[Recorded by Electronic Apparatus]
Wednesday, December 6, 1995
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[English]
The Chairman: Order.
I understand that Mr. Chrétien may be late, as he has a speech to make in the House.
I welcome Howard Migie from Agriculture and Agri-Food Canada and John Dobson from Transport Canada.
Howard, I believe you have a few opening remarks, and then we can move from that to questions.
Mr. Howard Migie (Director General, Western Grain Transportation Review, Department of Agriculture and Agri-Food): I'd just like to give a little background towards this report that came from the senior executive officers group.
At the time of the federal budget, both Agriculture and Transport put out a document that indicated that the government wasn't taking any decisions at that time on the question of car allocation or the role of the Wheat Board in car allocation or disposal of government cars, but that there would be a review of those three issues by the end of the year, the end of December. That was at the end of February.
In April there was a meeting of the senior executive officers from the various grain companies, and on the same day there was a meeting of that same group plus a number of the farm group leaders with officials from Transport and Agriculture. Nick Mulder asked the group to prepare terms of reference for the review and to take the leads in undertaking this review.
In late May this same group had a meeting. Also, several of the producers wanted to be involved in the process, which was indicated at that time in April.
When I speak of the SEO group, I'm referring to the six main grain companies, Prince Rupert Grain, the Wheat Board, the Grain Commission, the two railways, Parrish and Heimbeckeer.... It's that group that was supplemented by a couple of producers, and there was discussion with the producer leaders as to who wanted to work on it and how it could best be done. At the meeting in late May they had the terms of reference and there was an agreement that there would be two producer representatives on a technical committee and one on a steering committee.
They set up these two groups. One was headed by Rick Wansbutter of Saskatchewan Wheat Pool; it was doing a technical analysis of options. The steering committee was headed by Milt Wakefield from the Grain Commission. They were to conduct an analysis of options, and they decided that if they could they would try to reach a consensus on a preferred option - if they could all agree - and that would be their task.
They reported to Minister Goodale. He had a meeting in late May with the group and they gave an update. They worked through June, July and August to develop options on those three issues in different combinations. In September and October they spent their time trying to come up with a recommendation, trying to see if they could agree on one common set of recommendations among that fairly broadly based group.
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On November 3 they made a presentation to Minister Goodale and to Nick Mulder, the deputy minister of transportation. It's their report. It's their effort to address these three issues: how we can better handle car allocation; what the role of the Canadian Wheat Board should be in car allocation; and the disposal of the government cars.
As a group, they did add the issue of freight rates because freight rates and purchasing of cars became linked. How the productivity that comes about from changing the system should be shared was also an issue, so they also added that to their agenda.
So in terms of opening comments, that group made the report. They did give the terms of reference that they shared with government, and government was sort of endorsing those terms of reference as a good way to conduct their work. They involved producer groups and individual producers, but it came forward - as the SEOs' report - with three individuals who were part of the recommendation-setting group and who met two or three times to come up with a final set of recommendations.
I'm going to stop there, and John Dobson and I will try to answer whatever questions you have.
The Chairman: If I could say this before Mr. Hermanson comes in, we recognize that it is a report separate from government. I hope we will be talking to the SEO committee at some point, but what we're trying to get to the bottom of is whether or not we're locked in, whether or not the process was fair, and any questions that members may have relative to the government's involvement in it.
With that, I'll turn to Mr. Hermanson first.
Mr. Hermanson (Kindersley - Lloydminster): Thank you, Mr. Chairman, and thank you gentlemen for appearing before the subcommittee.
I've discussed the report with a couple of the members who served on the SEO group. I know their philosophical viewpoints were fairly diametrically opposed to each other's on most issues, yet they were in agreement that this deal was probably the best deal that could be cobbled together. They both stressed, however, that this was a very fragile deal. I think they both described it as being like a house made from a deck of cards. You know, you pull one card out and the whole thing collapses.
Do you share that opinion? If you do, do you feel the deal is a good enough one that it deserves to remain? Or do you feel that perhaps the best thing that could happen is that it does collapse and we start over again with a new proposal?
Mr. Migie: In terms of the statement about whether or not we can make any changes to this package and still have that same group accepting it, there are some areas where I think the group would admit fleshing it out is still open. In terms of the car allocation and the committee, there are some things that need to be developed further and there might be scope to address other concerns.
If you make one change, it's quite possible that you're really upsetting the balance that led to an agreement within that group. They were literally working under the principle of what their best alternative was to no agreement. They were trying to come up with a package as a group. If you were to take out one significant element and change it, you would probably lose the whole group right now. I think that's a fair assessment, but there are some things you probably could change. If you went back to the group and explained why it is better, personally I think there's some scope for that. The key, however, is that it has been presented as a package.
I think it does reflect something we don't usually do. It's not the position of each group because every one of those groups around the table had a position that was somewhat different from what came out at the end of the day. If you take away one thing that is a significant part of the package, you may find they would all decide to abandon it to go back to their original positions, which are quite separate and different.
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So what they're presenting to the government is that this group thinks this is the best package they could come up with and that they'll support it, as opposed to trying to develop something different, which may not have anywhere near that kind of support.
Mr. Hermanson: I have a further question. This is the part I have the most difficulty understanding. Even the railroads admit that the hauling of western grain is very profitable for them. Of course, they say that because it is profitable they will do their best to provide excellent service, and they go through their sales pitch.
If the railroads in fact are buying these 13,000 hopper cars for 33¢ on the dollar, why did the SEO group agree to their demands that the freight rates be increased by $1 per tonne to producers? We realize that they've had free use of these cars for years and years, depending on how old the cars are, that they have made millions of dollars using those cars, and that now they're offered an increase in their equity.
If they get $300 million plus worth of cars for $100 million, their equity goes up. They're in a better financial position because their net worth has increased three times or more what they've paid for these cars. Why are they insisting that producers suddenly pay $1 per tonne more to use these cars that the railroads have had free at the expense of the taxpayers for all these years?
Mr. Migie: There is a provision in the package as well that would say that the maximum freight rate for grain should go up whenever cars are purchased or leased in the future.
Mr. Hermanson: But that's anticipating that the railroads are buying those cars at their full value.
Mr. Migie: Whatever value it is, it would go up by the relative amount. It would be assumed that whatever they paid is market value.
I hesitate to say what others would argue, but because it is a package - and I can picture this - the railways would say that having the maximum rates for ten years with no review is something they might not have supported otherwise. Sharing productivity the way it's proposed is quite different. Currently, other than the $10,000 a mile that applies to branch lines, the maximum rate goes up with inflation so that there's no productivity sharing beyond that, whereas they are agreeing to productivity sharing.
I don't want to get into either defending or opposing the package, but I would say that this one element is certainly a plus for the railways, in my view. There are other things they have agreed to that I think from their point of view would be less profitable to them than the current situation. That's what you'd have to balance.
Mr. Hermanson: From a producer point of view, then, would you suggest that in this deal the producers are getting in other ways more than a $1-per-tonne value out of this deal because it's costing them that $1? In other words, is this a good deal for producers? Is there something else in the deal that is worth more to them than the $1 per tonne extra it's going to cost them in freight?
Mr. Migie: The government hasn't made a decision on the report.
In terms of some of the things producers get out of this, one is productivity sharing. There's something specific that relates to the maximum rates. The first 0.5% goes to the railways, but beyond that producers would get one-third of the maximum. The grain companies would get one-third, which would come in the form of lower rates at high throughput elevators, which, to attract grain, might involve slightly higher prices or grain companies paying the transportation costs to get the grain to the elevator.
The other prospect that encouraged some of the producers to be supportive is that some of the changes that the Wheat Board...and the Wheat Board was party to the agreement, would allow more flexibility on grain companies as to where cars are allocated and to which elevators. There might well be some savings from grain companies being able to have more scope to arrange a full train. It might go to just one elevator rather than having to be split up.
There are some efficiencies there; more people felt there would be a lower-cost system in total, which means there's more to be shared, and there would be some productivity sharing. So I think the producers would feel there is a plus there in total.
Mr. John Dobson (Policy Adviser, Freight Policy and Programs, Department of Transport): I wouldn't characterize the $1-per-tonne rate increase as being the railway's proposal. It was part of the package. I think the grain companies and others recognize that if the railway's costs were going to increase to pay for the cars, the freight rate should go up by some amount.
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They also recognized, when coming up with a number, that the government wouldn't accept $1 for all of the cars while it's trying to minimize the freight rate impact on producers at the same time. I think that's where the $100 million proposal came from.
Mr. Hermanson: Was serious consideration given to the government just keeping the cars, compared to selling them at 33¢ on the dollar? Why did the government agree to this?
You're here representing the Department of Agriculture. Why did the government agree to this?
Mr. Migie: The government didn't agree to any of this and we weren't party to the agreement. We weren't there for all of their meetings. We were invited as observers, but we didn't say anything.
Mr. Hermanson: Okay.
Mr. Migie: The committee that was looking at options early on looked at the Canadian Wheat Board owning the cars. They looked at the option of a producer group, which would be somehow formed to own the cars. The status quo was more or less the government continuing to own cars.
Mr. Hermanson: On this productivity gain, I understand why the railroads have to get the first 0.5%, because that moves them toward productivity gains, but I'm not sure why the remainder is shared on a one-third, one-third, one-third basis.
It's the grain companies I'm wondering about. Why would they suggest that they should share in productivity gains? Don't they have other ways of...? Their costs are not connected to transportation. They get their cost-of-elevation charges and handling charges through their facility. Would they not be better off to be excluded from the productivity gains and to be more up front in showing the costs they add to the movement of grain?
Mr. Migie: The productivity gain that's allocated to the grain companies comes in the form of freight rates below the maximum. The incentive rates we have now would be kept at their current level, plus anything that came in the form of one-third of that productivity gain would come forward as lower freight rates for high throughput elevators, for example.
It comes from an argument that people who have assets in the system have part of the decision of increasing productivity. The grain companies are in a position, along with the railways and individual producers, to actually lower the costs and get more productivity by their decisions. That's the rationale for sharing.
There was no magic, in my view, to one-third, one-third, one-third. I don't know how they arrived at that. That's what came forward as a proposal from the group. They were trying to find some way to increase productivity, to encourage people to seek out ways to lower costs and to have the incentive to do that. Eventually they came up with this proposal.
John, do you want to add something?
Mr. Dobson: I think they were looking at it as an opportunity to enhance the railways' incentive rate programs, which in turn they would use to try to attract grain to their higher throughput facilities.
I guess an argument could be made that at least indirectly the producers do benefit from the incentive rate programs because the grain companies generally pass those revenues on through capital investments and facilities, and perhaps through trucking programs and things like that. So there is an opportunity for the producers to get access to some of the grain companies' share of the productivity sharing of the railways.
The Chairman: Mr. Hermanson, we'll come back to you in time for a second round.
Marlene.
Mrs. Cowling (Dauphin - Swan River): Thank you, Mr. Chairman.
I've always been a very strong, firm believer and supporter of the Canadian Wheat Board, so my questions are going to hinge around the Canadian Wheat Board.
I'm told by some of my constituents that there are some fears about the viability of the Canadian Wheat Board. I'm wondering what you see in this report with respect to the board. How will this enhance the board? Or will it in fact weaken the board? That's my first question.
Mr. Migie: I don't think I'd describe it as strengthening or weakening. In the Wheat Board we're party to the agreement that they came up with to make the recommendations. It's a question of the priority role. They put out the principle that in the long term the Canadian Wheat Board's role in transportation should be no more than what is necessary to be an effective marketer of grain.
There are really two short-term changes that would affect the board.
One is that the board itself would not be creating the train runs. That would be transferred to the railways. The date of that would be determined.
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The second is that instead of allocating cars to individual elevators to a company, it would be allocated to a company in a zone so that the company would have some flexibility in deciding which elevators, and they could either truck grain from one to another or they would have some potential for more efficiencies. Over the longer term, provided the Wheat Board was feeling that its marketing concerns were being at least as well achieved with changes, they would continue in that direction. So there would be some standards on port performance, and if in fact the Wheat Board's performance as a marketer was being enhanced, they would continue along with that path over a period of time.
So I don't see it necessarily as a strengthening or weakening. It's more a question of the bottom line priority being an effective marketer, and the board is quite willing to try this out to see if it could become a more effective marketer through these changes. They're not going to proceed further if it means they're going to be a weaker marketer, but they don't expect that. It's a question of there being some gains to be made. Let's try it out by moving in that direction.
Mrs. Cowling: I spent a day at the Canadian Wheat Board about a month ago just to reaffirm and confirm in my own mind that the board was doing an excellent job, and of course I came away still feeling that way about the board.
One of the questions that was raised while I was there, and one of the fears that exists, is moving to zones instead of train runs and the impact that might have on the producers I represent, the farmers out there. They fear that it may increase their costs, because if in fact there aren't enough cars in a particular zone, they'll have to be pulling from other zones. For instance, in Dauphin - Swan River we may end up having to pull from a zone that may be a further distance, which will in fact increase the freight costs of those very land-locked farmers in Dauphin - Swan River who are already paying the highest freight costs in the country. Can you respond to that?
Mr. Migie: In terms of the concept, what they're trying to do is still have an allocation for a Wheat Board for a given company. That's quite separate still under this regime, so there would be an allocation that the board would make to a company based on a zone. It gives them more flexibility. I don't know how it could be less. Right now, instead of it being strictly to each elevator, there's going to be some more flexibility, and it would be the company's decision to make as to whether they would prefer to use the cars to more frequently serve, let's say, one elevator in a zone. They would then be responsible to ensure that there was appropriate service, either by trucking grain in or ensuring that all the elevators were fairly treated.
So they would have some of that responsibility. What they would gain, depending on the size of zones, is they believe they would be able to move the grain for lower cost.
Mrs. Cowling: I have another question, and it relates to zones as well, because one of the fears that seems to be out there - and I'm not sure whether it's true or not - is that going through zones instead of train runs may well also have a devastating effect on the quality of the product we move. People fear that it may deteriorate the quality of that product. Can you respond to that?
Mr. Migie: The grain companies feel that they can provide really good service to the Wheat Board, with more flexibility, and in terms of the Wheat Board's role as a marketer that they can meet whatever quality standards are set. This proposal does not go to the point of saying the Wheat Board operates a support position and is only signing contracts. It doesn't do that, but it does give more scope to grain companies, which will have to meet Wheat Board standards, and if they don't, then the Wheat Board won't go further in that direction. The Wheat Board has indicated a willingness to say we're prepared to try this out, it might lower costs. We're not going to compromise on quality or standards. The grain companies are saying the same thing. It would be at least at the current standard or better, and it will be monitored closely. Provided it does that, the board is prepared to go to fewer zones over time in order to give more flexibility.
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Mrs. Cowling: I want to touch on the time factor. What kind of a timeframe are we looking at, and what kind of an adjustment and transition will there be if in fact we move to that position?
Mr. Migie: There was an intention of three years that was put forward as a target. It also wasn't really certain that the railways could take over the train run system this coming August, but it would be perhaps the following year at the latest for that to occur. Their targeting was over a three-year period. Those are the words that were expressed.
Mrs. Cowling: Great. Thank you.
The Chairman: We've had Bill C-101 and the WGTA. We're seeing branch-line abandonment proposals.
What's the possibility of the grain companies using the zones to manipulate where the grain moves to so that they can close down elevators for lack of throughput?
Mr. Migie: You said where the grain moves to. Do you mean what elevator?
The Chairman: What elevator it moves to. There's a real concern from producers - and we've heard it from RailTex before this committee - that if you're going to maintain a branch line as a short line, then you have to catch it before it gets into its death spiral. It gets into its death spiral when you lose the elevators.
My question is, with the zone proposal, what's the possibility of the grain companies manipulating the grain to in fact lessen the throughput through one elevator and in fact close it down or close down a branch line in their interest, because they want to move the grain through a high throughput elevator down the line? There's an impact to that on producers.
Mr. Migie: The grain companies would have more scope to use high throughput elevators more. That would be some of their added responsibility when they do. They still have to ensure that individual shippers have equitable access. That could be achieved by periodically either trucking grain or using the elevators sufficiently so that the individual producers have fair access, and the Wheat Board would have some sort of guideline to ensure that. But it would give more flexibility to an individual company to have a lower-cost system in place. If that meant using a high throughput elevator more frequently and other elevators in their zone less frequently, they would have some scope to do that, but not to the point that an individual producer had lost his delivery opportunity.
The Chairman: Did you have a supplementary on criteria, Marlene?
Mrs. Cowling: Yes.
What that does, if I read this correctly, Mr. Migie, is it puts the grain company in the position where they're going to be negotiating competitive rates for their producers to be sure they can get the grain out. That would in fact enhance the stability of that particular company.
I'm not sure how that's going to fit with where and what the criteria are for developing the zones. Does that have any impact on how those zones are developed?
Mr. Migie: Deciding on the zones is something that still needs to be done, and the Wheat Board has a key role to come up with that.
Mrs. Cowling: Yes.
Mr. Migie: It is important exactly how they define those zones, and the Wheat Board has quality concerns that they have to address within their decision on each zone. There is a greater emphasis on efficiency and productivity through this approach. It does put some of the onus on the grain company itself. In its desire to have productivity gain, it may end up that there are lower rates negotiated, incentive rates, at those high throughput elevators.
The Chairman: Bernie, did you have a question?
Mr. Collins (Souris - Moose Mountain): Thanks, Mr. Chairman.
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When the group was set up and they had a mandate, was it within the jurisdiction of the group to add and remove items, just kind of willy-nilly? As they got a feel for something would they throw it into the pot?
Mr. Migie: There was only one item they raised and said they wanted to add that had to do with freight rates. That was the only one they put on top of the three they were asked to look at.
They felt they couldn't come to an agreement without sorting out how the freight rate would be adjusted for rail car changes and how productivity sharing would be handled, which really relates to the maximum rate and whether it goes up the full amount or something less. That was the only thing that was added in terms of the report. Although they discussed other issues, there was nothing else added.
Mr. Collins: Certainly the farmers have some concern - I think Elwin mentioned it - about this $100 million. If they had talked to a group of farmers from Beechy or Kamsack or some other areas, I wonder if they would have arrived at $100 million. They are concerned that the figure is a tad high. They wouldn't have as much of a problem, I suppose, if it were reduced by $50 million. I think I have registered that. They feel at some time those were likely paid for, and now they're going to be paid for again down through the process. Is that a fair comment from the folks out there who are going to have to foot the bill?
Mr. Dobson: We've had some studies done on the market value of those cars and the indications are that they're worth in the order of $400 million. They have been paid for, but they've been paid for by the taxpayers of Canada.
The acquisition costs of those cars have never been included in any of the freight rates paid by farmers. The railways have been responsible for their maintenance costs and those are included in the rates, but not the ownership costs.
Mr. Collins: Farmers happen to be a segment of the taxpayers of Canada, so indirectly they have paid in some way, shape or form. They feel that you're leaning on that fence post just once more. You just may break their backs if you keep leaning on it. They're just saying, look, we understand you have to go through a transition, but we're not so sure you should continue to use this process to arrive at that disposition.
When the group took a look at the options - I wonder if you could just refresh my mind - what were some of the other options that were discarded?
Mr. Migie: They developed a series of options in their technical group, but when they got together to decide on recommendations, they didn't sort of just look at those particular options. They more or less started with all the various interests at play and looked at what they were trying to achieve.
It isn't a question of one or the other, but they looked at options from status quo to one that had really no role for the Wheat Board and grain transportation. They had the Wheat Board purchasing the cars as one option. Others had a producer body versus the railways, or railways and shippers purchasing cars. So they looked at several options for each of the three areas.
Mr. Collins: From the group, though, I think you pointed out at least if there is a comfort level, this is where it's at. If they have to arrive at a point, this is the target point.
With regard to my fellow MP here, there is a concern as we go through whether there will be some very clear guidelines in terms of zoning and allocations and those things. Surely to goodness we wouldn't want to head down through the chute and then have to start wrestling with those as real problems if we can avoid them in the first place.
Mr. Dobson: In terms of the zones, I think that's something the Wheat Board will develop in conjunction with the industry. Over the last few years the board has tried to be more and more flexible in terms of its allocation policies. It has expanded its geographic areas a little and provided more flexibility to the grain companies to swap cars among train runs, and things of that nature.
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I don't believe that's anything that has ever been regulated. It's something that has been developed by the board and the industry.
As indicated earlier, the board is very much concerned about performance. I think that's something its members would keep in mind when they're developing a number of zones and moving to any fewer number of zones.
Mr. Collins: I hope they don't forget that they maintain a way of life for a lot of small communities along the way. It could impact on them greatly if these areas are not really dealt with fairly and we just move everything to the bigger captive markets. I just hope that's in the mix.
The Chairman: Mr. Althouse.
Mr. Althouse (Mackenzie): With regard to this car ownership business, Mr. Dobson, you indicated there was no cost to the system for the use of the government cars. Didn't the railways even pay a rental or equivalent of what it would have cost them to rent cars from somebody else in the system for that use?
Mr. Dobson: No. There have been no ownership costs associated with the use of those cars. The only time they paid for those cars was when they were used outside of western grain service when they weren't needed. The operating agreements allow them to use cars outside of the service and they pay current lease rates for that use.
Mr. Althouse: We're moving to a U.S. style of system, and when I look at its system the only people who really get service when they want it are those who own the cars. Is the department or the government interested in leaving that kind of service capability with the Wheat Board and the farmers?
If we as farmers are going to be paying for them, why can't we own them through the Wheat Board and let it administer them for us so we still have the kind of service we needed when we bought them in the 1970s? At that time I recall very well we couldn't get cars for love or money. They wouldn't rent them, and couldn't rent them, they said. So the Wheat Board, the provincial governments, and the federal government bought cars. The railways didn't do anything.
I don't see why we should put ourselves, as farmers, in the same position of not being able to meet the export commitments because of a lack of cars. If we're going to pay $1 a tonne, so be it, but give the ownership to the Wheat Board afterward. We've paid for them as farmers. Why don't we get to use them as farmers after we've paid for them?
Mr. Migie: Again, we're not in any way going to defend the particular package or criticize it. That option was discussed and the Wheat Board put forward that idea.
The issues that came about as the Wheat Board's mandate are really wheat and barley -
Mr. Althouse: And delivered on time and that type of stuff.
Mr. Migie: Yes. They would have cars that would be available for all commodities, including canola and others. That made some of the other participants in the group nervous.
The other had to do with the role of the Wheat Board and whether it is marketing per se. Is Transport there just to support the marketing or is it in transportation itself? If the Wheat Board owned the cars, it would probably lease cars to someone else.
Those are factors that went into the discussion. Producer ownership is still certainly an option. They're all valid options, but the group came out with the cars going to the railways as part of the package. But there are so many factors at play that there are certainly other options. If you change that one, you will probably change enough of the package that the group would not treat it as its package any more.
Mr. Althouse: Oh well, as soon as it is given to the government it isn't the group's anyway. It becomes your package as civil servants, and the cabinet has to do something with it. I'm just raising these points so when you make the decision you'll remember there were other arguments as well.
In the overall proposal on C-101, I think there's still a five-year ceiling. The senior executives are proposing a ten-year ceiling on freight rates, yet the review period, unless it has been changed, is four years.
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I don't understand how you can assess how deregulation works when it hasn't yet come into place. Will there be a proposal to extend that review of the system so that it occurs after all of the changes have come to fruition? If you put a ten-year ceiling, the review is eleven or twelve years off so that people who are doing their review at least understand what it is they are dealing with. If you haven't completed going to deregulation, how can you tell whether deregulation was a good thing?
Mr. Migie: The proposal the SEO group put forward has a ten-year, no review...and then it's whatever is Bill C-101 or its successor. That would require the amending of the Canada Transportation Act in order to do that. So that particular proposal was that after ten years grain would be treated like any other commodity in terms of freight rate setting.
Mr. Althouse: I understand the proposal. Maybe Mr. Dobson could explain why we now have a five-year freeze and a four-year review. What's the rationale for having a review before the full impact of deregulation has occurred? There must have been one somewhere, or is that something that just happened?
Mr. Dobson: It was part of the WGTA reform package. There was recognition that there was significant change and that there should be maximum freight rates for a five-year transition period with a review before any decisions were made on any changes. The grain transportation elements in Bill C-101 are basically the same as they were in the budget bill that implemented the WGTA reform package. So there haven't been any major changes to the freight rate elements of that package.
Mr. Althouse: The third thing I'm kind of curious about is that I understand that some years ago there was a commitment made that all new government policies would be submitted to a very vigorous environmental impact study. I've been unable to get one for this particular change. Was one done? What are the results? How do we get a hold of it?
Mr. Migie: When you mention ``this particular change'', you're not talking about the SEO group. Are you referring to Bill C-101?
Mr. Althouse: No, I'm talking about Bill C-101 and the budget announcements regarding scrapping the WGTA and the full deregulation of branch-line abandonment and so on, all of which does have a fairly heavy impact on the environment just with fuel use alone, let alone rebuilding roads and all of those things, which are fairly expensive and harmful to the CO2 emissions and a whole lot of other things. I haven't been able to get anything from anyone.
Mr. Migie: I'll have to get back to you on the question of the environmental assessments that were done with regard to last year's budget as it relates to transportation and Bill C-101.
Mr. Althouse: Were they done and are they available?
Mr. Migie: Some assessment was done in each case. I don't know what stage they're at in terms of making them public. I've had people come and talk to me who are assessing environmental implications for both Bill C-101 and the previous budget bill.
Mr. Althouse: But they're not available to the public.
Mr. Migie: I'll have to check on that.
Mr. Althouse: I haven't been able to get one. I've been trying.
The Chairman: You can check on that, Howard, and get back to us.
Mr. Hermanson.
Mr. Hermanson: Thank you, Mr. Chairman.
Bernie mentioned the concern of producers over the increase in freight costs and the sweetheart deal for the railroads. I differ from you a little bit, Bernie, in that I don't think farmers have this coming to them.
What I am concerned about is that the railroads are receiving so much equity. You mentioned $400 million rather than $300 million. I heard $300 million-plus. Maybe $400 million is more on track.
What I'm concerned about is that we have CN shares that are going on the market. Those shares are more valuable simply because CN is getting 6,500 rail cars for 30¢ on the dollar or whatever. So I'm wondering how they can justify raising the freight rate to farmers when in fact the railroads are getting a heck of a good deal here. They should almost be giving a discount because they are getting such a good deal. That's my rationale.
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I want to ask a couple of questions about...is it the CTA, the Canadian Transportation Agency? Are they the ones developing the policy for car allocation? Have I the right handle here? I'm trying to remember.
Mr. Migie: It used to be the Grain Transportation Agency.
Mr. Hermanson: Now it's going to be...?
Mr. Migie: At the moment, it happens to be Transport Canada because the Grain Transportation Agency -
Mr. Hermanson: But the SEO group has proposed -
Mr. Migie: They've proposed a group - I don't know if they've given it a name - that has....
A voice: Policy group.
Mr. Hermanson: Okay, that's what I was trying to think of.
They are strictly a policy formulating group. Who polices car allocation if there are problems? If they're only a policy-making group, somebody has to make sure the players are playing by the policies that have been developed. Who is that?
Mr. Migie: There has to be a legal mechanism. If the government were to say, this is a good proposal, therefore proceed with it, some of the things that would have to be developed have to do with legal powers that currently exist, and they wouldn't, presumably, under this format. So how do you make sure that people are accepting it?
Part of the challenge that was given in this case by the deputy minister of transport was to say, if the industry can develop something, then there won't be a need for a ``policeman'' or for government legislation. If the industry can develop something that people can accept, then why should the government be treating this area differently than they do any other area where there are cars and there are issues and disputes?
Mr. Hermanson: If there are problems with that whole process then, is it going to be through the appeal process in Bill C-101 that any problems are dealt with?
Is that going to be the mechanism that there would be a fall-back to because it allows for final-offer arbitration and dispute-settlement mechanisms? Is that what we're talking about when we're talking about car allocation, or is this going to go to some Canadian Transportation Agency that's going to be the arbitrator?
Mr. Dobson: You may be getting into a level of detail that I don't think people have considered yet.
The SEOs did discuss setting up a very small secretariat to provide assistance to them as they're doing their policy work, and that would include monitoring the car allocation policy.
Mr. Hermanson: Okay.
Mr. Dobson: I think that's a point worth mentioning.
Mr. Hermanson: The Canadian Wheat Board is to have the jurisdiction for the allocation of cars to zones. Am I correct?
Mr. Migie: Yes, for wheat and barley.
Mr. Hermanson: Just for wheat and barley. So who has authority for the allocation of cars for lentils, mustards, peas, and so on and so forth?
Mr. Migie: It's railways.
Mr. Hermanson: The railways have the authority.
Mr. Migie: The railways and the shippers would work that out.
Mr. Dobson: But there would be a policy group that would set the overall policy and provide the guidelines to the railways that the railways would have to respect when they're doing their train-run programming. That's what the purpose of this car allocation policy group is.
Mr. Hermanson: You expect that there'll be compliance with that policy, that it will be a self-administered discipline by the railroads, by the grain companies, and by the Canadian Wheat Board.
Mr. Migie: One of the issues they identified that needs to be followed up if the concept is accepted is, literally - and they're looking at options - in theory you could transfer regulations to this group, rescind the regulations...and there's a constitution.
They're still looking at the options of how that could best be handled. I suppose the deputy minister of transport has expressed that he doesn't see the role for government to be there to solve problems between who should get cars or how it should be allocated. They would like a system where a Department of Transport official wasn't making decisions that really affect whether or not certain sales could be made.
If the system is set up properly, there are priorities in terms of corridor, there needs to be still a split with the Wheat Board and all others, and the flexibility given to the railways to make up train runs should have a balance between the non-Wheat Board and the Wheat Board grains.
Mr. Hermanson: What you're telling me basically is that this policy group actually has a lot of clout, because -
Mr. Migie: It may.
Mr. Hermanson: - the agreement of all of the parties is that they will comply with the policies put forward.
Who's going to be sitting on that policy formation group? Is it the same SEO group that put this together?
Mr. Migie: They proposed that there be one representative of the Wheat Board, one from the railways, and one from the grain elevator companies.
The question that's been raised is, if you keep the group small and easier to reach agreement, the railways have been dealing with smaller shippers in the past, and what happens to smaller shippers who aren't part of the Western Grain Elevator Association?
Mr. Hermanson: Producer cars.
Mr. Migie: Producer cars are still being left unchanged in terms of the Grain Commission and its responsibility. That's not changed in this package. In particular that has to be sorted out to people's satisfaction. In fact, those interests will be dealt with.
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That came up at the meeting they had with the minister, where the dehydrators were asking if they had problems on car allocation. Right now they sort it out with the railways. That's their vehicle. They can go to the GTA, but the policy you have right now really puts the onus on railways and small shippers to come to an agreement.
The Chairman: We'll have to move on, because we have another witness.
You can have one more question.
Mr. Hermanson: Okay, thank you.
Before there was a system out of the WGTA, there was a system of penalties and incentives for efficient movement of grain. The ending of the WGTA came with the promise that there would be new incentives and new efficiencies. The only incentive I've heard of so far is this productivity gain that would be shared by the players in the transportation of our grain. Am I correct in assuming that is the only incentive or benefit of this new arrangement? Are there any penalties for the unwise transportation of grain?
For instance, I was just told the other day by a grain company that they requested cars and were given a 50-car spot, with 50 cars covered by the railroad rather than 51. If they had gotten 51 they'd have gotten an incentive rate that would have saved them $4,500. Instead, the railroad sent fifty cars one day and sent one car the next day to give them 51, but they didn't get the incentive rate.
The railway should be penalized when it does something like that. Is there anything in this proposal that would encourage efficiencies and penalize inefficiencies?
Mr. Migie: It goes in the direction of more commercial arrangements between carriers and shippers. To that extent, by not having either of the intermediaries, there's a better chance of accountability being clear between those two parties. If one doesn't perform well, you're more likely to know who is responsible.
There's no regulated mechanism for penalties in this system. Although in the past there was provision in the legislation, we never used the hold-back of the subsidy funds and there actually never was a system of awards and sanctions in place.
We still have an administered system, in part. This moves in the direction of making it more commercial, and the commercial parties have the incentives to try to lower costs as best they can and also to be accountable if there are delays and people lose contracts. The last recourse, I suppose, still is the Canada Transportation Act if they feel one party has acted improperly.
John, do you want to add to that?
Mr. Dobson: The only point I would add is that both the railways and the grain companies want more flexibility to manage their assets, and if they're given more flexibility, then I think they're prepared to enter into commercial arrangements, including contracts, with awards and penalties in them.
The Chairman: Before we close, I have a couple of questions spinning off some of the things Mr. Hermanson had to say.
John, you said the railways and the grain companies want more flexibility to manage their assets. The question has to be asked, what about producers?
Our first mandate as a committee was to look at the grain car shortage, along with the subcommittee on transportation. Even if you go back and look at your own responses toMr. Hermanson's point, you can understand why producers out there are worried in this new world. There doesn't seem to be a body....
What you're saying here is there could be one body made up of one representative each from the Canadian Wheat Board, the rail and the grain elevator companies. Producers are uncertain, given Bill C-101, where they're going to stand in this whole new world if they run into a problem in terms of car allocation or whatever. What's your response to that? Where do the producers fit in?
Right now we know in western Canada there's a lot of dissatisfaction with the Saskatchewan Wheat Pool moving shares onto the market. You wonder if we're not back to the big bad government, big bad railways, and big bad grain companies of a long time ago. Where does the producer fit?
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Mr. Migie: The model that is being recommended by this group and most of the others they've looked at is not the U.S. system. This particular model that's put forward in several of the options is not the U.S. system in which it's individual companies on their own. There is still a collective will to use cars efficiently and to use the pooling of cars where appropriate, but it goes in the direction of more commercial mechanisms.
There's still the same protection on producer cars. There's still the maximum freight rate that provides protection on rates. There's scope for having a lower maximum rate to the extent that there are efficiency gains, which are there for producers. There's scope for having incentive rates at certain high throughputs, which many producers will benefit from.
The Chairman: In terms of this committee itself, the SEO committee, I know the government hasn't made a decision on the report and you can't answer for the committee, but what obligation does the government have toward the recommendations of the committee, considering that we're there as an observer? It's not an official SEO set up by the government. It's not an official task force of the government, or I don't think it is. What's our obligation as a government toward the recommendations coming forward from this committee?
Mr. Migie: The government has said that report will be considered. If that group can agree, it lends weight to that report because that group stands behind it. The answer could be no. This isn't acceptable at all. It could be that there are some changes that would be needed or else it can't proceed.
There's no decision in advance such that if the group agreed there would be automatic acceptance, the law would be changed and it would be implemented. But there were certainly some incentives to say that if the group can agree on something, as opposed to it just being an initial position, and if that group was fairly representative of those who were using the system directly - there would be some producer representatives added, such as the Wheat Board, all the grain companies, and the railways - then it had more weight as a proposal and there should be something better before it would be rejected. But there have been no commitments made in terms of the report.
The Chairman: Right. In terms of the committee itself and balance in the committee, I wonder if you have any view on that in view of the balance of producers versus the other players in the system.
Earlier it was mentioned by yourself, Howard, that maybe the committee went this way in terms of zoning because it would enhance the railway incentive programs. John may have mentioned it. I'm not saying that there's a deal cooked here, but it sounds pretty good. The railways are going to get the cars, and if you have the cars, you've got absolute control of the system.
The grain companies are going to get a system by zoning, which allows them to manoeuvre where the movement of grain will go in terms of their own infrastructure make-up that they decide in their corporate boardroom.
Again, to come back, what about the producer? He or she is the one who is going to pay the bill. At the end of the day, they're going to pay the railways and the grain companies.
Based on that, is there enough...? I know I've heard a lot of concern from producers. I have a letter from the Canadian Wheat Board. It was written on July 21, which makes me wonder how come they've now agreed to this report.
So I guess my question, simply put, is do you think there's enough balance in the committee?
Mr. Migie: The group wasn't voting. It wasn't a question of voting. They were trying to reach an agreement they could all support, and they were trying to focus, as much as they could, on some of the objectives the group was trying to achieve and the alternative to no agreement, which might be something imposed by government or something they would have real difficulty with.
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So there were several people who, from time to time, were saying they were representing some producer interests to some degree - whether it was the three producers who were there at the committee, the Wheat Board, some of the grain companies, and the pools in particular - and there was enough there as a package that the grain companies, the railways and the producers felt they were all better off than they would be with either the status quo or some unknown system that might be imposed.
It was a judgment call on which you will have to get more information from them. I can't say why each of them felt that way. It certainly wasn't the first choice of any one group at all, but it was something they all felt was better than the alternatives they were likely to come up with.
The Chairman: Thank you.
Mr. Hermanson: Would it be fair to ask when the minister might make a decision about whether he would accept this or not? I think that's the obvious question to end with.
The Chairman: Do you have an answer to that?
Mr. Migie: The government has their report. The minister did want it to be discussed more widely in order to get some reaction or to see what people think of it. People might find flaws or they might have other suggestions, so he wanted to get a sense of that. I can't predict exactly when, but in terms of the changes being implemented, we were discussing August 1, 1996. Transport Canada was planning to really get out of the business of having their staff allocating cars by April, so they were targeting that kind of a date. So working back, implementation would come some time during that April to August period, or early in 1996.
The Chairman: On behalf of the committee, I know it's certainly not easy to answer for a report that's not your own, but we felt as a committee that we needed to know basically where the government is relative to this report even before we bring them in, which we will likely do at some point in the future. I think the information you have provided has been very useful.
Thank you, Howard and John.
The next witnesses represent the Advisory Committee to the Canadian Wheat Board. We have with us chair Wilf Harder and committee member Art Macklin.
If you have a presentation to make, you can go ahead. We'll then go to questions.
Mr. Arthur Macklin (Member, Advisory Committee to the Canadian Wheat Board): We have some copies that we can distribute.
The Chairman: You have Bill Rosher and Mike Halyk with you.
Mr. Wilfred Harder (Chairman, Advisory Committee to the Canadian Wheat Board): Thank you very much, Mr. Chairman.
In one form or another, I guess this is the third time we've appeared before this committee. We appeared here in May 1994, and just this past year, John Clair and I appeared here in June. The topic generally seems to hinge around transportation.
First of all, I should say the Advisory Committee to the Canadian Wheat Board consists of eleven farmers elected from across western Canada to represent producers. Given all the various items that are upon us, we have sort of restructured ourselves within the advisory committee. We have named a transportation committee within the advisory committee, and some of its members are with me here today.
Art Macklin will be the spokesperson for the transportation committee of the advisory committee. Mike Halyk, a member from Saskatchewan, is the longest-serving member of the advisory committee and is also on the transportation committee. Bill Rosher, one of our newly elected members, is on that transportation committee as well, as is Bill Nicholson of Manitoba, who is not here with us today. So you can see we have a good representation from across western Canada on that committee.
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I should also mention that Campbell Macdonald, who is the newly appointed coordinator of corporate services and acting secretary to the advisory committee, is with us as well.
I have just a few comments, and then I'll allow Art to carry on. I was very interested to hear the talk that went on here before we appeared. In case it gets forgotten, in general we think the railway must, no matter at what time, be under some regulation.
I don't think it is in our brief, but we only have to look at the U.S. situation to see what has happened there. Again, I'm reminding you of part of what I presented here in June of this year, where we see that in the state of Montana, Burlington Northern is virtually the only carrier of farmers' grains, and it costs $278 more to ship a carload of grain from Billings, Montana, to Portland than it does from Alliance, Nebraska. Alliance, Nebraska, is 500 miles further away, and the train from Alliance runs through Billings, Montana. We get faxes about what's happening in Texas, where there are also some railway mergers taking place. There's a lot of concern that grain farmers are captive shippers, and we see us following the same pattern here.
Just to set the tone of the things that scare us, I think Paul Tellier, president of CN, appeared before a committee here in Ottawa this fall and was quoted in The Western Producer to the effect that he felt the railways were really restricted with the maximum rates now and that they couldn't take advantage of increased producer prices. He went on to say that in terms of their freight rates, railways need to be able to follow grain prices as they go up because they follow them as they go down.
I have repeated that statement at nine meetings I've held this fall with producers across the country, and I have yet to find a farmer who really believes that when railways follow the rates up, they will be very quick to follow them down.
What some of us really think this is all about, this whole subject of change - and you mentioned the asset values the railways will be receiving under the purchase of the hopper cars - is that it clearly is a drive by government to enhance the privatizing of the CNR. I think that's pretty clear, and you don't need to be terribly smart to really figure that one out.
We also know that the railways are talking now about how they have increased their efficiency measures, how they are buying locomotives that have more fuel economy, how they are doing switching in their railway yards without having people in the locomotives, how the train crews can now stay on much longer and how they have all these efficiency gains. The implication here, of course, is that all of this is happening because of a change in the method of payment. There was never really anything that prevented the railways from doing that in the past.
With that, I will let Art carry on. We have a rather extensive position paper that was prepared. Certainly, we can't go through it all, but Art is going to highlight some of those things. Then we look forward to the question period.
Mr. Macklin: Thank you, Wilf.
I have a question for you, Mr. Chairman. What are we looking at for a time line here in terms of this presentation? I'll tailor my remarks to that.
The Chairman: Keep it as brief as you can, Art. We don't want to limit time too much, but we would like to be out of here at 6:30 p.m., I think.
Mr. Macklin: Okay.
Thank you, Mr. Chairman, and thank you, Wilf.
I'm just going to highlight a few points. If you want, I can mention the page I'm on, but it's going to be a fairly quick flip through.
First, I'd just like to underline the fact that we consider it a responsibility of the government to ensure that the system for grain transportation that is put in place will make Canada as competitive an exporter as possible. Government has a responsibility, in our view, and it cannot be abdicated.
Another point is that with the elimination of the WGTA and with all of the changes that have happened, there were three outstanding issues: the disposition of the government railcar fleet, railcar allocation, and the CWB's role in railcar allocation. Those were outstanding issues.
From the point of view of farmers, it seemed that out of the blue comes this SEO committee, in which, first, from our point of view, farmers were really not included and then only as a second thought. They took ownership of finding a solution to these issues and also started working on a package to deal with freight rates.
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I know the Canadian Wheat Board commissioners tried to have the advisory committee on that SEO committee. The advisory committee wrote a letter to the minister requesting that they be on, and we were not included in that committee. So from our point of view as an advisory committee - and this is not just referring to ourselves - we don't really feel there was much grassroots farmer representation on that SEO committee.
The first major issue about this that we would like to underline is the fact that producers should own those cars, and we're very clear about that. The suggestion of the SEO report is that they're being sold for 25% of their value. Very clearly, control of cars is associated with ownership of cars. I think anybody with any common sense can recognize that point. We feel that farmers should own those cars for a number of reasons, which we document in our report, and I'm not going to go through all of that.
I would underline a couple of things. One, farmers as taxpayers have paid some of that. The SEO report suggests that these cars should be sold to railways at a fire sale price and that farmers have to pay the fire sale price, the $1 a tonne. Well, that's not going to go down with western Canadian farmers, I can assure you of that. As Mr. Hermanson indicated, you're giving the railroads an asset worth $400 million for $100 million, which we pay, and really it should be the other way around.
From the point of view of farmers again, whether the cars are sold for $100 million or $400 million or are given away, if they're sold for any amount, we know we're the ones who are going to pay for them, so we might as well own them and control them. I would think one of the most sensible and logical ways for us to own them would be through the Canadian Wheat Board, which already owns 2,000 cars and has the financial capability to own these cars and the expertise to manage them as they have been doing for many years. So that's a mechanism that's in place right now.
I guess the other thing is that this agreement suggests that these cars would be kept in a Canadian fleet for Canadian grain, possibly for 10 years. These cars have a life of 20 years after that.
Export of grain out of Canada is absolutely critical to the total well-being of the Canadian economy and specifically the well-being of the western Canadian economy. We bought those cars - and when I say we, I mean the Government of Canada, the Wheat Board, the provincial governments - because the railroads would not invest in the rolling stock to do the job. In 10 years they will be under no obligation to keep those cars in Canada to move Canadian grain, and that's totally unacceptable.
The government would be faced with a situation 10 years from now where all the cars are possibly being moved into other jurisdictions, such as the U.S., to move grain down there because maybe the rates are better. We're in a situation where Canadian grain isn't moving because we don't have any cars and the railroads say, well, that's not our problem, we're in business to make money and we can make more money with our cars in the States, so you either pay us a higher rent or buy your own cars. That's not an acceptable situation to find ourselves in 10 years from now, and 10 years goes pretty quickly.
Those are a couple of points on car ownership, just to underline the fact that with ownership of the cars goes some control and some power in terms of allocation. That's connected; we recognize that. Farmers want some bargaining power in these negotiations with railroads over rates and over allocation, etc. Ownership of cars would give us some of that bargaining power.
Quite clearly, we're dealing with monopolies with the railroads. I might just point out that on page 4 here it says that the CN in their prospectus stated:
- Market share among railways in the Canadian grain and grain products market is mainly a
function of crop production and origins.
What they are clearly saying there is that it's not a matter of competition between railroads, but of how much grain is grown in the captive areas. That's what determines market share.
So basically they're saying we have a monopoly. Farmers know that pretty clearly.
I'll move on. To underline again, on the bottom of page 6, it says:
- Ownership of the cars would heighten the producers presence and negotiating strength in
transportation. This will be crucial if capped rates are eliminated.
As I stated, the CWB has the administrative capability, resources and expertise to manage cars. It did it for 13 years. It has 2,000 of its own cars.
Say the CWB were to purchase these cars. Underlining this, it would have the benefit of federal government credit guarantees that lower the interest rates farmers would have to pay in terms of purchasing these cars. It would be lower even than that of CN or CP. In fact, that would then lower the purchase costs for farmers and the freight rates associated with that. The Wheat Board would be the most advantageous organization to purchase these cars because of their credit rating.
On page 8, we feel that the CWB must maintain a significant role in railcar allocation to be an effective marketer of wheat and barley and to assure an efficient use of resources in a constrained system.
On this point, we felt that the thrust of the SEO report was to move the Canadian Wheat Board to a port buyer. That wasn't part of the consensus; nonetheless the thrust is there, and we believe the thrust is still there.
We are making some points here as to why it is absolutely critical for the Wheat Board to maintain the control of transportation of board grains from country position to sales destinations. It's not acceptable to us that they would decrease their ability to manage the system. The Canadian Wheat Board has contractual arrangements that it makes with the customer to deliver a quantity and quality of product within a timeframe to that customer to maximize the value of that product for western Canadian farmers.
If the Canadian Wheat Board has control over the management of the system, inventory, and timing of the movement, it can accomplish that. If it's managing and coordinating the overall system of many players within that, it can do it far better than if there's a fragmented system with a number of power centres, or control centres, that may not be coordinated - they may not have to coordinate - and that have their own particular corporate interests to look after.
They have a legitimate reason. I'm not criticizing them for wanting to do that. In fact, you hire people to maximize the return for your particular interests. The Wheat Board has been able to coordinate those sometimes conflicting interests to run the system to maximum advantage. We don't want to see any of that lost.
On page 9, we have a number of graphs and tables that compare the board pooling to the non-board system of pooling cars and grain at terminals. We make the argument here that if you don't have this overall coordination and cooperation within the system, you lose tremendous efficiencies.
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On the port pooling issue - and this is on page 11 - if you don't do that pooling of cars at port, you possibly lose 15% to 25% efficiency, and that 15% to 25% efficiency would have to be made up by increased cost in infrastructure, which farmers would have to pay. Again, that's not acceptable.
It's a big step backward if we go to port buying, and we absolutely are not prepared to go in that direction. The Wheat Board, I'm sure, would have walked away from this compromise if in fact that had been the case, but our information is that the thrust of all the other players at that SEO committee was to go in that direction. That's the information we have received.
Again, coordination of the system allows the Canadian Wheat Board to draw grain forward in a way to meet customer demand and also to maximize the total revenue to western grain producers, based on the quality and quantity of the inventory and the location of the inventory.
To give you an example of that, our customers are getting very sophisticated and particular in the specifications of the cargoes they receive. They want a consistent cargo on a 40,000-tonne boatload, from the first hold to the last hold of that ship. That means a fairly sophisticated grain gathering network to make sure the blend of protein and quality in milling and baking characteristics are going to be brought forward and blended at port position to meet that customer's requirements.
If the Wheat Board has less control over the total inventory and you have companies basically doing their own thing within their local area, within that particular company they may not have the quantity to do that kind of blending to meet the Wheat Board specifications.
So it makes it just that much more difficult, whereas if the Wheat Board can draw from the total system inventory from all companies in all locations, they can manage that inventory to maximize revenue. That's a very important thing in terms of the total economy of western Canada, and that's why the board absolutely has to be in control of transportation of its product through the country.
On page 14, another extremely important point is that the expectation producers have and an obligation the board has is to provide to producers some form of equity in access to a restricted handling and delivery system so they can have the cashflow they need and so everybody feels this single-desk selling organization is providing fair opportunity to producers to deliver into the system. Again, if the board doesn't have control of bringing its product forward in a way it can accomplish this, it's not going to retain the confidence of producers. So that's an issue.
We have a lot of documentation here. I'm on page 18.
I want to point out that the current system with malting barley is one where the board takes delivery at port position. We have some documentation there to indicate that kind of delivery is not as efficient and satisfactory as where the board is in the country. I just wanted to point that out, and the documentation is there to look at.
On page 23, the final point I would make is we reject the SEO proposals to sell the government railcar fleet to the railroads and eliminate the maximum rates after ten years. Also, the NTA must be part of the development and administration of the productivity models.
An earlier witness mentioned the productivity gains and said this would be a mechanism whereby farmers would share in the efficiencies. Well, as a farmer, and having some history in this whole transportation discussion, I recall that when we were trying to look at railway costs previously, railroads would not open their books to us and we really couldn't get a handle on what their costs were.
Sometimes we get conflicting stories as to what the railways' costs are and what their productivity gains are. Formulas can be manipulated and, quite frankly, we would very much need an objective third party, such as the NTA, at the table with access to all of the books and the information, to make sure the formulas were fair and compensated all of the parties.
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I was going to say we don't trust the railways, but I guess I would say because the railways are going to be privatized they have an obligation to give a good return on the capital invested, and they're going to try to do that. We have to recognize that. Farmers have to have some power in the system and the government has to have some control of and access to the figures.
We have one more point on page 24, and that is that the CTA should be expanded to recognize farmers' interests and the commercial need to have competitive rates and require the railways to give more notice of rate changes.
If you have a situation where you're trying to price grain - whether it's board grain or non-board grain - you don't have sufficient notice of rate changes and the railways can change those rates fairly quickly, you really have a difficult time pricing your grain and making a sale.
In conclusion, all players in this system need to have legitimate interests. Farmers have legitimate interests and we want to have some power in the system. The railcar issue is one where we feel farmers could have some power. We think the Canadian Wheat Board would be a logical organization to take ownership of these cars because it has the expertise and the financial capability to do that. As an advisory committee to the Wheat Board, we'd like to see that happen. Thank you, Mr. Chairman.
The Chairman: Thank you, Art.
There is no question that it's a well-documented paper and it will take some time for us to go through it in detail at another time.
Just before Mr. Hermanson starts, I hope you have given your points on page 24 to the people who are dealing with Bill C-101.
Mr. Macklin: We met with Mr. Dobson earlier today and gave him a copy, as well as Mr. David Pimm, who is in Mr. Young's department.
The Chairman: That's beyond the purview of this committee.
Mr. Hermanson.
Mr. Hermanson: Thank you, Wilf, Art, Mike, and Bill. It's good to have you appear before the committee.
You said the Canadian Wheat Board should own the cars, and I guess I have a problem with that. It raises a whole host of questions, and perhaps you can answer some of them.
As you know - and I think it became very apparent again today - there is less consistent support for the Wheat Board than there has been in the past. We just saw the results of the Alberta producers' plebiscite of 16,000 farmers, where approximately two-thirds of them voted for the option to sell their wheat and barley outside of the board. This is a significant factor.
I would suggest that under this proposal you will accelerate the growing unhappiness with the board, because suddenly you're asking the board to purchase these hopper cars. They belong to the taxpayers right now, and I don't think the board will get a better deal than the railways' deal of $100 million.
That's going to be a liability to the Canadian Wheat Board, which is going to reduce returns to Canadian producers who grow wheat and barley, because suddenly they're paying for these hopper cars on top of the other services provided by the Canadian Wheat Board. There's a greater incentive to grow off-board crops and there's a greater incentive for those who are unhappy with the board to demand changes that I know you don't support.
How do you propose the Canadian Wheat Board buy these cars and maintain producers' support for such a move? It already owns 2,000 cars that aren't in this whole equation.
Mr. Macklin: I guess I would respond to that by saying I am an Alberta producer and I did vote in that plebiscite. I don't think we want to get into that issue too much.
Mr. Collins: Oh, go ahead.
The Chairman: Limit it to 30 seconds.
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Mr. Macklin: First, the Advisory Committee to the Canadian Wheat Board represents producers of more than just wheat and barley. Wilf and I grow canola and special crops, and we raise beef cattle. I think the people who voted for us in the election represent a broad cross-section of production in the prairie region.
I don't have the details on all the mechanisms the Wheat Board would use to manage these assets, but I can tell you that the Canadian Wheat Board - and we did talk with some of the commissioners the other day - has been thinking about this for quite some time and is in the process of developing a concrete proposal that would answer these questions. I don't have that proposal with me right now, but I can say that we as farmers, whether we produce board grains or non-board grains, are going to pay for these cars one way or the other. It really doesn't matter who owns them; we're going to pay for them.
Mr. Hermanson: What you're suggesting here is that the growers of wheat and barley pay for them and subsidize the shippers of canola, peas and lentils.
Mr. Macklin: I won't speak for the Wheat Board on this because I don't know how this business plan is being developed, but if the Canadian Wheat Board were to purchase these cars, I'm sure mechanisms could be devised by which the use of these cars for non-board grains could be assessed and used to help pay for the cars. The Canadian Wheat Board has a track record of fairly allocating cars among the producers of all products, so as a producer of canola I don't worry that the Canadian Wheat Board wouldn't fairly allocate among all producers.
Mr. Hermanson: You may not be concerned, but there are a lot of farmers right now who are concerned about the products they market to the Canadian Wheat Board. If you pass on the cost of these cars through some kind of levy on the producers of canola, peas, lentils, mustards, you name it, you're going to increase hostility among those producers toward the.... If you think you have a problem now with a few hundred farmers who want to run the border, wait until you have a few thousand farmers, particularly in the northern areas. You already have problems in the south with durum producers who are unhappy, and now you have lots of canola producers who are unhappy too. You've exacerbated your problem rather than solving it.
Mr. Macklin: I'm going to ask Mr. Halyk to share some information with you. He was on a conference call the other day with a number of producers.
Mr. Micheal Halyk (Member, Advisory Committee to the Canadian Wheat Board): In the last little while, ever since the SEO report became public, a growing number of producers out there have been very upset with the process and are looking at alternatives. Just this past week we were invited in, as the subcommittee on this transportation issue, to be part of a process that's been started in Saskatchewan with SARM, the Saskatchewan Association of Rural Municipalities. Groups as diverse as the Keystone Agricultural Producers out of Manitoba, Unifarm out of Alberta, SARM, the Saskatchewan canola growers and the NFU were part of the discussion.
I was representing the Canadian Wheat Board advisory committee and I was putting forward our proposal at the table. At the end of the day the argument was to circulate the Canadian Wheat Board advisory committee's proposal because it was the best alternative to the SEO report, and we'll see if our respective groups can support it. I wouldn't be surprised if someone came back and said we think the producers should own it, but maybe we should look at some other means. However, I think the basis of the Canadian Wheat Board decision to purchase the 2,000 hopper cars was that it improved the total fleet and everybody benefited - not just producers but the total industry.
Yes, there is a cost and it has been borne by the wheat, barley and, at the time, the oats producers, but the cost is insignificant when compared to what we're looking at as the correct movement and marketing of our grains. The bottom line is that in a country as diverse as Canada, you can't divorce transportation from marketing. You simply can't do it.
Mr. Harder: I don't understand. If a farmer is going to pay for the cars, and let's assume for a moment that the Wheat Board bought them and charged the producers the same as CN or CP will charge them, generally I think producers would sooner have the board own them than the railway.
.1810
I've had the opportunity to travel to nine different meetings in the last three weeks. Half were held in Mr. Hoeppner's district and the other half in Mr. Iftody's district - I sort of live on the border. I've yet to have one farmer come up to me and explain why the hell the railway should own the cars if farmers have to pay for them. That is so ludicrous it is just unimaginable. It doesn't make any sense.
As far as the Wheat Board administering board cars, they've done it in the past and in general they were more than lenient towards open market crops, realizing the pressure that would be placed upon them.
Around 75% of us on the advisory committee grow canola, and we wouldn't stand for a system that treated that unfairly. When we were having problems with the administration of cars some years ago, everybody wanted their share but there were only so many to go around. That ain't going to change, because there are only so many cars. So a system was set up where every group knew what their allocation of cars would be, and it worked quite well. I believe that was started by the Wheat Board in order to put some organization into the system.
It makes no sense for me to pay for a car that the railways own and in ten years I have no control. I just don't understand the logic.
Mr. Hermanson: Under the SEO proposal, I think you'll have all the farmers mad at the railroads. Under your proposal I think you'll have farmers mad at each other, and that's a concern to me.
I have another line of questioning for later.
Mrs. Cowling: I want to congratulate your group for the overwhelming support that you received from the farm community with the election process through the Wheat Board advisory committee.
There seems to be some friction within the board. We have indications from the SEO that the railway should own the cars, yet we have the Wheat Board advisory committee saying that farmers should own the cars. That puts this committee in somewhat of a dilemma, because we're getting a mixed signal.
Who determined who would represent the Canadian Wheat Board at the SEO committee? There are people who were not there.
Mr. Macklin: My understanding is that Lorne Hehn was part of the May 16 group from which the SEO committee evolved, but there was also a technical group associated with this SEO committee, and I believe Commissioners Klassen and Beswick were part of that.
The Canadian Wheat Board went into that process. As I said earlier, the SEO sort of appropriated the ownership of these issues and started to take the initiative. I'm really not sure how that happened, but farmers seem to have been left out of the loop in that whole process.
I think Mr. Easter mentioned a July letter from the Wheat Board on this issue. The Wheat Board went into these negotiations saying that farmers should own these cars, but they found themselves as the sole voice supporting that position. As I understand the way this evolved, they still believe farmers should own the cars, but this was a compromise package, and it was accept this or maybe get something worse.
.1815
I don't think the commissioners are happy with this proposal, but they did agree to it and I think they feel a bit of internal conflict. From the point of view of producers, we weren't on that committee and we are representing our constituents back in the country. When we look at this thing, we are not prepared to accept it. As a committee, we have voted unanimously to reject it.
In this submission we have documented a number of reasons, all of them supportable, why we feel that SEO proposal will not work in the best interests of farmers. I can understand the kind of mixed signals you're getting. I hope you understand the process and can accommodate that.
Mr. Harder: People who didn't support the process were sort of told that if they didn't support it they would have a totally deregulated industry, and that could be worse. That fear is there and it's a terrible threat to have to live under.
Mr. Macklin: When this was explained to me it sort of reminded me of Chamberlain coming back from Germany and saying we'll have peace in our time.
Mrs. Cowling: I want to talk about zones instead of train runs. What is your position on that? How will that affect the quality of product that we move out of this country?
Mr. Macklin: After talking with some Wheat Board staff on this issue, our information is that if the zones are small enough, it could be workable. But if they're bigger zones, that could detract from the board's ability to bring forward the proper grade and quality of grain needed to meet a cargo.
Our current system has evolved over a period of time to meet customer demand, to be as efficient as possible. When you compare the Canadian grain handling system to the American system, we beat them in almost all categories, and we certainly beat them in cost and fairness to producers. We are moving from a system that has worked very well to a system where we don't know how it will work at all. Large zones would be very detrimental, but if the zones are small enough, we are led to believe that it would work.
There is another consideration. I know of many communities in the Peace River country where if the companies and railroads are given the opportunity to rationalize the system, they will do that, and it will be to the detriment of producers and small communities.
On the run between Grande Prairie and Falher, for example, there are half a dozen communities that will no longer exist if they consolidate this system and use these zones to allocate cars to points where they want to continue operations and don't allocate them to points they want to eliminate. It will be a tool to rationalize the system to the detriment of producers, I think.
Mrs. Cowling: My next question relates somewhat to what you said. I've always been a strong supporter of the board and will continue to be.
If the zones are large, will that be detrimental to the Canadian Wheat Board, which farmers supported and put together over the years? Will it cause problems for the board if those zones are too large?
Mr. Macklin: The board has indicated to us that it would. As I said, the better the Wheat Board's information on the inventory that's available to sell, and the more power they have to manage that inventory and bring it forward on a specific basis, the better they can maximize revenue when making sales. So small zones might work okay. The larger the zones, the less the board's ability to manage the inventory and move it forward to maximize the revenue.
.1820
Just to give you an example, which we've included in here, if in fact you have a sale for wheat with 12.5 protein out of the east coast, a particular company might bring forward 13.5 and 11.5 and average it to get a 12.5. That 13.5 may have a higher value to move it out to the west coast. If the board can control all that, it can maximize the revenue from the 13.5, bring in product from some other area that's 12.5 to fill that other sale and maximize total revenue. So the more control they have, the more they can maximize the revenue on behalf of producers.
Mr. Halyk: If I can enlarge on that one, there are those in the system, and I've been around it for a while, who tend to believe that if we move to the 25 zones or so that have been suggested in the SEO proposal, it may make the system so difficult for the board to manage that it would force the board to become a buyer at the port position, which is one of the fears we've been raising all along, that this is the direction in which the system seems to be moving.
Mr. Collins: Mr. Chairman, I have about 53 questions. I want to thank you all for being here.
The Chairman: You get six minutes.
Mr. Collins: I'm going to use mine up fast, because I want you to have another go at my good friend across the way.
Mr. Harder: We didn't come here to have a go at him.
Mr. Collins: You're doing a great job. Slow learners always need a little help.
Some hon. members: Oh, oh!
Mr. Collins: With regard to the vote in Alberta, if that vote had crossed the prairies, hypothetically, what would you people be doing now if we were in this position and we didn't have you as an advisory board bringing forth these concerns? Who would be here on behalf of farmers to raise these concerns?
Mr. Macklin: I will comment on that vote in Alberta. If that had been a prairie-wide vote and if that had been the question, I would lose total faith in government in Canada, because that was the most biased, misleading question anyone could ask.
When you ask the question ``Are you in favour of having the freedom to choose to sell to any buyer, including the Canadian Wheat Board, in domestic and export markets?'', that has the emotional words ``choice'' and ``freedom'' in there, and it had two inaccuracies. One inaccuracy is that the board is a buyer - the board is in fact a monopoly seller - and the second is the inference that the board can still continue to provide all the benefits it does while having a monopoly when you take the monopoly away. So producers in Alberta were misled by the question.
That was a question - and this is a fact - that was designed by a consultant who market tested that question prior to it being put forward to producers.
Mr. Collins: With regard to this, one of the comments I want to pass on to you is that people feel the problem with the Canadian Wheat Board, whether you're the advisory board or the management part, is that you've done a poor job of bringing forward the view of the board in terms of the farming community. I don't know if you see that, but let me assure you that people come forward to us. We feel that really there is some onus on you now. Thank God you went through the process you did, but I think as people who are right there on the front line, you know what the score is. I think you have to get out now and resell the ship before somebody tries to sink it on you. That's purely for advice.
I go back to what my counterpart said. The management who are on the board have now come to the position where you're not comfortable as an advisory committee, and you voted unanimously.
Let me just ask you this. I know what your feeling is with regard to that ownership. Would you still live with the $100 million and the surcharge kind of feature if car ownership was going to be retained by the Canadian Wheat Board? Did the committee look at that?
Mr. Macklin: We have not come up with details as to what the mechanism would be or what the cost should be.
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As farmers, we feel these cars were purchased to move grain out of western Canada because the taxpayers of Canada collectively and the Government of Canada felt that it was good for the total Canadian economy. That is still the case.
Movement of export grain out of western Canada provides, I understand, one of the biggest single in-flows of foreign exchange into Canada and is a tremendous advantage to all of the economy of Canada. So the same argument that purchased those cars with taxpayers' money in the start is still there. We as taxpayers partly paid for that, but if the Government of Canada wants to reduce the deficit and wants to sell them for any price, it should be farmers who own them.
The Chairman: Last question, Bernie.
Mr. Halyk: Mr. Chairman, may I just respond to his question? While I was doing that conference call, which I mentioned earlier, just a few days ago.... It certainly isn't the advisory committee's point of view, but the other group's point of view - and I have to bring this to the table - was, look, if we're going to be paying a tax on these cars to the tune of $100 million and have someone else own them, we may as well be paying the tax and have the ownership ourselves. That's where this other group that we have certainly been involved with in the discussion stages is coming from. I'm sure that somewhere along the way we will have to wrestle with that question.
Mr. Collins: The farmers from my area whom I talked to were certainly of the same view.
I go back to the potash industry. They found that if they were going to be in the business of having to move potash, they'd be a hell of a lot better owning the cars and having some control over it.
Let's go to the point where the minister has to make a decision. There is kind of a timeframe, and you know that. If, as Elwin mentioned, we take one of the cards out and the whole castle comes tumbling down.... If we start pulling out some of these pegs, are we going to meet a timeframe to make some of these decisions, which are shipper-bound or railway-bound and by you as farmers? Where do we go from here? Can you live with a lot of what was in the proposal, or is the whole thing a problem for you?
Mr. Harder: Number one, who invented the timeframe? You're the government. The government invented the timeframe. They can change the timeframe.
Every damned time we have a serious issue to discuss in this country we're under timeframes. We're a little tired of it. You invented the timeframe. It's a timeframe that someone in Ottawa invented. What's the rush, guys?
The Chairman: I think the timeframe is partly dictated by Bill C-101 and the movement away from the GTA. Regardless of the timeframe, we have to make the right decision at the end of the day.
Mr. Macklin: I would say that we definitely are not prepared to accept railroad ownership of the cars. We feel the government has a responsibility to ensure that rates are regulated. This car fleet has to remain in western Canada or in Canada.
I would make the point that we're not oblivious to eastern Canadian interests here, too, to some extent. Although the bulk of these cars have been in western Canada, taxpayers did pay for them, and maybe there are some arguments in negotiation in terms of eastern farm interests. We're not oblivious to that as an advisory committee to the Wheat Board.
There has to be a lot of discussion on this yet, and, quite frankly, farmers are just starting to become aware of all these changes. They have not been consulted. Members of Parliament have a responsibility, I think, to get out into the country and clear up any mixed signals you're getting. I know you have different signals from some supposed farm representatives in western Canada from what you're getting from us. Maybe it's time to come out west and hear from the grassroots.
The Chairman: Mr. Althouse, five minutes.
Mr. Althouse: You point out fairly clearly the advantages the board gets to the system with faster turnaround first with its allocation system, which you show on page 9, where you have the non-pooled grains compared. There you show that durum, which is a non-pooled grain and which would have to be shipped to the place it was designated to be dumped at, manages to get 19 trips per year. Yet for oats, which has the same restrictions on it but is run by somebody other than the board, they only get 12 trips. So we lose 7 trips a year because it's being done outside the board.
.1830
Do you have any idea what the extra ownership cost of those cars adds to the total system? We're getting 7 extra trips out of the ones the board is in charge of. What does that save on an annualized basis? What is the depreciation rate on cars? Is it a 20-year cycle or a 15-year cycle?
Mr. Macklin: I don't think we can give you a very satisfactory technical answer on that, but what we can say is that these cars have a life span - we're told - of around 45 years. The fact of the matter is when you have an increase of an extra 10 days in cycle time, that's a great many millions of dollars that you have to add in infrastructure, which farmers would have to pay because of inefficient movement.
Mr. Althouse: Given that it was the senior executive officers of the grain companies who were pretty well in control of this committee, by your information, was there any effort on their part to find a way of picking up the extra costs that basically their own operations are costing the system? In the case of oats, 60% extra costs for ownership is falling to the shipment of oats. Has there been any effort to permit the railways to charge more for the fact that the cars aren't being used as much or are being held up?
Basically, what we have here is a system that has turned railcars into grain storage.
Mr. Halyk: I don't think they necessarily are policing themselves on those grounds, but one thing they basically are doing by putting more onus on the railways to change the landscape in western Canada is really reducing the number of collection points.
I think that's the bottom line here. We are reducing the number of collection points. They then feel that all the grains would improve their turnaround, but the onus would then be on producers, the rural municipalities, and the highways in the respective provinces to pick up the tab for the extra costs there.
Mr. Macklin: I would like to respond to that, too. In terms of car turnaround time, we have this producer car issue. I attended a meeting in my home community of Grand Prairie. A senior CN official there indicated that when they had control, they would certainly assess the total costs to producers, and producer cars would probably not be economical for producers to use because of single car spots and turnaround times and things like that. It was quite clear that their intent - and this was CN speaking - was to maximize return for shareholders, and they would do whatever they could to accomplish that.
Mr. Althouse: So there does seem to be some effort on the part of the railways to think about adding for cars that sit at the port because the owner doesn't want to dump them yet. I know there are a lot of grains that are worth a lot more on track. So the owner - usually, it's an elevator company, not a private individual - will leave them sitting there waiting for the price to go up, for a shipment to be short three cars so they can get a premium of $2 or $3 a bushel, and yet it costs them absolutely nothing.
As well, one of the crucial parts of this SEO proposal seems to be the 10-year cap. While everybody was complaining about the WGTA rates for years, we finally started looking south of the line and found that they are in fact quite a bit lower than the open market rates that the U.S. charges their farmers. So we've now decided they're a good thing.
This whole package is contingent upon that rate lasting an extra five years. I am wondering if you've run across anybody who knows enough about mathematics to be able to tell us, given our experience with perpetuity only lasting 97 years, how long is 5 years or 10 years, either one? Really, how good is this promise? It doesn't seem to be signed in blood. Doesn't it depend essentially on what the next budget says it will depend on, given the agreement?
.1835
Mr. Macklin: What sometimes is confusing to me is that I seem to hear the Canadian Wheat Board saying, this is what the SEO agreement means. Then I hear the grain company saying, well, no, this is what the SEO agreement means, and I hear the railroads saying something different as to what it means. So sometimes I get a little bit confused.
Quite frankly, we've observed that if the railroads are not happy with the situation, they have various means to exert pressure on the system to get changes agreed to that will serve their particular interest. I really don't have any confidence that this agreement would really last; certainly I don't think it's in the best interest of the farmers. Given the conflicting understanding of what it means, I really can't see it lasting very long.
Mr. Althouse: I don't have any further questions, Mr. Chairman.
A comment, though. It seems to me that the history of control of the grains industry at the beginning of this century by the railways and the elevator companies is being reproduced at the end of the century. They would like to have the kind of power that is mentioned in this document before us here, where the grain companies can use their market power to extract an additional price between the time the producer dumps it off in their hands and when they deliver it back to the Wheat Board. They really want the Wheat Board to take delivery of it at the coast so they can pull out the premium grades and extract the price premium. Farmers are no better off; only the grain companies are better off. That used to have some resonance when the farmers owned the grain companies, but they're all getting out of the farmer-ownership bit completely.
I'm very upset about this particular effort and the fact that nobody in the Department of Agriculture or the government seems to be standing in the way of it, to stand up for farmers. They are busy being representatives of the agrifood complex, which is exactly these people who are ripping off the farmers.
The Chairman: Bill, you had a comment you wanted to make.
Mr. William Rosher (Member, Advisory Committee to the Canadian Wheat Board): I've heard a lot of concern in our area that if we drop this SEO agreement we'll lose this 10-year cap. Even if we have the 10-year cap and they can drop it with no review after 10 years....
We are looking at reinvesting in a farm, and I would trade anything to go back 40 years and be under that Crow rate and know that it's in perpetuity. As it is, I know nothing is for sure, but 10 years is not going to pay our mortgages that are for 20 and 25 years.
The Chairman: I'll come to you in a second round, Elwin, in a moment.
Just a couple of questions. The senior executive officers of the grain companies are mainly cooperatives, correct? These senior executive officers of the grain companies I think would be representing their producers' interests. Who really speaks for the producer? You're saying one thing and the grain companies are saying another. Do the grain companies really represent producers or not?
I've said, and I've said to the grain companies certainly, that I think they have a conflict in terms of their corporate board in their cooperative approach. But there is no question that the government is in a bind with this recommendation in terms of objectivity, when you have the senior executive officers of mostly co-ops coming forward with a recommendation that is at odds with what you as an advisory committee are presenting.
Mr. Macklin: Sitting before you, you have an Alberta Wheat Pool member, two Saskatchewan Wheat Pool members and a Manitoba Pool member. Quite frankly, as an Alberta Pool member, I think that organization has been captured by its management and is no longer representing the interests of producers, and I don't have any hesitancy in saying that. It's not that I still won't continue to patronize it as long as it remains a co-op, but if it goes the same route as Sask Pool and privatizes, it's no different from anybody else. Quite frankly, on this issue, I don't think they are really representing grassroots farmers, and I think that's going to manifest itself at some point in time.
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Maybe the others would like to comment from the perspective of the organizations they represent.
The Chairman: Let me put it to Wilf. I believe you're a director, are you not, of Manitoba Pool Elevators?
Mr. Harder: That is correct.
The Chairman: I have a letter here from your corporate secretary - and I'll give you a copy - addressed to Mr. Goodale, mentioning the resolution that was passed at your meeting:
- Be It Resolved that the CWB own and administer the Canadian government hopper car fleet.
- That passed just recently. Then they say:
- As you know, [Manitoba Pool Elevators] participated in the Senior Executive Officers process
and supports the proposal presented to you by the SEO group.... However, in the event that it is
not implemented, then....
- We would basically move back to this position.
You're a director; what's your position?
Mr. Harder: I don't support the SEO proposal, and I think I'm entitled to that position. I know from some internal discussions - and this is, of course, after the fact of the SEO proposal - that the particular cooperative I represent was less than enthusiastic, was not one of those that was leading the charge for the Wheat Board being totally out of the country. Those firms can speak up for themselves. There were one or two other non-cooperatives that really weren't leading the charge, either. I've also talked with some of the small private companies; they didn't really know the issue very well and didn't really speak up.
As I said, I live in both Hoeppner's district and Mr. Iftody's, and I've pointed this resolution out, and there they find no fault with that; they shouldn't, because I think 70% to 90% of them supported that.
As well our management sort of felt compelled - as did the people from the Wheat Board, probably - to get into this because there always seems to be this time line and this pressure, and it's the best deal they could get.
I don't approve of the deal.
The Chairman: Thank you, Wilf.
I have one other question - and I think Vic mentioned it - in terms of car turnaround cycle time and so on, on page 9. The Wheat Board has certainly been doing a good job in terms of their cars. But the question we've been talking about is ownership of cars, and I guess my question is, does that really matter, and if so, why? Or is the greater problem the allocation process? It's one thing to own them, but who controls and allocates?
Mr. Macklin: Both are important issues. Ownership is important. For one thing, why should we give a $400 million asset to the railroads for $100 million and then have us pay the $100 million? Farmers might as well have that equity; they've paid for part of it already.
Ownership by farmers would also ensure that this fleet stays in Canada, to be used for the benefit of Canadians. As I said, 10 years down the road, an action by this government to let the railroads buy them and then move them out of the country because they might get a better rate for them somewhere else - that action would look tremendously irresponsible.
This fleet was purchased for the purpose of moving grain out of Canada, for the benefit of the Canadian economy. It had better stay in Canada, and ownership by the farmers would ensure that happens.
Allocation is another important aspect of this, and ownership gives the Wheat Board and the farmers the sound negotiating power in this process, in terms of being able to have the cars and have some power to allocate them in a fair way.
.1845
They're both important issues, and the Wheat Board for its grains.... I understand that of the total movement of grains and oilseed out of western Canada, the Canadian Wheat Board handles 80%. So it's a big player and they have to have some control.
The Chairman: Mr. Hermanson.
Mr. Hermanson: Thank you, Mr. Chairman.
Art, as you mentioned, you had some problem with the way that Alberta plebiscite was worded, and I saw Bernie applauding wildly.
Mr. Collins: No, I'm just listening.
Mr. Hermanson: I would just remind everyone that Mr. Chrétien and Mr. Goodale both promised a plebiscite. They had two years to word it however they wanted and to have it held across three provinces, and they refused to do that. Thus you can criticize the Alberta government and that group for the way they did it, but they did it in the absence of some action from the federal government representing the whole Canadian Wheat Board district. So they have no one to blame but themselves for any perceived problems they may have created.
I was very interested, Art, when you made a statement wherein you compared the commissioners of the Canadian Wheat Board to Neville Chamberlain.
Mr. Macklin: Well -
Mr. Hermanson: I'm pretty sure you did.
Mr. Macklin: Yes, okay.
Mr. Hermanson: You basically said they sold out on producers because they went against their better judgment. I've changed the words a little bit, but that's basically what you said, and you have to confess that you said that.
I guess we could argue that because they're not accountable producers they cannot look out for the best interests of producers. I'm very concerned that you made that statement. I think maybe it bears out some thoughts we've had that in fact the Wheat Board commissioners should be responsible and accountable to producers rather than solely to the Minister of Agriculture and the Privy Council.
How are we going to now be confident that the Canadian Wheat Board, involved in allocating the cars to these larger zones, will have the best interests of producers at heart, if they haven't had the best interests of producers at heart in the whole SEO process? How do we know, for instance, that they won't allocate cars based on historical production of grains rather than growing markets, to protect their interests in wheat and barley? How do we know they will show impartiality towards off-board grains versus board grains, if in fact they will renege on their better judgment and not make decisions in the best interests of producers?
Mr. Macklin: I'm not a historian, but my understanding of Neville Chamberlain was that he in fact thought he was doing what was in the best interests of the people. History and the character of the people he was dealing with were such that it turned out his trust was misplaced.
I think that's the kind of situation we're dealing with here. I think the Wheat Board commissioners, in their best judgment, given the circumstances they were dealing with, have felt they were taking actions in the best interests of producers. I believe that's what they were doing.
We look at it and hear a few things in the period of time that has elapsed since that happened, and we come up with our observation that it's not the best deal and we reject it given the circumstances we have at this point in time.
Mr. Hermanson: But the commissioners haven't changed their minds. Or did they send you here to bring this message?
Mr. Macklin: If I were in their position, having committed myself to a certain proposal, I guess I would have some difficulty dealing with that. We as producers were not a party to that proposal. We are representing the interests of producers, and that's what we're giving you here. We're not giving you the Canadian Wheat Board position; we're giving you the position of the Canadian Wheat Board advisory committee, and we represent farmers.
Mr. Hermanson: You still didn't answer my question, though, about how we would know that they wouldn't show partiality in the allocation of cars.
Mr. Harder: Because you have an elected advisory committee.
The Chairman: So you're saying that you have an elected advisory committee to keep them honest.
You had a comment, Wilf?
Mr. Harder: Yes.
First of all, the Wheat Board commissioners did not send us here; you invited us here. Get it right.
Of course, the inference you made, Mr. Hermanson, was that because of the structure of the Wheat Board, the commissioners came up with a decision that some of us may not like. I should remind you that the Wheat Board commissioners present at those meetings were dealing with those that have a structure like the one you recommend, and they were smothered by that.
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So if you're really going to compare one structure to the other, the structure that is recommended for the Wheat Board is the one that defeated the SEO process in the end, and defeated the fact that farmers will not retain ownership of the cars.
Mr. Hermanson: What do you mean, defeated the process?
Mr. Harder: You're saying the structure of the board had something to do with the fact that it did not hang in there in support of the producers' right to own the cars. I'm suggesting to you - and I'm only repeating myself - that the groups that supported the SEO agreement were those that are under the kind of structure you suggest.
Mr. Hermanson: I wasn't suggesting the commissioners weren't acting in the best interests of producers; you were. I'm saying if you feel they're not acting in the best interests of producers in this issue, why should we have any confidence that they will on some of these other issues?
Mr. Harder: I know what their guidelines were when they went in there, and I know what our policy was. I think letters have been written to the commissioners saying the board should own the cars. I certainly have a lot more confidence in them controlling the cars than anyone else.
The Chairman: Mr. Harder, just to be clear, we have a letter from the Wheat Board written July 21, which was before the SEO committee reported. We're hopeful that the chief commissioner will be before the full committee on agriculture next week. Given this letter, which is the direct opposite of what the SEO committee recommended, you can be assured one question will be about what its position is now. So we'll get an opportunity to deal with that then.
Mr. Collins: I have a point of clarification for my friend opposite. We didn't say it would have to have plebiscites throughout the prairies. We said if that was what it wanted to do, it was fine. That was the board's direction, so let's not get that baby screwed up.
With regard to this document, when did you produce it?
Mr. Macklin: That document was put together within the last week. Our invitation to this committee was sent on very short notice, and the secretary to our committee has worked extremely hard and diligently and done a lot of research to put forward this document we are presenting.
Mr. Collins: When you said we should go out, let me assure you that's what I do, as you do. I take it as a responsibility. I went back to those farming communities and said, now look, here's what's coming down. Are you aware of it? Do you know what the people in other areas who are representing you...? I wanted their feedback. As I said before, their feeling initially was that if they were going to have to reallocate those, they wanted the Canadian Wheat Board to at least be somewhere as a comfort level.
Let's say 15 to 20 years down the road we have to get some new cars. If it was under CN, whose responsibility would it be to replace them? If it's under the Canadian Wheat Board, then whose responsibility would it be to replace them? I think that's an element that at some point will have to come unravelled from this mixture.
Mr. Macklin: I guess it would make common sense to me as a farmer that if the cars wear out and CN has ownership of the cars, they might replace them and they might not. If the Wheat Board has ownership of the cars and they wear out, they'd have to be replaced. Regardless, it's the farmers who are going to pay.
The Wheat Board is fully competent. It ordered the 2,000 hopper cars, paid for them, and managed them. It's no problem to do this. Farmers are going to pay.
I have a clarification about going out to the country. I respect that many of the members of Parliament represent rural ridings in the west - I think that's what you represent. My suggestion is that maybe we need to have a formal process where members of Parliament go out to the west and we really get a structure set up whereby we can determine what farmers want and need and what the best system is for the overall western economy to efficiently move grain to an export position.
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Mr. Collins: I would just say this. I think it is important for the Standing Committee on Agriculture and Agri-Food, at some point in time, to have you people in. I think it's incumbent upon us to take a look at the Canadian Wheat Board in terms of the management and your role. I can't appreciate your problems unless I become knowledgeable as to what they are about. I think it really would be a plus.
The Chairman: Okay, Mike, go ahead.
Mr. Halyk: On the cars, I think we should note that in the past, when the federal government bought part of that 13,000 hopper car fleet, it was the Canadian Wheat Board that was contacted to do most of the groundwork in purchasing those cars, lining them up and making the deals. So the Wheat Board is very knowledgeable about the whole industry. I don't think we'd have any problem in the replacement.
I just want to say one word on the Alberta plebiscite, since everybody has had a kick at it today.
I want to remind all of us that we had an election procedure recently in Alberta that resembled this politically, in my mind, which was the election of a senator. That was the issue of the day. The world was going to stop if we weren't going to have elected senators in Canada.
We've now gone through this charade in Alberta. We had that senator appointed. And what's happened? Nothing more has been said about it.
So sometimes what happens up front isn't really what's wanted at the end of the day.
The Chairman: Just two points. Bernie mentioned the full agriculture committee. There are two committees affected by this issue: the agriculture committee and the transport committee.
We have been in discussions with the transport committee to encourage them to go to the Wheat Board, look at the operation, and see how cars are allocated now, etc. We're also in discussion with the parliamentary secretary to the Minister of Transport to see how we can establish a better process of getting producer input and other input on this particular issue, because there is a problem in terms of the mixed messages.
Wilf, last comment.
Mr. Harder: My closing remarks have to do with some of the issues we talked about. One of the largest criticisms of the Wheat Board over the years is that the board has not been open and willing to give information.
Just while I think of it, in terms of salaries, I don't know what the head of the Winnipeg Commodity Exchange gets for a salary. I don't know what all the traders get. Let's put that one to rest.
Mr. Hermanson: We want to know what you get.
Mr. Harder: You want to know that, too. I get $150 a day, only when I'm here.
In the Alberta plebiscite, we wrote letters to farm groups for sponsoring. We wrote letters to the Alberta minister saying that our people would come out and debate openly in a public forum how the various marketing systems work. We were turned down.
The staff of the board, in the round table discussions that are coming forward, has offered to openly explain to producers, at this first set of round tables, exactly how our marketing system works. We have been turned down.
The board has offered - some of you have accepted - open invitations to come visit our facilities. Mr. Hermanson, you've had that invitation. You've all had that invitation. You can all come to visit the board.
That is not a problem - except that sometimes when you get what you want, people don't take advantage of it.
In terms of this whole transportation debate, maybe we can be faulted for not having been very aggressive in policy. That may be true, but it's also true for some others.
I'm very pleased to see that SARM, which has not always agreed with our policies, is finally seeing the light and what is going on here. Our municipalities in Manitoba are starting to see that as well.
When you changed that method of payment, as we said before in a presentation here, it very clearly was a way for the federal government to download transportation costs onto the provinces and municipalities. They are pretty damned unhappy about it. They can see that coming now. I really think that's what's taking place here, and that's what we should be very concerned about.
I know that even in my own province they're very concerned about branch-line abandonment and that the costs it will cause in rural communities are much more than what people can predict. On that one we have been clear. Certainly we can become more active. But frankly, up to this point, we really don't have a budget to be more active.
The Chairman: Thank you, Wilf. There is just one more point that I wanted to mention to you. It's on the short notice. The reason for the short notice is that when we had quite a number of complaints from producers on the SEO report, we acted fairly quickly, as a subcommittee, to get you in to give you the opportunity to get to Ottawa to be heard. That explains the short notice.
Thank you for your presentation.
The meeting is adjourned.