EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 7, 1995

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[English]

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

We welcome to the table this morning from Manalta, Mr. Forrest Hume, counsel. Sir, welcome to the committee. We look forward to your presentation of not more than fifteen minutes so that we can ask some questions of your organization.

Mr. George Chapel (President and Chief Executive Officer, Manalta Coal Ltd.): Thanks.

Good morning, Mr. Chairman, and members of the committee. I'd like to thank the committee for hearing our submission today.

I'd like to introduce our panel of witnesses with me today. John Morgan is vice-president and general manager of Manalta Coal; Mr. Forrest Hume is our legal adviser from the law firm Hume, McLearn in Montreal; and David Wilson is marketing and transportation manager.

My name is George Chapel. I'm president and CEO of Manalta. You have our submission to this committee dated September 11, 1995. I have a statement I would like to make in support of our submission, following which we will be pleased to answer any questions.

Manalta produces approximately 30 million short tonnes of coal per year. We have two mines supplying coal to the export market, which involves long rail shipments to Westshore Terminals near Vancouver or to end users in north-central United States.

Our rail shipments average approximately 5.5 million short tonnes per year, which represents almost 20% of Canada's total rail shipments. Our total rail bill exceeds $100 million annually. Since their inception our two export coal mining operations have contributed approximately $1.25 billion to the revenue of Canadian railways.

We understand that you have heard discussion during these hearings on what constitutes a captive shipper. In our case, on the export coal market, we are truly captive shippers, as we have no alternative co-transportation options available.

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Our Gregg River mine near Hinton, Alberta, is served only by the CN, and our Line Creek mine in southeast B.C. is served only by the CP. Road transportation is not a feasible alternative to the bulk movement of several million tonnes of coal per year over a 1,100-kilometre road haul. The captivity of the coal industry is easily demonstrated.

In the spring of 1995, rail service to the Smokey River Ltd. mine near Grande Cache, Alberta was interrupted due to the destruction of a railway bridge near the mine. The Smokey River mine was unable to ship any of its product during the 36 days the bridge was inoperative.

Manalta supports many features of Bill C-101. We endorse the principle that the Canadian railway network should be economic, efficient and adequate. In that regard, we are pleased that Bill C-101 provides the railways with the means of better controlling their costs and more freedom to manage their operations. However, we feel it is also essential that transportation services be provided to the shippers at the lowest total cost, as required by Canada's national transportation policy.

The international market for both thermal and metallurgical coal is extremely competitive. Canadian mines compete against mines in other countries, which are located significantly closer to tidewater and thereby enjoy a basic competitive advantage over most Canadian producers.

Australia is currently the largest coal-exporting nation in the world and operates efficient coal mines located much closer to ports than our mines. For example, the Boggabri mine in New South Wales has the longest rail haul to port of all Australian exporters at 360 kilometres, as opposed to the one-way haul of approximately 1,100 kilometres for our operations.

As you heard in previous testimony, both New South Wales and Queensland are in the process of rail reform, which will have the net result of lowering their freight rates and further improving Australia's competitive position. For example, in New South Wales the state rail authority is creating a common user roadbed by allowing open access running rights on state-owned trackage. There's a real risk that Canadian coal exporters will lose market share to the Australians as a result of those developments.

In the United States recent mergers of major class one railways have threatened to substantially reduce the competitive rail alternatives available to large numbers of shippers. As a result, and in order to ensure regulatory approval, the merged companies in such cases have granted broad common trackage and haulage rights to competing rail carriers.

A perfect case in point is the recent merger between the Union Pacific and the Southern Pacific railroads. In order to secure regulatory approval, these companies promised their customers that they would bring strong rail competition to every point that would lose a two-carrier option. We are concerned that the U.S. rail industry is rapidly developing what amounts to a common user roadbed network. In our opinion this will enable western U.S. coal to be more competitive in the Pacific Rim markets.

Rail freight rates are the largest single component of the cost of supplying coal to our export markets and are therefore a very significant factor in our overall competitiveness in the marketplace. Unfortunately, the lack of competition for our rail shipments allows the railways to extract monopolistic rents from us.

Many western bulk shippers suffer the same prejudice. Their captivity results in monopolistic rents. Inflated rail rates for such shippers in western Canada are used by the railways as a mechanism to subsidize their uneconomic operations.

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In recent years, CN and CP have been quite candid about this. Cross-subsidization of Canadian rail rates has been confirmed a number of times. For example, in a speech dated February 15, 1994 to the Quebec chamber of commerce, Paul Tellier, CEO of CN, said, and I quote:

...combined losses of our two companies [CN and CP] of $400 million in 1992 and $2 billion in the last 5 years, east of Winnipeg.

Another quote from Paul Tellier, CEO of CN, in The Financial Post, March 16, 1994, reads as follows:

Let's face it, westerners have been subsidizing rail services in Eastern Canada for quite a while.

Another quote this time from Brian Smith, chairman of CN, in The Montreal Gazette, September 27, 1994, says:

Eastern freight rail transport has been kept alive thanks to cross-subsidization from profitable western rail operations.

Finally, the CN preliminary prospectus, dated August 28, 1995 states:

In recent years, the Company has experienced significant losses from its operations in the east while its western operations have been consistently profitable.

How are the railways able to maintain high rates in the west, you may ask, in light of competitive access to shippers provided in the NTA of 1987? The answer is quite simply that remedies that should be available to shippers under the act either do not apply or are not effective for shippers who are truly captive.

Let me explain what we mean. There are three basic competitive access mechanisms provided in the NTA of 1987. The first was the extended interswitching. This mechanism does not apply to any bulk co-shipper in western Canada as they are not located within 30 kilometres of a competing rail line.

The second was the CLRs. The CLR process presupposes that Canadian railways are obliged to compete. The National Transportation Act Review Commission of 1992 revealed that CN and CP have effectively declined to compete with each other through CLRs. As a result the provision is largely inoperative in Canada.

The third is the final-offer arbitration. The FOA process permits the railway to submit its final offer after having viewed and considered the shipper's final offer. The process is not a double-blind process as initially intended. This disadvantage skews the remedy in favour of the railway and discourages shippers from seeking remedy.

The lack of competition for significant portions of the rail traffic has created basic anomalies in the system. For example, it has tended to perpetuate the railway's history of operating inefficiencies. Both CN and CP lag far behind their U.S. counterparts in this regard. Each has an operating ratio in the high 80% range, while the U.S. roads, because of competition, have reduced their operating ratios to the high 70% range.

The IBI study commissioned by the National Transportation Act Review Commission and updated by the railroads in 1994 clearly revealed that the railways' viability problems are cost related, not revenue related.

Speaking for our own situation, the lack of competition for our traffic has resulted in unreasonable freight rates. A recent analysis conducted by Mr. John Edsforth of Travacon Research Limited confirmed that the contribution earned by CN and CP on our traffic from those lines is approximately 60% above their costs. This is far in excess of the levels of rates required by the railroads to recover their costs and earn an adequate return.

We are pleased with Bill C-101's initiatives that provide the railways with increased flexibility to manage costs. However, the bill does not provide effective competitive remedies to capture bulk shippers such as Manalta, thereby perpetuating the same shortcomings of the NTA 1987.

In our brief, page 10 and following, we recommended four amendments to remedy this situation. Our amendments to Bill C-101 are all directed towards introducing effective competition, either real or regulated, for captive bulk shippers such as Manalta. Ideally, we would like to see the common-user roadbed concept adopted for Canadian railway industry, consistent with reforms that are being implemented to the benefit of our foreign competitors.

You will recall that transport minister Young indicated that unlimited running rights was also his preference when he testified before you on October 4, 1995. While this would eliminate most of the concerns of the captive shippers, we realize the introduction of such a measure in Canada would probably not be practical at this particular time. By way of an alternative, therefore, we would suggest the implementation of measures we have recommended to amend Bill C-101 to achieve effective competition for captive bulk shippers until such time as the common-user roadbed concept can be fully explored and implemented.

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Specifically, the amendment we recommend concerning CLRs would ensure the provision is used as originally intended in the legislation by requiring railways to quote rates for CLR purposes.

The amendment we recommend concerning FOAs would ensure the final-offer arbitration process is fair to both parties by requiring that each party submit its offer blind as opposed to the existing provisions that permit the railway to fully view the shipper's final offer before submitting its own.

In an ideal world all shippers would have access to all carriers and competition would ensure that rail freight rates that are available to Canadian shippers would maximize their competitiveness in the global market. Unfortunately, we do not live in an ideal world and surrogate measures must be employed to stimulate competition where none exists.

In the circumstances, the amendments we recommend would accomplish that purpose and we respectfully request you consider them.

Mr. Tellier told you the railways are puzzled by the shippers' objections to Bill C-101. In his view, shippers should not object to the railways making a profit. Mr. Ritchie echoed the same sentiment in his presentation to you. We want to make it abundantly clear that we do not object to the railways making a fair and adequate return. In fact, out export markets depend upon the existence of viable rail services. However, the railways are making far more than an adequate return on the movement of our coal because of lack of competition. They are taking advantage of our captivity to cross-subsidize uneconomic operations elsewhere.

Both CN and CP have stated that their revenues declined by 30% in the last ten years and that shippers have been the beneficiaries. This is true, but that only tells one part of the story. During the same period the Canadian metallurgical coal price dropped 36% and Canadian producers were forced by competition pressures to reduce their cost by more than 36% in order to stay in business. The Canadian railways, without the pressure of competition, reduced their cost by 21% in the same period.

The IBI study, commissioned by the National Transportation Act Review Commission, clearly revealed the railways' viability problems are cost-related, not revenue-related. Revenue adequacy is not the issue. Uncontrolled high railway costs are the issue. Thank you.

The Chairman: Thanks very much, Mr. Chapel, for your submission. We'll go right to questions.

[Translation]

Mr. Guimond (Beauport - Montmorency - Orléans): I understood you to say - and this is confirmed somewhat on page 3 of your text - that if Bill C-101 were passed in its present form, there could be a major impact on the competitive position of your two mines. I would like further information about this. Are you that dependent on the railway service? Of course, each of your mines is served by only one of the two major railways, and you are somewhat like hostages, if I may use this expression. But is transportation the only factor that has an impact on your international competitiveness?

[English]

Mr. Chapel: Certainly that is not the only consideration we have, but it does constitute a significant portion of our total cost. The cost of rail out of those two mines constitutes between 40% and 50% of our total cost of getting the coal to port.

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[Translation]

Mr. Guimond: Secondly, you are not very kindly disposed towards the two rail companies. I noticed this particularly on page 6, where you say:

As a result, the transportation charges which Manalta is forced to pay are, in our view, excessive and amount to monopolistic rents.

You presented a series of amendments that should encourage the use of the Competition Act. Personally, I made careful note of these, because as far as the monopoly of the two railway companies goes, I am quite close to your view. I would like you to tell me whether, under the present legislation, you have considered making complaints or requesting inquiry under the Competition Act. If so, have you ever done so unsuccessfully?

[English]

Mr. Forrest C. Hume (Counsel, Manalta Coal Ltd.): Mr. Guimond, attempts were made to deal with the Competition staff with respect to the existing Competition Act. This being a rail-related matter and our concern being primarily related to CLRs, it appears to me the more appropriate mechanism for dealing with competition with respect to CLRs would be a specific amendment within the National Transportation Act itself, rather than relying on the Competition Act in that regard.

[Translation]

Mr. Guimond: In your conclusion, you mention the example of Australia, and here I do not understand what you mean. You say:

...we feel that serious consideration should be given to re-examining the common road-bed concept that was highlighted in the NTARC of 1992 - especially in light of recent developments in Australia along the same lines.

I don't want to dwell on what happened in Australia, but I would like to understand the reference in order to avoid having the same thing happen here.

[English]

Mr. Chapel: I believe you're talking about the common roadbed arrangement the states of New South Wales and Queensland in Australia are putting forth. Effectively that operates like a toll road, whereby the railbed itself, the track structures, can be used by anybody who is able to provide the equipment and operate it in a safe fashion.

In those two instances, I believe the government will still maintain ownership of their common roadbed. Either the coal mines in the area will be gearing up to haul their own coal with their own trains or a third person will come in and offer that service to the coal mines. But it will not be done by the railroad company itself, as it is now done.

[Translation]

Mr. Guimond: Is Manalta solely a Canadian company that owns just these two mines, is it a multinational with facilities elsewhere, or is it part of a holding company?

[English]

Mr. Chapel: No, we're a privately owned company. We're Canadian, Alberta-based and Alberta-owned. We operate eight mines, two of which serve the export market. We sell coal to Japan, Korea, the northern central U.S. and Europe.

The Chairman: Mr. Gouk.

Mr. Gouk (Kootenay West - Revelstoke): I'd like to start with subclause 27(2). It's something we've heard about from virtually every shipper and producer who has come forward. I like the fact that you are prepared to look at some alternatives. I'm still weighing what direction I'm going to go on this.

I'm rather concerned that there doesn't seem to be any real initiative on the part of most shippers or the railroad to come to terms instead of polarizing it at two opposite ends. So I'm glad to see you've attempted to come to some kind of definition.

Two others we normally hear about along with subclause 27(2) are subclause 34(1) and clause 113. You've specifically absented those from your brief. Are you essentially satisfied those are not significant barriers to you in this bill?

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Mr. Hume: Mr. Gouk, we're satisfied, given the position of Manalta's export mines, that those two provisions would never come into play in any application we would be bringing, because we are absolutely captive to one of the two railroads for each of those mines. We don't feel we would have any difficulty whatsoever demonstrating that we are captive and that we require the kind of relief the act provides.

So those two others aren't of primary concern to us. We do have a concern with respect to subclause 27(2), which we've expressed, and that is the vagueness of the language and the problem of interpretation.

We've attempted to recommend a resolution to that situation for your committee, and in doing so, we have used the express language that was developed by the National Transportation Act Review Commission, which we think is clearer language and results in a situation that is more easily determinable and therefore easier to apply.

Mr. Gouk: Going back for a moment to your alternative wordings for subclause 27(2), you referred to a captive shipper essentially being one that has access only to one transport operator. I recognize that for some products - coal perhaps - rail is the only viable alternative. But for a lot of shippers, trucking is a viable alternative. It may not be what they want and there may be all kinds of other impacts, but it works.

When you talk about one transport operator, are you saying it is not just rail, but the bill can look at trucking wherever trucking has a practical aspect? This is not a coal bill but a transportation bill, so we have to look at all the other products that are transported as well. So in this amendment, are you talking not only about having access to one rail carrier, but also about only having access to a single unit in any transportation mode that is practical for your product?

Mr. Chapel: In our case, Mr. Gouk, we have access to one railroad and there is no other alternative to move that coal to the coast. If we were to truck it - a 300-million-tonne-per-year operation operating 365 days a year - we would require 550 trucks just for that movement. That would be a truck every seven minutes. When one is going out, there would also be a truck coming back. So you'd have a major truck every three and a half minutes.

Mr. Gouk: I recognize the situation within your industry. What I'm pointing out is it would have to be worded in such a way that for a different shipper, maybe where trucking is more practical, it becomes an alternative. Likewise, if a mine is more than thirty kilometres from an alternative operator - we'll say it's CP, because that's your particular operator - and if you could truck it, say, fifty miles and get onto CN, then would you in fact be captive?

Mr. Hume: If the nature of the commodity and the circumstances of the origin of the traffic are such that competition can be had between two modes for all or part of that traffic, then for the traffic that competition does obtain, we do not believe that shipper would be captive.

Each case would have to be viewed on its own merit. In our case, our submission is strong on its various points, because we are absolutely captive and the issue doesn't arise.

Mr. Gouk: Okay. Thank you.

The Chairman: I like what I'm hearing so far.

Mr. Fontana (London East): Thank you very much, gentlemen, for your presentation. I must admit it's a refreshing change from others we've heard. The shippers, with all due respect, seem to bitch and complain an awful lot without offering a heck of a lot of positive and constructive suggestions. I want to tell you it's enlightening to see that some do have some positive and constructive suggestions to make.

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This committee and the government understand your challenge. Obviously we want to make sure you can ship as much coal as you possibly can to our export markets, because that's the name of the game. Bill C-101 is about reducing the cost to the railways, which hopefully will have a positive effect on the rail cost to you, because at the end of the day, you have to compete or else we don't ship any coal whatsoever. I understand that.

You stated something about the CLR rates. I was wondering whether or not you had noticed that clause 119 states:

A railway company shall, at the request of a shipper, issue a tariff in respect of the movement of traffic on its railway.

It's not ``may'' but ``shall''.

So in terms of publicizing the CLR rate or whatever, don't you think clause 119 says that for you?

Mr. Hume: Clause 119 certainly does say that. The problem is that before the tariff gets published, the CLR rate has to be established.

The experience Canadian shippers have had, which was revealed by the National Transportation Act Review Commission, is that for Canadian domestic traffic or for traffic exported from Canadian ports, CN and CP consistently refuse to compete on the basis of CLRs. That's why we've suggested an amendment to the act that would make it specifically subject to the Competition Act if either of the railways continues to refuse to do that. I think that's only fair.

Really all we're asking is for the benefit of the provision to be applied to us where the carriers refuse to do it.

Mr. Fontana: Thank you. That's a good point.

I think you also have enlightened the committee somewhat on something we've been trying to get our heads around, and that's the issue of captivity. You've demonstrated, by virtue of the nature of your operations, that in fact captivity needs to be taken into account in a number of respects.

But I have to challenge the fact that you think the railroads have been unfair. Of course the railroads will argue the opposite - that they haven't been getting their fair share of the pie - based on prices that have either gone up in good times or dropped in bad times. How many times since 1987 have you gone to the agency to seek relief or to avail yourself of the arbitration that exists in the 1987 act?

I would take it that if you were really hard done by, you would have challenged either one of the railways through the agency. As I understand it, you haven't.

Mr. Chapel: No, that's not correct, Mr. Fontana. We have. Gregg River Coal, our wholly owned subsidiary and one of the mines we export from, did go through the process last year.

This leads into a discussion, if I might, about partnership. I believe in partnerships. Everybody in that coal chain is a partner and everybody has to contribute equally. The railroads play a major part, as I said. Roughly 50% of our costs are railroad costs.

In 1994 we took an $8 reduction out of Gregg River Mine for the price of coal into Japan. Before we left, we had some informal meetings with the railroad to discuss how we might share. This was unofficial.

Mr. Comuzzi (Thunder Bay - Nipigon): Was it $8 a tonne?

Mr. Chapel: It was $8 per metric tonne.

Informally they agreed they would participate like a true partner and take some of that reduction.

We went over to Japan and consummated our price review with the Japanese. It was an $8 reduction. We then went to the railroad. We had the ability to open up our freight rates and negotiate that with the railroads. We did that. After three meetings, we were making no headway.

We took an $8 reduction. The railroad's offer was about 3% of the $8, when our rail costs are up to between 40% and 50% of the total cost. We were forced to go through the FOA, and we went through that.

Mr. Fontana: So you went through the FOA process, not through the agency, on the CLR or whatever.

Mr. Chapel: No, it was the FOA.

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Mr. Fontana: Speaking of the FOA, you've suggested the present proposal under Bill C-101 is not really a double blind, but do you understand that the only party that can ask for an FOA is the shipper? Don't you think the railroads should have an opportunity of looking at the final position of the shipper so they can come back to look at it?

We can do either of two things: allow the railways the same rights to go to an FOA as the shipper to provide that balance, or....

The fact is that under the present legislation it's only the shipper that can request the FOA. Do you understand the balance we're trying to achieve?

Mr. Chapel: Yes, and we agree there has to be a balance, but in that case, Mr. Fontana, when we negotiate our freight rate, the railways up the rate by 10%. They can do that and then we have to react. They have the ability to set that rate when the negotiation is going on. They could ask for a 30% increase. Naturally, at that point, we would have to initiate the FOA.

We try to resolve these things rather than going through the FOA, and that's not an easy process, as we found out.

Mr. Hume: Mr. Fontana, I'd like to add something on the situation you described. I know other parties have made this proposition before you. I think when CP appeared before you they indicated that perhaps the process wasn't fair because only the shipper can initiate a final-offer arbitration.

The fact of the matter is only the shipper need do it. The shipper is the captive party. The railway doesn't need the protection.

Mr. Fontana: Well, in your case.

Mr. Hume: In our case, yes, and I'm only speaking on behalf of Manalta and shippers that are in the same position, that are truly captive. For Manalta and shippers like Manalta, the protection of the railway just doesn't need to be provided, because they have that market power to begin with.

Mr. Fontana: Who won that case, by the way, under the FOA?

Mr. Chapel: After a legal challenge, we ended up resolving the issue outside of.... We didn't complete the process.

Mr. Fontana: Thank you.

Mr. Comuzzi: Good morning, gentlemen.

As I understand it, you have eight mines, two of which are exclusively used for export coal and the other six of which are in Saskatchewan. In your report you say you spend $100 million a year in transportation costs. Is that for those two mines or for the total?

Mr. Chapel: It's just for the two mines.

Mr. Comuzzi: What would your total transportation costs be?

Mr. Chapel: We don't export from the other mines. We feed mine-mouth power stations. So we don't export the coal.

Mr. Comuzzi: I understand that, but you still have to transport the coal.

Mr. Chapel: But it's all with mining vehicles. Mining trucks deliver it to the power plant.

Mr. Comuzzi: Right in Alberta and Saskatchewan?

Mr. Chapel: Yes.

Mr. Comuzzi: I see. So your total cost of transportation is $100 million.

Mr. Chapel: Yes, in excess of $100 million.

Mr. Comuzzi: What's your percentage cost of transportation on a tonne of coal? If I'm correct, in today's market your customers buy the coal and tell you where they want it delivered, so the cost of the coal plus the transportation is the selling price.

Mr. Chapel: We sell it FOB the ship in Vancouver.

Mr. Comuzzi: So the shipping isn't part of your responsibility.

Mr. Chapel: Right.

Mr. Comuzzi: What is the percentage of transportation in the total cost of your coal?

Mr. Chapel: Again, I have to be careful here.

Mr. Comuzzi: We're all very careful here, Mr. Chapel.

Mr. Chapel: But I'm sure our competitors would like to get a hold of the transcripts.

Mr. Comuzzi: Give me an approximation.

Mr. Chapel: I did say earlier that between 40% and 50% of our total cost is related to the transportation issue.

Mr. Comuzzi: What's the going price of coal today?

Mr. Chapel: Right now it's $51.10 U.S.

Mr. Comuzzi: So somewhere between $20 and $25 of that is -

Mr. Chapel: You're going to have to do the arithmetic. I'll not be party to that.

Mr. Comuzzi: I wouldn't be wrong in my calculations, would I?

Some hon. members: Oh, oh!

Mr. Comuzzi: We've heard often in these hearings that both railways are truly competitive, but I gather from your remarks that although they are competitive and they're separate entities, there's a certain amount of consistency in price in their freight rates. Is that correct?

Mr. Chapel: Yes, to a degree.

Mr. Comuzzi: Which leads you to believe what?

Mr. Chapel: I'm naïve.

Some hon. members: Oh, oh!

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Mr. Comuzzi: I have one more question. You mentioned what Manalta has had to do to be competitive, especially against the Australian coal producers. Then in the same sentence you said the railways have uncontrolled high railway costs, and that is their problem. Do you want to expand on where you think the uncontrolled high railway costs are?

Mr. Chapel: You'd have to look at some of the labour agreements they have in place. I know of very few companies that guarantee employment for life. Those agreements may have been okay ten or twenty years ago, but the world has changed.

We have to be more competitive. We're doing more with fewer people, and I think the railroads have to do that. They have to implement new techniques, new rail cars and more efficient equipment. They also have to abandon some lines.

Mr. Comuzzi: What would you say is the most predominant factor that puts our railway costs out of line? Is it the management agreements or the union contracts?

Mr. Chapel: I'm at a disadvantage here, because I'm just speaking for Manalta.

Mr. Comuzzi: That's all I want to know.

Mr. Chapel: I don't want to be perceived as -

Mr. Comuzzi: I'm asking you to answer from Manalta's perspective.

Mr. Chapel: I think it would be labour. They need relief on some of the tax structures they face, including the excise tax they pay on fuel going across the provinces. That should be looked at.

Mr. Ritchie, in his submission, talked about the write-off period for new equipment. They're stuck with twenty-year write-offs whereas U.S. companies are given an eight-year write-off period. The equipment is changing dramatically from year to year, let alone twenty years from now. A piece of equipment is obsolete within two or three years, and the same thing applies to the railroad.

The Chairman: Mr. Nault.

Mr. Nault (Kenora - Rainy River): I would like to know where our witnesses got their idea and definition of ``captive shipper''.

Is that your own invention or did you steal it from somebody?

Mr. Chapel: It was basically our own invention.

Mr. Nault: It could have come from the Staggers Act. I'm just curious.

Mr. Chapel: No, it was pretty much our own. This is an issue we've wrestled with for quite a while. I did happen to read the transcripts from when the gentleman from Stelco was here, and his definition is very similar to ours. The situation is very similar, so it gave me some comfort that I wasn't way off base.

Mr. Hume: The two driving objectives in coming up with the definition were that the definition be as objective as possible and as easy to determine as possible. We thought that would make the test less offensive in the long run.

Mr. Nault: Would you agree, then, that there may be a need for a two-tiered process, one for captive shippers and one for those who aren't? For example, would it make sense for captive shippers to have complete access and those who are not captive to have the test of subclause 27(2) applied to them?

Mr. Chapel: From a selfish point of view, I'd say that would be acceptable to us. I really don't know the structure somebody else might be faced with, but from a strictly selfish point of view, yes, I'd agree with that, because we can prove we're captive.

Mr. Nault: On the final-offer arbitration process, you didn't mention another tier, which is mediation. It has been mentioned by some. Obviously you do a form of mediation before you go. Is your group interested in having a formal mediation process?

Mr. Hume, I know you're well aware of how that works in the railway industry. Maybe we could get some suggestions or ideas from you.

Mr. Hume: It's an idea that might be discussed. I tend to think the negotiations that take place between the railway and the captive shipper, as they are, provide a great deal of that kind of mediation in advance. By the time we get to an absolute impasse, the positions of the parties are pretty much entrenched and access to final-offer arbitration is the only thing we have available to us, given that we don't have effective access to CLRs.

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The Chairman: Thank you, gentlemen, for your positive and enlightening submission to the committee. We appreciate it.

Mr. Chapel: Mr. Chairman, I do have copies of my opening statement, which I will leave with the clerk.

The Chairman: Thank you very much.

We now invite to the table representatives of Novacor Chemicals.

Colleagues, before us is Terry Park, manager of logistics, strategy and development at Novacor Chemicals.

Gentlemen, welcome to the committee. Perhaps you could introduce yourselves and give us your submission in fifteen minutes or less, so that we will have some time to ask questions.

Mr. Terry Park (Manager, Logistics, Strategy and Development, Novacor Chemicals Ltd.): Thank you, Mr. Chairman and members of the committee. Good morning.

I have with me today Dennis McConaghy, senior vice-president and chief financial officer of Novacor Chemicals.

We are representing Novacor Chemicals today, and we'd like to thank you for allowing us the opportunity to present our views concerning Bill C-101 and the state of the Canadian railway infrastructure.

This morning I'd like to briefly review some of the points raised in Novacor's brief, which was filed with the committee in late August. After that we'd like to describe the evolution of our thinking and position on these complex and difficult issues. Finally, we'll be pleased to answer your questions.

Mr. Dennis McConaghy (Senior Vice-President, Finance, Novacor Chemicals Ltd.): Novacor is a wholly owned subsidiary of NOVA Corporation of Alberta. It is the largest manufacturer of petrochemical products and plastics resin in Canada, with locations principally in Alberta and Ontario, with one facility in Quebec.

In world terms we are the number two ethylene producer in all of North America, second only to Dow Chemical. We are number five in polyethylene in North America and number three in polystyrene. We have accomplished this without government subsidy, and this achievement has been a significant addition to the diversification activity of western Canada and a substantial source of export-related revenue to Canada.

Novacor is highly dependent on an efficient transportation infrastructure in this country. Transportation particularly as it affects railways and as it affects our western Canadian assets is a significant component of our cost structure. In terms of our fixed costs, transportation represents something in the order of 20% to 25% of the fixed costs of manufacturing. In terms of people, Novacor Chemicals employs roughly 2,000 people across all of Canada.

One other point about Novacor Chemicals is that we are generally regarded as one of the lowest-cost producers of commodity chemical products in North America. That theme of lowest-cost producer is one of the great reasons why we have taken such an active and renewed interest in the implications of Bill C-101.

As others have spoken to you, particularly for western Canada where the issue of intermodal competition is not as relevant as it is in some other geographies in Canada, having transportation service, particularly railway transportation service, provided at the lowest cost possible is a theme that every shipper will be absolutely seized with and is why Bill C-101 represents such a significant threat.

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We are landlocked for the most part in western Canada. We are a long way from tide water. This requires that the transportation service must be provided as efficiently and as competitively as possible.

We recognize that transportation competitiveness or railway profitability is not an end in itself. Rather, it's part of an entire chain of economic activity. If one piece in that chain isn't viable, the entire chain breaks down.

We would therefore hope that the committee would look at this entire problem from the perspective of trying to find a solution that serves all participants in this chain and not just focus in isolation on the issue of railway profitability as opposed to the overall competitiveness of those who are using that service.

Railways, particularly in western Canada, have some of the characteristics of a natural monopoly. That's one of the themes we will be continuing to come back to. That means we have to find some way of efficiently dealing with that reality while fostering competitive forces as much as possible in those areas where they make the most sense.

The reforms of 1987 were welcomed, but we would view them as still imperfect and hardly the vision we would like to see emerge.

Notwithstanding, we're going to make some specific suggestions with respect to Bill C-101, which we would hope the committee will find a constructive contribution to this debate.

Let me close my first round of remarks by emphasizing three themes that I think need to become the principles of future restructuring in wildlife.

First, we want to use competition to the maximum where it makes the most sense. In the case of railways, that means using competition in respect of the function of actually hauling cars on tracks.

Second, we have to recognize that there are substantial features of Canadian railways that essentially make them a natural monopoly, which has to be dealt with in the same way we deal with other natural monopolies in this country, i.e., through some form of conventional regulation.

Third, we have to recognize that there needs to be an adequate return to capital to maintain required railway infrastructure.

Those are the themes that need to be the guiding principles not just for how we resolve Bill C-101 but also for how we finally balance the interests of shippers and railway shareholders.

I'd like to turn it over to my colleague Terry Park, who will elaborate on the specific suggestions we have with respect to Bill C-101.

Mr. Park: Thanks, Dennis.

Bill C-101, although providing many welcome changes in terms of line abandonment, for example, has created anxiety in particular clauses that tend to emasculate existing shipper rights. In this context we're thinking in particular of subclause 27(2) on the notion of significant prejudice.

By way of history, Novacor has participated by various means in the evolution of NTA 1987 and the National Transportation Act Review Commission, and the Nault task force recommendations were encouraging to us. We looked forward to the elimination of outdated and unnecessary legislation and an emphasis on a competitive environment. It became clear to us, however, that there was more emphasis in Bill C-101 on railway viability than on enhancement of shipper relief provisions.

We are concerned that the stated goals of the reform will not be fully met and that Canada will suffer as a result.

In an attempt to find an acceptable compromise to these unhappy circumstances, Novacor sought support for certain basic changes subsequent to the filing of its brief with this committee.

On October 4, 1995, we wrote a letter to Transport Canada, suggesting an alternative approach to subclause 27(2), which we believe would work for both sides. In that letter we also recognized that Bill C-101 would not be the vehicle for extension of running rights or other mechanisms to provide further commercial leverage to shippers.

I'll just give you the alternative wording for subclause 27(2). We believe that a party should be entitled to apply for relief under the competitive access provisions of the law if it can demonstrate that it has a clear interest in the outcome of the application. This is a standard that is clear and readily ascertainable. Moreover, it is consistent with the treatment regulators of conventionally regulated national monopolies would apply to determining the rights of the parties to enjoy intervener status.

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The express wording we therefore recommend to replace the existing significantly prejudiced language contained in subclause 27(2) is as follows:

Where an application is made to the agency by a shipper in respect of a transportation rate or service, the agency may grant a whole or part of the application only if the agency is satisfied in the circumstances of the particular case that the applicant has a direct interest in the outcome of the application.

We think that wording assists in fostering regulatory efficiency and would ensure the test for obtaining regulatory recourse is consistent with that accorded other users of services requiring regulatory oversight.

We also suggested the federal government call together stakeholders in 1996 in a forum designed to resolve the still outstanding fundamental issue of railway viability versus competitive rail rates for shippers. We believe the railway solution can be found in the method used in the pipeline, electrical and telecommunication industries. Competition occurs in those areas amongst those using the infrastructure and not those owning the infrastructure. This recognizes the reality of Canadian railway infrastructure often being a national monopoly and the need for utilizing competition in those elements of railway service that should not be.

Subsequent to our writing Transport Canada with these ideas, they advised us that matters relating to Bill C-101 were out of their hands and that we should address our comments to you.

Novacor hopes the federal government will call together stakeholders early in 1996 regardless of the legislative fate of Bill C-101 to work collaboratively in a forum process modelled after energy deregulation in the 1980s. I just point out that we have shared this with Transport Canada and some of our colleagues in the shipping community, but this is the first day it's been tabled in a public forum.

We note in the United States that recent mergers of class one railroads have centred on the issue of competition. The so-called voluntary running rights that are being granted to third-party railroads in these mergers reflect the reality that the mergers will not obtain regulatory approval unless the regulator is satisfied that competitive access is provided for. As a result, circumstances approaching a common-user roadbed for railroads are developing in substantial markets within the U.S.

That is an example of the kind of development we feel appropriate to discuss in the forum we are suggesting for 1996. We would urge this committee to recommend such a forum in its report to the minister on Bill C-101. We say to you Bill C-101 is no resolution; it's merely a stopgap.

I'd like to turn it over to Dennis again.

Mr. McConaghy: I'd like to summarize by describing our amendments to our submission as what we hope will be seen as a constructive contribution. We've tried to keep the required adjustments and amendments to Bill C-101 to an absolute minimum, which in this case is affixed to subclause 27(2).

Apart from that, and perhaps even more importantly, we look to this committee to provide the necessary impetus and leadership to bring together a different process that will fundamentally resolve the tensions between shippers and shareholders in transportation railway infrastructure in Canada.

The notion that Canadian rail tracks should operate in the same way as Canadian roads or Canadian pipelines do, so that Novacor would have the option of hiring other people to haul our hopper cars or go into the hopper car hauling business ourselves, if we thought that was the way to resolve what was a fair price for that service, and leave to conventional regulation the way we're going to service that infrastructure, much as we do in terms of pipelines, seems to me to be an idea whose time to seriously work is long overdue.

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All those notions of common carrier status, common-user roadbed, revolve around the basic idea that we all have a stake in ensuring there's sufficient return to keep that infrastructure intact, but rather than trying to argue as to whether railways have been fair, we use the market, as we do in virtually every other commodity, to determine whether the service provided is fair or not.

It seems to us that there is a way to move this debate beyond the rather unsatisfactory and time-consuming process of regular rounds of amendments to this legislation, as opposed to looking to both the market and sensible regulation for those absolutely necessary components that need to be regulated, and this is really a vision that needs to be fully tested.

There was success in the energy side in the mid-1980s as to how stakeholders with intensely different positions could come together and synthesize a resolution centred around the theme of deregulation. More recently, that model has also been successful in some events related to electricity, principally in the province of Alberta.

So we would really close with asking this committee to give the necessary leadership to move this to a better plan of national debate and we hope a better future where the interests of railway shareholders and shippers are resolved in a more constructive and market-oriented fashion. Thank you.

The Chairman: Thank you, gentlemen, for your submissions. We'll go right to questions.

[Translation]

Mr. Guimond: In your brief, you mention that in December 1994, the Western Canadian Shippers' Coalition tabled a brief with the Transport Committee about Bill C-89. Is that correct?

[English]

This is on page 3 of the French version.

[Translation]

In December 1994, the Western Canadian Shippers' Coalition (WCSC) of which Novacor is a member, filed a submission with the Minister of Transport that requested, among other pro-competitive initiatives, amendments to the CLR provisions... and

[English]

Mr. Park: Yes, I've got it. At that time the general feeling was that this process was going to be very open, particularly with respect to the competitive access provisions. At that time we believed this particular round was going to be more open to those changes. When we filed a brief on August 30, we felt that was still the direction. Subsequent to that filing and here today, we realize this particular round is not going to deliver more shipper-competitive provisions.

[Translation]

Mr. Guimond: I see. So the presentation in December 1994 was a general brief, not one that referred to a specific bill.

[English]

Mr. Park: That's correct.

[Translation]

Mr. Guimond: Second, I would like to know whether you've seen the brief that the Western Canadian Shippers' Coalition tabled yesterday?

[English]

Mr. Park: No, I haven't seen that.

[Translation]

Mr. Guimond: No? You are still a member, because the Coalition's brief mentioned many points similar to yours, which I'm sure my colleagues have noticed. I'm thinking of subclauses 27(2) and 34(1), and clause 113 of the bill, so you have not seen their most recent brief?

[English]

Mr. Park: I haven't seen that particular brief, although I've seen drafts of it. I'm sure it's similar in nature because the complaints tend to be centred around these common issues.

[Translation]

Mr. Guimond: In your brief, you made the following comment about the public interest test:

Novacor is opposed to the requirement in the proposed legislation that a railway company seeking a running rights order from the Agency must establish that such an order is in the ``public interest''. This requirement is inconsistent with the pronouncement of Transport Canada that ``public interest'' considerations should not be dealt with by the Agency but by elected representatives.

What do you mean when you refer to ``pronouncements by Transport Canada?'' Are you referring to statements made by the Minister, by the Deputy Minister, by an official or by a clerk?

[English]

Mr. Park: I don't know the answer right off the top of my head to that one.

[Translation]

Mr. Guimond: You say that this requirement regarding the public interest test is inconsistent with something someone in Transport Canada said. Are you referring to someone in a position of authority or someone who expressed his or her opinion at a cocktail party? To which ``pronouncements'' are you referring?

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[English]

Mr. Park: Can you give me the page you were reading from there?

Mr. Guimond: I worked on it with the French text.

Mrs. Terrana (Vancouver East): Page 7.

Mr. Park: I don't know where that comment came from. I don't know on what basis it was made.

[Translation]

Mr. Guimond: So is it possible that this comment might be inaccurate?

[English]

Mr. Park: Yes.

[Translation]

Mr. Guimond: Thank you, Mr. Chairman.

[English]

The Chairman: Thanks, Mr. Guimond.

Mr. Gouk, please.

Mr. Gouk: Thank you, Mr. Chairman. There are just a couple of things I'd like to cover.

You mentioned the common railbed. I've had a look at this issue, and I was interested in it - in fact I appeared as an intervener like yourselves in the Liberal's CN task force where I brought that point up.

However, one of the concerns that I've got with a lot of interveners coming forward is they've sort of taken a position at the outset and then spent the rest of the time justifying the position, as opposed to looking for accommodation, and there's a risk that members do the same thing. I've spent some time with railways, not listening so much to what they've had to say, but actually looking at the potential problems with this. I won't say that I've totally changed my mind, but I've certainly softened my position a lot based, as I say, not just on what they've said but on the things that I've actually examined and seen with regard to why people feel that it won't work.

On the matter of captive shippers - first of all, do you consider yourselves captive shippers?

Mr. Park: With some of our commodities, in that they're extremely dangerous by nature, yes, we would be captive to rail.

Mr. Gouk: I'm talking about captive, period.

The Chairman: Truly captive.

Mr. Gouk: Yes - do you have an alternative, i.e., a second railroad within a reasonable distance to handle it, the alternative of trucking, or whatever?

Mr. Park: Yes, those are open to us.

Mr. McConaghy: I'd like to just elaborate. For the vast majority of our products we can only access market through rail. It is not economic to truck polyethylene from Alberta to Illinois or to the gulf coast or to the west coast. So we are reliant on railways. We would acknowledge that we have some access to interswitching between the two. But to put it into context for us, our customers have ten to twelve polyethylene manufacturers they can buy from. We only have two railways, so I would say we are entirely captive at this point to two railways.

Mr. Gouk: How many railways does it take to not be captive? Three, four?

Mr. McConaghy: You're asking a question about how will a market evolve when there begins to be competition for the function of hauling hopper cars, in our case, full of polyethylene resin. I don't entirely know the answer to that. What I do know is that if you let the market determine how many people want to enter that business, then I think you would get the answer to that question in a more realistic way then people trying to speculate on how fundamentally captive western Canadian industries are.

What I do know is that there is an issue today about the handicaps anyone has who would want to get into that business - the handicaps they have by being able to use other people's railbeds, because we don't consider that railbed in the same way we think about a pipeline or a roadway.

Mr. Gouk: If you were satisfied, with two railways, that you had complete access to the Competition Act if there was any thought of collusion or evidence of collusion, would that provide some relief to you in terms of only having two railways, as opposed to however many more?

Mr. McConaghy: It would probably be an improvement, but I don't believe it's really the model that would give rise to the greatest degree of efficiency and the kind of balance between the interest of shippers and the interest of railways. I acknowledge that it would help, but I don't believe it's really the vision that we'd want to carry. We'd want to look at railways in the same way we look at roadbeds or pipelines. That's the idea that I'd like to see explored further through the kind of forum process we've talked about.

Mr. Gouk: Okay. I think I'll leave it at that, Mr. Chairman.

The Chairman: Thanks, Mr. Gouk.

Ms Sheridan, please.

Mrs. Sheridan (Saskatoon - Humboldt): Thank you, Mr. Chairman. I have a few questions.

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First, I want to follow up on the question of a captive shipper. In the last five minutes we've heard ``captive shipper'' and ``truly captive shipper''. Do we next get ``really, really captive shipper'' and ``not so much a captive shipper''? To me that demonstrates the difficulty in coming up with a definition for this term. The group before you presented some suggestions on that, and you have made some comments yourself.

In your response I am hearing ``geographically captive'' as opposed to ``captive according to the kind of product''. I don't want you to get into a long answer on this because I want to get back to subclause 27(2), but can you comment on that?

Mr. McConaghy: My only response would be this. I don't think it's productive to become fixated on what is a captive shipper. In other industries that are subject to normal market forces, how captive one buyer is to his suppliers is a result of the way the market evolves.

If you look at a different model of how participants would like to get into the industry of hauling hopper cars or coal or whatever, however that evolves is a more eloquent answer to what is a captive shipper than trying to say there's a substantial problem because certain shippers have only one railway access. If there's only two, is that enough competition? It begs the question of how intensely two railways want to compete against each other.

So my answer to your question is that I don't think trying to assess how captive a shipper is, is as constructive as looking at an entirely different model.

Mrs. Sheridan: My other fear about trying to set up a definition.... I'm in a conflict here because it sounds like a great make-work project for lawyers. Being a lawyer myself, I could perhaps have job after this one. Once we start playing the definition game, it's the shippers who can afford the most lawyers and can afford to drag the litigation out for the longest who have the best chance of characterizing a shipper as one thing or another.

Mr. McConaghy: I agree with you. I would much rather have the hauling industry deregulated, and then we're down to simply dealing with the roadbed as the one component of this industry that's worth regulating.

Mrs. Sheridan: All right, let's go to subclause 27.(2). You've come up with a revised definition.

Mr. Guimond mentioned his surprise, possibly because he has been preoccupied with events in other parts of the country for the last month, that the Western Canadian Shippers' Coalition has pretty much been singing from the same songbook as you are. Over the last month, had he heard all the other western shippers - I know that he'll take the time to read the transcripts later on - he would have heard exactly the same thing, that you are not happy with subclauses 27(2), 34(1) and clause 113. A lot of these shippers, as stated by the coalition we heard from yesterday, are dealing in resource-based goods and so on.

However, you are trying to change the definition to a shipper with a direct interest in the outcome. To me, it's hard to imagine a shipper who wouldn't have some kind of interest in the outcome. It's so broad, why bother putting it in?

It's a two-part question, so comment on that part unless there's a clever strategy among shippers to change the wording for that purpose.

If we were to accept that definition.... In your initial brief you said that you wanted subclause 34(1) out as well. If you changed subclause 27(2), could you not leave in subclause 34(1) as a regulatory device on that somewhat broad definition in subclause 27(2)?

Mr. McConaghy: The evolution of our thinking is to reduce what would satisfy us, if there has to be a Bill C-101, to amending subclause 27(2). We could live with the rest of the provisions as is.

Mrs. Sheridan: Clause 113 as well?

Mr. McConaghy: Yes.

The only procedure, and this is why our language is the way it is, and your depiction of it is not inaccurate.... Shippers have acted in a hostile manner to the question of having resort to the agency clouded. So we look at the model of other regulatory circumstances. An individual who makes an application or has standing at a regulatory proceeding is usually accorded that standing based on this kind of a test, and we think that is more fair than embroiling us in lengthy litigation or regulatory confrontation to sort out what ``significant prejudice'' means.

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I'd like to emphasize a point. Our hope is not to fixate on Bill C-101. We don't think Bill C-101 puts an end to this issue. We have to find something better. So in the context of Bill C-101 we have tabled an amendment that we think can satisfy shippers, and it is the minimum that we could live with.

However, we hope we can point to something coming out of this that is more successful and real in terms of restructuring the balance between shippers and railways, and we hope this committee and the whole legislative process can give us that push to create a better focus than just Bill C-101.

The Chairman: Gentlemen, thank you for your submission to the committee. We appreciate you being here.

Next is the Saskatchewan Association of Health Organizations.

Welcome to the committee. We look forward to your submission. Mr. McPherson, we'll hear your submission for fifteen minutes or less, so that we can get to some questions.

Mr. Russ McPherson (Board Chair, Saskatchewan Association of Health Organizations): Mr. Chairman, thank you for this opportunity. My apologies for having brought the submission with us and not having translation with us.

I'll introduce Mr. Arliss Wright, who is the CEO of our organization.

The Saskatchewan Association of Health Organizations is a non-profit, non-government organization that provides leadership and services to a diverse membership of health-related agencies. More specifically, our nearly 200 members include our new district health boards, a new entity born of health reform in Saskatchewan - they are responsible for the full range of health programs and services at the local level - boards of privately owned hospitals and special care homes, province-wide service providers such as the Saskatchewan Cancer Foundation, publicly funded drug and alcohol rehabilitation centres, and a wide range of health interest groups, professional associations, licensing bodies and other health-oriented provincial groups and programs.

Saskatchewan is undeniably further along the road to structural health reform than any other province. We have 30 health districts charged with responsibility and authority for delivering a wide range of health services at the local level.

On October 25 provincial residents elected eight members to each of those boards, so that accountability is clear. We are also farther along the road in terms of conceptual reform, that is, in terms of moving our thinking forward about what constitutes health and what can be done to influence those basic determinants of health.

The World Health Organization defines health as a state of complete physical, mental and social well-being, not merely the absence of disease or infirmity. It's the extent to which an individual or group is able on the one hand to realize aspirations and satisfy needs, and on the other hand to change or cope with the environment. This definition has been widely accepted, including by our own federal, provincial and territorial governments.

In Saskatchewan we take this view of health seriously. We are looking at health from an increasingly holistic point of view. We have a provincial health council charged with making recommendations to government regarding healthy public policy, crossing various sectoral boundaries to examine the potential impacts of government decisions on the health status of the people of Saskatchewan. We've come to accept and appreciate, first, that there are several underlying determinants of personal health, and second, that personal health is closely linked to family and community health.

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The September 1994 report of the Federal, Provincial/Territorial Advisory Committee on Population Health identified the following as factors that make people healthy: income and social status; social support programs; education; employment and working conditions; physical environments; biology and genetic endowment; personal health practices and coping skills; healthy child development; health services.

With the exception of genetic endowment, it is not difficult to see how unilateral decisions to abandon rail lines in rural Saskatchewan can negatively affect each of these factors. In turn, the potential impact of these factors on communities, on families and on individuals - in short, on the health of our population as a whole - becomes apparent.

Saskatchewan has more rail track and more roads per capita than anywhere else in Canada. This is not surprising given our huge land area, our agricultural resource base and our sparse population. Nor is it surprising that upkeep of these roads and rail lines is costly. Under economic pressures, decision-makers are clearly forced to make choices.

Over the past several years, we've witnessed more open international and interprovincial agreements. These are leading to a more diverse economy, which in turn is creating greater economic stability. In time these changes should have a positive impact on the health status of people and their communities.

Unfortunately, what we see through the rail-line abandonment is the undercutting of the good to be gained. Arbitrary rail removal will lead to economic hardship in rural communities and to dramatic population shifts. Saskatchewan will suffer immense fallout.

This province is in a period of provincial restructuring, not only of its transportation system but of the social fabric of the province. A restructured transportation system needs to be affordable to maintain and operate because it has a profound impact on where health and education services and their capital assets are located and how they will function.

We're in the midst of restructuring our health system, education system and social services net. We need to restructure our rural and municipal service sectors as well, but this is still to be addressed. We are trying to respond to changing demographics, new and changing technology, continued cuts in federal transfer payments and provincial fundings, and the elimination of such federal programs as the Crow benefit. Unilateral decisions by CP and CN Rail will trigger a sequence of local responses that are not necessarily in the interests of individuals or of rural society.

In the social field, especially health and education, we are experimenting with program delivery and emergency services to meet needs in rural areas where the population is below one person per square mile. We believe strongly that it is the people of these rural areas, not the rail companies, who should make decisions about where services and institutions are located. Logic and practicality need to reign.

Unplanned and unpredictable rail-line abandonment, abandonment into which the people of this province have had no input, will require that we shift gears and accept different, perhaps inferior, service models and service levels. Why? Because more and more rural families will move to the cities as rural infrastructure collapses and as they lose reasonable access to services. Where rail lines are abandoned, schools will close, health facilities will close and stores will close. In short, communities will shrink, perhaps die. One has only to travel this province to witness the impact of previous rail shut-downs.

Our province is woefully lacking in terms of leadership on a comprehensive transportation policy. The result of this void over the past number of years has been uncertainty and its rippling effect throughout rural society. Communities have suffered, individuals have suffered, and farm stress has reached unprecedented levels.

Because we are in such a critical period of transition in Saskatchewan, we need to make carefully measured decisions that will serve our entire population in the foreseeable future. We need tools that will help us make those decisions, and we need maximum flexibility to respond effectively to ongoing change. In short, we need to have some influence over the decisions that will shape our lives in rural communities.

The following changes to the act are the minimum we need to keep our options open.

In the interest of brevity I will refer you to, first, the arbitration provision, second, the running rights provision, and third, the elimination of captivity test. I'm sure you have all the detail on that, so I won't belabour them.

The ability of rail companies to salvage rehabilitated rail lines for short-term gain at taxpayers' expense is particularly reprehensible.

In conclusion, we are not asking for any handouts, nor are we seeking to prevent the abandonment of rail lines where it is warranted. We are asking only for a handful of changes to Bill C-101 that will provide shippers, especially those in rural areas, with the means to influence decisions about their own future within their respective provinces. It is this ability to have some measure of control over one's own life and destiny that is so important to the health and well-being of individuals, families and communities everywhere. This is what healthy public policy is about.

Thank you for the opportunity to be here to speak to you today.

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The Chairman: I'm going to go in reverse order. Are you ready? I can go back.

Mrs. Sheridan, please.

Mrs. Sheridan: Thank you, Mr. Chairman.

I would like you, for the benefit of people who haven't had the opportunity to live in Saskatchewan all their lives, to explain in a practical way a little bit more specifically what your concerns are on the abandonment side.

It may puzzle some people as to why the health association people are here. This is a transportation bill. You haven't strayed into the wrong committee room.

So could you put that in realistic terms for people?

Mr. McPherson: Yes. Some of you may or may not be aware that, at the beginning of the health reform process, Saskatchewan had more hospitals than did Ontario. We still have far more physical structures than we need. We're in the process of rationalizing that system. It's very important to us that we make intelligent decisions about where buildings remain.

Rail lines in our province have a profound impact on population dispersal. When a rail line is removed, it has a big impact on where people live. If we make bad decisions in relocating physical plants, it's going to cost us more money that we don't have. The crossover is very important to us. As I say, we're below one per square mile in the area I come from, which is 20,000 square miles. Even counting the towns and villages, we're under 19,000 people. We need to have fairly innovative approaches to service delivery there, and we don't need to be blind-sided by the railway rolling up the tracks.

Mrs. Sheridan: What are your comments on this? In fact, Bill C-101 does give a greater opportunity for local municipalities, or even the province, to become involved in the running of the branch lines. It is an attempt to remove a lot of the obstacles and the red tape. Isn't that a good thing for communities like yours?

Mr. McPherson: I guess if you're getting into the detail of the act, you're probably far more informed than I am. But the people in our province tell me that it's not strong enough.

Frankly, we're looking at 300 rural municipalities that don't have a lot of ability to purchase the rail lines in a very short period of time. The decision to purchase them from the railways must be made with a fairly quick decision. We don't have the rural infrastructure. Our municipalities aren't structured in a way such that they can get together and make that decision fast enough.

So we're almost unlikely to see any reaction. The province has shown a commitment to not getting into the railroad business. They're having a difficult time running the road system.

So there's really no provision here. If the CPR decides to roll up a line, there's salvage available to them and some quick cash to be had. It's our concern that this is where it'll be going.

Mrs. Sheridan: You've indicated that there's a distinct lack of interest on the part of the province. But what if the time lines then were extended, for instance, for the RMs.

You're right, local farmers and business people and so on and so forth are sitting on those councils. They don't have a highly paid staff of people to advise them, as you say, on a bill like this one, or a lot of other things. Would that assist?

Mr. McPherson: Yes, if we had more time. All we're asking for is the mechanics of being able to make an intelligent decision about where we should maintain rail lines that we need to have there. If we have the amount of time to put a group together to hang on to it as a short line, if we have the running rights, if we have the ability to operate that way, then we can make choices about maintaining some of the lines that CP or CN may not think are viable, but which we may think are viable for other reasons. The time line right now is much too tight.

Mrs. Sheridan: All right.

The Chairman: Thanks, Mrs. Sheridan.

The solid questions of the member just prompt me to intervene with a supplemental.

Are you in favour of what you're seeing happen on the medical side in your province, which is the rationalization?

Mr. McPherson: As a taxpayer, yes.

The Chairman: Yes. And like the health field, don't you feel that the rail industry should also be in the business of rationalizing and ensuring that they have an operative plant, as the medical side has?

Mr. McPherson: Yes, we certainly are.

The Chairman: Yes. And don't you feel that maybe in the bill there are opportunities there to ensure that nobody, as you indicated a minute ago, is just rolling up a bunch of track and leaving communities isolated or the rest of it? Is there not a process within this bill to accommodate the opportunity for provinces, regional governments, municipalities, or the private sector to purchase those lines from the rail operator if they choose not to use it any more?

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Mr. McPherson: The provision's too weak. It's lip service.

The Chairman: In what way is it lip service? Give me an example. I'm having a hard time. I'm looking at a piece of paper in front of me that says Saskatchewan will suffer immense fallout. To me, what I read in the bill and what I get from you amounts to nothing more than fear-mongering.

Give me an example in which if a rail line decides it will no longer run a piece of track between community A and community B because they've decided to rationalize - this is like the medical field in your province - and move the plant to a more central location, that a difference in 50 kilometres of track is going to result in what you said: ``suffer immense fallout''.

Mr. McPherson: I guess it goes back to the level of population that we're trying sustain in the province. When you drop below a certain critical mass, it's very difficult to hold any of those services. The rail lines and the grain companies associated with them have a tremendous impact in terms of the taxes they pay in those communities. When you remove that, you've removed a key element to what's holding the system together.

You referred to the opportunity for the province or local groups to buy them out. I sit on the council of a municipality that has an annual budget of less than $500,000. We don't have the resources. For us to get together with a number of municipalities and groups would take time, effort, and a lot of organization.

As I pointed out in the presentation, we need to do a lot of restructuring in our municipal government that hasn't happened. That's not this committee's fault. That is however the reality of where we live.

All we're asking is that, for the lines CP may feel they don't want to keep, there's an opportunity, as the taxpayers already paid for a lot of the rehab on them, to keep those lines in place until we sort out provincially how we are going to do transportation.

The movement away from rail transport to road transport is already having a heavy impact on our roads. Anyone who has travelled there can tell you. I would invite you to come to some of the communities in Saskatchewan that have had their rail lines rolled up. It has a profound impact.

The Chairman: How long do you need, Mr. McPherson? How long does the province need?

Mr. McPherson: I guess in terms of notice and the railways, it would be longer than three months.

The Chairman: You're asking the province to give time to sort things through to enable itself to make a decision on whether or not they can buy that 50 kilometres of track. How long do you need? How long is that process going to take? What are you expecting from the federal government?

Mr. McPherson: I guess I'm not being clear. All I'm asking for is a longer opportunity to put a process in place to buy the track. Whether that becomes part of our long-term transportation policy or not is our problem, I guess. We just want the opportunity to hang onto that track.

All we're trying to do is manage change. It gives us the opportunity to make some decisions that will allow us to make some good decisions. We're not asking CP to keep the line in place; we're just asking for a little more time to put a program together to buy it, if that's the way it has to be.

The Chairman: You know that this bill does provide for information vis-à-vis the railways' three-way plan, etc., which we're going to get. We're looking at three years at the outset, and the bill hasn't even passed the House yet. We're still at first reading.

Mr. McPherson: Again, on the technical side of the bill, I just go with the advice I get in Saskatchewan. They're saying it's not enough time. In the meetings I've been at, the concern is that it's not long enough.

The Chairman: Mr. Fontana, do you want a short supplemental?

Mr. Fontana: I can understand where he's coming from, obviously. But I think if you did get into the details of the bill and didn't listen to some doomsayers out there.... Obviously, you had self-interest in your suggestion.

If you look at the status quo - that's without changing anything - then communities such as yours and your way of life is really in jeopardy, because railroads will be allowed to abandon those rail lines. This bill talks about providing the communities and everybody else with a three-year planning window. This is an opportunity to see three years in advance which lines have been earmarked by both railroads for potential sale, transfer, abandonment, and so on.

I think the process is really much longer than your suggestion of 90 days, which is what I think you were saying. The railroads have to provide advance notice.

Here's the beauty of it: they will offer those rail lines to potential short-line operators first for sale or transfer. If they in fact have to do this, I think that's an important area. If in fact there are no takers, then it goes to the federal, provincial or municipal governments to buy up that land. I think that's very positive.

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You need to put on pressure. Your minister was here last week. Social and economic decisions shouldn't be left up to CN and CP. Those are private corporations - or CN will be soon. It's up to governments to make those social and economic decisions.

Therefore, you have to make sure that your own government has mirror legislation that will allow short lines, because I think the Saskatchewan model for successor rights isn't going to be too encouraging. You have to pressure your own provincial government to allow for short lines to be created. I think that's very important.

Second, you have to get them and municipalities involved in providing the transportation network and system that's going to be unique for your area.

I think Bill C-101 is the federal legislation that will allow it, but we have to be partners with communities, provinces, and railroads to provide short lines. After all, you want transportation, because that's the key.

But in the event you can't get transportation, you have to be able to control that land so you're able to make those decisions for yourself. I think that's what we're trying to do for you.

The Chairman: Mr. McPherson, do you want to respond to that before we move on?

Mr. McPherson: I think that's what we're asking for. I guess, in walking the walk, we've lost a few miles of track right near where I live in very short order. It was no three-year notice either.

Mr. Fontana: But that's the old system.

Mr. McPherson: I guess the fear we have is what we've seen in the past. We have not seen a three-year notice.

Mr. Gouk: With regard to what Mr. Fontana says, I agree that there is a significant period. It's not three years; it's potentially three years. But once this three-year list is open, they can put something in there and then proceed to advertise it for sale. It could be significantly shorter than three years.

But on the other hand, I certainly hope that you don't need three years to get your act together. There have been other interveners who have said similar things to what you said. Usually they were representing the municipal level. Canadian Rails to Greenways Network was here yesterday, I believe. There is a significant time period, but you can't wait until it gets down to the municipal level and then start making a decision. This has to be worked on much earlier.

There is one other area I'd like some clarification on. You've gone over two parts: running rights and subclause 27(2). We had lots of correspondence and communication on that. I'm sure you've seen some of the comments that have been made by each of the people.

On this arbitration provision, you're saying we need a clause that will allow federal and provincial railways to have access to dispute resolution. To what extent? I have a little problem determining what it is you want them to resolve. Are you talking now of getting back to the concept of running rights? Is this some provision for running rights?

Mr. McPherson: Yes, that's what we're getting back to. When I made reference to the three changes we want to see, that meant through consensus. There were groups and meetings in Saskatchewan. We felt that the changes we wanted to see would provide us, based on past experience and much brighter minds than mine on this, with the ability to have short-line railroads.

We've had people who ran short lines in Saskatchewan on the committee, and that's their feeling. I'm not able to speak very well to the technical part of it.

Mr. Gouk: I have one comment. It's been made before, but I'll try to make this very brief.

Under the old rail-line abandonment system, the railroad had to show financial hardship, so they made sure they could. They demarketed the line. They did minimum maintenance on it. So when it got to the point that they went to apply for abandonment, nobody in their right mind wanted to buy it. Ultimately, the communities along that particular area lost those lines.

Look at what Bill C-101 attempts to address. I'm not trying to support or endorse things generally, but there are certainly things that I like within this bill. One of them happens to be the new abandonment process, because it allows them to start trying to sell off at a time when that line is still viable. They don't have to make the line look bad before they even start the process. So it makes it much more viable.

If we force you, once you've sold to someone else, to carry the new short-line operator's goods - this is your former client - over your tracks and disrupt your particular schedule running on your tracks so that you can carry the goods of your former client to your main competitor, then you're going to say, to hell with that, we'll just do the old thing, which is to demarket, build reload centres, do whatever it takes, and we're just going to run the line down to the point where nobody is going to buy it and it gets abandoned rather than carry our former client's goods.

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That's the kind of thing we're trying to achieve with this, and it's what I hear you saying, that we don't want to see abandonment; we want to see alternatives to it. Running rights, in my opinion, are working against the very thing you're telling us you want to have.

Mr. McPherson: I guess that's why we're paying you to be here. The point we wanted to make in today's presentation is there's much more at stake here than how we haul commodity X to port Y.

For us in the province of Saskatchewan, lacking a transportation policy - and I appreciate that there's some responsibility on our provincial government's part there - we are simply making the point that wholesale abandonment there will have a tremendous social impact. That's what we wanted to bring to the committee's attention.

Mr. Gouk: There is one final comment I would make, and I would echo what was said on the other side of the room.

In three provinces, Saskatchewan being one of them, successor rights stand in the way of the objectives you've laid out for us here today. Keep that in mind when you come back.

Mr. McPherson: I'm aware of that.

The Chairman: Mr. Guimond, to wrap it up.

[Translation]

Mr. Guimond: Mr. McPherson, unlike our Chairman, who made some comments about the process of hospital rationalization to which you refer in your brief, I would like to congratulate you on the high quality of your paper. It highlights the impact that this railway reform may have on communities, health facilities, schools and businesses. It's good to see people reminding us on occasion that there are human beings who will be affected by any reform a government may introduce.

I don't know if this is because you are from a province where the NDP is in power, but I would like to thank you once again for dealing with the human aspect of the question in your brief. That was the first point I wanted to make.

My second comment is similar to the one I made to the Federation of Canadian Municipalities regarding the presentation of the brief in English only. This may be because you did not have enough time or simply because you forgot, but I did want to remind you that Canada does have two official languages and that francophones, like myself, who do not speak the language of Shakespeare, appreciate having the material in their own language to better follow our proceedings.

I also would have appreciated it if Ms Sheridan, a member of Parliament from Saskatchewan, had made this type of remark, rather than commenting on the presence or absence of certain committee members over the past three weeks. It is quite contrary to the rules of procedure,Mr. Chairman, to mention a person's absence...

[English]

The Chairman: You're getting closely out of order here -

Mr. Guimond: I will make these comments to your whip.

The Chairman: - because the microphones weren't on at the time, so it wasn't recorded.

Mr. Guimond: I will make these comments to your whip.

The Chairman: That's fine.

Mr. McPherson: If I might respond, again, my apologies, it was put together very late by our staff and the ink is still wet on it. That's the reason we didn't have a translation, as I pointed out at the beginning - my apologies for that. We would have had a translation otherwise.

The Chairman: Thank you, gentlemen, for your submission to this committee.

Mr. McPherson: Thank you.

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The Chairman: We welcome the representative of the Great West Rural Development Corporation, William Matlock, chairman. Sir, we look forward to your report of not more than fifteen minutes so we can get to questions.

Mr. William J. Matlock (Chairman, Great West Rural Development Corporation): Good morning, ladies and gentlemen. Before I go any further, I'd like to apologize. My presentation is slightly different from the one I mailed down here, but I have sent extra copies now too.

On behalf of the Great West Rural Development Corporation, I thank you for giving me the opportunity to speak to the proposed Bill C-101. I can fully appreciate that by this time in the hearings you've probably been overloaded with facts and figures. I will therefore show some slides of our area and the diversification that is taking place and why our rail line is important now and in the future.

The Great West Rural Development Corporation consists of an area around the north end of Lake Diefenbaker and is made up of twelve rural and urban municipalities that joined together in 1991 to create jobs, diversify the economy and improve the quality of life in the area. The creation of Lake Diefenbaker and adjoining infrastructure has created an atmosphere to encourage diversification never before experienced in Saskatchewan. This area is served by the Canadian Pacific Railroad via the subdivision that starts at Moose Jaw and extends about 120 miles northwest to Outlook.

The line is 100-pound rail and was rehabilitated in the 1980s. Currently, our rail line has a ten-year average tonnage of about 260,000 tonnes. While it may appear that this is a viable situation, either for the main-line carrier or a short line, there are a number of points you need to understand.

The line could theoretically be divided into two parts: the south half from Eyebrow, a village about halfway between Moose Jaw and Outlook, and Moose Jaw, and the north half from Eyebrow to Outlook. The Saskatchewan Wheat Pool has built a concrete elevator at Eyebrow that may ensure retention of the south half, but no elevator companies are building major facilities on the north half. In fact, there are two large concrete elevators on an adjacent line at Davidson, Saskatchewan.

The grain companies are intent on closing facilities on the north part of the line and forcing farmers to haul to the concrete elevators at Davidson. If the grain facilities close on our line, the non-grain-related industries in our area may not be able to provide enough traffic to make the line viable.

There is much interest in a short-line railroad in our area. Farmers might be encouraged to develop their own handling facilities for grain if they see they have some control over the rail line future. The current act leaves too much power in this regard in the hands of the railways.

One of the diversified businesses in the area is an alfalfa dehydration plant, which processes bailed alfalfa into cubes destined mostly for the Pacific Rim. This produces approximately 27,000 tonnes or 400 carloads of product per year. Expansion of this plant, which could boost production to about 55,000 tonnes or 800 to 900 carloads annually, is currently on hold due to the uncertainty of our rail line.

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A green alfalfa research and development joint venture is now under way, which is attempting to produce a premium quality dehydrated alfalfa cube and also dehydrated potato starch. If this proves a success, it could mean that about 30,000 tonnes or 450 to 500 carloads could be produced each year. Again, this is only possible if a secure rail line is in place.

The potato industry is another diversified business present in our rural development corporation. While this industry is not as large as Manitoba's, we feel there is much room for growth with the research and development project currently taking place.

These are but some of the diversified industries taking place in our rural development corporation. This is why we feel very strongly that some changes have to be made to the proposed Bill C-101 so we can continue to expand our opportunities and create an environment that would be attractive to any diversified industry willing to be located here. This can only happen if we can be guaranteed satisfactory rail-line service.

Our first concern is that some form of arbitration must be in place to allow federal and provincial railways access to dispute resolution. The difference in size between federal and provincial railways means the provincial rail lines would have a disadvantage to disputes over purchase price and operating agreements, which would leave an area such as ours at the mercy of a large federal rail line.

Secondly, running rights must be in place to ensure short lines have access to operate over the track of a federal rail line to a point of interchange with another railway of its choice. This would encourage competitive rates, which I am sure you can appreciate would be very beneficial to an area such as ours.

Lastly, the captivity clause, which would prove very threatening to anyone wishing to challenge a large rail line, should be removed. Just the idea that one could be held responsible for all costs incurred if the claims were deemed frivolous or vexatious would certainly scare almost all shippers from using this clause.

We feel this bill would place us at a disadvantage with the rail lines and the grain companies and that they would be making the decisions rather than the affected communities.

It is apparent that demarketing the line takes away the option of selling the line to a short line, thus eliminating the possibility of retaining any rail-line service whatsoever. The grain companies must also bear some responsibility for this issue to ensure enough product is shipped by rail to make operation of the short line viable.

The bottom line, ladies and gentlemen, is that we live in an area that has probably $800 million to $1 billion in infrastructure works, whose viability and future expansion depend on a good working rail line. There is no pot of money large enough, in either federal or provincial coffers, to replace the damage that is occurring to the highway infrastructure in Saskatchewan.

Finally, in the future years when we realize some of our folly and return to rail-line transportation in some areas instead of truck, I hope we still have a rail-line infrastructure in place. I feel this can only occur if these changes happen to Bill C-101. Please give these three requests your consideration. Thank you.

The Chairman: Just to put things into perspective for myself, are we talking about one line here?

Mr. Matlock: That's right.

The Chairman: How long is that line?

Mr. Matlock: It's 120 miles.

The Chairman: We're not talking about the potential abandonment of the entire line here, are we, because of the elevators located on it?

Mr. Matlock: We don't know. We can't get a commitment for anything. The reality is that the north part of the line could be abandoned just for the fact of the concrete elevators in adjacent communities, yes.

The Chairman: How long is that part?

Mr. Matlock: It would probably be about half the distance, about 50 to 60 miles.

The Chairman: Now, your corporation would sit back and see the potential, the fear, you have and then understand there's opportunity within the legislation to go to the railways and say that if they're going to get rid of this, you're interested. Your corporation asks why you couldn't find a guy like - what's his name? - Tom Payne to come along and operate that railway for you. You'd work with him to ensure you have a branch line that is not only operational and dependable but maybe even profitable.

So I would ask, Mr. Matlock, whether your corporation has sat down to discuss that and considered going to a guy like Tom Payne - and I'm sure there are a lot of Tom Paynes out there who are prepared to operate that 50 miles of track.

Mr. Matlock: Two things, Mr. Chairman. First, Tom Payne is not going to look at us if it comes down to the point that CPR wants $80,000 a kilometre for us to buy this. I guess I'm asking where the mechanism is in place when CPR says it wants $100,000 a kilometre. The Great West RDC says it wants to pay $40,000 a kilometre, and we figure this is a fair price because of the taxpayers' dollars that have rehabilitated the track.

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Who sets the in-between? CPR says ``I don't want to sell; I don't have to sell''. There the track sits. Am I correct or incorrect with this? I am under the understanding that if it can't be sorted out, CPR does not have to sell to anyone. If they can't settle on a purchase price, they don't have to sell.

The Chairman: Mr. Fontana, do you want a supplementary?

Mr. Fontana: I'd like to look at the positive aspects of this. You have to understand that under the existing legislation CP would not necessarily have to sell to anyone. What you're also going to have to do is to talk to your Saskatchewan provincial government to make it possible for a short line to be created. We're not convinced that this might be the case. I know the minister was here. Also there is the fact that your municipality is being proactive.

Under the new regime of Bill C-101, on the three-year rolling plan you will have an opportunity to discuss in advance with CP the continuation of that line with a railroad on it. If no buyer can in fact be found, then it will be offered to the federal, provincial and municipal governments to keep at net salvage value. So there are a number of opportunities for the municipal governments, namely your corporation, or for your corporation trying to attract a short line. So I tend to think you're right. While no one can impose on CP that they must sell something, the fact is that the only reason why they would sell it obviously is because they're not making money and there would be a partnership opportunity for a short line that probably might be able to do it at far less cost.

I think the present legislation we have now really doesn't help you out whatsoever. I would be very concerned. The new legislation offers communities and short lines some great opportunities and you have to work with them. As the chairman said, I think your development corporation is probably best suited to attract a short line and start the negotiation process.

Is that where you're coming from when you say there needs to be a mechanism by which the railroad and a potential buyer has arbitration to ensure that they're being fair and reasonable with respect to their price of sale?

Mr. Matlock: Yes, that's correct. I still have this feeling that when push gets to shove somebody is not going to be happy with the price and the rail line is going to sit there. If nothing else, it will get rolled up because nobody can agree on its price. Where do we sort this out?

Mr. Fontana: But the second step is that if it can't be offered for sale for the continuation as a railroad, then in fact it has to come back on another loop that says it has to be offered up to the federal government, provincial governments and/or municipalities for net salvage value. So I think there is a carrot-and-stick approach here that benefits both parties.

Mr. Matlock: Again, we argue this net salvage value because it's been a rehab line and heavy rail. The argument that's been put forward to me is that we as taxpayers have already paid to rehab that line so why do we have to pay again to buy -

Mr. Fontana: I'm not sure how you can say that taxpayers paid for CP. We're not talking about Canadian National here, we're talking about Canadian Pacific, which is a private corporation. I'm not sure I understand how the taxpayer has in fact paid for that rehab.

Mr. Matlock: The billboard was at the beginning of the rail line.

Mr. Fontana: The users have paid for it, let's face it, in one shape or form in the price of the rail transportation.

Mr. Matlock: When they rehab the line the billboard is right at the beginning of the rehab project: Government of Canada. We paid for this.

The Chairman: The bottom line here is I don't think the executives at CP are fools. I'm willing to wager that executives of CP see that they don't have a winning situation operating that particular chunk of 50 miles of track but know that if they were to sell this 50 miles of track to the Great West Rural Development Corporation for operation to feed its main line...it sounds like a win for you, a win for CP, and a win for the buyers of the products and the producers you serve. So I can see something coming together. I understand there's a bit of fear there, but I'm willing to bet that logic and common sense will prevail.

Mr. Matlock: You have to understand, Mr. Chairman, that diversification was a buzzword for a lot of years. We finally did this. We put this piece together. We have the potatoes. We have the dehy plants in there now, and we have the pilot plants going with great potential.

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I don't know, I feel threatened, I really do.

Going back to the running rights then, we can pull this product if Great West were to buy this chunk of line. We could pull it down to the nearest CP point.

Again we're a captive market. How do we get it to the coast at the best rate to be competitive with the Pacific Rim without...?

The Chairman: Well, again -

Mr. Matlock: I guess I'm arguing -

The Chairman: I think the shippers have to have more faith in the railway, and there has to be a little less of this mistrust that's been going on between them. Eventually they have to come around to common business practice and common sense from one organization to the next, because we can't legislate everything.

Mr. Gouk.

Mr. Gouk: Thank you, Mr. Chairman.

Mr. Matlock, I want to make sure I'm clear on a couple of things. The products you deal in come from various forms to your company for refinement?

Mr. Matlock: No. We are basically just a group formed together to encourage economic development. We will go out and help anybody who wants to come into our area and set up a business.

We will show him what we have to offer in the area. We will show him the rail-line service, the truck service, the kind of workforce we could put in place for them, our water supplies, etc.

Mr. Gouk: Okay.

Mr. Matlock: Then we create the environment in which they would want to come and set up their business.

Mr. Gouk: Right now do the products you've referred to here, dehydrated alfalfa, alfalfa cubes and so on come from a single point to the railroad? Or do they come from a variety of different locations?

Mr. Matlock: They come from an area within one kilometre of the plant to as far away as probably 200 kilometres.

Mr. Gouk: Okay, that's for the plant?

Mr. Matlock: Right.

Mr. Gouk: Now, how do they get from the plant to the railroad?

Mr. Matlock: The plant is on the rail line.

Mr. Gouk: It's right on the rail line?

Mr. Matlock: Right.

Mr. Gouk: So if that line disappears, then the plant is out of business, or they then have to truck to -

Mr. Matlock: Correct. They have looked at the option of trucking 80 kilometres north to Saskatoon. They tried it that way. He said the bottom line is that it just isn't there. We can't make any money when we have to truck it that much farther.

Mr. Gouk: My inclination was to suggest a solution similar to what Mr. Fontana was doing. But of course there's a bit of a wrinkle in this from you in terms of this rehabilitation and the payment of rehabilitation.

The intent ultimately is that at the most you should have to pay for it, unless you're a competitive company looking to get into an operation. If somebody else does, then fine, you still have the rail line, but the bottom line you're looking at is the net salvage value.

Now, I realize you're having a problem with this and I am too in terms of what you refer to as a subsidy. Is it unreasonable that the railroad says, this is part of the operation we have, this is part of our assets, and the very least we would hope to get for this is the minimum value for the land?

I would suggest that a 100-foot wide strip of land probably is a linear park and nothing more. It has very little real land value. Depending on whether they can be reused or they're just scrap steel, the value of the rails at salvage value is a definable cost. It's relatively low. That is not an unreasonable amount of money for someone taking over that particular line to operate it.

Now, you said the railroad might want $100,000 per kilometre -

Mr. Matlock: I picked -

Mr. Gouk: I know the figures were out of the air. Let's say the salvage value is $50,000, you're offering $50,000 and maybe the salvage value is even lower.

But using that figure, the railroad would have to be out of its mind to turn you down unless there was another buyer who was prepared to pay more, and to just say, well, fine, we won't sell it.

In that case, if you were smart, you would then go to the province or the local municipality and say, look, you pick it up, turn it over to us, we'll reimburse you and we'll put the savings from what we offered those turkeys to what you had to pay into reducing our costs.

Mr. Matlock: Sure.

Mr. Gouk: It's not foolproof. But how in God's name do we write legislation that is foolproof?

Mr. Matlock: I fully agree. What I'm hearing from the gentleman at the end is that there's a three-year plan. I was hearing that a little while ago. My God, I don't want it to be three years. You have to come together with a plan quicker than this. You're talking to people like ourselves.

Again I'm prepared to sit down with CPR or with anybody to try to work out a reasonable rate. If it's just the rail price - and this sounds reasonable to me - I don't have a problem with that.

Where I have the problem is if we don't come to that.

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Mr. Gouk: When I've talked to the railroads.... In fact I questioned Transport Canada on this. Your line isn't in their three-year plan. If you approach them and say, look, we think you don't really want to run this line, we're interested in buying it, they can negotiate with you without it even being in the three-year plan.

At the conclusion of the negotiations, just before they sign on the dotted line, all they're required to do is amend your plan, put it on there, sign the deal; it is your railroad.

They're not required to wait three years if you approach them and they strike a deal with you. That's right from the mouth of Transport Canada and backed up by this committee.

The Chairman: Thanks, Mr. Gouk.

Mr. Matlock, thank you for your report. We appreciate your submission to the committee.

Mr. Matlock: Thank you very much.

The Chairman: Colleagues, we call to the table the representatives of the Atlantic Provinces Transportation Commission.

Welcome, Mr. Armitage. We are hoping we can get your submission in about ten minutes so that we can ask some questions at the conclusion of your submission. Welcome to the committee, and please proceed when you're comfortable.

Mr. Ramsay Armitage (General Manager, Atlantic Provinces Transportation Commission): Thank you very much, Mr. Chairman. You'll be pleased to hear that I have a fairly brief opening statement. Then I'll be pleased to try to respond to any questions.

First of all, let me say that we at the Atlantic Provinces Transportation Commission very much appreciate the opportunity to appear before the committee and present our views on this important matter.

I will start by briefly acquainting you with the role of the APTC and why we are interested. The APTC is an organization that represents the interests of the Atlantic provinces' manufacturers and producers in transportation matters.

Our mission is to ensure the provision of economic, efficient and adequate transportation services to meet the needs of shippers.

I should mention too that this submission is being made on behalf of our chairman, Joseph Hutchings, and the APTC board of directors.

As reflected in our written submission, rail transportation is essential to the needs of manufacturers and producers in Atlantic Canada, as direct users who depend on cost-effective transportation for both incoming and outgoing shipments.

Of critical importance as well, rail service is vital to the ports of Halifax and Saint John. In the absence of cost-effective rail service connecting the ports of Halifax and Saint John with major North American markets, many existing ocean-shipping services would be lost to United States ports and the ability to attract new services would be severely impeded.

This would have a domino effect as the liner shipping services through our ports are the means by which many of our regional exporters are able to compete in global markets.

The APTC agrees with the general thrust of Bill C-101 to eliminate duplication and unnecessary regulations. The APTC believes that competition and market forces should be the primary factors in determining the level of service offered.

However, in the Atlantic region in particular there is an absence of competition within the rail mode that makes the shippers' rights and protective mechanisms an essential element of the legislation. Our concern in this regard is that under Bill C-101 the shippers' ability to apply for and obtain redress has been considerably weakened.

The concerns of the APTC with respect to Bill C-101 centre on two key areas, namely, the future of rail service in Atlantic Canada and the weakening of shippers' rights and protective mechanisms.

With regard to our first concern, respecting the future of rail services, the APTC supports a less onerous abandonment process and a new framework that facilitates the provision of short-line or regional railways.

In Atlantic Canada, however, CN's financial performance has been less than adequate in recent years; that may be an understatement. Serious implications flow from this on the eve of CN privatization. Long-term commercial viability of rail operations in Atlantic Canada is an objective that we believe can be met, but the APTC is concerned that in the short term financial performance may be less than adequate to satisfy new investors.

The potential lack of viability of rail operations in the region in the short term supports the need for the establishment of an essential rail network policy as a matter of the utmost urgency.

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We feel that CN's lines east of Montreal must be recognized in Bill C-101 as an essential part of CN's coast-to-coast rail system. Bill C-101 does not address the need to establish an essential rail network policy. It's totally absent from the bill and of course we're advocating that it should be an integral part.

A secondary concern, as I've already indicated, pertains to proposed restrictive access to shippers' protective mechanisms, and that would include things like interswitching, competitive line rates, final-offer arbitration, and so on.

In that regard, subclause 27(2) establishes a test of significant prejudice - and I know the committee has heard those words over and over again - that a shipper must meet before the agency can proceed with an application. We believe this introduces an unnecessary and undefined regulatory process that infringes on existing shipper rights and considerably weakens the usefulness of the competitive access provisions of the act as a bargaining tool.

We also disagree with some of the other features of the new bill in the sense of subclause 34(1) pertaining to frivolous or vexatious applications. We disagree with the section pertaining to commercially fair and reasonable as a requirement of clause 113, and the removal of the limitation of liability requirements as contained in the present legislation.

In concluding our opening remarks, I wish to mention one other concern that is reflected in the APTC submission, having to do with the proposed restrictive application of competitive line rates to preclude provincially regulated railways and to eliminate the gateway via Saint John, which involves a railway corridor through the United States. That is explained a little more fully, of course, in the brief, as are many of these other points. I'm just touching on them here.

This completes the opening remarks, Mr. Chairman, and I'll be pleased to try to respond to any questions.

The Chairman: Thank you very much, Mr. Armitage. As usual, yours is a familiar face at this committee. We appreciate your submission.

We'll start with Mr. Gouk, please.

Mr. Gouk: Thank you, Mr. Chairman. I'll go first to our infamous subclause 27(2). Picking up on the way you described your concerns about it, if the wording in that were amended.... We're told by Transport Canada and by members of this committee that it is not intended to be a gateway block from the agency reviewing that case; it is only meant to be a manner of resolution after the case is heard. If it's amended in such a way that it makes it very clear that they must hear the case before making any decision, would that satisfy the main concerns you have about subclause 27(2)?

Mr. Armitage: Well, frankly, Mr. Chairman, that's the first time I've heard that proposal in terms of modifying the wording.

I personally - and I think I can speak for the Atlantic Provinces Transportation Commission in this regard - don't think this would be adequate. My understanding of the objective of this bill is that it is not to infringe or reduce or weaken the opportunity for shippers to obtain redress, whether it's competitive line rates or the other provisions that are there to assist shippers, as compared to the existing legislation.

Even what you described, Mr. Gouk, I think would do that, despite the fact, as you say, that it would be done after the -

Mr. Gouk: I would point out, though, with all due respect, that what you have said in your own brief is that your concern here is that shippers will have to pass a determination by the agency. The shipper will suffer significant prejudice before it can proceed, and that's your main concern.

Now, if we couple what I just said about that amendment along with a clear definition of what significant prejudice is - so it can't be stopped from going to the agency, it can only be a resolution after they've heard it - and everyone goes into that with a clear definition of what represents significant prejudice, would that then satisfy your concerns?

Mr. Armitage: I would say it would go a long way provided the definition was a reasonable one and it didn't really, as I mentioned before, infringe on the opportunity for shippers to obtain redress.

Mr. Gouk: Do you accept that the main redress people would be applying, which subclause 27(2) would affect, would be primarily captive shippers?

Mr. Armitage: Captive in the sense that rail transportation represents the only cost-effective means of transportation....

Mr. Gouk: And it being only a single railroad that can serve them and that trucks are demonstrably not a viable option - if that were the definition of captive shipper and subclause 27(2) did not apply to a captive shipper by that definition...are we getting close now?

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Mr. Armitage: I don't agree with the need for a captive shipper definition. I think the situation a shipper faces in terms of an unreasonable rate, or other problems that he may be incurring, is in itself evidence that -

Mr. Gouk: So what I'm hearing then is that you want subclause 27(2) out no matter how we try to fix it.

Mr. Armitage: Yes, that's really our -

Mr. Gouk: Fair enough.

In regard to subclause 34(1), a quick bit of research I did on that was very interesting. I found more cases that suggest it would be used against the railways than against the shippers, because the shippers tend to look at that going into it - frivolous and vexatious application. But the cases I have found are after the case is under way.

In regard to the railroads, I haven't done an in-depth study of this, but on at least two occasions that I have found, railroads have used what I think could very easily be determined frivolous and vexatious roadblocks to delay the whole application, one against a very large west coast shipper. That would in fact, according to what I've found so far, work at least equally in favour of the shippers as opposed to in favour of the railroads, and in the end it may in fact be of more benefit to the shippers than to the rail.

Mr. Armitage: Yes, I understand your point. My only concern, I think, is that the railways are all-powerful when it comes to legal matters and the regulatory process, as opposed to a shipper who would have difficulty justifying in terms of the cost of proceeding through a case and would find that more of a threat than the railways would. For that reason alone, I think -

Mr. Gouk: Interesting. I would say that it would be the exact opposite, for the very reasons you've stated.

If I'm a great big corporation and I can hire lawyers and stretch out proceedings against a small shipper who can't afford a long proceeding, then the last thing I want is something that's going to say you can't put that frivolous, vexatious motion before the board to delay this thing and cause a lot of expense to the shipper for no justifiable reason.

I'll tell you, I would want that in there if I were a small shipper, and I would want it out if I were a railroad trying to use the lawyers and so on to make you fold.

Mr. Armitage: It's an interesting point, and to be frank with you, I didn't think of it in that context. But I would still have problems with it.

Mr. Gouk: Okay, I think we'll move on. I will go over some of the other aspects.

With regard to the short line that you want to have included, or the provincial railroad short line that you want to have included in the system, they can in fact carry it through. The regulations dealing with provincial railroads are a part of the provinces, which you in fact represent, and the power to make determinations on behalf of those provincial railroads lies with you, not with us.

Mr. Armitage: We were interpreting this shortcoming in the legislation with regard to provincial railways as that provincial railways are not part of the act; they're not part of the definition of a railway.

Mr. Gouk: They're not, and that's why it falls to you.

Mr. Armitage: Therefore, even as a permissive thing, they don't have the opportunity to participate in a competitive line rate situation, the way we understand it. I think there have been other presenters, Mr. Chairman, who have made that same point - the New Brunswick Southern Railway and others.

The Chairman: Thank you, gentlemen.

Mr. Hubbard, please.

Mr. Hubbard (Miramichi): Thanks, Mr. Chairman. In terms of the Atlantic economy and your commission, would you have any breakdown of the costs to Atlantic shippers in terms of the three major modes of transportation - trucking, rail and marine?

Mr. Armitage: Not really. When you say the cost of, are -

Mr. Hubbard: Or the percentages of use - maybe I would put it that way - in terms of the various modes.

Mr. Armitage: I don't have any hard numbers, but the commonly accepted figure is that the trucks represent roughly 80% of the surface transportation and the railways the rest. If you bring marine into it, the numbers change quite dramatically, but if you're talking about domestic land transportation in Canada, trucks serving Atlantic Canada have roughly 80% of the market.

Mr. Hubbard: We've heard submissions from the west on roads versus railroads, and we have great differences of opinion in terms of the Atlantic economy and Saskatchewan, or Manitoba, or Alberta. Have you attempted or do you have any research to indicate Atlantic problems in terms of what the west is telling us?

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Mr. Armitage: I think the traffic in Atlantic Canada, with the exception of Labrador where we have a good deal of bulk iron ore, is very different from the situation out west where they have the coal, the sulphur and the various bulk products that are totally dependent on rail transportation to economically reach markets.

We have some of this, but not nearly to the same extent as in the west. I'm not sure it would be comparable, then, in that regard.

Mr. Hubbard: You are aware that the forest sector in the west have given us the same attitudes as the grain and the coal and the salt. It seems to be reflective of the west...a different approach to transportation.

Ramsay, we had a motion in terms of the CN privatization bill. You express concerns about the continuation of a national railway program into Atlantic Canada.

Mr. Armitage: Yes, Mr. Hubbard, this is in fact our key concern. We're very concerned in terms of the transition from a crown company, namely CN, to a privately operated commercial venture that has a strict business bottom line - commercial viability.

Our understanding is that CN is still a fairly long way from achieving viability in Atlantic Canada, which is principally the three maritime provinces in terms of rail service. They're getting towards that, but they need more time.

Our concern is that here we are on the eve of privatization and CN in Atlantic Canada is losing money. Will the new investors and the directors, and the management that goes with that, retain a railway system serving Atlantic Canada in the face of losses that may ensue for several years?

Mr. Hubbard: There were provisions in the BNA Act for a railway to be constructed into Halifax, into Atlantic Canada. It was a commitment of the government of the four provinces that made this nation back in 1867.

In terms of studying that, what is your interpretation of the federal responsibility of not just constructing but also maintaining and operating a line into Atlantic Canada and the ports, especially of Halifax? Have you discussed that or do you have an opinion on it?

Mr. Armitage: I think I'll bow out of that one, Mr. Chairman. I'm not a lawyer and it's a very controversial question. If I say the wrong thing, I'd be in trouble. I think I'll leave that one alone, if you don't mind.

Mr. Hubbard: Does your commission have any position in terms of the marine changes that may happen? We have three major ports in Atlantic Canada: Saint John, Halifax of course, and the third one in terms of our member's concern for Belledune.

With the changes in ice-breaking and the idea of user-pay, do you see any changes in terms of transportation that may occur in the country if the St. Lawrence Seaway has to pay for its share of the ice-breaking costs? We look at the historic significance of Halifax and Saint John in terms of being ice-free harbours.

Mr. Armitage: Yes, we have some real concerns with regard to the user-pay concept of marine services. That isn't to say we don't agree with it in principle - we do - and we'd like to see as many of those services put on a cost-recovery basis....

On the other hand, we have industries that depend on ports and marine services in order to compete in the marketplace, particularly overseas markets. We would not want to see the marine policy imposed in a way that would make it uncompetitive for those companies to maintain those markets.

Our position is one that says in implementing a cost-recovery system, make sure the impact is not going to be such as to do more economic damage than economic gain. In other words, we'd like to see an analysis done in terms of those ports that are supporting a significant industry base.

Mr. Hubbard: Back to the basic business on railroading. If user-pay comes in, would it make the ports of Halifax and Saint John more important in terms of the railway industry and the need for a strong railroad into central Canada?

Mr. Armitage: Yes, indeed it would - Halifax in particular.

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Mr. Comuzzi: Mr. Armitage, containerization is the new mode of transportation and Halifax is becoming very important in the container business. When CP withdrew from Atlantic Canada, particularly Halifax, they then invested substantial amounts of money in the port of New York to handle containers. Is that correct? What's your understanding of that?

Mr. Armitage: Close, Mr. Comuzzi. As I recall the situation, CP abandoned their main line. It was a main line as far as our region was concerned between Montreal and Saint John, in effect. After the legal abandonment had taken place it was picked up by a combination of short-line operators.

As far as investment in U.S. port infrastructure is concerned, CP purchased several years ago the Delaware and Hudson railway that literally runs between Montreal or Rouses Point down through the port of Philadelphia, with access to the ports of New York, New Jersey and other connections. My impression is that CP, apart from the initial purchase of many millions of dollars, put in a huge investment in terms of upgrading that line and are very close to a double-stacked capability that represents an extremely competitive option to the ports of Halifax, Saint John and, for that matter, Montreal in terms of overseas traffic coming into central Canada and the U.S. midwest.

Mr. Comuzzi: What was that railway they purchased?

Mr. Armitage: The Delaware and Hudson.

Mr. Comuzzi: In essence they decided to do the container work out of this area rather than either of the three ports in Canada.

Mr. Armitage: I don't think that's quite correct inasmuch as CP is a major player in the port of Montreal. They own the largest shipping operation coming in and out of Montreal in the form of Canmar and CAST. They own those two shipping companies that control something like 80% of all the containers that move through the port of Montreal. So Montreal is still a significant route for CP. But they have very neatly established a gateway through U.S. ports so that they really have it from both sides of the equation. But they certainly go around the Atlantic provinces in both cases.

Mr. Comuzzi: That's what I'm trying to get at...avoiding the Atlantic provinces.

Mr. Armitage: Yes.

Mrs. Wayne (Saint John): Ramsay, my understanding is that this new marine policy that's been put on the table...there's a long list of businesses, particularly in my area, that feel very strongly about the fact that they are willing to pay user fees for the services they require but they're not willing to pay user fees to keep the St. Lawrence Seaway ice free when we are an ice-free port. Is that correct?

Mr. Fontana: On a point of order, Mr. Chairman, Bill C-101 is not about marine policy.

Mrs. Wayne: Mr. Chairman, Mr. Comuzzi just brought it up and you didn't rise on a point of order, Mr. Fontana.

The Acting Chairman (Mr. Hubbard): Mr. Fontana, marine policy is tied in closely with the railroading out of Atlantic Canada.

Mr. Fontana: Not the question that she just asked about user fees - Mr. Chairman, you should know there is no marine policy as of yet, so I don't know what you're referring to.

Mrs. Wayne: No, there isn't, but it is on the table for discussion.

Mr. Fontana: No, it isn't on the table for discussion.

Mrs. Wayne: We have a copy of it. We'll send you a copy this afternoon so you can read it.

The Acting Chairman (Mr. Hubbard): We'll allow Mrs. Wayne her question.

Mrs. Wayne: Thank you very much, Mr. Chairman.

As you know, Ramsay, the New Brunswick Southern Railway were before us, and they have a major concern. Could you give me the opinion of your APTC with regard to whether or not there should be an inclusion in this Bill C-101 with regard to whether the New Brunswick Southern Railway should be deemed wholly in Canada as it was when the CP had that line under the National Transportation Act?

Mr. Armitage: We certainly share the views of the New Brunswick Southern in that regard. We feel that Bill C-101 reflects its shortcomings.

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Until CN abandoned the line between Saint John and Montreal, Saint John was an alternative gateway under the competitive line provisions of the National Transportation Act 1987. That act has a clause in it whereby the line through Maine, formerly operated by CP, is deemed to be a line in Canada for the purposes of competitive line rights.

We would like to see that provision maintained in the new legislation with respect to the current operators, one of them being the New Brunswick Southern.

Another feature is required there, too. Provincially owned and operated railways should be recognized under the competitive line rate provisions of the legislation, not in the sense that they would come under the jurisdiction of the federal government, because obviously they're provincial railways and that wouldn't be right, but in the sense that they could on a permissive basis, which I don't think flies in the face of that, participate in competitive line rates along with federally regulated railways.

The problem is that our only gateway in Atlantic Canada in terms of competitive line rates is through Quebec City, which involves a good deal of the haul on CN to begin with, and it really flies in the face of the whole concept of competitive line rates in the absence of the Saint John gateway.

The Chairman: Mr. Armitage, thank you very much for your submission to the committee. We appreciate the time you took to be here with us today.

Colleagues, our final presentation this morning is a representative from the Union of Ontario Indians.

We welcome the deputy grand chief from the Union of Ontario Indians, Vernon Roote. Welcome, sir, and Mr. Rogers, welcome to the committee. We look forward to your submission of not more than fifteen minutes so we can ask some questions of you if it's possible.

Mr. Vernon Roote (Deputy Grand Chief, Union of Ontario Indians): We represent a number of communities, as I will point out in our presentation.

I am accompanied by my elder in the southwestern Ontario region, Ray Rogers, who is from the community of Sarnia. He is here to help in answering any questions you might have regarding the expropriation of Indian land.

This presentation is solely for the purpose of addressing the expropriation of Indian land in general. More specifically, the community of Sarnia First Nation has the experience of the potential of expropriation. So that's what we'd like to address, and Ray will assist me in doing that.

First, for the record I'd like to read our presentation to you so the committee is aware of our concerns.

As I started out, I introduced myself as the deputy grand chief. More familiar to other individuals it's the vice-president of the organization. We represent 41 first nations, and those communities are along the area of the Great Lakes, right from Thunder Bay through to central and southern Ontario.

The Anishinabek Nation, as we are called, has a special relationship with the land that is in sharp contrast to the European notion of land and land ownership. We do not see land as a commodity. Rather we refer to the land as our Mother Earth, demanding respect, responsibility and honour. This difference is well documented in the history of the continent and forms the basis of many of the current outstanding and critical issues affecting the first nations in Canada today.

This difference of opinion has created widely different interpretations of the treaties we have made. In each case our interpretation has been ignored and the perspective of the Crown has prevailed, leaving us with very little land and an ever-diminishing ability to sustain ourselves.

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We are the original occupiers of and stewards for the land, and we have never ceded our responsibility or surrendered our interest. Yet today our nations are left with less than .01% of the land base. Our land base has been eroded by unilateral government agreements and policies. Included in this is the massive amount of land expropriated from our territories for railway and other transportation projects.

Over the past few decades our nations have succeeded in our struggle to have our rights and responsibilities recognized. Our efforts have led to the guarantee of aboriginal land treaty rights in the Constitution Act of 1982. This protection has been interpreted by the courts to mean that our treaties must be given a just, broad and liberal interpretation. This understanding and others secured by the courts of Canada have enhanced the momentum for the resolution of land claims and the recognition of first nations' jurisdiction over their lands and peoples.

The current Government of Canada has made repeated commitments to settle land claims and fully implement recognition of the inherent right to self-determination. It is widely acknowledged that the re-appropriation of lands through the claims and other processes is a critical first step in the realization of self-government.

It is in this context that we find the attempt to amend the National Transportation Act, allowing for enhanced expropriation powers, highly objectionable and inappropriate. Recognition of a private company's ability to recommend land for expropriation will further exasperate our already limited land bases. In addition, this move directly contradicts the guarantees of aboriginal and treaty rights and the stated commitment to resolve land claims.

We insist that all lands, when there is a potential first nation interest, cannot and must not be included in land eligible for this proposed fast tracking expropriation process. This is the only measure that will ensure consistency with the land claim process and the constitutional guarantee of aboriginal treaty rights.

The recommendations we give as our conclusion are: to amend and not to proceed without thorough consideration of first nation interest in land and outstanding claims related to railway activities. Amendment must contain complete exclusion of first nation lands, including the traditional territories to be consistent with the constitutional guarantee of aboriginal and treaty rights. Finally, amendment must include recognition of first nation interest in railway activities and the need for full consultation and approval.

That is our presentation. That's what is in the document that's been passed around for the consideration of this committee. We offer any answers to the questions you might have. Thank you very much.

The Chairman: Thank you very much, Mr. Roote. I appreciate your submission.

The parliamentary secretary has a point of order in reference to something you said on page 3 of your submission.

Mr. Fontana: Thank you, Mr. Chairman. It would be fair to point out to the chief that the expropriation powers that existed under the railroad acts before, I think we would agree, were probably draconian, which essentially meant that if the railroad wanted any land, they could essentially take it.

I think you should know that under clause 228 of this new bill, in fact, those powers have been severely curtailed if not essentially denied, save and accept that they will now have to go to the government to seek appeal to use the Expropriation Act. The powers you spoke of I think have been seriously curtailed.

I know that commitments have been made by the minister, Mr. Irwin, and even Mr. Tellier that when it comes to dealing with first nations people with regard to railway matters, Mr. Tellier had agreed and admitted to the fact that those kinds of relationships weren't the best in the past. In fact, he's setting up a committee to deal with all issues related to first nations and railroad concerns on the reserve and off the reserve. Obviously with lands where there is a claim, Minister Irwin is already committed to ensuring that that process and prior consultation will be in place.

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But I did want to clarify at least the expropriation concerns that you had, because I think what you'll see is that this bill has essentially neutered the railroads' ability to take land without due process, instead going to the government to seek approval to go through with the expropriation.

The Chairman: Thanks, Joe.

Mr. Roote, did you want to respond to that?

Mr. Roote: I suppose that is the purpose of our presence: to flag the problem of expropriation, and if you respond to that problem by saying that yes, there will be an appeal mechanism and the appeal mechanism will be through the federal government, that's fine. I only hope that it's enough and that there won't be any other situation arising out of the way the government has been dealing with expropriation. That's the caution that we put before you.

The Chairman: Thank you. Just as a supplemental to Mr. Fontana's point of clarification, and from my particular interest, I understand that the Department of Indian Affairs is planning to monitor the railways' three-year plan and will advise interested bands of the relevant properties becoming available. Does that alleviate any of your concerns as well?

Mr. Roote: I think it will, and I only hope that something else won't be developing out of this kind of a structure. The structure of governments, I guess, is our concern, as it has been for many years. We sort of shift from one side to the other side, finding different ways to perhaps try to jump the hoops, and that's our problem - trying to jump the hoops all the time. One law is made and so we have to shift from one law to another, different law, from section to section. In doing so, time goes by, and when time passes it allows whatever it is - in this case expropriation - to take place, because we're trying to prevent expropriation, but there are so many laws being developed. That's the problem we have.

The Chairman: Understood.

Mr. Gouk.

Mr. Gouk: Thank you, Mr. Chairman. Actually you touched on the area that I was interested in. We had a group of native bands from British Columbia come before us early on in these submissions, and their primary concern was the other end of the spectrum that the chairman just touched on; that is, what happens to rail land when the company moves to abandonment? They were concerned that any land on which they have or may have claim should not be disposed of before those claims are settled. Is that a concern to you as well?

Mr. Roote: I think we have to honour the agreements that were made, and they're called treaties. If those treaties included railway lands before or after the making of treaties, then I think whatever was made in that document.... Just as if you and I have a document today...whatever it says in that document must prevail. If those treaties mention railway lands, then I think it should be addressed in that way. If they're not addressed within the treaty, then I think there have to be different ways to try to solve that problem.

Mr. Gouk: One thing that's in this bill is a provision that if the railways are going to abandon any land that they got from the federal government, it has to go back to the federal government. This band's concern was, hey, if they took it from us, it goes back to us.

There's an unfairness I have seen - and I have to admit that these particular aspects of this are new to me; I have not delved deeply into problems with aboriginal land claims and titles. One of the things we have seen is where a right-of-way goes along off treaty land and when it suddenly gets to treaty land the right-of-way widens tremendously and then narrows back down again as soon as it gets off the treaty land.

Those are the kinds of things that I think definitely need to be looked at, at the expropriation end. Return of lands that were taken unwillingly from treaty land or land that is under claim has to be held until the land claim has been settled. I will look very strongly at that aspect of it.

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Mr. Roote: One example, if I may, Mr. Chairman, is in the southern Ontario region where I'm from. Our treaty basically says that the land will be sold, and the land will be surveyed, of course, before it's sold. Those are the terms of the agreement. But before the land was surveyed, the railway went through, and in developing the railway, the survey only went up to the boundary of the railway road allowance. So once the use of the railway is done, it reverts back to the federal Crown, and that's your point.

In our case, if the land has not been sold it's called unsold surrendered land, and unsold surrendered land will then revert back to the community of that tribe or those who made that treaty. If the land would not revert back to the tribe, then compensation, perhaps through negotiation, would be made. That's how I would answer that question and that example.

Perhaps Ray might want to say something regarding this.

The Chairman: Very good. Mr. Rogers.

Elder Ray Rogers (Union of Ontario Indians): We have great concerns. One you've answered already in regard to expropriation of Indian lands. In our area we are under a treaty, but we're also on ceded lands. Our reserve is on ceded lands. So we're involved with CN down there, being right in the city of Sarnia and the industry we have in the city. A great deal of our reserve at the present time is being leased for pipeline rights-of-way and other leases such as hydro. If railway lines that run through our reserve become abandoned, we feel that those lands should be returned to reserve status.

That's our main concern. When we heard ``expropriation''...we have to protect what little lands we have, as Grand Chief Roote has mentioned. The amount of reserve land we have left - we have to protect what we have.

The Chairman: Thank you very much, gentlemen, for your solid representation on behalf of the Union of Ontario Indians. We appreciate your submission and have your concerns registered. Thank you.

Mr. Roote: Thank you very much. Thank you for your time.

The Chairman: Colleagues, thank you. We'll see you this afternoon at 3:30 p.m.

Mrs. Wayne: One point of order, if I may?

Mr. Chairman, when you were out of the chair, when the representative of APTC was here, I brought up the marine services and the cost, and the parliamentary secretary interrupted on a point of order, saying I was out of order. Yet the hon. member Joe Comuzzi and the hon. member Charles Hubbard certainly spoke. Because we are tied in, in the Atlantic region - the ports and the railways are tied together and those services are both very pertinent to the operation of the other.

There was no point of order when the two members of the government side spoke and I would not rise on a point of order. I think it is great that they bring these things up, but I'll say this,Mr. Chairman. When the parliamentary secretary says it's bullshit and when he refers to my statements always as bullshit...the people in Atlantic Canada are going to know exactly what was said. But I think that kind of expression and that kind of language, Mr. Chairman, are out of order, no matter who is speaking.

The Chairman: Mr. Hubbard.

Mr. Hubbard: Mr. Chairman, I do not accept that the parliamentary secretary is out of order and I think the minutes should reflect that. He had an opinion -

The Chairman: But you did not accept it?

Mr. Hubbard: No, we didn't.

The Chairman: Okay. So noted.

Mr. Fontana: I apologize for the words that I might have used. I don't think my words were recorded, for your information.

Mrs. Wayne: They're recorded here, sir, right here, and they'll be recorded back home in Atlantic Canada and they'll all know the parliamentary secretary -

Mr. Fontana: Do what you like. I spoke not about Atlantic Canada but about -

The Chairman: This meeting is adjourned. Now you guys can talk.