EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 7, 1995

.1533

[English]

The Chairman: I welcome our first witness for this afternoon, from Lande & Roussel. Richard Lande is a transportation consultant.

Sir, we welcome you to this committee and know by the weight of your submission that if you're paid by the pound you must be a rich man. We hope you will give us an executive summary of 15 minutes or less so we can ask you some questions at the conclusion of your report to the committee. Thank you and welcome.

Mr. Richard Lande (Transportation Consultant, Lande & Roussel: Thank you, Mr. Chairman. My name is Richard Lande. I'm a transportation consultant and lawyer.

I have been very interested in the national transportation legislation from the commencement of my career, and I have represented many shippers who have gone before the National Transportation Agency for public interest appeals, final offer arbitration, extended interswitching, and non-compensatory rates. I have also written a number of articles on transportation regulation and a couple of books on the National Transportation Act, so I am as aware as anyone, I think, of the import of this legislation as proposed.

.1535

I want to take the next few minutes to express to you my vision of the draft legislation.

[Translation]

As I said, I am a lawyer and a transportation consultant. I am also the owner of the largest transportation consulting firm in Canada and I have represented hundreds of shippers during my career. I am familiar with the wording and impact of Bill C-101. I will be very happy to answer any questions this afternoon in due course and I greatly appreciate the opportunity to share my views with the committee.

[English]

As some of you may have elicited from my booklet, I am generally in favour of the legislation. I believe, moreover, that a number of shippers are either in favour of it or not opposed to it. I would like to give you four or five reasons why I think that is the case.

The first reason is that the railways will, I believe, be assisted by the legislation financially. They will pick up revenues because of the grain clauses. They will also gain in terms of productivity with the ability to rationalize their networks without opposition. The fact that they will not be encumbered by public interest appeals or non-compensatory rate appeals will serve, if anything, to assist them in their financial objectives. Of course that will mean that the railways should become more dynamic, more productive, and more customer sensitive.

As a second point, I think the privatization that is ongoing for Canadian National will mean that CN is a more aggressive player in the marketplace. As I'm sure you know, most shippers have a choice between using railways, intermodal service, and truckload. They can gain some competitive leverage through an assessment of the different modal options that are out there. As a consequence, the fact that Canadian National will be a privatized organization will, in my view, help that dynamic.

If you were to look at the research we've done on the New Zealand railways, on the Japanese railways, and on the Argentinian railways, I think you would find that privatized railways generally serve their customers in a more flexible way and are more attuned to rail-truck competition than when they are crown corporations.

The third reason I am in favour of this proposed bill - the first one being the gain in revenue to CP and CN, and the second being the enhanced flexibility of CN once it is privatized - is that I believe it preserves the essential protective clauses that have warranted shippers who are in need of assistance.

.1540

Interswitching, as it has been drafted and extended, is something shippers don't have in the United States. It is usually accepted that some three-quarters of all Canadian shippers are within that zone of sixteen miles, where they can benefit from the interswitching rates.

Interswitching, as it has been preserved, added to competitive line rates for the 25% of shippers who may not be within the thirty-kilometre zone, is a very powerful combination. Added to that you have final offer arbitration and also common carriers' obligations.

So in fact, although this legislation purports to deregulate to a certain degree the railways, they are still very much encumbered with a regulatory burden. As a consequence of that, the shippers who are in need of some kind of third-party intervention can very well solicit that from the agency or an arbitrator through FOA. That would be my fourth reason for supporting this legislation.

The fifth reason is the clauses that are being left out - for example, public interest appeals or abandonment oppositions - were generally not used by shippers and were not perceived to be useful. When they made attempts, the National Transportation Agency generally did not accord them the victory.

People who, for example, opposed branch line abandonments generally did not get their oppositions maintained. As was the case in the Thunder Bay grain case, the four-city lumber case and the container port of Saskatchewan case, people who tried to use the public interest appeal were generally sent on their way by the National Transportation Agency.

So shippers have either been reluctant to try these appeal mechanisms that are being left out, or, once they have tried them, have been discouraged. I don't think leaving them out of the legislation is a major drawback to looking at the validity of the whole package. That would be my fifth reason for supporting the legislation.

The sixth reason is I consider it a realistic balance of what the shipper community wanted and what the rail community wanted. It is impossible in Canada for all stakeholders and all constituencies to be euphoric over any piece of draft legislation. You have to recognize that shippers and carriers negotiate with each other and therefore each of them would be pleased to gain a small competitive advantage in legislative language.

That having been said, the legislation has certain advantages for the railways. As I said, it now relieves them of some of the regulatory burden. It will undoubtedly mean an increase in the revenues because of the fact that they will be able to rationalize in the grain revenues. It also has a lot on the side of the shippers. It preserves interswitching, CLRs, FOAs, common carriers' obligations and confidential contracts. It still enables shippers to benefit from any type of locational competition they can find, remembering that shippers are, after all, in a situation where they usually have different options before them.

.1545

They can use the railway; they can use intermodal; they can use trucks; they can go through the United States to some of their destinations; they can change the location of their distribution centre; they can consolidate. Shippers have a number of options, and as you are all aware, the trucking industry is an atomistic one. It is very competitive in Canada, and rates can be agreed to without any public filing. So you have a number of innovative clauses that can be reached between shippers and trucking firms.

All of that is being preserved. So the balance between what the railways are going to gain through Bill C-101 and what the shippers are going to preserve through Bill C-101 is a good match.

I'm going to add a seventh reason, which you'll see in my analysis. I believe many shippers are in favour of the legislation. I have tried, in a non-empirical way, to ask a number of my clients what they feel about the legislation.

Most of my clients do not care about this legislation. For most of my clients rail is only a part of their overall logistical picture. They are as concerned about rail regulation as they are about pallets, warehousing and the globalization of some of the product demand. So to get them to focus in a legalistic way on things such as clauses 113 and 27 is really an exercise in futility.

I have, however, asked them if they have any problem with the fact that they will not be able to oppose rail abandonments in the future, and whether they think that somehow the loss of the public interest appeal is going to restrain them in terms of their negotiating ability.

A large number of them - not all of them - have said this is fine. After all, it is a step in the right direction. It gives to the railways what we in our own respective industries have had for many years, and that is freedom. We can rationalize our plants. We can cut the number of distribution centres or increase it. Why not give it to the railways as well?

They all recognize that the railways are not in a fortuitous financial position. It doesn't mean that much to them, but they recognize this is a step toward a deregulatory environment.

One of the reasons I put in my brief, which is in their collective assessment, is that the trucking industry in Canada is almost totally deregulated, the U.S. rail industry is now virtually deregulated, and therefore the prime competitors to the Canadian railways, i.e., the trucks and the U.S. rail, are in a situation that would make it somewhat disharmonious with the Canadian environment if we were to continue it.

Therefore the question arises: Why should the Canadian railways be burdened with regulation that their competitors, such as the Great Lakes marine industry, are not burdened with? The Great Lakes marine carriers can price as they wish. There is no public interest appeal for rates established by the lakers. The U.S. carriers can price as they wish. The trucking industry can price confidentially. So why not allow the Canadian railways to compete on an equal playing field?

That being said, I have tried, in a quasi-scientific way, to ask people to voice their opinions. I've given a series of five conferences across Canada over the last six months. At each conference I've asked the people there if they would mind expressing to me their impressions of Bill C-101.

When I realized I was going to come before you, I only had one of my five conferences left, so I asked people to put down in writing what they thought. You have some of the comments on one of the pages at the end, ``What is your impression of Bill C-101?'' I'm sorry, while everbody might have had views on Bill C-101, it doesn't mean that they spelled correctly. However, it seems to be in favour. It says ``improvement on existing legislation''. In general, I move it toward a free market system, beginning to allow our railways to improve and compete profitably, etc.

.1550

I would say in conclusion that the legislation will permit the shippers to preserve their key protections. It will not jeopardize their negotiating ability with the carriers. And as long as interswitching, CLRs, FOAs, and common carriers' obligations are in fact retained, I think the Canadian shippers would be very constructive with regard to allowing this legislation to go through.

Thank you very much for your consideration, Mr. Chairman, and the entire committee.

The Chairman: Thank you, Mr. Lande. The committee is all the wiser given your submission, which is based on your vast experience in these matters. So we thank you for this.

Mr. Mercier, do you have a question?

[Translation]

Mr. Mercier (Blainville - Deux-Montagnes): Mr. Lande, I listened with a great deal of interest to your submission. On page 4, I note the following sentence:

As of this fall, the company will no longer be subject to the parliamentary reporting obligations or public interest expectations which are incumbent upon a government-owned corporation...

As I understand it, therefore, contrary to what we have in several countries, you do not consider the railway system to be a public utility, but rather a commercial operation like any other. The public interest is not uppermost in your mind.

Mr. Lande: In the past, railways were viewed as a public policy tool. Efforts were made to develop the regional economy by imposing state-controlled rates.

These rates were not supposed to be discriminatory. In the case of a smaller company or one established in a small community rather than a large city, rates were not to be an obstacle to industrial development within a non-urban region.

Today, the climate has changed. This doesn't mean that these principles are no longer valid, but in my opinion, companies that decide to set up operations in a particular location will weigh a number of business considerations. We shouldn't expect the state to impose conditions that will hinder a company's interests.

Let me give you an example. Several of my clients have set up distribution centres in various parts of Canada and the United States. Their overriding concern is seeing that their product is competitive from a commercial standpoint. The decision whether to set up operations in one location rather than another and the fact that their transportation costs may be higher or that a government office could possibly intervene in their affairs are secondary considerations. Their market is so fragile that they are prepared, in my opinion, to focus all their energies on the competitiveness of their product.

.1555

As far as my clients are concerned, it is of secondary importance to them whether a slew of persons examines the rates to determine if they are fair and reasonable or to ascertain if discrimination exists or if rates charged in one location as compared to another are unfair. They are too concerned about their own market.

What matters most to them is having competitive contracts with the railways and being competitive with the trucking firms.

Over the past seven years, I have had the honour of representing most companies that have tried to have public interest and final offer arbitration clauses enforced. I find it is becoming increasingly difficult to convince a client to launch this type of action.

[English]

The Chairman: Mr. Lande, just as a reminder, our members are only given a certain time period for questions and answers, and sometimes if the answers are too long they can't get any more questions in. So please try to be as brief as you can.

Mr. Mercier.

[Translation]

Mr. Mercier: I understand what you are saying, but as far as the necessary competition between the trucking industry and the railways is concerned, I gather that you are in favour of bimodal transportation.

Mr. Lande: Yes.

Mr. Mercier: Secondly, insofar as trucking is concerned, part of the costs are borne by the state which maintains the roadways.

Mr. Lande: That's true.

Mr. Mercier: If the rail industry weren't subsidized, don't you think it would be at an unfair disadvantage with respect to the trucking industry since this industry benefits indirectly from subsidies, given the fact that the state maintains roadways?

Mr. Lande: You're right, of course. However, does the solution lie in invalidating this effort, as Bill C-101 proposes to do, or does it not lie instead in having the real costs borne by users?

I don't know the answer, but I quite agree with you that the two situations are not equal.

[English]

Mr. Gouk (Kootenay West - Revelstoke): Mr. Lande, I'd like to start by clearing up a couple of things. First, you used two terms; you used the term ``most shippers'' in reference to most shipppers either liking this bill or at least not being opposed to it, and then you used the term ``my clients''. When you say ``most shippers'', are you talking about most Canadian shippers or about your clients, or are you saying that most Canadian shippers are your clients?

Mr. Lande: Most Canadian shippers are my clients. I represent over 1,000 Canadian shippers. My firm is the largest in Canada and we have had the good fortune of being the legal counsel to most of the shippers who have major transportation requirements.

Mr. Gouk: And you're saying that most Canadian shippers are either in favour of or not opposed to this bill.

Mr. Lande: The ones I have had contact with, the ones who have come to my conferences, the ones who have expressed to me their views, are either in favour of or not opposed to this legislation. In other words, as I said earlier, many people do not care because they're not rail dependent. They have some of their traffic in rail, but most of their traffic is either intermodal or trucking.

.1600

Mr. Gouk: Dan, I heard you say that. I would suggest you must have a very selective group of clients because I have a stack this high and I guarantee you it's not usually this thick. In fact, the average is less than half the thickness of your executive summary and it's still this high. With a few exceptions every one of them hates subclause 27(2) and most, but not all, either don't like subclause 34(1), clause 113, or both.

Are you essentially in favour of subclauses 27(2) and 34(1) and clause 113? Subclause 27(2) is significant prejudice, subclause 34(1) is frivolous and vexatious, and clause 113 is commercially fair and reasonable.

Mr. Lande: I think the legislation should be looked at in a holistic way. You have to look at those things that help the users of transportation and those things that help the suppliers of transportation. Neither of those constituencies is going to be perfectly happy with any set of clauses. Certainly in my recollection that has never happened.

I only see subclause 27(2) and clause 113 as part of a balance. I'm very pleased the key clauses that represent interswitching, final offer arbitration, competitive line rates, and common carriers' obligations are in there. I would suspect the associations of shippers that have come before you are also very pleased that if something goes wrong and they're not getting the best deal possible offered to them by one railway, they can go to another railway and get the long haul covered by a connecting carrier.

Mr. Gouk: I would suggest that if most of the shippers who came before us were actually pleased with subclause 27(2), they had an incredibly strange way of showing it.

Could I ask you to do something for me, since you like these particular provisions? You've obviously given them a lot of consideration.

Mr. Lande: Indeed.

Mr. Gouk: Could you please define for me ``significant prejudice'' as it relates to subclause 27(2)? What does that mean, specifically?

Mr. Lande: Significant prejudice to me would be notable harm, or serious harm. If you find the situation that causes you to come before the new Canadian Transportation Agency cannot be tolerated because otherwise you would suffer serious harm, then you are welcome to go before it.

Mr. Gouk: Okay. Could you also define ``commercially fair and reasonable'' for me?

Mr. Lande: Commercially fair and reasonable means the rates or service given, in the context of the supply of equipment, are what the carrier is able to afford, considering the competitive environment the shipper is negotiating within.

Mr. Gouk: You've lost me on that one, I must admit.

Mr. Lande: Well I can be more -

Mr. Gouk: The rates should have a relationship to the equipment, but what does that mean?

Mr. Lande: That's right. Let me give you an example. A case went before the previous Canadian Transport Commission that was sponsored by a member of Parliament whose name was Les Benjamin, on the subject of covered hoppers. The subject before the CTC was whether common carriers' obligations meant that the railway always has to afford the most expensive type of its equipment, or can it simply give, to whatever shipper, equipment that under the circumstances is fair and reasonable but is not necessarily the covered hopper. It could be a boxcar, for example. It doesn't have to be a pressure differential covered hopper; maybe it can be another kind of covered hopper.

.1605

The CTC decided you must look at the circumstances and then see whether the carrier has fulfilled its common carriers obligations. In other words, is it just and reasonable in the circumstances?

Mr. Gouk: In clause 113, though, we're looking primarily at rate. How do we establish a rate as being commercially fair and reasonable? I'm not saying this to be facetious. I'm looking at some other amendments on a different part of this where I would like to use ``commercially fair and reasonable'', but we've knocked ourselves out trying to come up with a definition, and I'll be damned if we can.

Mr. Lande: A guideline given to the new Canadian Transportation Agency when it establishes a rate or a condition - because condition is service, so common carriers' obligations affect condition - is that it just make sure the rate is within the competitive context of the negotiation and will not deprive the railway of its revenue, for example, nor make it impossible for the shipper to benefit from it.

Although you're looking at this clause ``fair and reasonable'' for the first time, it has been in railway legislation in different versions since the 1800s. The British railway legislation and the U.S. Interstate Commerce Act have often used those terms ``fair and reasonable''. So any party who is attuned to the fact that railways should not be as free as enterprises, generally this is a kind of qualifier that the rates should be fair and reasonable. Another way of saying it is ``just and reasonable''. If you look at previous Canadian railway legislation, you'll see those terms.

Mr. Gouk: That has sufficiently modified it for me. Thank you.

The Chairman: Before we go to this side, Mr. Lande, I want to spin off Mr. Gouk's comment on his stack of mail from shippers who are opposed to subclause 27(2).

Correct me if I'm wrong. You've been a participant in these hearings as well. If we're talking about subclause 27(2) or clauses 34 or 113, the stacks all of us have are from similar representative shipper groups. We're talking about how many grain companies, how many coal companies, and the majority of the movers of those particular products that we can count on the fingers of both hands? The stacks are this high, but we're leaving out the 1,000 other shippers who may be a silent majority in this particular instance.

Mr. Lande: There are two things I'd like to say. First, in a book I wrote called The National Transportation Policy of Canada I made the comment that many of the shippers' organizations are quite issue-specific. In other words, you may find that a certain group of concerned Canadian shippers will proselytize their particular viewpoint through a number of associations. It may be the same people because Canada doesn't have an extraordinary number of shippers.

Second, even if the potash industry, the wood pulp industry, or the lumber industry had a major problem, I think it's important for you to just look at what I have submitted to see that the rates of those industry groups have diminished by about 15% to 20% since 1988. So even though they are very important stakeholders, they have gained in terms of the rates they have paid. Now it may be the time for the pendulum to swing a bit to let the suppliers of the service also have a chance.

.1610

The Chairman: Thank you, Mr. Lande.

Mrs. Terrana (Vancouver East): Good afternoon, and thank you for your presentation.

When you talk about ``most shippers'', do you mean shippers in the west as well?

Mr. Lande: Yes, I do.

Mrs. Terrana: I was looking at your list here and they all seem to be from Ontario.

Mr. Lande: I would say you are quite correct in that most of the companies that I have worked with are not bulk commodity shippers.

Mrs. Terrana: I am from Vancouver. The main concern I hear from the shippers in the west is that with these new changes, and also with not having the Crow rate any more, it would in effect be a disaster for them in many cases. I want to ask you whether or not you have been looking at that particular part of our country.

Mr. Lande: Yes, I have. The shippers who are situated in the western provinces are able to use the four critical elements, such as final offer arbitration, competitive line rates, extended interswitching, and common carriers obligations.

Canada is a huge country. As such, transportation to the west and from the west is very critical. Anyone involved in transportation knows there is a different set of carriers going from east to west. Because of the large distances, we usually estimate that for a company situated in central Canada with 30% of its market in western Canada, for instance, it would cost 60% of its transportation budget to get there.

Transportation is, if anything, more critical for getting product to the west from the west. I still feel this legislation is an adequate balance between what it is that the railways need and what it is that the shippers need.

Mrs. Terrana: Where was the conference referred to on the sheet you gave to us held?

Mr. Lande: This particular conference took place about a week and a half ago in Toronto.

Mrs. Terrana: They say we didn't go far enough. What is your feeling? Should it be deregulated more?

Mr. Lande: No, I don't personally think it would have been wise to deregulate more. I know, for example, that today there was a company located in Manitoba that came to me with a problem in regard to service. I immediately told them about the common carriers obligations. I would not want to have a situation in which there would not be any means of intervention.

Mrs. Terrana: Do you think we have been fair to both the shippers and the railway companies?

Mr. Lande: I think that no matter what you do, neither constituency will applaud you because they remember 1987 and that was not the case then.

Mrs. Terrana: I know that, but what about your feelings about it?

Mr. Lande: The books that I've written have been quite critical of what has happened in Canada since 1987. I personally feel the National Transportation Agency did not really give life to some of the very innovative clauses that the legislation of 1987 had. I am quite content with the fact that we are now having a change.

.1615

Obviously, from a shipper's perspective, it would be better if there were more things to protect them. From a railway perspective, it would be best if you left out final offer arbitration and a number of other things. Perhaps the best that can be achieved is that another chapter will be opened in Canada for legislation involving transportation and we'll see how it works.

Mrs. Terrana: In addition to this.

Mr. Lande: This package.

Mr. Comuzzi (Thunder Bay - Nipigon): In your summary you leave the impression that this legislation meets with the majority of the shippers in Canada, maybe in numbers of shippers, not necessarily in tonnage shipped. Would that be a correct statement?

Mr. Lande: I think you're onto something there. Most shippers who are involved in the retail trades, who have consumer products, are either unaffected or conceptually in favour. The ones who are bulk product shippers have more concern, because naturally a greater percentage of their sales, market penetration, etc., depend on distance.

Mr. Comuzzi: Certainly. So your report would emphasize the agreement of the majority of shippers you represent but not necessarily the agreement of the majority of customers by way of tonnage in this country.

Mr. Lande: That is correct.

Mr. Comuzzi: That would be supported by your references on page 2, where there is no mention of the three main tonnage shippers in this country, those being the coal industry, the wood products industry with the exception of Domtar -

Mr. Lande: And Repap.

Mr. Comuzzi: - and Repap, and the grain industry with the exception of Continental Grain. That would be correct.

Mr. Lande: I used to be the lawyer for the Council of Forest Industries of British Columbia. I have represented Campotex, Sultran, and so forth. I am familiar with those companies.

I think you're right. The viewpoint I'm exposing really is one part of the shipper constituency.

Mr. Comuzzi: Let me make a statement, and correct me if I'm wrong. What you have exemplified here is the division between the rail business in the western and eastern parts of the country. We are told that the section of both rails, CN and CP, in eastern Canada east of Thunder Bay is not a profitable enterprise. The rail businesses in the western part of the country, both CN and CP, are profitable enterprises. Your thesis here is based on the eastern part of the country primarily. Would you agree with that?

Mr. Lande: I wouldn't agree with that insofar as earlier I was saying to Mrs. Terrana that most central Canadian manufacturers need to have competitive rates into their western Canadian markets. So they are very concerned about having adequate rail competition, having dynamic pricing, having alternatives so they can move their products into the rest of the country, in particular into western Canada.

Mr. Comuzzi: But in the North American economy western Canada is peanuts in the dollar volumes. When you look at the Midwest in the United States and at the eastern seaboard and at the western part of the country, the western Canadian market is really not significant when you're shipping soap or Campbell's soup, that kind of stuff, which are your customers here.

Mr. Lande: It's true that I don't represent a lot of U.S. companies, and from a U.S. standpoint what we're talking about today probably isn't very significant. However, it's significant for me.

.1620

Mr. Comuzzi: Referring to page 12, you say `` Although this brief does not purport to represent the views of these companies''. You also say: ``The legislation, as proposed, is supported by a large number of shippers.''; ``Shippers will be able to achieve equitable rates...''; and ``Shippers will continue to benefit from railway competition...''.

I'd like to come back to that, but the chairman's going to cut me off.

Consider ``The legislation, as proposed, is supported by a large number of shippers.'' This is really not accurate unless we use a corollary that, with the shippers you represent, as signified on page 12, insofar as the number of shippers, I agree, but insofar as volume shipped, it's not accurate.

Mr. Lande: Can I just qualify that?

Mr. Comuzzi: You've already agreed to that.

Mr. Lande: The shippers I have listed on page 12 are only a sample of the companies I deal with on a regular basis. It's maybe one-third of the number, or maybe one-quarter of the number. So don't look at page 12 as the people I am representing.

What I have tried to say is not that these are the views of the companies on page 12, but rather that I have seven reasons why I believe the legislation constitutes a reasonable balance. It's not a perfect balance.

Of the seven reasons, one of them happens to be that in my solicitation of views of clients and people who have gone to the conferences and so forth, they generally are in favour of the railways being given a chance to rationalize their networks and being given more of a free market attunement. That's only one of seven reasons.

Mr. Comuzzi: I have one final small question. It just so happens that I read a report this morning from the Canadian Pulp and Paper Association, whose membership includes Abitibi-Price and St-Laurent Paperboard. Their views, in that report I read this morning, were opposed to what you have here. That's the dilemma we find ourselves in.

Mr. Lande: Maybe the way to resolve the dilemma is simply to know that in every shipper's constituency there are many different vantage points. Some of them are very focused on certain clauses. They think the legislation should be rejected unless it has modifications to those clauses. Other shippers believe that in the mainstay the legislation should take its course. They are not as vehement. So I think it just represents the different variations of the commercial community of which we are talking.

The Chairman: Ms Sheridan, Mr. Fontana, and then we'll wrap up.

Mrs. Sheridan (Saskatoon - Humboldt): All right, I'll try to be quick because I know you are worried about the time.

I guess my point is the same one Mr. Comuzzi was just making, and Mr. Gouk, in a sense. It's still not clear to me on whose behalf you are speaking. I think the point Joe made about division between east and west shippers is a very cogent one.

I look at this list of people on page 2 and on page 12 of your brief. I understand the qualifications you've put on that list. There's also the list of people who were at the seminar in October. I see the names of places like Montreal, Rexdale, Toronto, and Markham. The big difference between those places is not only in what it is they're putting on the railway, but also where they're located. There's no comparison between those place names I've given you and places in Saskatchewan, for instance, like Avonlea, Arborfield, or Outlook. We had people here this morning who were worried about the alfalfa they're processing. They need to get on a railway. There's just a big geographical difference, which you have recognized.

I guess I'd like you to try one more time as succinctly as you can to tell me whether this is your opinion, based on your years of work in the transport field, or are you here on behalf of a group of individual shippers who have asked you to go forward and present this point of view? Is this simply your opinion?

Mr. Lande: This is my opinion, yet because I am involved as actively as I have been in the National Transportation Act of 1987 in trying to write about the possible impact of this, I nonetheless receive the views of a number of shippers. But this is only mine; I take full responsibility.

.1625

Mrs. Sheridan: Mr. Whittington was here the other day on behalf of Luscar Coal. He spoke on behalf of that particular group of coal shippers. You are not in that position.

Mr. Lande: No.

Mrs. Sheridan: So everywhere I see ``Most shippers...'', or whatever, I could put ``I think that most most shippers...''.

Mr. Lande: Indeed: ``I think that most shippers...''.

Mrs. Sheridan: All right. The next question is your definition of ``significant prejudice''. This is a red-letter day for me, because it's the first time I think I've ever agreed with a Reform Party statement. This has to do with the lack of comfort Mr. Gouk appeared to take in your attempt to define or clarify ``significant prejudice''. Although it puts a smile on the lips perhaps of a lawyer to think of the many possibilities, I don't think many Canadian shippers would take much comfort in thinking ``Oh, I see, `serious harm' as opposed to...''.

I'm not making fun of you.

Mr. Lande: No, I understand.

Mrs. Sheridan: Do you understand what I'm saying? As for ``serious harm'' and ``significant prejudice'', even the attempts to clarify that have not been successful.

If we have to look at ways to do that, for instance, as opposed to simply deleting it.... I know the chair does not want you to go into a long dissertation on how to define that, but -

Mr. Lande: ``Significant harm'' is defined in one way by section 50 of the Competition Act. It is defined in another way by the dumping legislation. It is defined in yet another way in subsection 113(5) of the National Transportation Act. It is a term that is not abundantly clear. It doesn't have empirical strength; it's merely a guideline. It probably could be improved. If there were some alternate suggestion to make it more clear, I think that would be great.

Mrs. Sheridan: So if we left it just as it was at this stage, we still have to resort to these other pieces of legislation before a coal shipper can figure out whether or not he should have a go at getting his application heard with positive results under subclause 27(2) as it currently stands.

Mr. Lande: In most pieces of legislation there are terms that are abstract, such as ``public interest'', ``economic policy'', or ``national transportation policy''. So why pick on that particular one?

It would seem to me that the role of the National Transportation Agency is to interpret guidelines. It's to interpret conceptual directives. Saying that something is commercially fair and reasonable or seriously prejudicing is not perfect - that's true - but I think it still has a common sense meaning.

If I were to have a choice between taking the bill as is or rejecting it because of the looseness of interpretational possibility on a couple of clauses, I would take the bill as is.

Mrs. Sheridan: Thank you.

The Chairman: Are you finished, Georgette?

Mrs. Sheridan: Thank you.

The Chairman: Mr. Fontana.

Mr. Fontana (London East): Let me just continue this argument with regard to subclause 27(2).

You have some experience in attending the NTA on behalf of the shippers. Obviously that hasn't happened or occurred a number of times, because we understand that the NTA has not had to adjudicate on these matters. Usually, that's leverage in order for the two parties to negotiate.

Therefore, I'm wondering about two things. I wonder whether or not subclause 27(2), which is ``significant prejudice'' or ``significant harm'' - call it what you want - will, in your opinion, cause shippers to be more reluctant to go to the NTA. Will it be a barrier because of those two words for them to even want to apply? This is even though we've tried to explain to them that this isn't a gateway sort of application to the access, but really only guidance to the agency in terms of the remedy based on the facts of the case.

I'm just wondering whether or not you believe - you had some knowledge and experience in this - that might be a cause of difficulties in fact, not an inferred or a perceived thing?

.1630

Mr. Lande: I will give a short example, if I may. I represented a company that went before the National Transportation Agency, and the argument was that it lost traffic - it was fine crushed salt traffic - because the rates were non-compensatory. The National Transportation Agency ruled that the rates were below the cost of the railway, but that it didn't significantly harm the industry. This company I represented said that they suffered something like $6 million of prejudice. They had to lay one of their vessels, and they thought that was significant harm.

We then went to the Federal Court of Appeal and on a decision majority of two against three, the third one being the Chief Justice of the Federal Court of Appeal, they said that significant prejudice means a company has to go bankrupt. It's the predatory pricing definition.

However, the Chief Justice of the Federal Court of Appeal - and now this has gone to the Supreme Court - has said that significant harm means significant harm. It means there was some harm. It was notable harm. It was something serious. It wasn't that the company had to go out of business, but rather that it was significant.

So these words are in fact complex. It would be better if there were a clearer formula. Perhaps in the regulations that would accompany the legislation, there should be some parameters, but at the present time it's one of -

Mr. Fontana: Okay, I think you've explained it.

As an alternative, can I ask you something? Again, I haven't had the opportunity to go through every page. You obviously have an awful lot of experience. I think Mr. Nault asked certain shippers who is captive, who is not, where competition exists and where it doesn't, and what the pricing has been by commodity group since 1988. I think some of the stuff is in there.

It would appear to me that you're saying that in most cases, with the exception of some bulk shippers, competition pretty well exists in this country, between either more than one railroad or more than one mode. Therefore, if I were to ask you to protect the ones that are most vulnerable, those that are truly captive, would we be best served to try to define captivity as the U.S. model has? Would it give some guidance to the agency in determining significant prejudice if one defined captivity?

Mr. Lande: The U.S. model has a very poor definition of captivity. To my knowledge, on only one occasion did the Interstate Commerce Commission rule that a coal company was in fact subject to market dominance. So of the hundreds of possible interventions, it only thought one was captive.

I don't think it's useful to have a captivity test. Moreover, I'm saying that although I don't think subclause 27(2) is in favour of shippers, the legislation should be looked at in terms of the whole. Final offer arbitration is not in favour of carriers. Common carriers' obligations are not in favour of carriers. When you look at the balance, there are some things that are on the side of the ledger in favour of shippers and other things on the side of carriers; subclause 27(2) happens to be one of the ones in favour of carriers.

On the whole, the bill is valid. It's not perfect for either side.

The Chairman: Thank you, Mr. Lande. We appreciate that you have found the balance in Bill C-101 and we thank you for your submission to this committee.

Mr. Lande: Thank you very much for hearing me.

The Chairman: We invite representatives of the Canadian Gas Association, please.

.1635

From the Canadian Gas Association we have John Klenavic and Robert Waldon. Welcome,Mr. Klenavic and Mr. Waldon, to our committee. If you could give your submission in 15 minutes or less, we could have some questions come your way. Thank you.

Mr. Robert Waldon (Supervisor, Lands Administration, Union Gas Ltd.; Canadian Gas Association): Thank you very much, Mr. Chairman. In view of the workload you're all coping with, I promise you it will be very brief. I hope we can assist you in that way. Thank you for allowing us to speak with you today.

My name is Robert Waldon. I'm supervisor of lands administration at Union Gas in Chatham, Ontario. With me is John Klenavic, who is the vice-president of policy at the Canadian Gas Association.

We have a number of important issues concerning utility crossings of railways. As I said, we will be brief. We have a very short submission we could table, with your permission, Mr. Chairman, that will expand on the September 27 letter from the CGA to yourself. I think it would perhaps fill in a little further some of the information that was initially presented.

The Chairman: Sure, the clerk will get that from you and table it. Thank you.

Mr. Waldon: Thank you very much. You may be familiar with our industry association, the Canadian Gas Association. It represents 320 members involved in the gas industry, including all of the major natural gas transmission and distribution companies in Canada. Together, these companies serve approximately 4.3 million residential, commercial and industrial customers who use natural gas for heat and energy.

Pipeline company undertakings are federally or provincially regulated, and pipeline construction projects are approved only if they are found to be in the public interest. Thus our undertakings are an essential service for people and businesses who depend on natural gas for heat and energy.

We see the proposed Bill C-101 as an opportunity to, as the Honourable Douglas Young has stated, modernize and streamline rail regulation by addressing a number of historic difficulties in regard to utility crossings of railways.

Fundamentally, we recognize that both rail and utility services such as natural gas pipelines are essential services for Canadian society. In fact, pipelines and railways are to a large extent complementary. Pipelines supply an economical source of energy to many of the same companies whose products are shipped by rail. It is therefore appropriate for this committee to consider improvements in Bill C-101 that will also modernize and streamline the process by which utilities can cross railways.

In order to reach persons, communities, and businesses who desire the economic and environmental benefits of natural gas, pipelines must frequently cross railways. Railways are a part of the human-built environment. Both the railways and pipelines must be able to carry out their mandates in the public interest in a way that fosters safety, efficiency and dependability of their services.

The goal of safety is well supported by the current laws and regulations covering utility crossings of railways. Design, construction and inspection procedures are well proven, and both industries have an excellent safety record. We do not, however, feel that the existing regulatory process for crossings has helped to foster efficiency or dependability. We respectfully submit that Bill C-101 as presently drafted does not address these concerns either.

Let me explain. The delivery of natural gas must be efficient. This means the delivery of gas service must be timely and at the least possible cost. In order to cross a railway, however, utilities must first submit an application to the railway. Despite other federal precedents that require prompt responses to crossing requests, a railway is under no obligation to respond to a crossing request in a timely manner.

Our experience is that between three and six months is typically required before a railway will respond with a proposed crossing agreement, even where the crossing meets the comprehensive standard design and construction requirements of the NTA's general order E-10, which is the regulation governing crossings of railways, and the Canadian Standards Association codes.

.1640

This delay places extreme pressure on the pipeline company to accept whatever terms and conditions are presented by the railway. These terms and conditions include the following: stringent indemnities that exceed the level of indemnification that a pipeline is required to give to the railway under the NTA's general order E-10; the right of a railway company to unilaterally cancel or force a removal or relocation of the pipeline on such short notice as to make removal or relocation impossible without major interruptions in gas transportation and delivery; payment of application, administration, and rental fees to railways, which the NTA and the courts have consistently refused to award and which only add to the cost of providing an essential service; agreements that are by nature a licence, and not a permanent registered interest in the railway right of way lands.

Both individual and industry attempts to resolve these issues with the major railways have been unsuccessful.

The utility's only recourse is to make a crossing application to the National Transportation Agency, but this would add additional time to the process, as much as 120 days or longer, as contemplated in Bill C-101, clause 29. This simply defeats the goal of efficient pipeline service.

We feel that Bill C-101 should be amended so that railways will be required to respond to utility crossing requests in a timely manner.

A less formal and expedited mechanism in making application to the NTA should also be put in place that allows standard crossings to proceed pending arbitration of disputes over crossing terms and conditions.

We also ask that Bill C-101 be amended to reflect the position on fees that has consistently been upheld by the NTA and the courts; namely, that railways be prohibited from charging application, administrative, or rental fees for approval of a crossing agreement.

We must also respectfully submit that Bill C-101 as drafted does not foster dependability in the supply of an essential service by pipeline companies. This is because there is no requirement for railways to notify utilities of proposed abandonments or of sales of their rights of way. Nor is there a requirement to protect the existing facilities of utility companies when railway right of ways are sold.

These sales may be to persons who do not plan to use the land for railway purposes. If that use involves excavation or construction or is not compatible with the safety and security and operation of the existing pipeline, then a risk of damage to the pipeline arises, which may result in interrupted service, or even injury to persons and property.

Further, if crossing agreements are assigned to a purchaser by the railway, then there is a possibility that the purchaser could attempt to enforce the relocation and removal clauses that are prevalent in the railway company crossing agreements.

In all cases, registration of a permanent easement at the relevant land registry office would protect the pipeline and give proper notice to any purchaser of railway rights of way. We therefore respectfully ask that Bill C-101 be amended to require such protection of utility facilities when a railway is abandoned and prior to its being offered for sale.

In summary, CGA proposes that Bill C-101 be amended in three ways: one, that railways be required to respond to utility crossing requests within 30 days and that an expedited arbitration mechanism be created to resolve disputes over crossing agreement terms and conditions that would not delay the construction of standard crossings; two, that railways be required to notify utilities of their intention to abandon a rail line and also be required to grant a registered easement in order to protect the utility facilities prior to sale of the railway to a third party; and, three, that railways be prohibited from charging application, administrative, or rental fees for utility crossings.

We feel that these amendments will improve the ability of pipelines to cross railways and provide their essential service in a manner that fosters safety, efficiency, and dependability. They are consistent with Bill C-101's stated objectives of modernizing rail transport in Canada by recognizing the rightful needs of other parties who are impacted on by the presence and abandonment of railway facilities.

Mr. Chairman, that is our submission. We thank you for your consideration. We shall be pleased to answer any questions the committee may have.

The Chairman: Thank you, Mr. Waldon.

.1645

Just as a point of interest, how many times has the gas company crossed rail lines in the past?

Mr. Waldon: I couldn't give you a precise number, but I would say that in order of magnitude there are certainly tens of thousands of railway crossings.

The Chairman: So you've made requests to the railways to cross their lines tens of thousands of times.

How many times have you put together a proposal that said ``Look, CN or CP, we want to cross your line at this particular junction. Based on the last time we did it, here's how much it cost us and here's what the fee was, etc. We're going to work that in there too. Here's the ballpark figure for what we calculate it out to be worth, here's the proposal, and here's the amount of money. What do you think?''

Mr. Waldon: Mr. Chairman, there have been ongoing negotiations with CN for the last four years.

The Chairman: It's just a simple question. You submit an application to cross a line, and in that submission you tell them how much money you're going to pay. How many times have you done that?

Mr. Waldon: It's not possible to tell a railway how much money you're proposing to pay. The railway just simply sets a fee. In view of the need to provide these pipeline facilities in a timely manner, the pipeline company really has no negotiating position.

The Chairman: Do you think that timely manner would be achieved if your proposal to the rail line to cross included a ballpark figure based on the last time you crossed the line?

Mr. Waldon: Do I think that proposing a fee to the railway would expedite the crossing?

The Chairman: If the amount of money that it costs to do the job and the fee that's attached to it were with the proposal when you made it initially.... In the interests of saving time and not having to wait months, the figure is there already. You just say let's go to work instead of saying we'd like to do this, you get back to us on how much it's going to cost, instead of playing this back and forth see-saw stuff. You're complaining about the length of time it takes for them to come back with something.

Mr. Waldon: In the past, discussion of fees has not been an impediment to obtaining these crossing agreements. It's the fact that having the application turned around by the railways is a very slow process. These crossing applications comply with standard designs and they comply generally with general order E-10. They're fairly straightforward. They've been done many times and there is really no reason why they can't be processed quickly. I don't think the fee itself is an issue that enters into the process.

The Chairman: So that's not what holds things up and that's not the reason you go to the NTA afterward. It's not because of the amount of money involved; it's strictly just getting permission to cross.

Mr. Waldon: Permission to cross is required under the current legislation and we must go to the railway first. That's where a lot of the delay starts.

With regard to applications to the NTA, there have been applications in the past dealing with not only fees, but the terms and conditions of the crossing agreements. Applications to the NTA would also be required if a pipeline can't achieve the standard designs in general order E-10.

The Chairman: Mr. Mercier.

[Translation]

Mr. Mercier: Mr. Waldon, you spoke of the problem of gas pipelines that cross railways. This problem is similar to one encountered by municipalities when a road must cross a railway line. I am familiar with this situation.

You also stressed the importance of maintaining an agency such as the NTA to which contentious issues, notably the matter of the fees charged for pipeline crossings, could be referred.

Subclause 27(2) of the bill outlines the procedure for asking the Agency to arbitrate a dispute:

(2) Where an application is made to the Agency by a shipper in respect of a transportation rate or service, the Agency may grant the whole or part of the application only if the Agency is satisfied, in the circumstances of the particular case, that the applicant would suffer significant prejudice if the relief sought were not otherwise available.

In other words, the bill provides only for the filing by a shipper of an arbitration request in respect of a transportation rate or service. There is no provision for arbitration in the case of a crossing dispute.

.1650

Do you think this provision should be amended so that it clearly applies to crossings instead of to a transportation rate or service, and to your situation rather than that encountered by shippers?

[English]

Mr. John Klenavic (Vice-President, Policy, Canadian Gas Association): I don't think,Mr. Chairman, that would solve the administrative problem. The fee is not the issue. The rates or whatever being charged to shippers may be an issue with the article you've cited.

In this case it's the permission to cross with some form of an easement. Usually the crossing does not interact with the railway, which is a bit different from a municipal road, say, crossing a railway, since of course the work is all done underground.

Mr. Waldon: Mr. Chairman, I wonder if I can expand on that.

Clause 102 of the act governs the utility crossing of railways. The way the clause is set up, we're required to approach the railway first and attempt to secure an agreement to cross. That's where the delay is happening.

[Translation]

Mr. Mercier: You say you favour the idea of the National Transportation Agency retaining the possibility of arbitrating disputes. It seems to me then that the bill should state clearly that disputes over crossings can be arbitrated by the Agency.

[English]

Mr. Waldon: I'm sorry, Mr. Mercier, I'm not sure I understood the question. Could you repeat it, please?

[Translation]

Mr. Mercier: I'm saying that the provision in the bill respecting arbitration applications filed with the Agency specifically mentions transportation rates or services, but not crossings. Do you see this as a shortcoming or do you feel that the problem of crossings is adequately addressed by the other provision?

[English]

Mr. Waldon: I couldn't give you a legal opinion in that regard. I'm not a lawyer; I'm just a person who works on crossings. But I think we would definitely see improvement in the process of achieving crossings if there were some sort of an arbitration mechanism available.

I'm not sure whether the clause you're referring to would do that, but if there is a gap, then yes, I agree with you that it would be very beneficial to have some mechanism available to arbitrate disputes over crossings.

[Translation]

Mr. Mercier: I agree that there is a shortcoming here.

[English]

The Chairman: We have a difference of opinion.

Mr. Gouk.

Mr. Gouk: I'm looking at clause 102. To me it says that if you have a problem you can apply to the agency, and the agency will make the decision, which in essence is a form of arbitration. Your only concern there is that it takes up to 120 days for them to do that, and you would like something faster?

Mr. Waldon: But front-ended to that 120 days is the time required to go to the railway company first and ascertain whether they'll agree to the crossing and on what terms and conditions. Sometimes there can be a delay of up to six months in just getting to that point.

Mr. Gouk: Is it that some of them are done fairly quickly and some of them are long, or do they all tend to be fairly long?

Mr. Waldon: It varies across the country, sir.

Mr. Gouk: Okay. When you get the go-ahead, who puts the gas line in, the gas company or the railroad?

Mr. Waldon: The gas company's contractor would install the gas line.

Mr. Gouk: Okay. Is there a disruption for the rail line while that is being put in?

Mr. Waldon: Generally speaking, no, and there should not be. The railway provides flagmen as a safety precaution and the actual construction can be timed to avoid rail traffic, for example.

Mr. Gouk: But you do have to dig through as opposed to tunnelling, usually?

Mr. Waldon: The approved method of crossing now is by bore and auger, which means to excavate pits on either side of the railway right of way and then simply bore underneath. So the rail traffic is not interrupted.

Mr. Gouk: Okay. And it still takes them that long.

You must have to go over private land from time to time.

Mr. Waldon: Oh, yes. Absolutely.

Mr. Gouk: What is the process if a property owner says they don't want you to go over their land?

.1655

Mr. Waldon: It would depend on the situation. In the case of transmission pipelines that have been approved by either the National Energy Board or the provincial regulatory authority, if parties cannot come to an agreement because the projects are in the public interest, there is the possibility of expropriation. In the case of distribution lines that are being constructed to provide natural gas service to residences and businesses and these are being built under franchise agreements with local municipalities, there is no such recourse.

Mr. Klenavic: Prior to expropriation, there is an arbitration procedure under the National Energy Board Act. So if a land owner does not accept the settlement for the pipeline crossing, there is an appeal procedure.

It's very rarely used. In the last expansion I recall, a few years ago, of Interprovincial Pipe Line, something like 900 land owners had to be crossed. Two got to the point where an arbitration hearing was called, but both parties withdrew their objections on the day on which the hearing was scheduled to open.

Mr. Gouk: So how long would it normally take you to get the necessary approvals to go ahead on private land with the transmission lines?

Mr. Waldon: Again that varies with the complexity of the issues and the nature of the land being crossed. It would be awfully hard to put a precise time on it.

Mr. Gouk: Would the amount of private land that you cross for the purpose of transmission lines be similar to, greater than, or less than railroad crossings?

Mr. Waldon: I would have to say it would be greater than.

Mr. Gouk: Is the procedure generally acceptable to you in terms of dealing with private land crossings?

Mr. Waldon: Private land crossings of course are a negotiated procedure - the pipeline company and the land owner have to come to some sort of agreement - whereas the crossing of a railway is a much more regulated activity.

Mr. Gouk: Does it tend to take longer to do a rail crossing than a private land crossing?

Mr. Waldon: Than compared to say an individual land owner?

Mr. Gouk: Yes.

Mr. Waldon: Absolutely.

Mr. Gouk: Would you be happy if essentially railroad land was treated like anybody else's private land and dealt with as someone's private land as opposed to a rail corridor as such?

Mr. Klenavic: There's a bit of a difference there because the land owner is compensated for the use of the land and certain obligations are put on him - for instance, you can't build buildings above the pipeline - whereas this is a crossing by a gas utility of another utility, both of which are ostensibly there for the public interest, and any charges eventually end up being paid by the user of the services.

Mr. Waldon: Another analogy might be pipeline crossings of other pipelines or pipeline crossings of electrical lines or other utility lines. Generally speaking, these go fairly smoothly and the designs are preapproved. As long as you can achieve the standard design, things fall into place in a timely manner.

Mr. Nault (Kenora - Rainy River): Would it be safe to assume that when you go to the agency the main dispute and argument between yourselves and the railways is about price?

Mr. Waldon: I don't think price would be the leading cause of a dispute. The terms and conditions in the agreements are a concern. The fact of a fee being levied at all is a concern, especially in an environment where most utility crossings of each other are at no fee and the inspection and review services are provided free of charge, as is the pipeline locate.

Mr. Nault: If in essence it's a debate about whether you should pay or not pay - because if you're arguing that the railways are utilities, I guess we can agree to disagree on that point - then in the bill, under subclause 28(2), interim orders are allowed. So if the disputes between yourselves and the railways are not about allowing you to use or to cross the railway but in fact some of the particulars of the agreement - in essence, cost - then what's stopping you from...? If you agree, you're going to have to put that pipeline there, and you go to the agency for some sort of resolution. Why then aren't you getting an interim order to go ahead and put it in? Because, really, the agency is going to decide on that particular matter in any case.

.1700

Mr. Waldon: I'm not familiar with the process you're describing.

Mr. Nault: You talk about 29 in your presentation. Under subclause 28(2) it says:

The agency may, instead of making an order final in the first instance, make an interim order and reserve further directions either for an adjourned hearing of the matter or for further application.

That means they can let you within a matter of days go ahead and do it, and it's not going to take you 120 days. So that process is there in the act. Have you never used it?

Mr. Waldon: I can't confirm whether that feature exists in the current legislation. If it does, I'm not familiar with the company having used it.

Mr. Klenavic: I think it would leave open the possibility that the pipeline company would have to move or shut down its pipeline later - which is not an acceptable way to do business - if the interim order is not confirmed. If it is confirmed, then you don't need an interim order.

Mr. Nault: No, the question I asked you was that in most cases, by the sound of what you're telling us, the real debate is cost. You don't want to pay. It seems to me that the railways are letting you use or cross their lines some 10,000 times or so. So the real debate is the cost to your individual company of going underneath the railway track, in most cases.

So if it's a matter of cost and you go to the agency to resolve the dispute, what's stopping you from getting an interim order allowing you to continue with putting the pipeline in, and then the agency will make the decision in the end, within 120 days?

Mr. Waldon: The use of an interim order is an interesting suggestion, and it's one I'll take back and ask people to look at. But I would like to comment with regard to cost that the terms and conditions of the crossing agreement are usually the major issue of dispute.

Yes, cost is a concern. We're concerned with providing an economical source of energy, but the way the process is set up now, we still have to take that first step of going to the railway and getting an answer from the railway before we're in a position to ask for assistance from the NTA.

Mr. Nault: Okay. My understanding is that it's in the act now, and I'm surprised that you've never used it if in most cases the debate is about cost.

The second issue, and the last one I wanted to deal with, is the protection of a pipeline company's interest in the case of the sale or the discontinuance of the rail line. My understanding is that in the act we're dealing with, Bill C-101, if nobody wants to buy the particular abandoned line, if it couldn't have been sold to someone who wanted to keep it as a rail line and it ends up being sold, you have the opportunity to purchase it if none of the levels of government want to buy it to protect their right of way, or whatever. Don't you think that's enough protection? Like any other corporation or business, you have the opportunity to buy that particular right of way.

Mr. Waldon: Please understand that we generally cross these railway right of ways. There are some longitudinal occupations, but they're the exception rather than the rule. So our interest is really confined to the crossing location rather than the entire length of the railway right of way.

Mr. Nault: Yes, that's my point. In most cases you go out and purchase land from private land owners. What's stopping you from purchasing -

Mr. Klenavic: Excuse me, but we don't purchase the land normally. It's an easement arrangement.

Mr. Nault: An easement.

Mr. Klenavic: Yes, the land owner retains the ownership.

Mr. Nault: From a private land owner?

Mr. Klenavic: Yes.

Mr. Nault: So in essence you don't think it's a good idea to go out and buy these to protect your interest. You think you should get an automatic easement.

Mr. Waldon: I think if we had to buy railway right of ways to protect the various crossings, the pipeline companies would become fairly extensive land owners, and that's not really the intent of our business.

The Chairman: Thank you. We'll have one last question, from Mr. Guimond, and then we can move on.

.1705

[Translation]

Mr. Guimond (Beauport - Montmorency - Orléans): You mentioned your concern for protecting the interests of companies in the event of the sale or abandonment of lines. Under Quebec's civil law, it is clear that when, for example, a property with a gas pipeline easement is sold, the new owners remain bound by the easement obligation.

Why would you want to take the matter further? In common law, that is in the rest of Canada, is it not clear? Can people lose their rights if the land or railway line is sold or abandoned? Does the pipeline owner lose his rights? Must he renegotiate an agreement with the new owner?

[English]

Mr. Waldon: The current situation is that pipelines are not granted easements by the railway companies. We're given a licence, which can be cancelled unilaterally by the railway company.

If the railway is abandoned and the railway right of way is sold to a third party, there is the potential that the third party could attempt to enforce the cancellation clauses in the licence.

With regard to the provincial laws protecting the rights of people with interests in lands, generally that protection comes through registration of the relevant agreement at the land registry office, or in Quebec, in the minutes of the local notary. Because we're only granted a licence rather than an easement, it's not possible to register that interest against the property.

[Translation]

Mr. Guimond: As far as response time is concerned, you find that the Agency takes too long to respond to requests, which wastes your time. What would you say if we were to amend subclause 102(3)? This provision stipulates that if an agreement cannot successfully be negotiated, the Agency may authorize the construction of the crossing or specify who shall maintain it. Perhaps the Agency could be required under subclause 102(3) to respond to the request within a specified period of time. What kind of time frame would you like to see?

[English]

Mr. Waldon: If I could just clarify, we're not suggesting the NTA as an agency is slow to react. We're saying we find the period of time leading up to the point where you can go to the NTA is lengthy, and from what we see in the bill, we understand the NTA could take up to 120 days or longer. That's not to guarantee they would take that full amount of time.

Where a pipeline crossing of a railway conforms to all of the relevant regulations - E-10 and those of the Canadian Standards Association - such that it's a standard crossing and the design is well understood by all parties, if there is disagreement over the terms and conditions of the agreement, that dispute should be put aside so the pipeline crossing can be built. The dispute could be resolved with some sort of arbitration or negotiation mechanism perhaps less formalized than actually making an application to the NTA. That might be in the interests of all parties in terms of saving costs and making the process work a little smoother.

Mr. Guimond: Thank you.

The Chairman: You say tens of thousands of crossings. How much do you pay in annual fees a year, ballpark?

Mr. Waldon: I don't think I could speak for the industry as a whole.

The Chairman: No, but for your own company.

Mr. Waldon: Definitely hundreds of thousands. It's roughly $150,000 to $200,000 a year.

The Chairman: In fees to the railway company?

Mr. Waldon: Yes, and we have an annual review of various railway company fees. We frequently receive notices that the fees are being increased.

The Chairman: Gentlemen, thank you for your submission to the committee. We appreciate the work you've done. Good luck.

Mr. Waldon: Thank you.

The Chairman: I invite to the table our next witnesses, from the Grain Services Union.

.1710

Mr. Wagner, welcome to the transport committee. We would appreciate it if you could give us your report within 15 minutes so we can ask some questions of you.

Mr. Hugh J. Wagner (General Secretary, Grain Services Union): Thank you,Mr. Chairman.

We have a number of oral comments on Bill C-101. In addition to that, as I've mentioned to your clerk, we'll be leaving with you for your reflection at a future time an impact study that our union commissioned on the effects of rail line abandonment and country elevator consolidation resulting from rail line abandonment. I believe the two processes are inextricably bound up with one another.

Mr. Chairman and members of the committee, I represent a group of workers situated primarily in the country elevator industry of western Canada, principally in Alberta, Saskatchewan and Manitoba. Our concerns with regard to Bill C-101 pertain specifically to those aspects dealing with abandonment of railway branch lines and the effects on the rural infrastructure, on rural communities, and on jobs and employment in the industry.

At the present time there are 4,000 or so workers employed directly in primary country elevators. They work in about 900 different communities in some 1,400 different elevator locations. The process begun by Bill C-101, or more correctly by the federal budget in February prior to Bill C-101 and the elimination of the Western Grain Transportation Act, has raised for us some substantial concerns in relation to the viability of employment and, by extension, the viability of a great many rural prairie communities.

We don't oppose change by any stretch of the imagination, but we do say that before we embark on wholesale changes to the present framework and underpinnings of our transportation system, we ought to examine all the costs and implications.

For example, last October a meeting of the Honourable Ralph Goodale's so-called May 16 Group, which my union is a member of, was convened in Regina, Saskatchewan. At the meeting leaders of the six major grain companies unveiled a vision statement. The document was called ``A Vision for the Grain and Oilseed Industry in the Year 2005''.

The first three of the five objectives were that Canada will have the world's most efficient, viable, and competitive production, marketing and transportation, and handling structure; that we should commit to deliver to our customers what they want, where they want it, and when they want it, in both raw and processed form; and that we will collectively double our capacity to export and process grains and oilseeds.

On behalf of the organization I represent I can say that we endorse those objectives, but as with every human declaration or endeavour, the devil is in the details. Therefore, in our organization we have taken steps to look into the future, and that's why we commissioned the study, which we'll leave with you, called ``The Impact of Elevator Consolidation''.

We did so partly in response to the scarcity of information. I don't know whether committee members are aware or not, but in all of the discussion and debate about transportation deregulation, whether it be rail, trucking, particular shipper segments, or component industries and dependent industries such as the grain industry, there has yet to be attached or associated with any legislation engaged in so-called deregulation something that provides for an adjustment process as it pertains to working people.

There are quite literally tens of thousands of jobs tied up in our transportation industry. To date there is no consistent, well-thought-out adjustment process that will apply to workers when they are affected by changes such as Bill C-101. No less than anyone else, the grain elevator worker - and the community he or she lives in - is going to be affected by the provisions of Bill C-101 that pertain to rail-line abandonment.

.1715

Just last Friday the minister's task force on the so-called light steel lines released its report in Toronto. The 860 kilometres of branch line that were under examination I believe will be abandoned fairly rapidly, likely by as early as next spring. As a result, some 100 workers will be affected in the form of outright job elimination in the elevator system. In addition to that, railway maintenance and operating crews will be affected, the tax base in those rural communities will be affected, as will the effective road maintenance costs.

When we go beyond that, and I don't believe that the future of those 860 kilometres of branch lines was any great surprise to those of us who had been watching the industry and have been actively involved in its development, what we're primarily concerned about are the second, third, and fourth waves of branch-line abandonment. The study we've commissioned estimates that under the auspices of Bill C-101 from 2,500 to 9,500 kilometres of branch line could be abandoned, depending on the timeframe. Even Agriculture Canada estimates that some 4,800 kilometres will be abandoned.

What the study we commissioned suggests is that we're heading towards an inland terminal configuration of 110 or so grain terminals replacing the existing 1,400 country elevators. What isn't in that trend, and what we argue ought to be taken account of, is whether that is the type of system we want to end up with and whether it will adequately serve a diversifying agriculture and the communities that depend on agriculture and transportation.

There are obviously going to be some cost savings through branch abandonment, but it really comes in the form of cost transfers. The railways and the grain companies might save on maintenance, upgrading costs, elevation costs and labour costs associated with that, but their savings will be transferred in the form of cost increases to farmers and workers in the communities in which they live and work.

There are environmental issues raised, and safety issues, and at the end of the day we have to ask, where do the savings go from the much more rapid abandonment process anticipated by Bill C-101?

If we go to North Dakota and compare their situation to that of Saskatchewan, Manitoba, or Alberta, we find that the cost of shipping a tonne of grain from North Dakota to tidewater on the west coast of their country is not any less than it is in Canada. And a question we raised is why are we launching ourselves into what could be a potentially fatal blow to much of the transportation infrastructure that we as taxpayers have paid for and that we as handlers and movers of commodities have depended on, built on, and sacrificed for?

There has been substantial rationalization in the system, enormous efficiencies. The Canadian system turns itself over seven times a year, and in that regard its efficiency record is second to none. We have had problems from time to time, but we think they can be resolved without wholesale abandonment of our prairie rail-line network.

As I mentioned before, there are currently 4,000 people employed in the elevator system in the prairies. The experts tell us that the five-year projection is to cut that group in half and then to further reduce that group down to about 1,650 workers.

.1720

The current system has a payroll of $124 million. The longer-term horizon cuts that payroll in more than half. Moreover, using a multiplier effect the annual decline in economic activity in the three prairie provinces is somewhere between $150 million and $200 million. That doesn't take account of the loss of the taxation base to rural communities, with railways and grain elevator companies being among their largest taxpayers.

Where do the consolidation savings go? If I were so lucky as to be able to draft one amendment to Bill C-101 - and, as I've heard from previous speakers, it's a very comprehensive piece of legislation and there are no doubt many axes being ground in front of you over the past while, and probably more to come - it would be that the decision-making process with regard to the abandonment of branch lines be put in the hands of the stakeholders. In other words, the farm community, the labour community involved with the branch lines, chambers of commerce or boards of trade in the area, with representation from provincial government and federal government, should constitute panels to make the final decisions as to whether a branch line is abandoned or not, since they are the people who ultimately will pay the tariff.

I suppose there's no easy or convenient method of structuring such a stakeholders' input. One of the ideas I have come up with and recommended on behalf of my organization to the ministers of transport and agriculture is that regional committees, consistent with the boundaries of each of the federal ridings in each of the three provinces, be struck with the member of Parliament serving as the chairperson of the committee with representation from each of those interested parties on that committee and that committee, under the chairpersonship of the member of Parliament, would make the final decision as to whether a branch line is abandoned or not.

Mr. Comuzzi: That's sadistic.

Mr. Wagner: Sadistic, did you say? It may be deliberately so.

So what we recommend overall is that before we make it easier to abandon a railway system the taxpayers of the country have spent so many hundreds of millions of dollars in constructing and maintaining, we ought to first take a look at the total cost impacts, and that goes beyond incremental road costs, beyond maintenance savings and so forth. It goes into a complete examination of the cost and benefit as it pertains to the community that depends on the rail network.

The Chairman: Mr. Mercier, please.

[Translation]

Mr. Mercier: Mr. Wagner, you stated that the decision to abandon a short line should be left to federal, provincial and local representatives and that ultimately, the decision rests with the member of Parliament. Do you think that it is realistic to think that this decision could be made by agencies and persons not associated with the railway company which will, quite clearly, have to bear the financial consequences of a decision made by other parties? Does this seem realistic to you?

[English]

Mr. Wagner: I think it's not only realistic but it's democratic. It may be said that the branch line belongs to the railway. However, I point out that this branch line has been constructed, maintained, and operated with the substantial assistance of the taxpayers of Canada. The user of the service pays a substantial tariff to use it. People have invested millions of dollars of their own capital to build facilities dependent on that branch line. We're not here talking about the rate the railway will charge for moving the freight, we're here talking about whether the roadbed exists for the purpose of moving the freight at all.

.1725

It might be an usual approach; it might be different from what is envisioned in the bill. However, I would submit that it's the most democratic approach, because it is the people affected who will make the decision. And they might decide to abandon. Not every branch line is going to be retained, nor should it be.

[Translation]

Mr. Mercier: Thank you. I merely wanted to point out that what you are proposing is the complete opposite of what is in the bill which, rather than be concerned about the public interest, is instead concerned about company interests.

[English]

Mr. Wagner: On that point, you and I might very well agree.

Mr. Gouk: Are you aware that there are provisions in the bill whereby, in any situation where the railroad took land from the government, it cannot dispose of it, except to give it back to the government?

Mr. Wagner: That's correct.

Mr. Gouk: And you want to go with that sort of idea, except go beyond that to include land that they purchased or acquired in some other way.

Mr. Wagner: That's correct.

Mr. Gouk: It's a perplexing thing. I understand where you're coming from.

When I first came to Ottawa my attitude regarding the railroad was, by God, we gave them all the land; if they're not going to run the railroad, then they had better give us back the land. I've since sat down and read a bit of history on that: how much land they got, how much it cost them on top of that to build the railroad, what they had to do with the land and how they had to do it. It sounded as if the governments of that day were a bit smarter than those of this day, because, from what I can see, they made a pretty shrewd deal in how they gave the checkerboard system of land to the railroad in the middle of nowhere and said, ``We're going to give our land away. You can make something out of yours only if you sell it, so you had better build the towns and get the people and everything else to create a need for that railroad that we're asking you to build''. It tends to put things in a different perspective.

I have a great deal of sympathy for the situation in which find you yourself. I have something similar, to a much lesser degree, with some abandonment problems, but I've been concerned about the old method of abandonment versus the new one.

I think this serves the public interest in the individual areas much better, in an attempt to try to retain the rail lines and the ability of the local governments to acquire the land in the event that it doesn't continue to operate as a railroad. That option then has to come down to them, to work either individually as municipalities or in conjunction with concerned citizens groups or unions, as the case might be, interested in acquiring that land.

I gather that you would accept that process. You're just saying, except that we shouldn't pay at all.

Mr. Wagner: When we talk of land, I'm not sure whether we're talking about maintaining the rail line or simply the land the line sits on.

I suppose I'm less concerned about the ownership of land at the end of the day, and I'm more concerned about maintaining the service, or involving the community involved in a discussion about the options, because closing a branch line inevitably means shifting that traffic to the municipal highways and grid roads, and so on, and with that is associated a cost. I'm suggesting that there should be community involvement in what will be a very complex decision in the making of a number of choices.

The question of how or whether the railway company will be compensated is another issue, I believe a legitimate one, that would be put on the table. It might well be that the railway company would say they can keep the branch line open for x amount per tonne, or for such-and-such an additional increase in the freight rate they charge. That would be part of the bargain the community would consider, because they might consider that, even with an increase in the rate, it's still an option preferable to transferring the traffic to the provincial road network, and so on.

They might decide to purchase it as a short-line operation, but I submit that when you examine the short-line railway proposition, it's something that sounds better and has a certain cachet or appeal, but for all intents and purposes in most instances it really isn't very viable on the basis of a single line or even a small group of lines. What you require is a much larger network constructed to be able to support -

Mr. Gouk: Could you not get into a situation, though, where the railroad, under the provisions of this act now, have to advertise that they intend to sell this line, or that they would like to divest themselves, in one way or another, of this line?

.1730

Instead of going in and saying you want to buy and operate the short line, would it not be viable for you to go to them and say you would like them to continue to operate it instead of selling it, and you are prepared to possibly, if you can, make some concessions to them to get them to do this? You could negotiate.

If someone else buys it and they're prepared to run it as a railroad, great, but if they're not, you could simultaneously be looking at negotiations, rather than at buying it, to encourage them to continue to operate it by yielding certain new opportunities for them.

Mr. Wagner: That might very well be a preferable option to short-line operation and/or discontinuance. Indeed the National Farmers Union commissioned a study on that issue, and that study recommended the formation of a prairie regional rail authority that would in fact engage in that kind of dynamic. Rather than having CN or CP withdraw from the business, their presence would be maintained, but in an altered form.

I'm sure that by involving the community, a variety of different solutions and possibilities will come to the fore, and I'd rather that happen, even if it takes some more time, than the other option of simply abandoning, because once they're abandoned, they will not be resurrected, I think it's fair to say.

Mr. Gouk: Thanks.

Mrs. Sheridan: Thanks for your presentation.

I want to put a hard question to you. I have a lot of sympathy for much of what you're saying as well. However, you didn't come here for sympathy, and that won't change anything anyway.

You're very much like the person who came here this morning representing SAHO, the Saskatchewan Association of Health Organizations, who talked about the impact of abandonment on small towns. The town I grew up close to had 49 people, so I know what you're talking about.

However, we are here today looking at a piece of legislation that's supposed to assist the railways to behave in a businesslike manner and to make businesslike decisions. One of those decisions may well be that this piece of track is not profitable and they can't, in any kind of business kind of sense, maintain the thing, just as a farmer makes a decision that he or she is not going to plant a certain kind of crop in a particular year or is going to change from beef to grain or whatever. Those are business decisions, and you can't not make them because you feel sorry for the guy down the street, or down the gravel road.

You described your stakeholder model. First of all, I do not want the job of chairing that committee, under any circumstances.

A voice: Nor would I.

Some hon. members: Oh, oh.

Mrs. Sheridan: Thank you.

Certainly you have to admit there's a real conflict of interest amongst the people you identified in the sense that at the end of the day, if you want to maintain your job at the elevator, it's going to be hard for you to say you think the track should be shut down.

The other thing to think of is this. For all of us, whether you're talking about an RM, a provincial government or the federal government, there is no more money. The source of the money is still the guy who works at the elevator or the farmer, as much as anybody else. So it's in all of our best interests to spend that money as wisely as we can.

Rural Saskatchewan needs to look at ways of keeping their economy going and making it still possible to live in rural Saskatchewan in some kind of dignity. Is it not better to find other ways to spend that money to accomplish that, rather than merely shoring up outdated legislation or maintaining it at any cost? Instead of putting money into say maintaining an unprofitable branch line, why don't we say forget it, that's not going to work; let's divert that money into something that will work and be a little more creative in our thinking?

It's a long question. I'm sorry for that, but can you respond to it?

.1735

Mr. Wagner: I think you're right that people will tend to act in what they perceive to be their own self-interest, but dependent on the approach one takes to the system.

I'll give you an example. In the 20 years I've been involved as a collective bargainer in the grain-handling business on the prairies, we have seen the number of delivery points reduced by more than 50% and the number of elevators closed by more than 50%. There's yet to be a single work disruption or collective bargaining dispute over that process. Part of the reason is that the workforce, through its union, was involved in the adjustment to change and the driving of the change to some extent.

While we are concerned about the financial viability of the railways, I'd submit that the overwhelming majority of branch lines are profitable, because the traffic hasn't suddenly disappeared. With the elimination of the WGTA and the subsidy, which was paid directly to the railways, the farmer-shipper is now picking up the full tariff. So the railways are getting compensated as much under the new regime as they were under the old one.

The problem for the farmer and the worker on the branch line or in the community is that if the railway in pursuing either interest says that's not profitable enough and abandons the branch line network, you really don't have a cost saving, you simply have a cost transfer. And rather than spending those scarce dollars on rail line maintenance and hauling bulk commodities by the most efficient means possible - which is by railway locomotive - we'll have that cost and traffic shifted to the road network, which will get beat up over time and require the investment of more capital by the taxpayer, who's already taxed to the hilt.

The Chairman: Next we'll have Anna.

Mrs. Terrana: In this bill there are some provisions regarding the sale of these short lines. Would that not accommodate your needs? You're talking about a new committee, another committee, chaired by Georgette -

Mrs. Sheridan: I'm happy to do it.

Mrs. Terrana: I come from the city, so I would not have enjoyed it.

Don't you think the provisions that are spelled out in this bill would accommodate your interests?

Mr. Wagner: I don't believe so, because I don't believe that short-line railways are the answer, the reason for that being you have to have a large enough traffic base in order to make the operation economically viable.

Of the two presently existing short-line operations in the prairies, the longest-standing one is the Central Western Railway in Alberta, which has about 250 kilometres of branch line under its operation. It has yet to make a dollar without a subsidy, and it's been subsidized to the tune of about a million dollars a year. In fact, under the legislation and the amendments to the Western Grain Transportation Act, or the abolition of the act, provision was made for a producer check-off of 10¢ a tonne, in effect to go to support payments for short-line railways, illustrating that by themselves they don't have the size or the muscle to make a difference.

Mrs. Terrana: But if you have a group of people you were anticipating - the stakeholders, the unions, etc. - maybe it's good for a community to have a little branch line that they can use as they like for their grain. Maybe you should think of this. It could be a good investment.

Mr. Wagner: Well, I'll consider it, but I don't see much prospect for it.

The Chairman: Thanks, Anna. Joe Fontana, and then we'll close up.

Mr. Fontana: Mr. Chairman, just for clarification, it seems to me that this witness,Mr. Wagner, is the only one who doesn't seem to think the short lines are going to work. In fact, short-line operators who have come before this committee look forward to the opportunities. Provincial governments have said that they support short lines. CN and CP indicate that they want to work in partnerships. Shippers want short lines.

I can understand that in terms of self-interest obviously a union is going to protect their union brethren, but I think you have to be a little more sympathetic to the very people who in fact have come here - including grain operators - and indicated that short lines are going to be one answer to the abandonment problems, as Mr. Gouk has indicated.

.1740

The other one is that what you've suggested is a very good model. Perhaps, while it's not realistic to suggest that we can turn over the railroads to stakeholders, it is within the stakeholders' interest that once the railroads publicize their three-year plan, those very same stakeholders can come together in a very quick fashion, including the provincial governments, who have an awful lot of responsibility with regard to transportation even though they like to pretend they don't. In fact, they have a very big part in trying to develop their own transportation systems for their own communities.

I just didn't want to have you give an awful lot of people the impression that short lines aren't the answer. In fact, they're going to be the answer to this country's transportation problems. They will save your jobs and save the producers who want to get their products to your grain facilities at a much lower cost.

Mr. Wagner: With respect, sir, I think we'll have to differ on that one. I would point out that the railways, CN and CP, have no reason not to be in favour of short lines, because it lets them off the hook. If the provincial governments have said they're in favour of short lines, they haven't ponied up any kind of organized assistance to get them established on any widespread basis, and they would have to.

The principal problem with short lines is that unless you have a network of a size to generate a volume that is comparable so you have in effect some cross-subsidization within your short-line operation, it's not going to make it.

Mr. Fontana: I don't know if you've looked at every short line model, but not every short line in this country - we don't have many yet, but we will have more - is subsidized. You may be talking about the western one that in fact gets that 10¢, but there are short lines in Ontario and there will be a lot more in Atlantic Canada that are operating profitably and without subsidy.

Mr. Wagner: Oh, indeed. There are different markets, different configurations, and different population bases.

Mr. Fontana: But I think it's wrong to suggest, sir, that there isn't a short line that can survive out west without a subsidy.

Mr. Wagner: Well, there isn't one that has.

Mr. Fontana: There aren't many from which to take the model.

Mr. Wagner: I guess time will tell, but I don't believe you're going to see a great outbreak of short lines, nor are you going to see them as the answer to the problem on a confined basis.

The Chairman: Mr. Wagner, thank you for your submission to the committee and for answering our questions. We appreciate your time.

Mr. Wagner: Thank you.

The Chairman: We invite to the table the representatives of Transport 2000 Québec.

We welcome Mr. Normand Parisien, the coordinating director of Transport 2000 Québec. Welcome to the committee, sir. You have a presentation, and hopefully it will last no more than 15 minutes so we can ask some questions of you.

[Translation]

Mr. Normand Parisien (Coordinating Director, Transport 2000 Québec): Good evening, Mr. Chairman, members of the committee. Unfortunately, our Chairman was unable to get away to be here with us. He sends his regrets.

We wish to apologize to the committee for not having an English version of our brief. Nevertheless, we will be sharing with you some of the concerns we have immediately following the reading of the brief. We will also be making some comments in English regarding Bill C-101.

[English]

We would like to apologize for not circulating an English version of this brief before the committee because of financial and time constraints. We will bring some conclusions and comments later on. Perhaps we may be excused, because we have been told by our partners from Transport 2000 Canada that they submitted only an English version of their presentation.

.1745

Transport 2000 is a non-profit organization dedicated to public interest with regard to transportation systems and services all over the region of Quebec.

[Translation]

Mr. Chairman, we have some serious concerns about this bill the repercussions of which will be felt in different ways in Canada. Aside from the elimination of subsidies under the Western Grain Transportation Act, we are concerned about stepped-up efforts to abandon short lines in several regions of Quebec.

First of all, we would like to mention that the spirit of the bill can be applied equally to air transportation, to the extent that we believe the air transportation industry must operate increasingly in a competitive international environment. Therefore, we reject outright any kind of protectionist policies for the air transportation sector and we share the objectives of the bill in this regard. We believe that airline companies will inevitably face a competitive environment, except when obvious security issues are involved and tough regulations are needed.

However, in our judgement, the situation is quite different in the case of rail transportation. Land-based systems are above all domestic transportation systems which cannot be completely subject to competition, particularly mounting competition at the international level.

Even in the United States, where recourse to other types of economic policies is available, tougher regulations have been in place since 1991. Moreover, at the end of our appendix, you will find a statement delivered in the US Congress following the adoption of the Intermodal Surface Transportation Efficiency Act in the fall of 1991. This legislation was passed by a large majority of Congress members.

We would also like to draw your attention to the fact that in June 1993, this learned committee made a number of recommendations to the Minister of Transport who has yet to respond to several of them. A total of 25 recommendations were made and in our view, Bill C-101 which is currently under review does not deal with these concerns. We would like to mention several of them.

Regardless of the government in power at the time, there was unanimity among the parties in the House on this report. In our system of parliamentary democracy, it is important that the government respond to such documents. Mr. Chairman, you were Vice-Chairman of the transport committee at the time and one of the signatories to this report.

Firstly, we are extremely concerned about applications for the abandonment of shortline railways. The committee had asked the government to define what constitutes a basic national rail network and this does not seem to have been done. In 1991, the Quebec Department of Transport submitted a proposal for the establishment of a regional rail system, but given the current economic climate, the Quebec government does not have the resources to invest in the modernization of its rail infrastructures and Bill C-101 is silent on this score.

.1750

However, in the United States, massive sums of money are being invested in modernizing infrastructures, despite the fact that operations are decentralized and recourse to private enterprise is fairly widespread. This course of action is understandable given the important critical mass in this sector of activity which allows for a competitive private sector. Here in Canada, the circumstances are quite different.

The only reference in the report to passenger rail transportation is that provision must be made for the movement of passenger trains. When main lines or short lines are abandoned, VIA Rail must be asked whether it wishes to continue operating these lines. In our judgement, this is not enough to ensure the stability of the rail services provided by VIA Rail.

For example, in response to certain concerns expressed, the Minister of Transport was forced to clarify in September the policy stemming from this legislation with respect to passenger rail services other than those provided by VIA Rail. This would include, for example, passenger rail services provided by the Quebec North Shore and Labrador Railway and by the Ontario Northland and Algoma Central Railway Inc. Draft legislation providing for a capital project and infrastructure program for VIA Rail stretching over an adequate period of time has yet to be tabled.

Another recommendation in your predecessor's report which has yet to be acted on involves defining clearly the concept of public interest. This expression comes up quite frequently in the report and there is no reference whatsoever to it in Bill C-101. Even the current National Transportation Agency does not have a sufficiently specific mandate to venture into this area. Thus, it is very hard for the public to express its concerns about matters in the public interest, since a broad range of transportation policy issues central to the needs of the community come into play.

One striking example of this is environmental protection and energy issues. Bill C-101 makes no mention of these considerations, whereas they were one of the committee's major concerns. It had asked the Minister of Transport to take into account environmental considerations in the drafting of a policy. That is why the committee rejected the findings of National Transportation Act Review Commission.

When the bill does refer to transportation policies - I believe in clause 5 - in our view, there is nothing here in the way of a transportation policy capable of guiding us into the 21st century. Compare the bill to the U.S. Congress Declaration of Policy on the challenges of drafting a transportation policy for the United States. If we do not address these concerns, it will be extremely difficult to maintain a sustainable transportation system in the 21st century.

What we will have in the 21st century is a road network worn down by trucks, connections via the United States in order to travel from one Canadian region to another, a polluted environment and deteriorating infrastructures.

.1755

Will we have to borrow form the World Bank to modernize our transportation systems in order to make them more energy efficient?

Mr. Chairman, we felt it was important to bring these issues to your attention.

We find the 15-day period totally inadequate. It is extremely unlikely that, in the event of the abandonment of right-of-ways or lines without any kind of infrastructure program, transportation departments will be in a position to take over the operation of these abandoned segments.

That is why the committee requested in 1993 that abandoned right-of-ways be "banked" for acquisition in the public interest.

Mr. Chairman, this concludes our remarks.

[English]

The Chairman: Thank you, Mr. Parisien.

To questions, Mr. Guimond, please.

[Translation]

Mr. Guimond: Mr. Parisien, I would like to thank you for your submission. However, to be fair and true to myself, given that my colleagues have seen or heard my reaction when briefs have been tabled in only one of Canada's two official languages, I must make the following remark. It grieves me to do so, but I have no choice.

When a group appears before a committee of Canada's Parliament, its brief must be drafted in the two official languages. I made exactly the same comment this morning to a group from Saskatchewan. I also criticized the Canadian Federation of Municipalities for a similar oversight on their part, not their first one, I might add.

Mr. Parisien, you feel that the National Transportation Agency should have a role to play. I am rather critical of the Agency because in my view, the applications to abandon lines were almost a reflex action.

You note on page 4 that the National Transportation Agency, this regulatory body, would become an empty shell. In your view, what role does Bill C-101 see the Agency taking on?

Mr. Parisien: We feel that the bill is not very clear on the role that the National Transportation Agency should play. According to our analysis, railway companies wishing to improve their financial situation asked the government to make the process of rationalizing rail lines more flexible. It is in this spirit, we feel, that the Bill was drafted.

With respect to the taxation of rail corridors, different harmonization rules have applied. Another irritant, in the opinion of the railway companies, is the fact that deregulation was necessary in order to facilitate the abandonment process. Companies complain that this process can take six months or a year.

In our opinion, this is the crux of the matter. The National Transportation Agency is a public body which exercises vigilance to ensure that major portions of the rail system which were developed over the past 10 years and which form part of our collective heritage are not abandoned.

We cannot disregard the contribution of the rail network to the community, to regional economic development and to the efficiency of transportation systems. The railway companies claim that this bill will bring about the rebirth of the rail industry.

.1800

In our view, rationalizing the infrastructures that the railway companies must support and improving the financial outlook is simply not enough. It is important that Parliament strike a balance between the private and public requirements which must be managed by the National Transportation Agency.

As an agent of the legislator, the Agency must ensure that the public interest will be protected when federal transportation policies are implemented.

Mr. Guimond: Transport 2000 Québec seems to feel that Bill C-101 is not necessarily useful, or that while it may be useful, it has not been submitted to the proper forum. Considering that it focuses more on financial problems, it should have been submitted to the finance or some other committee. That's one of the things I wanted to hear you say.

Furthermore, you seem to feel that Bill C-101 would have been unnecessary if the government in power had acted on the 25 recommendations in the Corbett Report which our Chairman endorsed. He signed it. Having read the Corbett Report, I thought that it was a unanimous report. No dissenting report was presented. In other words, if the current government implemented the 25 recommendations in the Corbett report drafted by the Progressive Conservatives... I suppose the report is poison because it was prepared by the Progressive Conservatives, but in any case, I would like to hear your views on this.

Mr. Parisien: As far as the tax situation of railway companies is concerned, clearly they are experiencing some difficulties to the extent that there is no competition. They are not treated in the same way as the trucking industry which, as a free rider, can use the infrastructures financed by the taxpayers. Railway companies must pay property taxes on rail corridors whereas this is not the case for users of the road network.

Even in this area, the problem will not be resolved since land taxes come under provincial jurisdiction. This bill will not resolve the problem of taxing railway infrastructures and in particular, rail corridors.

We understand very well the problems that the railways have in competing with the trucking industry, but we don't think Bill C-101 is the solution. It is a means of resolving other problems, not the problems of competitive taxation.

I don't know whether I've answered the question, but the National Transportation Agency, in this context... In order to compete with the trucking industry, railway companies will abandon active lines to improve the return on their operations. In our view, the Agency will no longer be able to play the role it once did as an instrument for the public or to exercise vigilance in ensuring that our heritage is not being abandoned. To our minds, the rail system is as much a part of the national transportation system as the network of roads and airports.

The trend in the United States is to infrastructure integration, whereas here in Canada, we seem to be moving instead toward the dismantling of infrastructures. We are deeply concerned by this trend, not only for social or environmental reasons, but also because it will be extremely difficult to compete from an economic standpoint with the United States.

[English]

The Chairman: Thanks, Mr. Guimond.

Mr. Fontana, you wanted to add something and then we can move on. Mrs. Wayne has a question too.

.1805

Mr. Fontana: I don't want you to be left with the impression that, as it relates to passenger rail service, VIA will be worse off because of this legislation. I hope you will think there are some very positive things, because in this legislation VIA will be not only a railway, but also a shipper. It will therefore have railway rights and all the shippers' rights, including FOAs and so on. So I think passenger rail service by VIA will be in better shape because of this bill.

Secondly, with regard to those non-VIA rail passenger subsidies, you should note that the bill provides for the Governor in Council and hence the minister to make those subsidies available to those non-VIA passengers, which he has already indicated will continue.

Mrs. Wayne (Saint John): Are the recommendations made by you tonight for Transport 2000 Québec supported by Transport 2000 Ontario and the head office of Transport 2000, or are they from your group alone?

Mr. Parisien: We are much more sensitive because of the railway abandonment process. Most of our concerns are with regard to the bill before the committee. We mostly share the same vision of what a sustainable transportation system is.

I think there will be a huge debate at an OECD and Government of Canada joint international conference in Vancouver. The Deputy Prime Minister has just asked the national round table on environment and economy to merge with a set of principles regarding sustainable transportation. A lot of countries all over the world are making progress toward sustainable transportation. There are some concerns with -

Mrs. Wayne: With the environment....

Mr. Parisien: I think we are heading toward the same vision, but the application of this vision may differ from one region to another. It's not a problem, but we think the federal government must take some leadership in coordinating a force within each region to share some goals, but to decentralize operations and management in a more effective way.

Mrs. Wayne: So you're saying the quality of life of the people in the regions should be taken into consideration in Bill C-101 and we shouldn't just look at trying to break even, if you like, in a business.

Mr. Parisien: Yes, we think the spectrum of that goal is is too narrow.

The Chairman: Thank you, Mr. Parisien. We appreciate your submission to the committee.

Mr. Parisien: Thank you, Mr. Chairman.

The Chairman: Finally, colleagues, we ask Mr. Ashley from the NTA to join us at the table.

.1810

Mr. Ashley, welcome to the committee. I understand you'd like to give us an opening statement and then we can get right to questions.

Mr. Ron Ashley (Counsel, National Transportation Agency of Canada): Thank you,Mr. Chairman. On behalf of Mr. Gilles Rivard, chairman of the National Transportation Agency, I would like to thank you for asking agency representatives to attend before you in your examination of Bill C-101, the proposed Canada Transportation Act.

[Translation]

My name is Ron Ashley and I am a lawyer with the National Transportation Agency. I am here today representing Maître Gilles Rivard at his request because he wanted a spokesperson for the Agency to be on hand to comment at greater length on any issue that might come up today.

[English]

Mr. Rivard has directed me to appear before you today as he is most anxious to assist you in your duties. It is his view that in his capacity as chairman of the agency, if he were to appear here before you as a witness he would likely not be able to offer you detailed comments on the proposed new law, either in substance or procedure.

As a lawyer and chairman Maître Rivard is extremely respectful of his role as head of the agency. He is an adjudicator and acts like a judge, a quasi-judicial officer. As chairman of the agency he settles disputes following within the statutory jurisdiction of the agency. In this respect the agency is like a court and members are the judges. Evidence and argument are brought before them on a case-by-case basis. They hear the evidence and argument, interpret the law and render a decision.

[Translation]

Since Maître Rivard's duties are those of a quasi-judicial officer, any comment that he might make to you could be interpreted as if he were biased or had a marked or personal preference as to the way things should or will be.

[English]

As adjudicators, Mr. Rivard and the other members of the agency are decision-makers who are only allowed to speak through their decisions, and their decisions are case-specific. Thus they cannot offer comments in a factual vacuum or offer advice on hypothetical or possible situations. Further, and importantly, they cannot comment on any policy advocated by the government.

Unlike, for example, the investigators at the Bureau of Competition Policy or the tax investigators at Revenue Canada, the members of the agency do not issue advance rulings on what is permitted or what is not permitted under the law, or what will be examined because certain matters raise an issue under the law. They cannot comment on what the law should be or should not be.

The difference is that the competition and tax investigators are like police, but the members of the agency are not at all like police. As I mentioned earlier, they are quasi-judicial decision-makers.

[Translation]

Let me just say that the Chairman has forwarded a brief to the Minister of Transport on Bill C-101 in which he comments on various aspects of the draft legislation or rather on the various administrative problems it entails, for example, the obvious problems that would result from having only three permanent members on the new agency.

I understand that senior Transport Canada officials are currently reviewing these comments.

[English]

In his submission to the minister, Mr. Rivard makes it quite clear that it is not his role to comment on substantive government policy. He affirms that it is the role of a federal quasi-judicial tribunal, like the agency, to accept and implement government policy as this policy is set out in legislation duly enacted by Parliament. It is exactly because of this that Mr. Rivard respectfully declined your earlier invitations to appear before this committee.

.1815

[Translation]

Maître Rivard specifically asked me to abide by this rule. I will answer all of your questions today, bearing in mind these instructions.

[English]

Finally, it should be mentioned that earlier this year Maître Rivard offered to senior Transport Canada officials whatever technical assistance they might need in the drafting of the bill.

Transport Canada took advantage of this offer and, as a result, and at Maître Rivard's request, three agency employees, including myself, worked at Transport's offices this spring and participated as technical advisers during the drafting of the bill.

[Translation]

I trust that I have enlightened you as to the nature and scope of my participation here today.

[English]

With these comments in mind, I will do my best to help you in your examining of the bill.

Thank you.

The Chairman: Thanks, Mr. Ashley. I can appreciate the fact that you are the messenger of this statement, but I was hoping that we'd have a helluva lot more substance than this stuff that we just received from Mr. Rivard.

Mr. Guimond, please.

Mr. Ashley: Mr. Chairman, if I -

The Chairman: It doesn't need a response. I am going to go right to -

Mr. Ashley: I can help and add specificity to the clerk's request in respect of two clauses you've spent a lot of time and effort trying to understand. Would you wish me to go directly to the request to appear?

The Chairman: Mr. Ashley, I'm not going to get into it with you. I am just trying to say that there could have been stuff that we targeted. There could have been a discussion of how much the agency has done, the reasons, the numbers. We could have had a more substantive representation.

Mr. Ashley: I am prepared to answer all -

The Chairman: I understand that you're just the messenger. That's why I am not going to take it out on you today. I am not asking for a response.

Mr. Guimond, please.

[Translation]

Mr. Guimond: I have a question along similar lines. We shouldn't shoot the messenger! Fortunately, I have a good memory. I am reminded of Gordon Baker, the lawyer representing Jack Matthews in the matter of Bill C-22 on Pearson airport. I would put questions to him in his capacity as Mr. Matthews' representative, but Mr. Matthews had told him not to say anything. Fortunately, the Senate settled that matter. This reminds me of that incident.

In any case, I must ask the Parliamentary Secretary to the Minister of Transport if the committee can have a copy of Maître Rivard's submission to the minister. It may contain some interesting facts. Would it be possible for us to get a copy? Could you supply us with one, Mr. Ashley?

[English]

Mr. Ashley: It was sent in September to the minister, and I can obtain instructions from the chairman in that respect. If this committee is unable to get it through the minister's office, then the answer is yes, I will seek instructions.

The Chairman: Our clerk will undertake as a committee clerk to contact the parliamentary secretary to find out if we can get that report.

Mr. Ashley: Okay.

[Translation]

Mr. Guimond: I have another question for you, Mr. Ashley. You stated that you and two other Agency employees had worked with Transport Canada officials on the drafting of the bill, but I guess your recommendations were not retained since Maître Rivard said, among other things, that there were obvious problems with appointing only three permanent members. At the beginning, there were nine members, and the number was whittled down to three, the number retained in Bill C-101. I suppose you felt differently about the matter. What was the Agency's position as to the number of permanent members that the new body should have?

[English]

Mr. Ashley: Your question raises two aspects. One is what was my position when I was a technical adviser to senior Transport Canada staff. The second one relates to what is the chairman's current position.

I can say that in respect of his current position he foresees under the new law that although there will be a reduction in workload in the rail sector, there are to be anticipated approximately 400 to 450 files per month in the air, marine, and rail modes that will require signing by the members of the agency. His experience has been that due to matters such as sickness, vacations, and business obligations, there are times that under the new law, if two members constitute a quorum, it will be virtually impossible to make some of those decisions.

.1820

Interestingly, many of those decisions under the new law will continue on in the air mode in particular, particularly in the sensitive non-scheduled international market and in the scheduled international market. I can say that there are decisions during weekends that have to be made by the members. I fear - and I express the sentiment of the chairman - that the ability of the agency to conduct those businesses in the future may be impaired if there are three full-time members.

I acknowledge that there are temporary members. I think it's fair to say, though, that under the new law those temporary members do not have to reside in the national capital region. Also, it may be that those temporary members are hired for a particular purpose, for example a railway costing expertise. I think it will be difficult to demand of a temporary member who has a railway costing expertise to decide on an international air file. I think it would be difficult, or perhaps untoward, to expect that.

Mr. Guimond: Okay, I have a last one.

[Translation]

In the course of your talks with Transport Canada officials, did you have an opportunity to express your opinion as to the appointment of Agency members? Bill C-101 makes provision for maintaining the same kind of patronage system. I have already spoken directly to Maître Rivard about this matter. In any case, I already mentioned to the committee - and I bet some money on this with friends - that Maître Rivard's mandate would not be coming to an end, since he had been appointed by Progressive Conservatives. I haven't changed my bet yet!

Regarding the new Agency members, have you made your recommendations known? Perhaps some other method could be used to appoint members aside from political patronage. Have you given any thought to this? Would you like to see members appointed by the Governor in Council?

.1822

[English]

Mr. Ashley: I have heard arguments along those lines, but as to whether or not the agency has endeavoured to make a submission along those lines, I am not aware of any.

Mr. Gouk: Approximately four weeks ago I requested, through the chair of the NTA, that they appear as a witness, and I specifically requested that they come prepared to answer the following question. Of all the cases the NTA has heard since 1987, how many of them would have been affected by the provisions, as they read now, of subclause 27(2) of the CTA?

Mr. Ashley: I am more than willing to get into that in as much detail as you wish today.

Mr. Gouk: I just need a number.

Mr. Ashley: If you will allow me to wade into it, I will do my best to answer.

Your question related not only to subclause 27(2) but also to clause 34. Since 1987 there have been in the neighbourhood of between 4,000 and 5,000 cases before the agency. Admittedly many of those are in air, but there is a very large number in rail. I know the focus of your deliberations is particularly in respect of the competitive access provisions of the law in rail.

All the people who came before the agency as applicants, whether a carrier, a shipper or a municipality, drew to the agency's attention the evidence and the argument that had to be furnished to the agency in respect of the law. Subclause 27(2) uses entirely new language that has not heretofore ever been before the agency. I will get into a matter where there is like language, and if you'll bear with me, I'll get to that in a minute.

The agency cannot act or speak without evidence, and only after hearing argument. I do not mean to be trite, sir, and I don't mean to be a dithering, obfuscatory lawyer, but it is impossible for the agency to answer that question.

The Chairman: That's a new clause: ``dithering and obfuscatory''.

Some hon. members: Oh, oh.

.1825

Mr. Gouk: Yes, indeed. You would have done well with another presenter we had earlier today.

I have several other questions. It's obvious I'm not going to get anywhere with this one.

The Chairman: Go ahead, drill away.

Mr. Gouk: What the hell does ``significant prejudice'' mean? Define it for me, from the NTA's point of view. Say I'm a shipper coming before you and you're going to either do something for me or throw me out the door, depending on how you interpret ``significant prejudice''. What is it?

Mr. Ashley: You're not asking me where it appears in the proceeding? You're not asking me whether it's at the front end or at the back end?

Mr. Gouk: No, I'm asking you what it is. I can deal with where it fits. I want to know what the hell it is I'm trying to fit in.

Mr. Ashley: I will tell you what I expect the agency will hear, by way of argument, as to what it will mean.

On one end of the spectrum, it could be argued, and I assure you it will be argued, that the mere inability of a shipper to get its goods to market because of a railway's refusal to grant a CLR is by definition significant prejudice to the ability of a shipper to get its goods to market.

At the opposite end of the spectrum will be evidence and argument tendered to the effect that in a shipper's inability to get its goods to market, the test of significant prejudice will only be met if that shipper has to close its plant.

It may mean other things. The shipper may not be able to penetrate foreign markets. What percentage of its bottom-line profit is contingent on its penetration of that domestic market or foreign market? Will the inability to get to a market or to get a rate from the railway impact on its ability to hire employees, expand, remain competitive or add a new plant? It means all of those things.

I can assure you, based on my experience, that the agency will hear all those things. I might add, a specialist tribunal with an 85% success rate for appeals before cabinet and a 95% success rate for appeals before the Federal Court of Appeal will do a very good job in trying to deal with the law if that's the law it is given.

Mr. Gouk: You see where the problem is. You've just given me an incredible range, including that possibly a shipper has to be bankrupt before this thing may be decided in his favour. So we're saying to the shippers, don't worry about subclause 27(2), it's great; it won't harm a damn thing, as long as you're prepared to go bankrupt. I find that absolutely astounding.

We heard a similar thing from the other guy who was here, that we have to mint a new coin to pay for his words. I'm absolutely disgusted that the NTA, knowing exactly what I'm looking for - a clear definition and a clear example of subclauses 27(2) and 34(1), but most specifically subclause 27(2).... Is this some problem? If we don't have subclause 27(2), does it stop you from doing your job?

Mr. Ashley: No.

Mr. Gouk: In the last eight years, have you had a problem doing your job?

Mr. Ashley: The answer to that, sir, is no, it will not stop the agency from doing its job. It has no choice but to do its job.

Mr. Gouk: If we can move on, then, can you tell me what ``commercially fair and reasonable'' is, as it pertains to clause 113? When you're faced with having to make a determination on whether something is commercially fair and reasonable or not, how do you define it?

Mr. Ashley: What is commercially fair and reasonable is, I suspect, consistent with what is competitive. What is competitive in any circumstance depends on the product market, the geographic market, the elasticities of demand for that product, temporal aspects, production efficiencies, market structure, market conduct and market performance.

I can tell you that on the street it would mean covering the fixed costs, covering the long-run average variable costs, contribution to fixed costs and perhaps a return on shareholder equity. But to say today that in the future that will be what the agency does in every case would be wrong.

The competition people have appeared before you. This law is predicated on competition in the marketplace. If you look at the case law under the Competition Act, the courts have stated that even a non-compensatory rate, a below-cost losing rate, can be a commercially fair and reasonable competitive rate. Perishable goods, production oversupply - the jurisprudence under the Competition Act shows that a commercially fair and reasonable rate can be many things in many circumstances, and what may be commercially fair and reasonable today may not be tomorrow.

.1830

If there is a case, I can assure you that the agency will examine all those things. It has no choice.

Mr. Gouk: Let me point out what you've just said. When I asked you about the meaning of significant prejudice, you said ``it could be argued....'' When I asked you about the meaning of commercially fair and reasonable, you said ``I suspect it means....'' That's little goddamn comfort to the shippers.

I've tried to find a little bit on both sides of this thing. I have told the people here that I am not pro-rail, pro-shipper or pro-producer, I'm pro-economy. I'm trying to find where the balance is in this thing.

If I thought I could find something in subclause 27(2) that I could accept.... Tell Mr. Rivard that he has just blown it. I have nothing but contempt for his refusal to come and answer our questions honestly. I have waited on this for four weeks and I have wasted all the time I have waited on the NTA coming. If this is what the NTA does, if this is how they decide.... It's no goddamn wonder the shippers are worried. ``I suspect...'', ``it could be argued...'' - that's no comfort at all, Mr. Ashley.

Mr. Ashley: The agency, with the exception of myself and two other employees, had absolutely no say in the drafting of this bill. I was drawn in at the eleventh hour as a technical adviser to give technical input. I can assure you that my advice was either accepted or rejected. Mr. Rivard asked me to go. That is where the agency's involvement in this law begins and stops. To say that Mr. Rivard is at fault for doing that is absolutely incorrect.

Mr. Gouk: Can I then surmise from what you're saying that you - this will be hard for you to say - don't necessarily agree with these provisions, but you're going to work with them to the best of your ability? These things are highly subjective, and the NTA, soon to be the CTA, will have to deal with that as best it can.

Mr. Ashley: That is correct, sir.

Mr. Gouk: I apologize for some of my anger. Perhaps it was wrongly directed, but you can see where my concern is - the lack of objectivity in this, trying to answer on behalf of the shippers, and the NTA, to the extent that it has been represented by you, is telling me that they're probably damn right to be worried.

Mrs. Sheridan: I want to see if I understand what you're saying. First of all, in fairness to you, the point has to be made for people like Mr. Gouk, who are so distressed by what your presence here is not delivering. The fact is that the NTA - in future the CTA - is a quasi-judicial body, and I don't know if you or anyone else on that body can answer questions in the abstract. If you went to the judge at the Court of Queen's Bench and asked how recklessly you would have to drive before it constituted criminal negligence and then you would govern yourself accordingly, no judge in the country would answer that question because it depends on the circumstances.

Before we waste a lot of time trying to get the NTA to define significant prejudice in the abstract, we have to recognize that a quasi-judicial body is governed by those kinds of concerns. It doesn't matter how angry that makes us or how frustrating it may be, that is how quasi-judicial bodies work.

That doesn't solve any difficulties I might have with the lack of definition in subclause 27(2) or some of the other clauses we've heard about, but one thing that is clear to me is that if we do not give our quasi-judicial bodies the right to adjudicate, ultimately that will harm the shipper, the railway, and any other applicant that comes before it - if that body is prejudging things before the applicant has an opportunity to present his or her evidence and have it adjudicated in an impartial manner.

.1835

That's the basis of our entire judicial system. Although it's frustrating, our job as parliamentarians is to make these decisions and make sure we get them right. That's why we've been listening to all these witnesses. I do want clear definitions, but I guess we're barking up the wrong tree to run after you for that information.

Mr. Ashley: As a lawyer, I can tell you that the agency has no right to try to draft the law or to tell this committee whether it's good or bad or should be changed. It cannot do that. It must accept government policy as that policy is codified. Once codified, the agency administers it.

The agency has an unscrupulous record of administering the law. The CTC did as well, but I cannot come here and tell you that significant means substantially, or that substantially means something more than in law de minimis and means something less than whole. I cannot tell you that and if Mr. Rivard were here, he couldn't say that either.

What will become of those clauses will be decided on a case-by-case basis. If there's subjectivity in the law, precedent will remove the subjectivity. One case built on another and then another will offer shippers, carriers and any municipalities that apply a notion that while subjective in its formulation, an application is consistent, readable and predictable. That's the tenet by which the agency governs itself.

I'm sorry to be long-winded, but I cannot tell this committee what significant means or how the law should be changed to placate shippers.

Mr. Fontana: Mr. Ashley, while all of us might be a little frustrated that Mr. Rivard isn't here, I don't understand Mr. Gouk's outburst. I thought you were giving him a range of definition of what significant prejudice meant.

Mr. Gouk got all excited when you said it could mean on a case-by-case basis - I think that's how you said you would evaluate it - whether or not it meant someone was going to go bankrupt. But I also heard you talk about competition, plant size and all kinds of other factors, so I don't understand Mr. Gouk's outburst as soon as you mentioned a range of criteria the NTA would take into account on a case-by-case basis.

Did I misread you or did Mr. Gouk misread you?

Mr. Ashley: Mr. Fontana, what I attempted to do was to show that if subclause 27(2) is the law, I would expect Mr. Rivard and the other members to hear evidence and argument on a range of options. I'm not basing that on navel gazing, I'm basing it on my experience with the existing test under subsection 113(5) - significant impact on a competitor, significant lessening of competition.

I have been in those minimum compensatory rate cases and I have heard the evidence from the carrier and the shipper. It ranges on the spectrum of what I just said.

Mr. Fontana: Even without subclause 27(2), isn't that what the agency does now on an evidence basis? It takes all of those kinds of factors into account. Carriers and shippers plead their case to the agency on the basis that they have not been able to come to a negotiated settlement on a competitive access provision. They will argue the significant impact that a decision may have on the shipper, the carrier or a municipality. Isn't that what happens now?

.1840

Mr. Ashley: With respect, Mr. Fontana, it is not. What happens now is there are only two or three sections dealing with like language. I mentioned subsection 113(5). That is the minimum compensatory rates. That will not apply under the new law. The test there is significant lessening of competition or significant impact on a competitor. There is evidence and argument on that.

There's another section with comparable language, section 59, detriment to the public interest. That is not continuing. On that, evidence and argument was presented as well.

On running rights, which will continue under the new law, the test is just or necessary in the public interest.

Those sections have a test like that of subclause 27(2), but they're broad impacts. Subclause 27(2) is a specific impact on a shipper. The experience of the agency is with broader assessments of impact, whether it be on the market generally or on competition. So I'm afraid the answer to that is no, but it's a qualified no.

Mr. Fontana: One of the concerns that have been raised by some shippers is that the significant prejudice would be either a pre-test or a first step to access to the agency. You were trying to answer Mr. Gouk as to where significant prejudice would be used. Based on the language that's used in subclause 27(2) now, do you believe that it's going to be a pre-test to access or, as Transport Canada and the minister have indicated, that it is supposed to be guidance to the agency on the remedy, on the decision after you've heard all of the evidence?

Mr. Ashley: I can answer that specifically. I am aware that the minister has indicated that he intends subclause 27(2) not to be a gate to be dealt with at the end of the day as a part of the quasi-judicial function. I'm aware that subclause 27(2) is not like the gate that we see in section 290 of the Railway Act, which has a very up-front prima facie test: is there a case here that warrants hearing by the agency? Subclause 27(2) does not do that.

All I can say is that the minister is on the record as saying that he intends to make it clear that subclause 27(2) is at the back end. Therefore I cannot go further; I'm sorry, Mr. Fontana.

Mr. Fontana: Isn't it clear now that it's at the back end? That's what my question was.

Mr. Ashley: I will be very direct. I believe the subclause can be read in such a manner that lawyers will argue that it is both at the front and at the back.

Mrs. Wayne: Could you confirm whether or not shippers provisions we have in Canada, such as competitive line rates, CLRs, exist in the U.S.?

I'm also informed that the captivity issue in the U.S. is addressed in terms of market dominance. Could you explain what that means?

Mr. Ashley: I will do my best, and if I don't do a good job, may I undertake to respond in writing as soon as possible?

Mrs. Wayne: Yes, you certainly can.

The Chairman: That would come via the clerk, Mr. Ashley.

Mr. Ashley: Yes, sir.

I understand that the jurisdiction in the States is with the ICC, and there are competitive access provisions there. I understand that you've heard evidence here, conflicting evidence sometimes, that it exists. Others say that it doesn't exist. I could say that it does exist. It exists, for example, in respect of running rights. It exists in respect of other competitive access.

I'll be direct, though. I do not know if a CLR provision exists in the United States, but I can assure you that I will go back to the agency this evening to talk to my colleagues and will answer that question.

Mr. Comuzzi: I don't know if this is a question, Mr. Chairman, but it goes to the structure of the committee of the House of Commons.

If the committee of the House of Commons requests the presence of a person to appear before it and that person does not come before the committee but sends an emissary, isn't anybody in this process of the House of Commons answerable to the committee of the House of Commons?

.1845

The Chairman: I think I'm not -

Mr. Comuzzi: I would like an answer to that.

The Chairman: That's what I'm going to attempt.

Mr. Comuzzi: Okay.

The Chairman: I haven't discussed this with the clerk just yet, but I think we've gone through this one time before. It is a staged process. If you want to follow through with it, Mr. Comuzzi, the next stage is to get this committee to undertake that the request now be made to the House, with a motion, etc.

Mr. Ashley: May I interject, Mr. Chairman?

With due respect, the request sent to the agency to attend today was addressed to the chairman's executive assistant. The language, while in French, if you'll forgive me, was that this committee would like to hear representatives of the agency. Again with due respect, when the chairman saw that language he thought the best representative would be me. I can offer you more than the chairman because for the chairman to offer to you the types of comments I'm trying to offer today, he would be haunted, I assure you, in the future for having prejudged, for having predetermined, for being biased and what have you. That would totally destroy -

The Chairman: Well, Mr. Ashley, he'd probably not even go that far. He'd just sit there and say ``No comment``, so he wouldn't be very haunted. He wouldn't be answering any of our questions, probably as much as you have been here today. But that is a matter for another day; if Mr. Comuzzi wants to take it up with us again, he can.

Mr. Comuzzi: Could one of the clerks give me the process by which to do that, please?

The Chairman: Sure, the clerk can provide you with it, but it is in the Standing Orders.

Did you have another question? No? Okay, then we go to Mr. Gouk for our closer, and that's it.

Mr. Gouk: Just by way of comment on the questions posed by Mr. Fontana as to why I would be particularly upset about the range of answers on the definitions - and it is with no particular animosity to Mr. Ashley - I would suggest that perhaps he was being brutally honest and I appreciate that very much. The problem is that when she was here, I expressed specifically to Moya Greene of Transport Canada a concern that this was very subjective. The answer from her, and to some members on the other side - Mr. Fontana was foremost among them - was that with these things there is all kinds of clarity of definition; this term is commonly used and exactly what is meant is therefore very clear, although nobody has ever managed to come up with a definition.

I have listened to shippers come in with concerns and I've sat here thinking about whether or not they are justified, whether they are slightly paranoid, or whether they are totally paranoid. Now I'm hearing from the very body that must make these determinations that they don't know what it means, that they will have to delve into it. You're not saying it, but this means the writers of this legislation are saying ``Trust me, it'll probably come out okay, depending on how we decide to interpret this as we start to establish precedent''. It's not meant to be a gateway, but lawyers will be able to argue that. And God knows when you'll actually get your case to the CTA.

That's disturbing, but I don't mean it's disturbing from you. I apologize if I was upset, because it certainly wasn't geared at you even when I was furious. It is part of a bigger frustration in trying to deal with this damn bill. I hope you can understand what we're up against.

Given the specific question I asked, I suspect that had he chosen to, Mr. Rivard - either himself or through you - could have given me a more definitive answer as to what subclause 27(2) would have done for them in the last eight years, but perhaps not, given the fact that you are saying that in order to apply something you first have to determine what it means, but you frankly don't know what it means. I suppose in that sense you have in fact answered my question.

Mr. Ashley: Mr. Chairman, if I may respond to Mr. Gouk, no offence is taken. I'm yelled all the time as a lawyer and I suspect it will carry on like that.

Mr. Gouk: So are we. It's an occupational hazard.

Mr. Ashley: I can tell you this from experience, because I was involved in the 1986 amendments to the Competition Act. The language in that act used ``significant lessening of competition''. There was a great debate at that time. What was meant by ``significant''? Was it substantial? Was it something more than ``little'' and was it something less than ``all''? They wanted an arithmetic threshold to establish what was significant in terms of market shares. Was it 10%? Was it 20%? After much of that committee's deliberations - and which you are going through now - the decision was that no specificity could have been offered that would have been of assistance.

.1850

Again, with specificity you lose somewhere else. I want to be clear here, but I have to be careful. because I'm not advocating policy. I'm saying as the lawyer that it is what it is.

I can also speak in respect to whether or not Mr. Rivard could have added more flesh to what I have said. With due respect, he could not. In fact I think I went far beyond what he could do. I know you believe I'm not being too helpful. The members of the agency are like members of the NEB, like members of the CRTC: they cannot speculate, they can't provide opinions based on hypothesis. With the utmost respect, it is impossible to go back there to take a look at a case in respect of which no evidence was drawn on subclause 27(2) and to say it may or may not have been impacted.

Mr. Gouk: Using your own terms, ``with due respect'', you have not been any help, but it's not your fault. Maybe you've been a great help. I don't know.

The Chairman: Well, I would counter with the fact that I think it was made concrete by the example of Mr. Ashley's experience. I think it solidified, for me as a member of the committee, that there has to be an appreciation of the fact that you can't just draw a simple answer to the question of what the definition is until you have a specific case. So case by case -

Mr. Gouk: It's after the fact: sign here and then we'll tell you -

The Chairman: Well, Jim, give me the case -

Mr. Gouk: If I can just -

The Chairman: No, I want to finish. I want to wrap up. Mr. Gouk, please, I just heard you speak for five minutes. I just want to conclude, all right? And this doesn't help Mr. Comuzzi.

Mr. Fontana, do you want to conclude? I've just about had it, myself. I can't get through to him because he doesn't want to listen.

Mr. Fontana: If I could, I think this is a very serious issue. We have a significant witness here and we're trying to deal with a very important matter.

Mr. Ashley, you said you have taken certain matters to the court of appeal and have been very successful. Perhaps you look at other case law from other quasi-judicial bodies. I wonder if I could ask you if you have ever heard the terms ``significant prejudice'' or ``significant harm'' before. Is this something the courts, as opposed to quasi-judicial bodies, have a problem dealing with?

Mr. Ashley: Mr. Chair, I'm familiar with the courts and I have a lot of experience with dealing with what the term ``significant'' means. I cannot say offhand whether or not the conjunctive ``prejudice'' has been dealt with by the courts. I do not know.

Mr. Fontana: Let me just give you a tangible example we've used with the witnesses who were here. As you know, subclause 27(2) is to be used on the remedy side, not as a gateway to the access. I was disappointed to hear that you might.... Well, it's not difficult to understand that lawyers can argue both ways on any particular issue, and that's fine.

Hypothetically, in the case in which a railroad decides to raise the price of that CLR for a shipper by 1%, 2%, or even 3%, and the shipper obviously can't come to grips with that.... And in most cases, as you know, Mr. Ashley, they don't even come to you, nor do they even go to final arbitration; there have been very few cases that have come to the agencies since 1987, so the system is working to a degree. If the shipper feels the railway is going too far, can that shipper come to the agency, put his case forward, but on that basis of 3% not show that it would be significantly prejudicial to their plant, to their operation? Could he do so simply because he thought the railroad was being unreasonable by asking for a 3% increase? Do you feel ``significant prejudice'' would give some guidance to the agency in terms of the remedy available to that shipper?

.1855

Mr. Ashley: I believe the minister has stated that is his intention with respect to that section,Mr. Fontana.

Mr. Gouk: Could we have a bit more of a political answer?

The Chairman: Jim, order, please.

Are you all through now?

Mr. Ashley: If the question is whether or not a 3% rate increase amounts to a significant detrimental impact on that shipper, the answer is that in law it will be for the shipper to say they are and for the carrier to say they are not.

Mr. Fontana: What factors would the agency use to determine whether or not, as with that example of 3%, it was significantly harmful to that shipper?

Mr. Ashley: I have a list of matters the agency would likely take a look at, Mr. Fontana.

Mr. Fontana: If you could either read some of them or table them with the committee, I would appreciate it.

Mr. Ashley: I am ready to do it now. This is a list I formulated based on my experience and in talking to my colleagues. What is the impact of the rate on the long-term viability of the shipper? What are the short-term implications? What's the bottom-line impact? Does it impact the ability of the shipper to expand into domestic markets, to continue in domestic markets, or do the same in export markets? What is the nature of the goods? How many other markets does the shipper serve? How many other carriers could the shipper use? How much higher are the rates of that other carrier? Are they intermodal carriers? Are they intramodal carriers? Will it foreclose the shipper from expanding? What are the competitive effects in the export market or the destination market? Would an increase of a rate of 3% mean that market penetration would be foreclosed or impaired?

That is the best I can do for you in terms of showing you a list for determining what it may mean, Mr. Fontana.

Mr. Fontana: And I think it was very useful. Thank you.

The Chairman: Thanks, Joe.

Mr. Ashley, I'll stand by my opening remark that I found your opening statement empty, for a lack of a better word. I found your answers to our questions most helpful, however.

Thank you, sir, for coming before our committee today and answering the questions to the best of your ability.

Mr. Ashley: Thank you, Mr. Chairman.

The Chairman: I appreciate it.

Colleagues, we'll see you tomorrow afternoon at 3:30.

The meeting is adjourned.