few trucks, but not very many.

There are some situations - I'll just finish up on the Alberta situation - in which pulp and paper is 95% captive to one national rail carrier. On panel boards and plywoods, it's about 70% captive to one rail carrier. Lumber is very mixed, because quite a lot of lumber is trucked from the origin mill to a reload centre at some other point. It then goes from there by rail to market because of the distances involved. There are certainly situations in northern Alberta, as we understand it, in which lumber and to some extent plywood is moved by truck to a reload centre because the railways will not compete for competitive land rates. Some of that lumber, if they would compete, would likely be on rail from origin.

We can't identify the numbers for you today. We don't think it's important to identify it specifically, but there is a large amount of that occurring. That's what happens in the environment in which those people operate.

Mr. Hubbard: Could you provide, Mr. Renwick, to this committee, a list of 25 major plants that are completely captive to railway?

Mr. Renwick: With respect, sir, I think the words ``completely captive'' need a little identification. Say you happen to get a trucker who comes along one day and says he has a licence and wants a load of lumber. But he comes along once a month. We don't consider that very significant. That person would be captive to rail.

But in terms of giving you -

Mr. Hubbard: You can't tell me that in a country such as ours with the number of 18- and 24-wheel trucks on the road, that the roads are not good enough to provide -

Mr. Culham: Maybe what we need to understand is that our distances to market are in thousands of kilometres. I think the average distance to market is something like 2,600 kilometres. There's no way you can put all the pulp out of the Hinton mill into a truck for 2,600 miles. There's just no way. You can't do it with lumber.

The great bulk of our shipments are by rail to the final destination. There might be some movement at the origin on the lumber side, but for all intents and purposes most of it goes by rail from the origin.

Mr. Hubbard: That is because rail is the cheapest possible way for you to do it. Prince Edward Island sends about 12,000 loads of potatoes to central Canada each year. They have no rail. New Brunswick sends most of its products to central Canada or down the Atlantic seaboard by truck, yet you think you're captive. I have difficulty, coming from Atlantic Canada, with your captivity.

Mr. Black: We have the new Alberta Pacific mill in northern Alberta. It produces 1,500 tonnes of wood pulp a day. Basically there are not enough trucks available in the area, let alone economics involved in terms of moving the trucks. What do you do if you move it by truck? You move it to Edmonton and you put it on rail. If there's one truck a year and we have 4,000 railcars, I think we're captive.

Mr. Culham: This discussion also points out some of the concerns we have with respect to tests. There was a case with respect to Domtar some years ago under the previous legislation in which it took seven years to decide whether Domtar was captive to railway or not. In the end, the CTC of the day decided that they were. They went through great expense and there was a great, long decision to decide that they were indeed captive. I think they said that 1% of the volume of traffic they were looking at was shipped by trucks.

The whole point is that it should be up to the shipper to decide whether they're captive or not, not a quasi-judicial body. Consider those seven years. Even if it's five months to take a decision, we make decisions on a day-to-day basis as to how we move our products. So the whole question of captivity to be determined by this committee or by a quasi-judicial body just doesn't make sense from our point of view. It's up to the customer to decide whether he is captive or isn't getting the service he requires.

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Mr. Hubbard: But it's up to the customer. We're looking at a type of user-pay situation in which the customer and the person providing the service have to decide jointly. I have difficulty with the idea that the customer is going to control it. I think probably that's what the shippers are saying to us: they, as the customer, want to be the -

Mr. Culham: It's 90% or maybe more than that. As we say, only eight or so of these cases have come before the agency over the past eight years. I guess we come back to this point: we don't understand why there's a focus on tests and captivity when we have eight years of experience in which shippers and railways have negotiated and come to a conclusion on contracts. We don't understand it. They're there.

Mrs. Cowling: Thank you, Mr. Chairman. My question is a follow-up to my colleague on this side with respect to comparing the Atlantic provinces to the western provinces. Would you compare the movement of your product as the same as moving it out of the east? Is it fair to compare that? If it isn't, would you explain why it isn't?

My other question is with respect to the movement of your product by trucks. When you move your product by trucks, what are the roads like? What are the conditions of those roads? Is product moved on high-throughput highways, main highways or gravel roads? What are the conditions?

Mr. Black: In the case of the condition of the highways, as I mentioned, we're more than 200 kilometres north of Edmonton. In Alberta the roads are pretty good. There are some roads that aren't so good when it's 20 degrees below and there is a howling wind. There aren't a whole lot of B trains hanging around empty at our doorway waiting for pulp. There aren't a lot of groceries coming into the area that don't come in smaller vans. We calculated during the rail strike that we would need 80 super-B-train vans per day, of which we could get hold of one, just to move pulp as far as Edmonton. So we are very remote.

If you carry on with the next thing, there is good equipment available that you could do in small doses. There are a few things we could do if we had a local market.

That comes into the second thing. We don't have a local market. Our markets are either offshore, through the port of Vancouver, or they're in Wisconsin, Minnesota, or the far New England area. So we have significant hauls from western Canada just to get to the marketplace. Consider the proximity in the east. If you're sitting in Thunder Bay you don't have too significant a haul to get into Wisconsin. You have almost a local market right at your back door. If you're sitting in Quebec you don't have that significant a haul into New England.

Mr. Fontana: I have one point, Mr. Chairman, just for the record. I hate to bring this up because this is a legal matter and obviously somebody has interpreted it, but I would ask you to read subclause 28(2).

Interim orders are available through the agency, and subclause 28(2) covers that point very well, subject, of course, to contacting the party to which an expected order will apply. Of course, with today's communications that shouldn't be a problem. Maybe way back in horse and buggy days it was, but today, with faxes and what have you, there is provision there for an interim order. So I don't really know what the big problem is there because subclause 28(2) covers that off.

Mr. Renwick: If you'll give me just a moment, sir....

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Mr. Jim Foran (Counsel, Council of Forest Industries): I think, Mr. Fontana, it's questionable whether that gives the agency an injunction power. I think what that really contemplates is the agency making an order after a hearing. Instead of making the order final, it's making it interim.

For example, back under the old section 23, in the rapeseed case, after a very lengthy hearing of many months the agency said that it wanted to assess the impact of its order on its rates, so it made the order interim. I think it was really subsection 40(3) that gave the injunction power. That section, unfortunately, hasn't been carried through.

I would question, sir, whether subclause 28(2) would give an injunction power to the agency.

Mr. Fontana: Why did I know you were going to say that, Jim? Obviously we're going to disagree on the point. I thank you.

The Chairman: Gentlemen, thank you very much for coming before the committee.

Colleagues, we invite to the table the Canadian Rails to Greenways Network. Doug Franklin, welcome to the committee, sir. I wonder if you could introduce those you brought with you today, give us your presentation in fifteen minutes or less, and then we can get to some questions.

Ms Anne Robinson (Executive Director, Canadian Rails to Greenways Network): Thank you very much. With me is Doug Franklin, from the Heritage Canada Foundation. Pierre Camu is chair of the Trans-Canada Trail Foundation.

My name is Anne Robinson. I am currently the executive director of the Canadian Rails to Greenways Network. I'm also a local politician, a municipal one. I don't know if that's good or bad.

The Chairman: Our parliamentary secretary was one, so we'll have to say it was good.

Ms Robinson: I'm often at the other end of the abandonment process. I'm from a rural municipality, so it was a little bit intimidating to see this. Our whole chamber is about this size. This is my first time in this process and I'm very glad to be here and to have the opportunity.

Our objective is really to address what happens to abandoned rail corridors. We would like to see those kept in the public domain. We see that as a very important objective. So we are more concerned with the process after, and the decision on what happens when they are not going from rail to rail. Instead, in essence, the decision has been to abandon the corridor.

We really want to support the three-year plans you've initiated under Bill C-101 and the formalizing of the protocol process. But at the same time, we have some concerns that the bill doesn't go far enough.

We'd like to leave a couple of messages. One is that we really feel strongly that the federal government does have a role. We don't want you to throw out the baby with the bathwater here. Deregulation is important, and we recognize that. And there is certainly a push for decentralization these days. However, we also feel that the federal government can play an important role in encouraging provinces to keep the abandoned corridors in the public domain.

In fact, a report has been done. I don't know if you have copies of it. It is called Mechanisms for Managing Abandoned Railway Rights-of-Way in Canada. It's an excellent document. It gives some sound ways of ensuring that these corridors remain for future generations.

It doesn't have to cost money. We're not looking for big dollars.

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I know from being a local councillor at the other end, and meeting with those angry farmers or businesses that may want to take a chunk of that rail corridor, that when you have a federal or provincial policy that backs you, you have a lot of strength. It's very much harder to tell Mr. So-and-So, who you've known for twenty years, that he really can't have that public piece of property because you want to keep it for future generations. I think there's a lot of strength in a policy that can come from the federal or provincial level. There are some really good suggestions on how to do that within your own document that you had proposed and asked for.

Every time a decision reverts to a lower level, I think you heighten the chances of losing that whole corridor. As you've lost a chunk of it, you've lost the whole line for a future generation.

We have examples right across the country of where there have been abandoned corridors recycled. We have one right here in the city. The Government Conference Centre was an old railway station. The paths that I'm sure many of you have either cycled or walked on used to be old rail lines. They're critical to the tourist industry in this city. There are initiatives now occurring right across the country. Prince Edward Island bought their whole corridor. They are now transforming that into a first-class tourism attraction. What is happening in that province and in the whole of Atlantic Canada is exciting.

However, there are other provinces that haven't taken that initiative, and they need the time to consider those options. We are worried that this bill will not give them the time. Fifteen days for a municipality to respond, as outlined in Bill C-101, is impossible. We often don't even meet every fifteen days, let alone round up the bucks if we're interested in buying it. So with that time element we're going to be severely compromised.

The last point is that this may be the last kick at the can. Although Canada has had excessive rail capacity since the 1920s - and we do support rail-to-rail conversion and short-line initiatives that you're trying to encourage - we do think there will be a significant increase in rail abandonment in the next ten years.

CN and CP currently together own about 89% of the main and secondary rail lines in the country. We think that before the federal government sells off CN, it should consider seriously retaining any of the CN abandoned corridors that may come up. This is a treasure for the country and for the future that shouldn't be lost. Since 1992 - this was reported recently in the papers - CN has shed about 4,200 kilometres of low-density track. That's a lot. It's a lot to this country.

We also think this is a policy for our times. It can unite the country. It's environmentally sensitive. It's about recycling abandoned rail corridor lines. It lends itself to multi-use. Down in New Brunswick they are burying the fibre-optic lines and allowing multi-use trails on top of those, so there can be combined uses. We think that's important. We think that if you miss this opportunity, you will have lost a real opportunity for the future.

I just want to close with a quote that is in this very document:

Indeed, it would be hard to justify losing this transcontinental network of corridors that was built in the course of the last century, when all of the experts we consulted agreed that these lands represent something of inestimable value to the community in general.

I recognize that this was done by lawyers and I appreciate your previous comment, but that aside, I think their comment is well made.

I would just like to finish. I think both Doug and Pierre are going to add their own experiences and a couple of comments before we get to questions, if that's okay. Am I within my time?

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The Chairman: If they're short, gentlemen, it's okay, but we'd like to -

Mr. Pierre Camu (Honorary Chairman, Trans-Canada Trail Foundation): I pass.

Mr. Douglas Franklin (Director, Government and Public Relations, Heritage Canada Foundation): I just wanted to add one point, Mr. Chairman.

The Heritage Canada Foundation believes very firmly that the imprint of railway lines on this country, which includes many historic routes, actually serves as a heritage resource. They indicate how Canada was settled as a country. Where railway lines were built, there were communities and industries and so on. We believe it would be unfortunate to merely have these eroded on a piecemeal basis. So would the removal of railway bridges and other facilities or parts of the infrastructure. It will mean there will be no access once those are lost. Most railway lines in Canada that have been abandoned, unfortunately, have led to the elimination of many of the infrastructures.

I would like to say on behalf of the Heritage Canada Foundation - and our organization helped to get the special bill protecting heritage railway stations passed through Parliament in 1988 - that this is an extraordinary thing. Because the federal government has jurisdiction, many people are looking to you for leadership. They will feel they have a very strong and important and proactive ally if you take the initiative to look at land banking and other ways to protect these corridors for future generations.

Thank you.

The Chairman: Thanks, Mr. Franklin, and thank you, Ms Robinson. Congratulations on your first presentation before a House of Commons committee. You were very relaxed. Maybe you ought to think about moving up to federal politics.

What riding are you in, Mr. Gouk?

Some hon. members: Oh, oh!

Mr. Gouk: I'd like to start by saying I am very supportive of the concept of what you're providing. The chairman likes my little analogies within my own riding. We have, separate from the one I talked of earlier, an abandoned right of way that runs between a city in my riding and a city in the next riding. We're now looking at trying to acquire it for the very types of things you are talking about.

I would like to ask you, first of all, if you're familiar with certain parts of this bill. Clause 145 deals with the protocol if there has not been anyone wanting to buy the line up for sale, as it were, to operate it as a railway. It goes to the federal government, to the provincial government, and then to municipal governments. I gather you're aware of that. You accept, for example, that a municipality may wish to buy it, and that would be a solution because they get it at net value. Your concern, however, is the fifteen-day time limit.

Ms Robinson: That's right.

Mr. Gouk: I looked at that and thought, wow, on the surface fifteen days is fast. I was on council and I know how fast they move, and it ain't that fast. There is, however, the three-year list to start with, which sort of puts you on notice about a potential problem. I have two lines in my riding and I know they're at risk already, as do the towns. Then there is the period in which the fact that they are going to get rid of it is advertised, and in which we wait to see if somebody is going to continue to operate it as a railway. So that really puts you on notice. After that whole process has gone by, it goes through a time period for the federal government and then for the provincial government. It then comes to the local government, and I would hope that by this time they know whether they're interested or not.

So it isn't fifteen days to say, yes, we want to complete the sale. After it has gone through all the rest of the process, it is fifteen days to say, yes, we're interested in buying it. You then have ninety days after that - a month and a half - in which to conclude negotiations, and that includes negotiating on the price. If you can't arrive at a price, there is a further provision to go to the agency to ask them to do a determination.

So I would say you have a minimum period of at least three months in order to go through this process. Do you think that would be more sufficient?

Ms Robinson: I think it's better than fifteen days. What wasn't clear within this was the three-year notice. It seemed to me that you would not in fact have to have it on for the full three-year period to give notice. Also, I think smaller areas are sometimes very consumed by their own and are inward-looking rather than watching for ads to see if something has come up. Hopefully, though, they would be watching whatever rail corridor is within their community.

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I would say ninety days to negotiate is on the short side, but I suppose it depends how far apart you are on price. You may indicate that you think you want to, but fifteen days to make a decision as to whether or not -

Mr. Gouk: It would be like a letter of intent, because you wouldn't necessarily know the price.

Ms Robinson: That's right, or whether you could scramble to find it.

Mr. Gouk: Keep in mind all the steps that take place before it comes to the municipality - the period of advertising; possible negotiation with interested parties; collapse of that, if in fact there are any; and the process through federal and provincial before it even gets to the start of that fifteen-day period. So even if they were not previously aware, they would have a lot of time to be put on notice of this coming up, along with a fifteen-day period in which to basically provide a letter of intent.

Ms Robinson: Yes, it's quite the reverse from the existing situation in the sense that now you receive notice if it is in your area. You wouldn't necessarily have that -

The Chairman: We could get into an argument on notice, but I think it is clear there is a lot of advance -

Mr. Gouk: One parting comment I would make, Mr. Chairman, is that if this passes and you're concerned with it, make sure the member of Parliament in each and every riding knows you want this. If he wants to be put on notice, then transfer the responsibility when it flows through here in order to make sure they stay in touch and find out where these things are at risk. They should know where they're at risk. I know where they're at risk in mine, and I'm sure they do in other ridings as well.

The Chairman: Thanks, Jim.

Mr. Hubbard, please.

Mr. Hubbard: Very briefly, Mr. Chairman, I think you and I discussed the idea of abandonment and what happens with the right of ways last week. My point is this: quite often it goes from the federal to the provincial to the municipal. If we are to keep a continuous route, it's very important that municipalities don't get involved with selling parts of the route off somewhere around a small table. This is often the case.

Municipalities generally are the biggest leviers of taxation. When a line is abandoned, nobody wants to be responsible for the legalities of it or the taxation on it. They seem to want to pass it on or get rid of it somewhere. If the province or federal government maintains it in their ownership, they have to pay municipal taxation. For that reason, therefore, neither a federal agency nor a provincial one would probably want to maintain that right of way.

If our witnesses could provide to us.... I know I would like to see these things maintained, but the municipalities are the biggest obstacle we have to maintaining these rights of way across the country.

Ms Robinson: Do you mean they are the biggest obstacle in the sense of the tax levy?

Mr. Hubbard: It's because of two things: first, taxation; second, when a number of municipalities are involved with a particular line that should be maintained for communications and other reasons, if one municipality decides at a small table - three or four members of a small council - to dispose of one mile of that line, the whole thing is destroyed for the entire area.

Ms Robinson: Absolutely, and that's why you need the provincial -

Mr. Hubbard: So we have to overcome those two obstacles. I would hope the witnesses - I know the time is short - could provide for us, as legislators, some solution that we could write into this in order to enable us as a nation to maintain these greenways, these walkways or these communication routes.

Ms Robinson: It would be very interesting to know what is being paid in taxes, and whether or not a municipality could afford to then absolve them.

Mr. Franklin: May I say a word about that in response to your question, Mr. Hubbard? I believe the report done by this particular firm in August 1992, Mechanisms for Managing Abandoned Railway Rights-of-Way in Canada, is an excellent document in that regard. It reviews, for instance, existing federal legislation provisions for such things as crown trusts, use of the tax act, and so forth. I believe it is a very creative document. It was prepared in 1992 specifically under the aegis of the National Transportation Act Review Commission and it goes a long way toward answering your concerns. As a delegation, we would highly recommend it to you for serious consideration.

The Chairman: Ladies and gentlemen, thank you very much for your presentation to the committee. We appreciate the time you took to be with us today. Well done, Anne.

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We welcome to the table our last witness of the afternoon. With us from Nova Scotia Power is Mr. Ross Miller, the manager of structures and rights of way.

Welcome to the committee, Mr. Miller. We always save the best until last when we do these committee hearings.

We have about twenty minutes before we have to go to a vote in the House of Commons, so maybe you can give us an executive summary of the submission you so kindly gave to this committee a little while ago, and which we had a chance to look through. We can then get to some questions.

Mr. John K. Poirier (Counsel, Nova Scotia Power Incorporated): Thank you, Mr. Chairman. Because of the time, we have been asked to skip directly to our recommendations.

A lot of the rationale for our recommendations is similar to that of Stentor, from whom you have already heard. I think our proposal differs from that of Stentor in one important respect: we propose that Bill C-101 contain a clause that would effectively create a statutory easement for utility wire crossings.

I believe Stentor has proposed that the legislation mandate that the railway companies be required to execute easement documents. That is probably appropriate for a lot of telephone wire crossings, which are underground where we can't see them. But electrical installations are almost exclusively overhead, so they're very visible to anyone who traverses the property. We believe it is possible to simply create in the bill a right in utility to erect and maintain those wire crossings.

In our written submission we mentioned the Nova Scotia Rural Electrification Act, which has now been repealed. It was a piece of legislation brought in by the province during the 1920s to provide for the extension of electricity to rural areas throughout the province. Under this act, a clause provided for such a statutory easement for distribution installations.

We brought copies of the act's provision for you to consider for possible inclusion in Bill C-101. We feel it would cut down significantly on the bureaucracy in the railways - on the requirement for negotiating documents, for executing them, for keeping track of them, for registering them and so on.

In the case of Stentor's underground telephone lines, it probably is necessary to have registered documents because you can't see the crossings when you go to the property. But in our case they are clearly evident. If there was legislation declaring that there was an easement for that crossing, we feel it would suffice for our purposes and it would give us the protection we feel we deserve.

The only other thing I might add is that we feel it is possible to put the National Transportation Agency rulings - I believe Stentor quoted them to you, and we've cited several of them - in Bill C-101. This would simply legislate and effectively provide for the same terms and conditions that those National Transportation Agency rulings have held for utility crossings.

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The Chairman: Mr. Miller, did you want to add anything to that?

Mr. Ross Miller (Manager, Structures and Rights of Way, Nova Scotia Power Incorporated): I guess not. We did have a comment on some of the requirements under the approval process that the railways have for utilities for wire crossings. We feel the documentation we're required to prepare is somewhat excessive for the purpose. We would like to see some changes made in that regard also.

The Chairman: For the record, we were wondering how much compensation has been paid. Can you give us a ballpark number?

Mr. Poirier: Is that for rail crossings -

The Chairman: That's right.

Mr. Poirier: - from CN? The amount of compensation required is not excessive. It's usually in the form of a yearly or annual licence fee.

Our difficulty is not with the fee that's charged. It's with the right we acquire, which is effectively merely the right to be there at the railway's pleasure. We can be required to move at any time. In the event that the railway transfers ownership we have to deal with a new owner. That's where our problem lies. We are unable to obtain an easement right in perpetuity for that crossing.

Mr. Miller: John has mentioned one of our concerns. In this past week we've seen two notices from CN transferring our rights for rail crossings. That's really one of our concerns when we have a licence arrangement where we don't have any long-term easement. When we don't have any easement to give us long-term rights we're concerned that we will not be able to retain these rights. They can be transferred by the railway to anybody in private industry or what have you.

The Chairman: If you achieved the right to easement in the bill would you still be prepared to pay?

Mr. Miller: I think we're prepared to pay for the devaluing of the property involved if there were a devaluing of a line crossing -

The Chairman: - the fee that comes along with that and all the rest of it?

Mr. Miller: With other property owners, if it's felt there's a devaluation of the property when we get an easement we would compensate for that. But when we do it once, we wouldn't expect to have to continue to pay a fee every year.

The Chairman: Mr. Gouk.

Mr. Gouk: We had a fairly interesting brief from the Federation of Canadian Municipalities last week and they brought up this whole idea of utility crossings from a municipal point of view. I think there is some merit in what they've said and I'm going to look at yours in light of that. I quickly read through the brief. There seems to be a lot of common sense to that approach, and I'll see if I can find a way in what I'm doing to encompass your concerns and those of the FCM.

I have just one question. Can I have you confirm that at any point where you cross a rail corridor, if there were some future problem - if, for example, your line was high enough for existing trains but they decided they were going to run higher trains and it became a problem in terms of absolute clearance or some zoning clearance or whatever - you would accept the sole responsibility for all costs to upgrade your crossing to comply with the new conditions set out by the railroad?

Mr. Miller: I'm not sure I would necessarily agree to that. If we obtained an easement under the rules and regulations codes, whatever applied at the time, I don't know if it would really be fair to the utility to expect it to go back and retroactively change things when code requirements change.

Mr. Gouk: You're essentially saying that maybe you shouldn't do this on the railroad's behalf. You're not paying them except for any possible depreciation in the value of their land, and they allow you to do this and say, fine, there's no depreciation on our land, go ahead, no charge. Then they start running double-stacked trains they may never have envisioned on that line, and your line isn't high enough for those new double-stacked higher trains. Are you saying they should be the ones who pay to reconstruct your line for clearance?

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Mr. Miller: That might be a somewhat remote example, but with Canadian utilities, with the Canadian Electrical Association, with reviews and clearances of these things, we would hope this would get discussed and would never come to that point.

Mr. Gouk: Yes, if it never comes then it is a moot point. I am just saying that if it is necessary to upgrade the crossing because of some new requirements by the railroad - real requirements in order to meet the needs of their operation - would the crossing utility accept the cost of that upgrading? Would it, if such a case should occur, using what I gave you earlier just as an example...?

Mr. Miller: As a utility, Nova Scotia Power certainly has a position with development and developers. We will always relocate lines and work with developers and allow development to go ahead. Even if we have rights that are there and are firm, we are not going to push those issues. We don't with developments, so I guess this could be an issue to be discussed. I wouldn't want to go on record as saying that we would certainly agree to pay for all the costs.

The Chairman: Mr. Hubbard.

Mr. Hubbard: With the change of the CN line and the sale of it to the new company Railtex, have you had any trouble with the new company as opposed to the former dealings you had?

Mr. Poirier: Yes, we refer to that in our submission. Following the sale, Nova Scotia Power was advised that there was a new owner of that line. We spoke with Railtex and they had expectations from their experience in the U.S. of compensation of up to $1,500 U.S. a crossing. We thought that was somewhat excessive and we negotiated them down a fair amount. But we still paid a substantial sum for, I think, in excess of 300 wire crossings between Truro and Sydney. That amount paid over to Railtex was, as far as we were concerned, a windfall profit to Railtex. That company had no expectations of receiving any compensation from the utility. It was only after the sale by CN that the issue arose.

Mr. Hubbard: I would think you have some tower crossings, high wire ones and also probably a lot of residential 25,000-or-whatever-volt wires. In terms of giving us some concept of how big this problem is, how many of these easements or crossings do you feel you have with Nova Scotia Power?

Mr. Poirier: There are approximately 1,500 electrical wire crossings over railways in Nova Scotia.

Mr. Hubbard: How many of those would be the high-tensile wires with the big voltage?

Mr. Miller: I look at them all as significant; I guess I'd put it that way. Our transmission system certainly isn't as extensive as those in other parts of the country, but....

Mr. Hubbard: With this, do you have any examples of actual electrical lines running parallel with railway lines, where they'd run a distance along the track and have poles or towers on the railway property?

Mr. Miller: Yes, that's a situation where we have -

Mr. Hubbard: You do have some of that, too.

Mr. Miller: Yes.

Mr. Hubbard: We also have other sources of power across this country. For example, in Nova Scotia we talk about the possibility of natural gas having a route for getting across the province. Would you also advocate that some of this rail property be open for that type of transmission?

Mr. Miller: In my personal view, which isn't necessarily Nova Scotia Power's, I do support a lot of what was said in the previous presentation. I am on a rails committee in Nova Scotia with the provincial government and utility looking at some of these things with groups such as the nature trails group. I think the thrust of the previous presentation, that these corridors should be saved for the public good, is something that Nova Scotia Power does support, yes.

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The Chairman: I am not sure I asked the question precisely enough. You are paying annual fees for rights of way for your power over the top of the tracks. How much does Nova Scotia Power pay a year for all these fees? What's the total?

Mr. Miller: For permits, fees and whatever, it is between $50,000 and $100,000 per year.

The Chairman: Every year?

Mr. Miller: Yes. That may not be totally railway fees. There are some other federal government fees that could be in there.

The Chairman: Mr. Hubbard asked about the power lines that in some cases run parallel to track. Does the railway ever carry communications lines along your towers along the track?

Mr. Miller: To my knowledge the railway doesn't have any wires on our structures, if that's the question. We do have joint-use structures with the telephone company and also with the cable television companies. These may or may not be on railway property.

The Chairman: I see.

Are there any further questions?

Gentlemen, thank you very much for your cooperation, for your executive summary and for the recommendations you've given to our committee. We appreciate the time you've taken to be here with us and to answer our questions.

Thank you, colleagues. The meeting is adjourned. I'll see you tomorrow morning.