Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 14 - Evidence - May 15, 2007 (morning meeting)
MONTREAL, Tuesday, May 15, 2007
The Standing Committee on Transport and Communications met today, at 9:01 a.m., to examine and report on current and potential future containerized freight traffic handled at, and major inbound and outbound markets served by, Canada's Pacific Gateway container ports, East Coast container ports and central container ports and current and appropriate future policies relating thereto.
Senator Lise Bacon (Chairman) in the chair.
[Translation]
The Chairman: Our committee is to examine and report on current and potential future containerized freight traffic handled at, and major inbound and outbound markets served by, Canada's Pacific Gateway container ports, east coast container ports and central container ports and current and appropriate future policies relating thereto.
Our witnesses this morning are: Mr. Michael H. Broad, President of the Shipping Federation of Canada, and Ms. Anne Legars, Political Director, Government Affairs. From the Centre for Research on Transportation, we have with us Mr. Teodor Gabriel Crainic, Director of Intelligent Transportation Systems Laboratory.
[English]
Welcome to our committee. We are pleased to have you with us. We have an hour and a half together, so we will give the floor to you first and then we will ask questions.
Michael H. Broad, President, Shipping Federation of Canada: Thank you, Madam Chairman. The Shipping Federation of Canada was incorporated by an act of Parliament in 1903 and represents about 95 per cent of ocean vessels trading to and from ports in Atlantic Canada, the St. Lawrence River and the Great Lakes.
Our members own, operate or act as agents for these vessels that transport virtually all of the trade between overseas ports and Eastern Canada. In addition, many of our companies operate on both the East and West Coast of Canada and include container carriers calling at the Port of Vancouver where 70 per cent of the cargo discharged ends up in the Quebec and Ontario markets.
The federation welcomes the consultations your committee is holding in connection with containerized freight traffic. It is interesting to note that in November 2000 the federation made a submission to the Canada Transportation Act Review Panel that concluded that transportation services should be regulated globally and that transportation should be viewed as a flexible, multimodal network that is environmentally efficient. The only update to this statement might be to add the word "secure."
That being said, we will provide a short presentation based on the five issues raised in your study's overview and we will be happy to answer questions. As I am more familiar with intermodal operations than policy, I have asked my colleague, Anne Legars, to help me answer some of the tougher questions.
One issue that we will not comment on is the important role short sea shipping can play in any intermodal system. We will leave that subject to the expert, Nicole Trépanier, who will speak to you later, I understand.
With respect to security issues, first, Canadian ports, terminals and vessels calling at these ports comply with the International Ship and Port Facility Security, ISPS, Code, a comprehensive set of measures to enhance security developed by the International Maritime Organization. In December of this year, the Marine Transportation Security Clearance Program will be introduced, and these processes will reduce risk. There always will be some element of security risk in the transportation network, but Canadian ports are considered secure by our international principles.
I am sure you have heard from the Port of Montreal about their excellent security initiatives, which are not only charged back to our ships but, rather, considered part of the cost of doing business. The Port of Halifax is ready for the new security clearance program and has invited our members, their customers, to start applying for their port passes.
With respect to the balance between efficiency and security, processes could be streamlined without affecting security. However, for the most part, we do not consider reaching this balance a major issue in the container business. Some efficiencies have come about because of an increase in security regulations. For instance, the 24-hour rule where cargo must be reported to Canada Border Services Agency, CBSA, 24 hours prior to loading in a foreign port, has forced foreign shippers to provide important bill of lading data earlier, thereby improving the documentation process throughout the supply chain.
We note that vessel and port security in Canada are overseen by Transport Canada, whereas cargo security — the import and export cargo — is in the hands of CBSA. Unfortunately, more often than not, the two agencies do not work together. At times, CBSA seems to work in a vacuum, all by itself. A little more cooperation would go a long way to improving efficiency.
With respect to supply chain transparency, information technology in Canada's intermodal system is used by all modes. However, there is little to link them and information is transferred through Electronic Data Interchange, EDI. Although the rail and most marine carriers have excellent technologies, detailed cargo information is not transferred between them electronically.
The same is true to an even greater extent between the trucking industry and the shipping lines. There is no common platform for transfer of all the data. However, we must take into consideration competitive factors between the modes. For instance, shipping lines may not want to give detailed information to the railways for fear the railways will solicit business directly. Some shipping lines may use both railways and several trucking firms.
Some efficiency may be gained in the single-window concept endorsed by the CBSA and the World Customs Organization. In this scenario, manifest information would be transferred electronically to CBSA from the originating ocean carrier and would allow the other modes to handle the cargo after discharge in Canada without additional data entry. Transport Canada and the Canadian Coast Guard also require vessel information for security, traffic and inspection purposes. Marine carriers could enter all the information into the single window, with the cargo information for CBSA.
Unfortunately, these government agencies tell us that this concept is not possible as they cannot share information due to privacy regulations, something that should be definitely reassessed.
With respect to environmental considerations, we can speak only on behalf of the marine mode. Environmental standards are included in the Canada Shipping Act, Part XV, "Pollution, Prevention and Response." This part comprises the Canadian regulations and provisions of international conventions. It covers pollution from ships, including oily water discharge, sewage, garbage and air emissions. What is not covered are greenhouse gases. There are no provisions for marine, as the International Maritime Organization, IMO, has not yet developed international standards. However, these standards reduce the environmental footprint of ocean-going vessels.
There is no doubt that congestion and delays in the intermodal system contribute to increasing environmental impact of container movements. Port terminals that are congested require double handling of containers, increasing the use of lifters and trucks within the terminal itself. This increased handling, in turn, leads to delays in delivering the containers to idling trucks waiting to pick up the cargo from the pier. However, there are no tools that allow for the assessment of the environmental footprint of the chain, therefore rendering improvements beyond compliance with regulations limited to the implementation of best practices.
On the subject of federal policies and programs promoting intermodal transport, the federal government provides little expertise in intermodal matters. Transport Canada is still structured along modal expertise silos rather than along logistics intermodal issues. Transport Canada's own annual report speaks to each mode but not to the multimodal dimensions of transportation. However, the inclusion of Infrastructure Canada in the minister's portfolio may help to gain a more horizontal approach to transportation. We have also recently been made aware that Transport Canada shares a monthly round table on corridors and gateways, where eight departments discuss integration and horizontal issues.
The federal government currently offers the following contribution grants programs: The Pacific Gateway Initiative, announced in 2006, with an initial investment of $591 million; the measures announced in the 2007 budget, which include the national gateways and trade corridors initiative, $2.1 billion; the enriched Asia-Pacific Gateway and Corridor Initiative, an additional $410 million; and the per year budget for each province and territory for transportation facilities, $25 million. These projects are not specifically earmarked for multimodal projects but it is understood that projects that have a positive impact on the multimodal network are the ones which will receive funding.
In addition, two programs were aimed at intermodal projects: the Intelligent Transportation Systems program, with some $13 million awarded; and the Transportation Planning and Modal Integration Initiatives Program, which awarded about $5 million to 45 projects, the last round being in 2006. Is the federal government on track to create and enable market environment for intermodal growth? The short answer to that is that it is on track to deliver. The 2005 annex to the Security and Prosperity Partnership of North America includes a section on the enhancement of the North American intermodal transportation network. The key milestones are the development of an intermodal concept by the end of 2006 and the work toward establishing an intermodal corridor work plan, a memorandum of cooperation and a pilot project.
The last budget can be interpreted as an acknowledgment of the need for accelerating public spending in intermodal infrastructure. The long-awaited upgrade of two major acts, the Canada Transportation Act and the Canada Marine Act, would enable the environment for intermodal growth. The statutory review of the Canada Transportation Act took place in 2000 and led to a panel report in 2001, followed by the straight-ahead policy blueprint from the Minister of Transport in 2003. However, this blueprint has yet to lead to the statutory amendments that would encourage and enable intermodal growth.
The Canada Marine Act was reviewed in 2002 and led to a panel report in 2003, but the statutory amendments that would have allowed the Canadian port authorities to be more active in infrastructure developments are not in place.
Finally, the last budget referred to a new national gateway and corridor policy framework, and we are eager to discover what will be covered in this policy.
With respect to coordination among government and industry stakeholders, communication between government and industry is usually fragmented, to say the least. There have been few forums for all modes to discuss intermodal issues together with the several government agencies with whom they deal. Each mode has discussions on their own with government, and the government agencies tend to act in silos. Friction in the intermodal system can be easily identified but difficult to overcome. The Greater Vancouver Gateway Council is one forum that gathers together industry and government to set policy with respect to intermodal issues. The recently established St. Lawrence and Great Lakes Gateway Council is an excellent vehicle to identify the needs of intermodal traffic in this region and we understand the Atlantic gateway council is also taking shape.
A large number of parties are involved in intermodal traffic: the seller, the buyer, the freight-forwarder, customs broker, shipping line, ship agent, terminal operator, rail company, the trucker — all sorts of people. They must deal with CBSA agriculture revenue, security and contraband, Transport Canada safety and security inspections, the Department of Fisheries and Oceans and the Canadian Coast Guard, to name only three. However, in the end, will all these issues that you are looking at increase capacity and improve competitiveness? Security and environmental concerns are issues that must be considered up front and dealt with. They cannot be sacrificed for efficiency and they can and are being dealt with. Transparency is difficult to achieve for competitive reasons. However, some national policy and forums, perhaps through a national gateway policy where all players can discuss issues related to efficiency and capacity of the supply chain and trade corridors are necessary.
When we speak of a need to increase capacity and improve competitiveness, one needs to look no further than the West Coast and we need to look at two main issues: port and rail infrastructure. There is a need to increase the ability of the West Coast ports and increase the ability of the Canadian railways to handle traffic. The opening of Prince Rupert, the merger of Vancouver and Fraser River and North Fraser ports and the expansion of Deltaport will improve port capacity. However, our members continue to have questions. Will the Canadian railways be able to handle increased business? Will intermodal transport need to fight for space on trains with bulk products?
With respect to the East Coast, both Halifax and Montreal are handling the present levels of business. However, important lessons can be learned from the West Coast experience. Continuing to make improvements to the intermodal system will make Canadian exports more competitive.
[Translation]
Teodor Gabriel Crainic, Director, Intelligent Transportation Systems Laboratory: Madam Chairman, I would like to thank you for giving us this opportunity to meet with you.
I will be presenting my point of view as a university professor, and with an observer's hindsight. The Centre for Research on Transportation was established in 1971. Since then, we have been observing and working on the various transportation systems. Lately, we have begun addressing intermodal transportation systems in Canada.
I will briefly share with you some thoughts and ideas on studies that we conducted, and I will emphasize such issues as cooperation, dialogue and innovation.
Like my colleague said earlier, I think that Transport Canada is to a large extent still organized in terms of silos. These days, transportation is a fluid and extremely integrated system. Intermodality is an integrated concept. You cannot talk about intermodality and focus on a single stakeholder, a single mode of transportation.
For nearly 20 years now, there as been a dominant paradigm in the transportation world. I am talking about intelligent transportation systems, which are based on information sharing; speedy data collection, quick, intelligent processing, as well as significant and timely feedback given to the right people to foster improved management, whether it be for individuals who go to work in the morning by car or bicycle, or for a major company that has to ship its goods. In fact, we think that significant gains can be made by promoting the integration and intelligent sharing of information.
Of course, there are confidentiality issues. Likewise, nobody wants to give information to a competitor or an organization that could take advantage of it, whereby the need to have an impartial organization to manage the information. A very simple parallel can be drawn with what occurs in a city. Information that is gathered is not given to a private organization or a transportation company, it is sent to an independent traffic centre, to interested parties moving about the city. The same thing should occur within a country and a transportation system. Would this be Transport Canada? Or another organization? Could we consider organizations such as those related to the Pacific Gateway, and we hope, Atlantic Gateway? I would like to see a single organization, up and running fairly soon, rather than having one in the Atlantic region and one for the St. Lawrence River. It seems to me that we are all in the same region and should be able to work together.
Information is regularly shared via EDI, on a daily basis. Similarly, people in railway companies will meet with their counterparts in ports every day. However, only part of the information is given and I would say that it is not released outside of companies. The information is not taken into account in most business planning processes. There is no long-term or short-term impact on the management of those companies. Where need be, capacity could be increased through the use of technology or by changing physical layouts. The terminals on the West coast are an example where capacity was increased solely by improving the working environment and investing substantially in handling equipment, such as gantry cranes to manage containers. When need be, the same type of changes, whether to the working environment or information system, could help increase capacity at East Coast ports.
There is also room for added capacity on the railways. The passage through the Western mountains is, I admit, a problem especially in winter time. From the point of view of railways companies, there is the issue of profitability. At one point, the case will have to be made that there will be sufficient volume to ensure the profitability of that mode of transportation. Clearly, there is room for new services. For example, there could be regular and more frequent shuttle services, which could ship the trucks over a distance of 300 to 400 kilometres, and thus have a significant impact on the environment. In fact, all of these ideas point to the need to study the medium- and long-term costs and benefits.
One of the lessons learned from operating intelligent transportation systems is that once information is gathered, it has to be processed before it can be redistributed, if not it only becomes grabbled bits that are moved from one point to another and serve no useful purpose. There is no use in shuffling information for left to right. It has to be handled intelligently.
In Canada, there is a long-standing problem with regard to transportation research. In the 1980s, Transport Canada abandoned its program, which focused on university research. One day, a senior official was sick, and the program was abandoned. It cost between $1.5 million and $2.5 million a year. The decision to drop the program forced almost all transportation research centres into bankruptcy, except the one in Montreal, because we were also receiving funding from Quebec. I believe that Canada is the only major country that does not have a national transportation research program. For a country the size of ours, and which was built to a large extent on transportation, that is quite surprising.
We need a research program. It should of course focus on national policies and issues. The program should have clearly stated themes, be well structured and have appropriate levels of funding. I apologize to the Public Service, but the program also needs a non-bureaucratic allocation process.
NSERC could be responsible for the management of such a program. We have also quarrelled with various existing programs, which are designed in terms of industry work. I believe industry is better suited than myself to say whether it appropriately meets their needs or not. But obviously with regard to a university setting, the same paradigm is not quite appropriate in terms of financial linkages and the like.
Therefore, the time is right to do something about intermodal transportation. We have to realize that intermodal transportation policies are increasingly being developed throughout the world. Intermodal transportation will continue to grow significantly year after year.
The number of inbound routes to the continent is on the rise. The Suez Canal is opening new sea lanes. We are starting to see boats arriving in Halifax from that region.
Panama will double the capacity of its canal, and we will once again be seeing post-Panamax ships arriving directly on the East coast. We all know that ports out West are congested, and that no new ones can be built. The Northwest Passage might also open in the near future. We have to prepare ourselves; there is still time to begin construction. The European Community now has a policy with respect to intermodal transportation, and the development and integration of all its new Eastern member States.
There is now a tremendous number of ideas and opportunities. We are well positioned. We are much closer to the markets than are New York and Syracuse. I think that we can succeed in building a more effective system.
The Chairman: One of the advantages of an eventual liberalization of Canada cabotage rules would be a more effective use of foreign containers on our territory. A number of sectors could gain from such a liberalization, including the agricultural community, railway companies, port authorities and consumers, who could benefit from lower distribution costs.
Do you think that Canadian cabotage rules should be amended? If so, what could be the disadvantages of relaxing our rules? Also, would more flexible cabotage rules pose a risk to Canadian container suppliers?
[English]
Whoever wants to answer the question, please proceed.
Mr. Broad: That is a good question. Are you asking about loosening up the regulations to allow cabotage with intermodal containers?
The Chairman: Yes.
Mr. Broad: That is difficult right now because the containers that come into Canada are owned by the shipping lines. Right now they are used for domestic traffic when necessary. In the past, they were used a lot. Traffic, particularly from the West Coast, Vancouver, came in via containers and then the containers were emptied here.
A lot of the retail companies brought all their cargo into Toronto and Montreal, and distributed it across Canada from there. Full containers came in from Asia, were de-stuffed and then repacked for the different places across Canada. Over the past few years, all the retail stores have opened up distribution centres out West — Canadian Tire in Calgary and Hudson's Bay and Sears in Vancouver — so not as much domestic traffic moves back west anymore. There was a loss of business there. However, with respect to using them for other domestic traffic, yes, I guess it would help a bit, but I am not sure whether the traffic is there to go back to the port of exit.
Imports are so strong that shipping companies want to move their containers back to the Far East quickly. They are sometimes willing to send them back empty on the ship because the freight rates are so high coming in that they do not want to miss a turn.
[Translation]
The Chairman: Have you had discussions with officials from the federal and provincial Departments of Transport to examine issues related to container transportation in Quebec?
Transport Canada has held consultations on containerized intermodal transportation. Did you take part in those discussions and do you feel that governments understand the need to position Canada on the North American container transportation market and on making the efforts needed to do so?
Mr. Crainic: I would answer your question by mentioning another point.
The Chairman: I think that this is like what you said earlier.
Mr. Crainic: Yes. In fact, I did not take part in Transport Canada's meetings. However, we are in contact with officials from the two departments, both in Quebec City and Ottawa. Occasionally, we also collaborate with people in Toronto on some types of projects.
We do indeed feel that there is some concern. We are discussing with officials from the research and development departments at the Quebec Department of Transportation. They are obviously concerned about issues under provincial jurisdiction. There is still a concern about what the federal government will do, and about the lack of communication.
From our perspective, i.e., the university research community, I can safely say on behalf of my colleagues from across Canada that transportation does not appear to be a high national priority. It is clearly not a strategic sector. For example, if you consider federal funding organizations like the Natural Sciences and Engineering Research Council, transportation is not one of its strategic sectors. And that has been the case for at least 15 years.
The departments perform their work in the context of their mandate. No one gave them the mandate to support research and development in this field. If we gave them more responsibilities, perhaps they would do this. At the moment, their mandate restricts them in the short term, I would say. There are some people who have to think about the long term. Of course, they have no choice in the matter. People are what they are, and they have to provide information on policy for cabinet, for the minister, for decision-making and so on. I do not want to get political here, but political decisions are never very long-term, at least not in appearance.
We do not have the impression that they will apply this thinking in the long term. This will be done more or less privately or through exchanges. Sometimes, this involves the inclusion of organizations where people talk to each other, such as the councils on the St. Lawrence. However, I would say that this will does not exist. If Canada wants to play a major role economically, it must export and import goods. We are not seeing that.
The fact is that there are an incredible number of empty containers in the country, and the reason they are leaving empty is that we do not export enough. We have a problem in this country, and we are not the only ones, the Americans have an even greater problem. However, the fact remains that we do not export enough. We send too many empty containers because we do not manage to sell enough to Asia or elsewhere.
The Chairman: Would you like to add something, Ms. Legars?
Anne Legars, Political Director, Governmental Affairs, Shipping Federation of Canada: We were not involved in Transport Canada's consultations on containers and cabotage. In fact, we were not contacted. This is the first time I have heard about these consultations.
The Chairman: If in our report to the government in the fall we recommend that the Centre for Research on Transportation be restored, would your group find this acceptable?
Mr. Crainic: The Centre for Research on Transportation still exists. In fact, the department still has its centre. I think that if Transport Canada had a new research program geared to the universities, everyone would be in favour. There is no doubt about that.
If we were to ask for one other thing, it would be to find a way of pooling in the information among the various stakeholders. Clearly, this is a sensitive job, given that they are all private companies or sometimes high-security government bodies such as Canada Customs. We do understand that some information cannot be shared. However, if we want greater integration, there has to be a way of sharing information that has been cleaned up, validated, and so on. We think work could be done along these lines.
[English]
Senator Tkachuk: Mr. Broad, you raise the issue of CBSA and Transport Canada operating in a vacuum at times, one not knowing what the other one is doing. Can you expand on that point and give us a couple of examples that we can refer to?
Mr. Broad: I do not know if Mr. Taddeo brought this one up, but the port wanted some of the equipment that CBSA uses to inspect containers at the port positioned in a certain place. CBSA said, "No, we want to position here," and they did not want to listen to the port. Transport Canada, of course, supported the port to make the dock, the terminal, more fluid but CBSA put their foot down and said, "No, we want it at a certain place."
As I said before, Transport Canada is responsible for the port security and the ship security in Canadian ports, but CBSA has a lot to do with inspection of ships — going on board and inspecting the cargo, perhaps, and looking at the crew — because they cover cargo and immigration too. There does not seem to be any coordination with respect to the regulations, and CBSA is coming up with reporting procedures, in addition to what we already give Transport Canada. Those procedures could be combined.
Another example is ships in the Great Lakes — and this example relates not to container shipping, but to bulk shipping. CBSA wants us to report at every port on the lake, and put in a report if the ship calls at Toronto, then Hamilton, then Sarnia and whatever. That does not make any sense. Transport Canada says, "No, you do not have to do that," but CBSA wants that done. CBSA operates on its own. It is like an outlaw type of organization and it is incredible. One of our members was fined $1,000 for something that has not been put into regulation yet, and they refused to refund the money.
Those are only a few examples. We have asked Transport Canada and the co-chairs of the National Marine and Industrial Council, Louis Ranger and Guy Véronneau, to propose that the CBSA president be made part of that council along with Transport Canada, Fisheries and Oceans Canada and Foreign Affairs and International Trade Canada, so they have a better idea of what effect their policies have on our exports and imports, and they can try to work more closely with those other government departments. Maybe that information will flow down to the people on the job.
Senator Tkachuk: We had testimony from the Port of Montreal about the railroads, and they are satisfied with the service they receive from the railroads, which is not something we heard when we were out West. It was a constant — all of us were shocked at how a business could operate with none of the customers being happy. We looked for a happy customer but we could not find one.
How can we, as a nation, promote competition? I do not think we can beat them into providing good service, but what we might want to do is provide competition. How do we promote more competition on the West Coast, for example, which I believe would improve the behaviour of CN?
Mr. Broad: I think Burlington Northern Santa Fe, BNSF, has a rail line into Vancouver, and I think that both CP and CN are averse to Burlington Northern coming in there. Burlington Northern is a big American firm and so —
Senator Tkachuk: I am sorry; I am not acquainted with that railway. Burlington Northern Santa Fe is already there, or wants to be there?
Mr. Broad: Burlington Northern has access to the Port of Vancouver, the Deltaport, but two or three years ago, when there was a big backup, one of the shipping lines, an Asian company, wanted to use Burlington Northern, to try it out, and for some reason they backed off at the last minute. There was a lot of pressure from both railways on that company and I think from other people too, to back off. It is difficult to —
Senator Tkachuk: It seems strange.
Mr. Broad: Yes, it does, but it is difficult to come up with ways to make the railroads more competitive when they are more competitive when there is less traffic. When traffic is full, CP will limit their business and CN will take it on but the customer will have to wait. Of course, CN wants everything balanced. Even though the trade is not balanced, they want their business balanced.
Also, as my colleague mentioned, there are the problems out West. In B.C. this year, high winds at the port blew over the gantries. We had the snow slides in the west and freezing weather where they cannot run full trains through the Prairies because of the freezing weather. That I can see that happening, but when the cargo is backed up everybody points fingers at each other.
Before I took this job, I had a small ship agency and one of my customers used both CN and CP. I asked him, "What is the service like? How do you compare the two companies?" He said, "I had the CN guy in the other day and I told him, 'you do not have customers, you have people that pay you money.' The CP rep came in and said he was the greatest guy in the world, he makes all the phone calls and tries to help us out, and everything. However, at the end of the day he does not do anything more than the CN guy, but he does it nicer."
Senator Tkachuk: Mr. Crainic, you wanted to add something?
Mr. Crainic: I want to add a couple of things. One, we need to realize the port in the West has the mountains, and the general problems go well beyond intermodality. I remember a couple of years back I was in CP in Calgary and they were all still shook up because the winter before, the minister called the president of CP directly, saying, "You have to buy more locomotives because the trains cannot pass."
There is a problem with passing through the mountains and going to the ports. The ports are also congested and there are other problems. Now, in a sense, we have to realize, with respect to railroads, that they have changed dramatically the way they operate in the last few years. In Canada, there used to be an excess of assets. There were locomotive engines and cars everywhere. When I did my Ph.D. thesis 25 years ago CN had, I do not know, a quarter of a million cars. They did not even know, and they did not bother to know, where half of them were in the country. It did not matter because they had enough. That is no longer true. The whole industry, especially here, in the States and in Europe, has gone through a lean period. They now operate with a volume of assets they believe is required to operate efficiently. Operating efficiently means, indeed, operating round circuit type of routes so that equipment moves and does not stay idle in customers premises or in yards because when it stays idle they lose money.
The whole operation now even has a name. If we name things, they start to exist. Full asset utilization policy means that the assets must move so for CN, that translates most of the time into one service every day out of Halifax and two out of Montreal. I do not know how many out of Vancouver.
The return train, more or less, comes back with the cars. That is because they must have a return on investment. Stakeholders have shares and they want dividends on shares. That is purely stock exchange. What is needed, in a sense, through maybe cooperation between the shippers, the ports and the railroads, is to show that there is sufficient movement to have an extra train. Otherwise, that train will simply not exist, unless somebody legislates and forces a number of trains out of Deltaport terminal, and I do not think that we are anywhere near that state of mind in Canada.
The other opportunity is to demonstrate to the railroads that there is enough traffic to justify an extra train per day, or every three days. I think it can be demonstrated. It is not directly available like that but that is the only way. It is not a question of competition, because CP operates pretty much as CN does. The reps might be nicer sometimes.
For example, truckers do not like railroads and railroads do not like shipping. The small does not like the big so the food chain goes all the way, in the intermodal world. However, it is not a question of competition. If they open the BNSF line, the rep will tell customers, "Yes, but when you have less volume and you'd like to come back to here we might not have space on the train." That is normal business practice and that is exactly why the other guys back off.
The answer is to increase the capacity of the Canadian network. The trucks can take it if we do not pull trains that are too long and send them into the Fraser River, but the question is, can we demonstrate that we have enough volume? I think we can but it should be done.
Mr. Broad: If I could add just one point, in speaking to CN they say, "Well, if we go to the board for $1.6 billion for intermodal transport, we need proper forecasts." Oftentimes, when they ask their customers, they say, "What's your volume of business going to be next year?" Customers will say, "It's only going to increase 3 per cent." Customers say that because they fear that if they say it will increase 10 per cent, they will receive a whack in rates: the rates will go up. I think, in the railway's defence, there is also that issue. They must invest a lot of money in the system and maybe the forecasting could be a little bit better. Maybe smart systems need to start overseas, when the cargo is originally booked, maybe a month beforehand, so that people know it is coming.
Senator Tkachuk: I want to explore Burlington Northern a little further. It does not seem that far from Vancouver to the United States border or to Seattle to provide competition by connecting to major U.S. railroads to move product out of the port and to Eastern Canada. Are we reaching there or is that a possibility? Our railroads are involved in the United States. Why would we care whether the United States railroads are involved in Canada? Mr. Crainic?
Mr. Crainic: If I remember correctly, a couple of years back CN and BNSF tried to merge. They had been hauling all over the place both in Canada and the States. I see in my mind the headlines on the major journals all over the place about giving the traffic to the Americans. I think if somebody wants to go that way, we should have something like a free sky. We should have maybe a free rail act in North America, in the sense that they can pick up traffic and move it in the other country, and it is done everywhere, even if they do not own the other railway.
A number of concerns should be eased for the mind of the Canadian public. I am not as nationalist as I should be, but I imagine how journals and television crews will handle the topic. Besides, we have that line, so it is not as if we could really open up a lot because in the states they are not as linked together. BNSF is a huge, very nice company, but it would be difficult for them to bring freight, for example, directly to Montreal. They would pass it to someone else, so the chain through the States needs to be looked at also and it is not clear that we have a clear chain to the East. They might bring it to Chicago, though, and that could be already a good incentive, but it is not as simple as it sounds.
Mr. Broad: The container volume in Canada is about 8 per cent of the volume in North America.
Senator Tkachuk: Yes, I am not advocating it. To me, it does not matter. When the customer goes to the store in Windsor, I do not think the customer wonders what railroad the item came in on. The customer does not care as long as it is there, right?
Anyway, I have only one little item left. Mr. Cranic, you brought up the topic of how little research, if any, is done by the federal government on transportation issues. Considering that transportation involves trade, which is how we live in Canada, and the environment now and all of these other issues, if you were setting it up again, how would you advocate going about it, with the universities, think tanks and people like that becoming more involved, where research could be done and money could be given. How would that system work?
Mr. Crainic: University researchers are working on transportation issues, but the financing of that research is more on the basic level, such as from the Natural Sciences and Research Council of Canada, NSERC, so it helps develop basic research. We never have enough money, of course, but in a sense that exists at a basic level. Now, what we do not have is something that allows a more significant project, something that is on a larger scale that addresses a strategic need or what we need for a broader scope.
In our community, the average grant per year for a professor is between $20,000 and $25,000 a year. Let me remind you that a Ph.D. student is paid $18,000 to $20,000; so fundamentally, if they do basic research they will never be able to do a large project.
If large projects go through punctual initiatives, then they may have a chance if they manage to build a complex financial arrangement because right now Transport Canada does not pay more than 50 per cent of the cost of the project. That may be fine for the industry but for universities, where do they want to finance the other 50 per cent? I am talking about strategic projects, strategic programs in NSERC and the others; and transportation does not exist.
I think that, on one hand, Transport Canada and the Government of Canada should re-emphasize that transportation is a strategic domain for Canada, or maybe even that intermodal traffic is, right now and for the foreseeable future, a privileged way to develop transportation and to favour industry and commerce in Canada. That statement is not really made and followed by action, from our point of view. Either, it can be managed through Transport Canada, through a program of research funding, funding centres and teams on projects that are clearly identified, or they can give the priorities and the funds to, for example, NSERC and let them manage the program a little bit at arm's length. That is also acceptable, but the first thing is to have that clear vision and statement, and then follow it with funding.
The advantage of taking the management out of the ministry and giving the mandate, let us say, to NSERC is that maybe the programs will be less volatile and less easy to cut when the ministry needs to cut $2 million from the budget, as happened last time.
Senator Zimmer: Thank you for your presentation this morning. It is always nice to be back in Montreal because I am a Montreal Habs fan. They are not in the playoffs but it is still nice to be here.
Senator Tkachuk talked about the Port of Vancouver, and I want to go a little further. At public hearings that we held in Vancouver in March, the committee heard about the problems that lack of rail service has caused at the container terminals there since November of last year. We also talked about the weather and the derailments. To what extent has service been affected here? What is in service here in Montreal for containerized terminals? Has weather and derailments affected the service into Montreal, as it has done in Vancouver?
Mr. Broad: It was a mild winter here, so it was not so bad.
Senator Zimmer: It was a problem out there. They know every year they will have winter and of course across the prairies it is difficult, but is it similar here? Even though you may have a mild winter one year, does it change over the years or is it similar at all?
Mr. Broad: It is difficult to compare because Vancouver is the gateway for Asian cargo, where the big spike has been. Montreal is basically Northern Europe and Mediterranean port transfer, and volumes over the last few years have been fairly steady. They increase 2 per cent to 3 per cent, but not 10 per cent to 25 per cent like in Vancouver. Halifax is static: There was no increase last year. Weather plays a part here but the volumes are not to be compared to Vancouver.
Perhaps there are alternate movements too. If they are going from Montreal to even Chicago — but Detroit or Toronto more likely — if there is a rail derailment or traffic is held up, they can always truck it. Companies such as Ford and the other car manufacturers that have cargo coming in from Europe will truck it rather than ship it by rail.
There are options, in case something happens, but out west there are not many options. They cannot send a crew out. As my friend from CN says, it is tough to send a crew out in the middle of the prairies when it is 40 below to fix things up, and to take containers off and move them by road. They cannot do it. I think both railways do a fine job of getting things right after derailments: getting things back on track, so to speak, as soon as possible.
Senator Zimmer: It is not as severe as it is out west?
Mr. Broad: No.
Senator Zimmer: One example they gave us was that a ship would come in, they would order a hundred cars but because of the weather or whatever, the train would not show up. Of course, they would have to hire the longshoremen and pay them, and CN accepts no responsibility there. Obviously, the severity is not the same because of the proximities.
Mr. Broad: Right, and also we must take into consideration that people complain about the railways, but the railways have a few things to say about the terminal operators too. There is a lot of finger pointing.
Senator Zimmer: We heard about that. We witnessed that when we were there. We were not sure who was pointing at whom.
Mr. Broad: As with everything else, the problem is probably a little bit of both.
Senator Zimmer: You talked about infrastructure plans. The Port of Montreal has been assured by consults that the infrastructure plans for containerized freight will meet the needs in the future. Of course, it is critical with the other two modal systems. Are you confident that the rail and trucking industries are prepared to invest sufficient capacity to meet the demands for commuterized transportation for the future? Are you confident that these industries are prepared to do the same?
Mr. Crainic: Crystal balling: in a sense, trucking always responds. Unless something dramatic changes, right now trucking is cheap and they are running for business, in a sense. The problem in trucking is driver availability. If they have drivers they will go after any cargo, anytime, at almost any price, many of them actually under-cost themselves. They do not charge what they should charge to survive, so trucking will be there.
From a Montrealer's point of view, I am almost afraid that there will be too much there. In a sense, I believe that there is too much trucking in North America for distances that are not meant for trucks. Railways will put service in if they believe they will have steady traffic. Talking with people at CN at one point, it is clear they have made a choice that the services they run are always at full capacity.
For intermodal traffic, they have implemented that system with advance bookings for all traffic except the import one. To be sure that the trains are full, and when you look at the frequency of service, where it is once every day — in Montreal that means two trains because one comes from Halifax and one starts here — they will not go higher until they are certain they can fill it up every day of the year.
They will invest if we can show that this traffic will be there. They will not invest because there might be a spike, in the same sense that they will not send an extra train into the Deltaport terminal because of storms and they have three ships lined up in front of the terminal. They will not do that, because neither the terminal, nor the shipping companies, nor the customers will pay them the extra.
We need to realize that, as we said, it goes both ways. Somebody must cover the costs. The public, us, in one form or another, either as shareholders or as customers in Rona or Loblaws will pay in the end, but upfront somebody must pay for these things. Also, to send an extra train, they must have the train, they must have the engines, they must the people and they must have the cars. It is not as easy as sending an extra truck.
It is the same thing with airlines. If you have ever been stranded in an airport, even in Montreal, why does Air Canada not put on another plane when it is over there? It is exactly the same reason: Somebody must pay and somebody must bring it back. As long as those economics are not addressed somehow — and I do not have a magic wand either — there will not be more capacity.
Senator Zimmer: Representatives of the Port of Montreal told this committee that the federal government should concentrate its efforts on providing transportation infrastructure. Do you think that federal funds would be better invested in road or rail-related infrastructure such as grade separations, and specifically what investments would you recommend?
Mr. Crainic: I think investment should go with a national policy. If we have a national policy on transportation first, then a long-term vision, investment should support that vision. Right now, I do not think we have that. From a sustainable development perspective, it is obvious that we would like to support as much as possible a less environmentally harmful means. Therefore, we should examine and eventually try to promote rail, even a cabotage, putting containers on ships from Montreal and sending them to Toronto or even Chicago or Detroit, if it is not a question of time. It depends on what kind of cargo is there. On the other hand, I do not think that we will get rid of cars and trucks — I do not want to get rid of my car — in the foreseeable future so we should not unduly penalize trucking either.
The question in Montreal is, do we keep the port where it is, or do we move it? If we move it, rail will have a huge investment, because they will have to move tracks and I do not believe they will do it alone. If the decision is made to move the port, money will have to come somehow. What form and when, I do not know. In any case, my point is, let us have a vision for the medium- and long-term development of the transportation system in Canada, and then investments and money should support that.
Mr. Broad: I think I was asked that question by the finance committee a couple of years ago here and Monte Solberg ripped me apart because I did not answer it properly.
Senator Zimmer: I will not do that.
Mr. Broad: If you ask 20 people where they would put the money — and I am talking in ports, railways, trucks, warehousing people or whatever — you will probably receive 20 different answers. A lot of people say, "I don't even know." Vancouver had a problem. Containers were backed up. They could identify where the infrastructure problems were. It took some time but they brought people together — the railways, the terminal operators, the city, provincial governments, trucking companies and everybody under the gateway council — and they came up with a vision. That was the start of the gateway project, which Mr. Lapierre started in the previous government. There was a problem there that could be identified.
Here things are moving along pretty well. There are not too many delays now. People are getting their cargo. There might be some weather delays. I think before people start spending a lot of money — I think I agree with Mr. Crainic here — they need some long term vision and they need to have some real direction before pumping money into assets that may not be required. They need to be careful.
Mr. Crainic: To add something short, they might want to move the Port of Montreal from an urban development point of view. In a sense, if they look at the development of the city of Montreal and the urban issue, they might say, "Let's move the port," but then it is a different motivation. I will not go into the municipal policy right now — I do not know if you want to go there.
Senator Zimmer: Talking about governments, and federal regulations and policies, what federal policies or regulations — for example, customs, taxation and operational — most affect the efficiency, competitiveness and capacity of your container transportation operations, and what changes to these policies or regulations would help your business become more efficient and effective?
Mr. Broad: All of them, together: The policies with security and environment are necessary, as I said before, and we cannot sacrifice that — but I think, in general, if government agencies work together a little bit closer and identify certain areas, we could probably build some efficiencies into the system, particularly with respect to reporting and ship inspections.
We have 18 different departments — not 18, but several — inspecting the ship. We have CBSA stopping the loading and discharging of vessels because they have a tip that somebody is on board the ship. They could still do their work during the operation of the ship but they do not. They stop everything, and for a ship that is worth $35,000 to $40,000 a day, it hurts. Those are, I think, isolated incidents and I think the market usually takes care of things.
Senator Merchant: Yesterday, we heard from some frustrated — should I say angry — people: Association du camionnage du Quebec and one of the transport companies. You mentioned moving by truck this morning. They felt they were treated poorly in terms of waiting times at the port, there was no support system for them, and they were not on anybody's radar screen.
What is the situation here and why are they so frustrated? I can tell you some of the things they mentioned but let us hear from you first. Why are they so frustrated?
Mr. Crainic: I do not know why exactly they are as frustrated as that right now but I know they are not happy these days because they believe that everybody points finger at trucks because of the environment and sustainable development issues. So, they are edgy, whatever happens.
From what I remember last time I was at the Port of Montreal, they are given a wide window when to come or to pick up their containers and when they arrive, there is a lot of waiting. There is no coordination, if you want, between the management of the container piles in the yard and when actually trucks come in.
If I look at other ports in other countries elsewhere, but I think even in Vancouver, there are ways to give a more precise time window to the truck. It requires more sophisticated management of the container piles in the terminal, both on the ground and in the information system. It boils down to that cooperation, integration and exchange of intelligent information between the two industries.
It could be done. It might require some investment on both sides in terms of equipment and training of people. Is the port or the terminal operator or owner interested to do that if nobody pushes for it? If not, they have what they have now. In a sense, truckers do not have the clout that railroads have. Even there, if you talk to the Port of Montreal about CN, they will say, "They give us the cars they want and not the cars we want." They say we are much better in Halifax because we are managing the traffic. They say they have much more power than truckers have. So I think that is why truckers are angry. There are ways to ease those pains. I am not sure it will ease all the pains, but it could be done some way.
Mr. Broad: Did they give you any average times per week that they were delayed and how many months they were delayed? Did they give you figures?
Senator Merchant: I do not think they gave us that, but they spoke about the delays. They spoke about nobody investing money to help them. I think they said that they were 240,000 in number. They gave us a number of truckers. They were a large group but their voices were not heard. No attention was paid to them. As far as the environment went, they did not think that they were contributors to pollution. They said something about the systems that are now in place guaranteeing that they are not polluters. I cannot remember if they said maybe they were even better than the trains.
The other thing that frustrated them terribly was that they took seven days to work 60 hours. Also, they were frustrated by the interprovincial barriers and that we do not have free trade commerce in Canada. Do you have some idea as to how the federal government can play a role in easing some of these frustrations?
Mr. Crainic: I think we will not develop too much on the environment issue. That is what they say. I am not sure they are right, but that is another issue. They carry significant weight with the provincial transport ministers: that I can tell you. They are well heard. They are a large number indeed and they are vociferous in the world of transportation.
It is true that we do not have free trade in Canada. At least we do not have customs at the provincial borders but we do not have the free trade they have in Europe. That is for sure. That is not only a federal issue, it is also provincial, so then we come back to our good old Canadian amusement on federal-provincial cooperation, let us put it this way.
It will be interesting to have fewer barriers but, again, when you look at the States we may console ourselves because they are not much better. They even have union regulations that force some interesting routes for trucks. Regulations are not the same in the east and west.
Things could be done. As I said, personally I am not sure we want to truck things from Montreal to Vancouver. I would rather put those lorries on the train and have a driver and truck pick them up at the other end, if we have sufficient shuttle trains to do that. I think that for the good of everybody it will be much better. I think driving hours and regulations are stringent, but they are more lax here than in the States. Again, when they cross the border they are allowed to drive only eight hours a day, which is two hours less than here. Again, "il faut prendre ca avec un grain de sel," as we say.
Sometimes they are not entirely wrong. They have good points. Clearly, trucking is an important industry in Canada. It must be taken care of but, as with any other industry, they push and they have a high voice, so it is good to hear but it is good to ponder.
[Translation]
Ms. Legars: I would like to add something regarding truckers. It is actually the environmental policy that will help truckers reduce waiting times in terminals. There are more and more terminals and harbours that include as part of their environmental policy, the development of an appointments system or the introduction of better schedules for truckers at the port to cut down on waiting times. So the environmental policy in harbours and terminals will be one way of finding a solution to the problem.
[English]
Also, from the ocean shipping side we are aware that trucking is an important segment of the intermodal chain. In the past few years, the more important disruptions we have had were related to truck strikes — we had one in the Port of Montreal in 2000, we had one in Burlington, Ontario, we had one in the Port of Vancouver — and each time it was disruptive.
In Quebec about seven years ago, there was a bill to bring the truckers back to work, but at the same time the Government of Quebec put together a kind of permanent forum with the truckers to help them out, to solve their problem and to have better contracts. We appreciated the way it was solved. If you have a forum where people can address their issues, you can prevent a situation where people are pushed into a corner and they have no other choice than to strike or disrupt the intermodal chain.
I think it was a good way to tackle the problem and we think in the industry that it is only fair that each link of a modal chain be able to make a decent living so that we can have a chain that works and we do not have disruption all of a sudden that jumps on our face because someone in the chain was not able to make a decent living.
I think it is a collective issue, somehow, to make sure that everybody is able to make a decent living, but also I think there are still lots of efficiencies that can be gained at the gateways. At the gate and in the terminal, it is certainly an issue that should be solved.
Senator Tkachuk: It is the market that drives the truckers more. In other words, we cannot guarantee a decent living for everybody. The people who have a decent living are the ones who survive in the marketplace. They operate much more efficiently than railroads because more of them are entering the marketplace and that is what we would like to see in the railroad system: some competition.
We have to find a way to promote it. You mentioned it would be better to haul by railroads across Canada, but the railroads obviously are not doing it and that is why trucks are doing it. It is not that people say, "I want to use a truck." They say, "What is the best way for me to send that product from Vancouver to Winnipeg or Montreal?" They choose a truck, because there is nobody else: because someone is sitting around doing nothing, or whatever.
The truckers who appeared before the committee said, basically, "We don't get no respect." That is what they were talking about and I think in a lot of ways they are right. We blame them for a lot of things but I know when I want to move something I phone a trucking company. The trucker comes, picks up all my furniture, or whatever I want to move, and moves it. I cannot phone a railroad to do that. It would not happen.
Mr. Crainic: You can, but they will send you a truck.
Senator Tkachuk: That is right, exactly.
Mr. Crainic: We must realize there are fundamental differences in how railroads and trucks function as a transportation system. Railways can never, by definition, send you a car and move it right away to the door where you want it delivered. That is not how the industry works. The industry works through consolidation and building of those long convoys for efficient long-distance travel.
In a sense, if you want to move freight to have a modal transfer you must change the economic environment so that even if it is, in a sense, longer by rail, it becomes cheaper or more interesting. That was a policy at one point. That is why I referred to the European Community. They had white papers on transportation regularly and they have a policy to favour rail, through policy instruments, some of which have to do with efficiency in infrastructures, some of which have to do with taxation. Taxation is a bad word that nobody wants to talk about, but if we have an environment tax on transportation, pay as we drive, for how long we drive and the way we drive, then things would change. I am not sure if we are ready to talk about that in this country but that is an issue we must face eventually.
Senator Merchant: I have a question that may interest all of us in this committee. Maybe we should travel somewhere other than only between Montreal, Halifax and Vancouver to learn some best practices and see how other countries operate. Do you thing that would be useful to this committee, to look into something a little more —
Mr. Crainic: Travelling is always interesting. There are some good practices in some ports, obviously. We have to realize that Canadian ports on the scale of worldwide container terminals are at some levels and there are some huge ports such as Rotterdam, Hamburg or Singapore and Hong Kong. If you would like to see, at one point, efficiency in handling, we can go to Singapore, Hong Kong or even Rotterdam. The volume they have at one point justifies some investments that I am not sure our volume will justify.
It might be less glamorous, but maybe looking at some ports that are more on our dimension and in more direct competition, both on the East Coast and the West Coast, might be more profitable than going to those super-huge ports that have different needs than ours.
Mr. Broad: And cheaper labour.
Mr. Crainic: Cheaper labour, yes, but they have fully automated terminals where they store containers for less than 24 hours in Hong Kong. Those terminals move like our luggage in an airport — more efficiently, actually — so there is a huge investment there. Trucks have a time window of 15 minutes to get into the port, all that is technology.
Senator Merchant: The truckers here yesterday mentioned Rotterdam but if there are other ports in North America that we should look at, that are at about the same level as Canadians —
The Chairman: If you ask for the budget.
Senator Merchant: If I ask for the budget — oh, no, I would leave that up to you.
[Translation]
Senator Dawson: The message people in the West are getting is that there is no transportation policy.
I was here 25 years ago, and I can tell you that there has not been a general discussion about transportation in Canada for a long time. This certainly deserves this committee's attention in our recommendations, because your grievances are the same as everyone else's.
As you were saying earlier, it is surprising how well finger-pointing works. Because, to listen to what everyone says, you would have the impression that it would be difficult to move a commodity from point A to point B. But in the end the system works.
I understand what you mean when you talk about silos, Mr. Broad. I want to come back to a comment you made at the beginning regarding the Atlantic Gateway and the Eastern Gateway. Clearly, the reason we will be having both, is that the Department of Transport is divided into an Eastern and an Atlantic region. However, as regards the needs of the market, harbours, clients, importers and exporters, we should be looking at a gateway for Eastern Canada.
Yesterday we went to the Port of Montreal, and when the Port of Montreal looks at boats, it does not look at when they cross the Quebec border into or out of the Maritimes. It looks at boats from the time they come into the Gulf and when they want to plan their return. When we were travelling out West, we saw how effective good coordination on the part of users can be. All the people involved in the gateway take part in a round table to promote communications and information sharing.
Do you think we should insist on having a single gateway, or could there be such several entities? At the moment, rather than having 12 ports in Eastern Quebec, we are going to have two gateways that may put as many walls as there are between Quebec and Ontario for trucks transportation.
[English]
Mr. Broad: No.
Senator Dawson: The question was a little bit slanted.
Mr. Broad: No, but it is good. You bring up a good point, because transportation in ports in this country are all for the exporters and importers. Those are the people we all serve. Maybe they are the people to ask questions about transportation and what they see. I am sure you have met some already. As far as the one gateway in Eastern Canada goes, right now I guess you would have some competitive problems because the terminal operators in Montreal are different from the terminal operators in Halifax and they may compete for cargos, ships or whatever.
That is one problem. The other thing is that the markets are different. Halifax serves Asia and Southeast Asia more, and Montreal is more North Europe and the Mediterranean. There are different types of operations. The ships that call at Halifax all go down the U.S. East Coast and continue, so a ship takes off some containers and loads others back on.
In Montreal, the ships come in and they discharge all the containers and they load all the containers. I think Montreal already is a gateway. I am sure Dominic Taddeo of the Montreal Port Authority says he has been a gateway for 40 years or whatever, but I think there is already a base of gateways. I guess Halifax would probably be the container port in Atlantic Canada and there is a gateway through Montreal. There is a good basis to build on, and maybe down the road we could see some efficiencies there, but I think to start with, before people start throwing money at things, they need to look at each of them separately.
Down the road you are right. If it will benefit the Canadian importer and exporter that is what must happen. That is the whole reason we are all here.
[Translation]
Senator Dawson: Professor Crainic.
Mr. Crainic: Yes, if we look at the whole system from the point of view of a professor, it is quite clear that we could have a better service, if there were some coordination among major ports and carriers in the Eastern part of the country.
Obviously, there is competition among some terminals. There are also political considerations. It may not be clear that for all the Eastern provinces, Quebec and the Maritimes would agree to having a single gateway right away. We hear different views on this from different departments. So there is no guarantee that advocating a single body immediately would be profitable and produce results. For the time being, it would be better to promote greater cooperation among the various partners, modes of transport and terminals within each of these entities. We must also insist that the two entities talk to each other and that they share information so that some day integration may be possible. However, from an overall point view, my answer is yes. In the short term, from a practical and political point of view, I doubt that this could be done. If we devote too much effort to this, that means we will focus less on other issues. So perhaps ultimately we would not improve the situation at all.
[English]
Senator Eyton: I apologize for arriving late. I did not hear your introductory remarks, but I will plunge ahead anyway. I want to pick up on Senator Dawson's line of questioning.
It seems to me that, at least from a federal point of view, and I think from a business point of view, what we should look for an integrated national high performing shipping transportation corridor that goes right across the country, with subsets into the U.S.: to Chicago, Kansas City and other trans-shipping places. It seems to me that should be self-evident. In our visits to the West Coast, they have the wind in their sails and of course there is lots of business and they are optimistic.
Their problem, of course, is dealing with the volume of business but there was, as I heard it, good cooperation between the Port of Vancouver, which encompasses three separate operations and Prince Rupert. They are working together, and together they asked for improvements to infrastructure that would assist them, but they were thinking in terms of a national shipping-transportation corridor.
Even Saskatoon showed up and said they wanted to be part of the national corridor. Improbable as it sounded when first mentioned; it makes sense. Here, I have a sense that in the East, Montreal wants to go its own way or is choosing to go its own way, Quebec City is on its own, and other ports along the way perhaps are maybe competitive. Halifax can develop its own strategy and it seems different.
I know you mentioned the eastern gateway but I do not think there is much attraction to it yet. I find it hard to understand why what I would call a winning business formula that I tried to describe at the onset, and the evident progress that has been made in the Asia-Pacific or Western gateway, why that progress does not serve as an example for Montreal, Halifax and the other ports, or nascent ports, in Nova Scotia, Quebec and perhaps even in New Brunswick. Can you comment, please?
Mr. Broad: I think local interests have a great bearing on it. In the Greater Vancouver gateway, the municipal governments are involved, the provincial government is involved and federal government is involved.
I think the same holds true in the East. They will have the Quebec government, the federal government, the Montreal government, the Quebec City government and all these cities, so to expect to have one gateway, particularly at the beginning, is not practical. They will have different environmental concerns in Atlantic Canada than in Montreal and they have different governments operating, so I think it would be difficult, particularly at the beginning, to come up with a gateway that everybody is happy with. I think with all those people involved it is —
Senator Eyton: Is there a role for the federal government to say, "We have a vision and we will support it with funding for, in effect, infrastructure"? I think the ports are, by and large, in decent shape but for the supporting infrastructure, could the federal government intervene and say, "Look, we have a vision and it is one you can join, if you choose, and if you do certain funding and certain privileges are available."
Mr. Crainic: If I may pick up on something that you said earlier, because it is important, on the West Coast they faced one market and a huge problem. On the East Coast, the ports face several markets and not yet a big problem. Growth might not be as high as we would like it to be — Halifax actually has no growth — and the liners that come into the ports right now, in a sense, separate where the merchandise comes from and they have sufficient capacity to handle what they have now. In a sense, we are talking about a perspective here to be able to increase our capability to attract flow: to try to convince people that they should do something, because in the future it will be better. It works hard with individuals, it works hard with companies and it works hard with institutions, unfortunately.
The notion of corridors is an important and maybe the way to push things in the East might be through a strategy to have coordinated corridors from here to the rest of the continent where we have cooperation. In the beginning, it might be around a St. Lawrence-Quebec gateway and another in the Maritimes, but somehow we come together within that idea of a corridor where we can capture as much freight as possible to move it toward the interior of the continent.
That is where the federal government can arrive at a national policy where those corridor policies, supported by intermodal intelligent systems, come into being and then establish some means to encourage and to support development within this area.
Senator Eyton: I want to make an observation. The railways, by and large, particularly since CN was privatized and CP became a free-standing enterprise, have measured themselves by so-called operating ratios. Operating ratios, in general, refer, as I believe, to the cost as a percentage of operating cost. Of course, in their terms, that means as soon as you apply that ratio, "You better be darn sure that you are making the least cost for the most revenue," and that translates into two-way traffic.
Now, I am not so sure here in the East, because there probably is a more balanced trade, although you did indicate earlier in your comments that we still do not export enough, we import too much, so there is a disparity here and a very large disparity on the West Coast.
We have heard people comment that there is a real problem for the railways, it has to do with climate, accidents, landfalls and earthquakes and many outside forces that make it difficult for them to provide the service that the shippers want.
I have a feeling that the operating ratio has at least that impact and maybe much more in terms of saying unless we get two-way traffic in a situation where there is an imbalance you have a problem.
Please comment on that observation. What do you think the federal government could do to try to alleviate that imbalance in terms of supply railway cars?
Mr. Crainic: Let me make a general observation: Trade, is unbalanced everywhere and any time and anywhere. It is difficult to find any two points on the globe that has perfectly balanced trade. Worldwide trade is unbalanced; local trade is unbalanced.
One of the major issues is the loss of transportation when you move assets and then you do not have enough to move them out. Rail is even worse, in a sense, because they are captive of the tracks. A truck may change the road, an airplane may go up and down, a ship is on the whole sea, you can change the trajectories, or the road if need be. Railways are on those rail tracks and they cannot move off them. If you move cars and engines into a location, you have to bring them out. If you send five trains a day out of the terminals in Vancouver and they end up somewhere in Chicago, what do you do with them? They are empty, you have to bring them back empty, and the cost is too high.
The fact is, those are private companies, as you said. People have bought their shares and they are traded. The way the economy works today is on short-term gain in all the sectors of the economy, even at the price of long-term development. To say to a privately-owned company that is accountable to its shareholders, that it should operate in such a way that it increases its costs while the price of the shares goes down, just because somebody else has to operate more efficiently, will simply not happen.
I agree that it is a push to bring down the cost of operations and, in fact, that is why they will not operate services where they are not almost certain that they are continuously full, because the ratio will go badly. That is how they are judged. They are judged by the external environment, by the trade exchanges in New York or Toronto and by the economy's analysis, and that is how they live or die.
The answer might be yes, but I do not see what remedy there is, unless somebody wants to nationalize rail transportation and operate it as a public service that loses money, as public transportation does for people. That is all right, it might be a policy, but then we are changing the environment completely.
We operate some railroads as a public service and that is a different ballgame, but as long as we operate railroads as private owned and managed companies for profit the only thing that we can do is have people and companies, talk to one another so they can organise their operations in a better way. Imposing to change the ratios will not change operations.
Senator Eyton: I think I might accept that observation if there was truly a competitive marketplace; however, if you are a single railway company and there are many places where there is only one line supplying, and I just say that where it may judge to be not truly competitive then I think I probably would have concerns.
You talked about the shareholders, but of course, the federal government has a responsibility to all the citizens here in this country, so I am not sure that your rationale applies where there is not a truly competitive marketplace.
Mr. Crainic: There is a partial answer — I do not know how well it will apply to Canada, nobody has looked at it — Europe has separated the ownership of the trucks from the management of the trains. Now, they could do that because railways were still fully state owned in Europe. In order to increase competitiveness, they say, "Well, somebody manages the trucks and everybody else who operates trains has to pay them in order to use them." It means that anybody could offer services and, in fact, we are seeing the emergence of shuttle networks or shuttle services operated by other people than the traditional companies that are going on the lucrative markets, of course, and that increases the competition.
I do not know how far we can get, but right now in CP owns its trucks and manages its trains, and CN owns it is trucks and manages its trains. Even VIA Rail has to pay CN to use the trucks. That might be one way to go, but again we are going to a significant change in the organisation of the transportation sector in Canada.
Senator Eyton: It is one that went very successfully with the telecommunications industry, where in fact, there used to be one carrier, and of course, there are all sorts of choices today.
Mr. Broad: Yes, and in fact, two or three years ago, there was a proposal for legislation to allow people the running rights. The legislation did not come about and there was a lot of pressure by shippers and railways to stop it. In any case, I think when you are looking at two competing railways can they compete on service? It seems to me that if one railway could guarantee service, it would get the business or most of the business. The problem is that the people paying the bills do not want to pay for the empty return. That is a big part of transportation in everything — air, rail, truck, marine — it is the empty return, and nobody wants to pay for that up front. Nobody wants to take that risk. There is nothing like a traffic manager negotiating a rate with a railway and getting them down and down on their yearly contract, but, boy, when his cargo is stuck he will pay anything to get that cargo, but he does not want to pay it up front. The empty return is tough to solve.
[Translation]
The Chairman: Thank you very much for coming here this morning. By the number of our questions, you can see that we are very interested in this file. Do not hesitate to send us more information, if you think that we need any.
Let us resume our study and hear from Mr. Richard Corfe, President and Chief Executive Officer of the St. Lawrence Seaway Management Corporation, and from Ms. Nicole Trépanier, Executive Director, Armateurs du Saint-Laurent, Quebec Shortsea Shipping Roundtable.
Welcome to you both. First, we will hear your testimony and, as you can see, the senators will have quite a few questions for you.
[English]
Richard (Dick) Corfe, President and Chief Executive Officer, St. Lawrence Seaway Management Corporation: Thank you very much. The St. Lawrence Seaway Management Corporation has a mandate to manage the St. Lawrence Seaway on behalf of the Government of Canada. The St. Lawrence Seaway Management Corporation was created in 1998 and has a 20-year mandate to manage the seaway, which is part of the government's infrastructure.
[Translation]
Madam Chairman, I would like to begin today by commending the committee for undertaking the study of containerized freight transport in Canada. As you know, the ever-growing volume of container shipments world-wide is putting tremendous pressure on Canada's coastal ports and transportation infrastructure — pressure that, if left unaddressed, could result in serious implications for Canada's economy.
I appreciate this opportunity to share with you the unique perspective of the St. Lawrence Seaway Management Corporation on this pressing issue, and discuss how the seaway is well positioned to help address the challenges at hand.
[English]
As you well know, rapidly increasing trade volumes with Asia are being felt acutely on Canada's West Coast and the government has taken steps to support our West Coast ports to accommodate rising container shipments through the Pacific Gateway Strategy. However, it is important to acknowledge that it is only a matter of time before the same situation will be felt by Canada's East Coast ports. A recent study by the University of New Brunswick forecasts that container shipments throughout North America will increase by 75 per cent in the next decade. This dramatic rise will pose a number of challenges to Canada's transportation system and movement of goods; challenges that will not be limited to ports and waterways, but will also affect the efficiency of highways, railroads and border crossings.
The planned expansion of the Panama Canal will serve to exacerbate future congestion, particularly on the East Coast. At present, the gateway for shipments traveling between Asia and North America's East Coast is operating at 93 per cent capacity. However, with plans to double the Panama Canal's capacity by 2015, Canadian and U.S. East Coast ports expect to be flooded with container shipments from Asia.
The intensifying train environment requires that Canada plan for significant growth in container volumes on the East Coast as it has already done for West Coast ports through the Pacific Gateway Strategy. Not only will we need to consider the impacts on waterways, highways, railroads and borders, but we must also consider the impact this growth will have on the economy, the environment and the day-to-day lives of Canadians.
Canada is currently struggling with problems of highway congestion, safety and gridlock at border crossings at an estimated cost of hundreds of millions of dollars a year to the economy. Our over-reliance on the land-based transportation of goods has also contributed to environmental degradation caused by greenhouse gas emissions, noise pollution and highway and rail line expansion.
[Translation]
I submit that the St. Lawrence Seaway, the world's largest inland waterway, can be leveraged to support Canada's effective management of increased container shipments, ease congestion on our busiest highways and railways and do so in a manner that is both complementary with intermodal channels and is environmentally responsible.
The seaway is strategically located. Currently, 150 million North Americans live within an eight-hour drive of the Great Lakes/St. Lawrence Seaway system. More than 30 per cent of North America's Fortune 500 companies are located within a day's drive of the Great Lakes and the seaway. Ontario and Quebec, home base for the seaway, represent two-thirds of Canada's industrial output and are the heartland for Canada's largest retail markets.
Developing collaborative, intermodal partnerships will go a long way to successfully manage the growth of containerized freight shipments. The St. Lawrence Seaway Management Corporation has been working diligently towards this goal through our highway H2O marketing initiative that promotes short-sea shipping along the Seaway and Great Lakes system as one solution to ease the pressures on our overloaded land-based transportation system, and to add much needed capacity to Canada's transportation system as a whole.
[English]
As the Canadian and U.S. economies grow and challenges linked to congested rail and land arteries continue to escalate, transfer of containerized cargo from large ocean-going vessels to smaller seaway-sized feeder vessels for shipment along the waterway can increasingly complement port facilities and transportation modes. Moving cargos closer to their final destination by water before transferring them to railcars or trucks offers the unique potential to relieve the strain on key transportation arteries from the Atlantic Ocean to the mid-west.
The St. Lawrence Seaway is ready and able to take on this expanded role. The seaway is built and paid for and is currently operating at 60 per cent of its capacity. This means that the seaway can accommodate an immediate upsurge in growth with little infrastructure investment; infrastructure is already in place to handle significant volumes of containerized freight.
Not only can short sea shipping feedering provide a reliable, un-congested pathway to inland markets and reduce container dwell times in ports, it also represents and environmentally responsible solution. Fuel use and greenhouse gas emissions per tonne-kilometre are significantly reduced when cargo is moved by marine transport when compared to both road and rail. Several initiatives for break-bulk cargo movements on the St. Lawrence River and into the seaway are already in place and the net benefit to the environment has accrued. Shipping along the seaway can also reduce highway maintenance costs for provincial governments, enhance fuel efficiency and reduce citizen commuting times to and from work.
Why is seaway not being used to its full capacity. I would respectfully submit there are a number of regulatory hurdles that prevent the shipping of containerized freight along the seaway from reaching its full potential. In particular, there are three areas where regulations act as disincentives for shippers to transport containers along the seaway system. The first regulation is the 25 per cent duty that must be paid on foreign-built ships. This duty makes it cost-prohibitive to use new foreign-built feeder vessels on the seaway and is the most serious impediment to the growth of short sea shipping. Other countries where the significant socio-economic benefits of inland water transportation have been realized, such as Holland, France and Germany, do not place such duties on foreign-built ships. Furthermore, this duty no longer serves its intended purpose, which was to encourage the rebuilding of Canada's marine fleet. Domestic shipyards are not suited to many of the special-purpose vessels required today. However, Canadian shipyards do stand to benefit from new business related to servicing vessels brought into Canada to serve short sea shipping.
The second barrier to maximizing the seaway's potential relates to our regime of antiquated pilotage regulations — the reform of which has been long overdue. Wide-ranging compulsory pilotage is outdated and cost-prohibitive in this day of experienced and well-trained masters and crews and sophisticated navigations technology. Pilotage regulations need to be updated to exempt Canadian-flagged vessels from compulsory pilotage along the St. Lawrence River.
Finally, tolls and marine service fees are also inhibiting the seaway's potential. Marine service fees and government cost-recovery programs, including seaway tolls, should be overhauled to remove economic barriers that are not present in road and rail transportation. In making these policy decisions, the social and environmental benefits of shipping along the seaway must be integrated into the total cost equation. We are confident that, when taken into account, the potential savings on land-based infrastructure investments and maintenance, and the environmental benefits of shipping by water will more than offset the minor revenue reductions that these policy changes may cause.
[Translation]
In closing, every Canadian stands to benefit from increased short-sea shipping, including containerized cargo, along the St. Lawrence/Great Lakes corridor. Encouraging the increased use of the St. Lawrence Seaway system will not take away from other transportation modes such as trucking and rail. On the contrary, it will enhance their efficiency. Our goal is to develop collaborative, intermodal partnerships to successfully manage the growth of containerized freight shipments to facilitate the movement of goods — and, indirectly, people. We hope the government can help us in this endeavour.
[English]
I thank you for your time, and will be pleased to answer any questions.
[Translation]
Nicole Trépanier, Executive Director, Armateurs du Saint-Laurent, Quebec Shortsea Shipping Roundtable: Madam Chairman, I will make my presentation in French, if it is all right with you, but I am ready to answer questions in English.
I thank the Senate committee for inviting us to present our point of view. First and foremost, my presentation is on behalf of the Armateurs du Saint-Laurent, a sector based association of 19 shipping companies. Our offices are in Quebec, and the ships of member companies must be registered in Canada. Therefore, I am representing Canadian transport companies, whereas my colleague Mr. Broad and Ms. Legars deal with international ship owners.
Our members are present mainly on the St. Lawrence River, the Great Lakes, the Seaway, the Atlantic provinces and the Arctic region of Canada.
In making this presentation, I am also wearing the hat of President of the Quebec Shortsea Shipping Roundtable. We have a mandate from the joint forum on marine transportation in Quebec, which has been in charge of implementing the Quebec government's marine transportation policy since June 2001. I do not pretend to give you the roundtable's official position, but I will share my experience as president. You should note that the roundtable includes Transport Canada and Transport Quebec, and although they trust me, they rarely send me as their official delegate to forums like the Senate.
From the five issues included in your study, I chose three that I feel qualified to speak about. Of course, I am not a specialist in containerized shipping, far from it, but I am very interested in marine issues, including containers. Regarding the federal policies and programs for promoting intermodal shipping, let me first make some comments.
The Quebec Shortsea Shipping Roundtable did an in-depth study of the current federal programs, to find out exactly what kind of support there is for developing shortsea shipping.
We wanted to provide adequate information for marine consigners and shippers regarding these matters. We noted that although there are many programs, they are rarely adapted to the marine sector in terms of funding and eligibility. The programs are mainly involved with building highways, public transit, acquiring new technology, developing new fuels, et cetera. Although politicians have said that collaborative intermodal transportation should be encouraged, the programs are developed, so to say, in silos. I think that previous interveners mentioned this fact. Unfortunately, this leads more to rivalry than to collaboration. It would be better to have fewer programs, aimed at organizing transportation in a general way.
I also noted that witnesses from coast-to-coast have told you that we need an overall transportation policy. To create a business environment that is favourable to the growth of intermodal transportation, we must have the proper, modern infrastructures. Therefore, substantial investment will be needed to remedy the fact that current networks are poorly integrated as a whole. This applies to several regions of Canada. Unfortunately, there is no current federal program to remedy this.
The vitality of marine transportation depends on a port system that is both dynamic and responsive. For the last 10 years, the federal government's approach has essentially been one of increasing divestiture of port infrastructure. Whenever there was a divestiture, maintenance investments dropped to a minimum level. The financial situation of the current government does not justify further enforcing this policy. We should foster the emergence of TMCD services by building modern infrastructure that meets the needs of all, and I emphasize all, transportation modes. This applies as much to regions as it does to major urban centres.
As a country, we must have a global transportation strategy rather than a piecemeal or reductionist vision. To resort to each one of these modes according its respective strengths and benefits is a duty.
For a long time, we favoured fast routes at the expense of people's quality of life. This led to a gridlock on the road network. Even as recently as this morning, on my way here, I noted accidents, pollution, so on and so forth. Not everything is urgent. We simply need to plan otherwise, and this responsibility falls on shippers who, for now, are not entirely accountable for the choices in transportation.
In April 2006, Transport Canada organized a marine conference in Vancouver entitled "Moving Towards a Shortsea Shipping Strategy." At the end of the conference, Canada, the U.S. and Mexico signed an agreement of collaboration in this area. We support Canada's involvement in this continental project. However, we have first some cleaning up to do in our own backyard. To this effect, a Canadian strategy must be established. A real Canadian marine policy is needed.
I would be remiss to not highlight developments that occurred in Quebec, as recently as in 2006, such as the assistance program for modal integration, that seeks to better integrate the various modes within Quebec's transportation system while also taking into account competitiveness, reducing social costs of transport activities and protecting the environment. As I was saying, the program was launched in 2006 and is valued at $21 million over five years. The same type of commitment should be emulated by the federal government, as it has jurisdiction over marine transportation.
Another point I would like to raise is the level of coordination between government and industry stakeholders. I would say that this is a crucial component. Both government and industries have duties to fulfill. This is achieved through coordination, as well as consultation. We must make sure that what is being proposed and implemented is realistic, operable, and is fair.
It is important to create a regulatory and legislative framework, in addition to a cost structure. Mr. Corfe talked about the marine service fees, and how these fees help develop marine transportation, and even the TMCD. Today, the regulatory framework hinders the development of these services. From the shippers' point of view, marine transportation is administratively cumbersome. Imagine what the ship owners think.
If Canada truly wants to be able to absorb the influx of goods, as we foresee, a first step is needed: we need to act and plan in concert with those involved in the logistical chains, modes of transport and shippers. If the forecasts of volume increases originating from Eastern Canada and moving through the St. Lawrence-Great Lakes system are accurate, how will we make sure that the goods reach their final destination? This is where I believe that we, as a domestic transportation system, can take a position. It is great that the goods can get here, but we need to be able to transfer them to their final destination within the country. Trucking has certain limits, everybody knows that there is the labour shortage which was mentioned earlier; waiting lines at the border and in urban zones; people require better supervision of heavy trucks on the roads, an even more.
For now, the CN route between Halifax and Montreal remains free of traffic congestion, but if demand continues to accelerate, major investment will be needed in infrastructure. From this perspective, making use of the domestic marine fleet should seriously be encouraged. As Mr. Corfe was saying, this is already possible within the system. The H2O highway and the TMCD provide a solution that should be integrated with the Canadian transport system. The question I would be asking myself if I were in your shoes is the following: are the vessels needed to take on this additional load available to Canada's fleet? And I would answer you: yes, for now.
However, if we truly want to bring back the market, we, as Canadians, given the luxury we have at times to be both opportunistic and protectionist, should eliminate the 25 per cent duty charged on the importation of vessels as soon as possible. Once the demand increases, we will need specialized vessels, in particular container vessels that we will have to introduce into the system quickly and at a competitive cost.
Canada's marine fleet is aging, a fact known by all. A the moment we do not have available the shipyards to build them. The order book of serious international shipyards is filled for the next 10 to 15 years. We must think about new purchases within realistic timelines if we want to remain in the market. Canadian marine transporters and their shipper's clients are unanimous in calling for the elimination of the 25 per cent duty. This so-called protectionist measure has never served to sustain our shipyards.
My last point deals with environmental considerations. The role of political players is to level the playing field between the various modes of transport by considering infrastructure costs, how rigorously social policies and regulations are applied, and the respective environmental advantages offered by each mode. Broadly speaking, the environmental benefits of using marine transportation is vaguely known or recognized; and yet, it is the most efficient mode of transportation in terms of GHG tones emitted per kilometre, as has already been stated. What is unfortunate is that the environmental advantages of using marine transportation are not factored into the choices of shippers, at least here in Canada.
A recent international study conducted by Montreal professors Claude Comtois and Brian Slack clearly indicates that the top trading nations are those which have adopted sustainable approaches. The study drew comparisons between 800 international ports and categorically concluded that the most environmentally friendly countries were predominantly European, this goes without saying.
The Saint-Laurent and Great Lakes marine industry is currently developing a voluntary program intended to further eliminate its ecological footprint as well as perform in other respects.
Again on the European side, in an effort to stymie gridlock, offset losses in productivity that result from waiting lines, and to reduce the environmental impact, the TMCD is seen as a solution. It is seen as a key component in government programs and directions. From 1995 to 2002, there has been a 25 per cent increase in intra European movements alone. Today, the TMCD carries 40 per cent of all goods transported within Europe, whereas trucking carries 45 per cent.
Here in Canada, marine transportation continues to receive bad publicity, or its merits are hardly mentioned. Invariably, when incidents occur, they are made public, whereas statistics on the low number of accidents, spills, or loss of human life receive little coverage in the media. As the saying goes, no news is good news.
I continue to believe that our transportation choices must be based on fair and honest data. On that basis, marine transportation would deserve a much better reputation in the media, among the public and with government. You will say that it is up to us as an industry to promote our advantages, and you are right. And that is something that we have been working hard to do, over the past few years. However, it is also important for governments to contribute to that marketing exercise, because they also will benefit down the line.
Senator Dawson: I want to say at the outset that I have no hesitation in supporting your demands. What you are saying seems obvious and it was even before everyone was talking about the environment and global warming. But I would like to ask you some specific questions.
Ms. Trépanier, there are projects underway in Quebec. We saw the cabotage project between Sept-Îles and Quebec City. I would like to know how many trucks you estimate that initiative has taken off the highway between Sept-Îles, Tadoussac and Quebec City. Is this something that the government should encourage through amendments to the regulations?
I just want to bring in a bit of history here. You talked about the 2001 maritime policy. I do have to tell you that, before 2001, Quebec had no marine policy at all. I can accept people wanting to blame the Canadian government for the lack of progress, but it has to be admitted that since this was federal jurisdiction, there was a silo approach of not doing anything because these matters came under the federal government. That meant that there were no roundtables where it could have been decided that, instead of road repairing, it might be more logical to cut down on trucking and use coastal shipping at least 9 months of the year, if not 12. That is just a little correction I wanted to make. I would like you to give me an example of a similar case that would reduce trucking.
[English]
Mr. Corfe, you made three comments. When was the last time there was a study on the 25 per cent levy and how has the government addressed that issue or has there been any attempt, either legislative, regulatory or consultative in the last so many years to touch that 25 per cent levy? With the closing of Davies Shipbuilding and other shipbuilding capacities, it seems that we are protecting a market that no longer exists. It was probably justified historically but it seems to me that it is not justified in 2007.
When were the last major changes made to the pilotage regulations? We experienced the advances in technology yesterday, while at the Port of Montreal. The port security has knowledge of where each ship is going and they have play-by-play knowledge of every buoy in the river.
Your third point was cost recovery. Again, in the1990s, we had billions of dollars of deficit and the government had to look at ways of saving money and sharing the pain. I would agree with you that today, given the surpluses that the great previous government left this government, that there are capacities for the government to look at partnerships with industry. I do not think there is a free game any more. We are not going to go back into deficit financing, I would not encourage the government or the next government to get into that, but there are ways in which we could define partnerships between utilisers of the seaway and the Canadian government in trying to modernize some of those facilities, without going into funding by deficit.
[Translation]
Ms. Trépanier: You have asked a number of questions, but they are relevant. Both of the shortsea shipping projects recently implemented in Quebec originate in Sept-Îles. The first, for the Alouette aluminium refinery, which was increasing its production to 250,000 tons of aluminium and aluminium ingots a year, was feeling pressure from North Shore residents. For those who may be less familiar with the region, Highway 138 is the only road link to the aluminium refinery. The statistics show that there are far too many accidents on that road. It is an expensive, twisty highway that carries a huge amount of truck traffic. Moreover, when you get to Baie-Sainte-Catherine going in the direction of Sept-Îles, you have to take a ferry because there is no bridge across the Saguenay River, at least at this point, and I do not think that people want one.
As to the ferry, the CEO recently said that the heavy trucks were taking such a toll on the ferry's structure that its life expectancy would probably be reduced by 5 to 10 years. We are talking here about a ship. Just imagine what they do to the roads. People lobbied to have other transportation modes used for supplying and linking points along the North Shore.
I will speak on behalf of the Government of Quebec for two seconds and say that Highway 138 is a problematic, expensive highway that results in huge cost for damages to people involved in road accidents, emergency services and so on.
How many trucks were taken off the road because of that project? We have with us the secretary of the Marine Transportation Roundtable who can help me out. I am not great with numbers. Between Sept-Îles and Trois-Rivières, we are talking about 15,000 truck loads a year. That is a lot. That means a 15,000 ton reduction in greenhouse gases for the environment. In road costs the Quebec Transportation Department saves $700,000 a year. We are happy to pass along those kinds of figures.
The second project is the Forestville Kruger project, involving a very small municipal port, and it is starting with a barge service. Wood chips are shipped on barges to Trois-Rivières. It is an ongoing service that replaces 18,000 truck shipments a year, if I understand correctly. Those are significant numbers.
I forgot to mention that the Alouette aluminium refinery shipments, once they reach Trois-Rivières, can then be sent by truck, train or vessel, since the Seaway has obtained its new volumes in the recent months.
Regarding the other question you asked me about how federal regulations can support these projects, this has been discussed abundantly at the Quebec roundtable and, as I said, Transport Canada is represented by policy people.
I have said so and I will repeat it: federal marine transportation regulations are not suited to shortsea shipping. It was developed and designed on the basis of cabotage considerations, and those realities no longer exist. Today we need to adapt to our international commitments, often for value-added cargo. The very basis for marine transportation development, at least in the Great Lakes and the St. Lawrence Seaway system, but elsewhere as well, is raw materials and the provision of supplies to isolated communities. In other words, the members that I represent do not ship many containers, unless they are going to the Arctic. They transport iron ore, grain, et cetera.
Senator Dawson: Yes. If there were a report card, you would get an A.
Ms. Trépanier: That is very nice of you. Was my knowledge broad enough?
[English]
Mr. Corfe: I would like to make a point about the aluminium companies in Trois-Rivières. We have been able to take some of that aluminium at Trois-Rivières to Toledo; it was once transported by road and rail. That is an example of when something starts to move, starts to make sense, you can leverage it into the future.
With respect to Senator Dawson's questions, the 25 per cent seems to be forever under study. It comes up in the context of international trade because we are the only country that has this kind of regulation. Up until recently, I think it is fair to say there has not been a consensus even in the industry around what to do with it. Some organizations have had to go ahead and pay the 25 per cent on newly built vessels. It is a bit of an issue to give this new generation a free pass. The Canadian ship operators and owners are on the same page with respect to a process to phase it out. They are talking about it in Ottawa. Every time there is talk of a trade pact with another country, this topic is discussed because they are seen as barriers. It is topical and maybe just needs a little bit of a push to get it on the front burner and get it resolved.
Pilotage seems to be on the agenda always. Pilotage is important, safety on the waterway is extremely important, the pilotage and pilots play a role in certain circumstances to make that happen, and we go on record as saying that this is an important part of what we do. As Ms. Trépanier said, we are caught on the policies that tend to be for vessels coming into coastal ports and not inland waters. In addition, having pilots onboard vessels, whether ocean or inland vessels, throughout the Great Lakes and open waters — which is a fourth coast for us — increases the cost. It increases the cost to a point where the economics of trying to do the right thing for the environment, trying to do the right thing for congestion, do not work. The Great Lakes pilotage is under internal departmental review. There has been a review at the departmental level for the St. Lawrence pilotage and maybe Ms. Trépanier can talk more about that, because the pilotage associations have to be self-sufficient. Self-sufficiency means you pass your costs onto the users. The way the regulation is set up now; there are not a lot of incentives to drive down those costs. It is a cost-recovering mode. There is work going on at the departmental level and there are initiatives underway. A full review of the Pilotage Act would be something we will be pushing for.
Your third point is on cost recovery. When the management corporation was created in 1998, it was created as a not-for-profit corporation with a mandate to run the system and recuperate the costs we incur through the tolls we charge.
I think Senator Eyton made a point earlier on the railway operating ratios. An asset like the seaway is what we call a perpetual asset; it will be there forever. If you are going to use it, it has to be maintained. Two kinds of costs go into maintaining the seaway: One is the operating cost and the other is the upkeep cost, the capitalization cost. Our position is that the seaway should have a revenue structure that covers its operating costs, and the government who owns the asset, should be responsible for the maintenance of the way into the future. We are talking about $80 million. There is about $40 million of cost recovery from the Coast Guard. We are not talking about enormous amounts of money when you compare it to the barrier that it creates to getting into this market. We are trying to get short sea shipping up and running and we are missing environmental opportunities because it is cost prohibitive.
There is, again, work going on here. There is work going on through the marine association to try and resolve the issue of cost recovery from the Coast Guard, which goes back to the mid-1990s. We are working with Transport Canada on a management agreement that is under discussion at the moment, as to how we can rationalize the toll structure we charge. These items are under discussion. What tends to happen, though, is they stay under discussion and nothing actually comes to fruition. Madam chair, initiatives like this one might push this issue into action.
[Translation]
The Chairman: Transport Canada recently held workshops on shortsea shipping in every region of Canada and it organized a conference with the United States and Mexico on this issue in April 2006. Canada, the United States and Mexico signed an agreement to study best practices in the area of shortsea shipping. Where are we with that in terms of promoting shortsea shipping of containers on the St. Lawrence River?
Ms. Trépanier: That is an excellent question, and I asked myself the same thing when I was preparing today's presentation.
After all, container shipping is not a big market at the domestic level. I would be lying if I told you that we shipped a lot of containers or if I told you that we could respond tomorrow if large quantities were transferred to us, in the event that they could be found. There are a few Ro-Ro container ships, which can roll containers on or off trucks or other modes of transportation. They are used in the Arctic. They are used for bringing in supplies. Those types of ships are not only more flexible, but they can be used where it is more difficult to come into shore, where there is no dock or port to be able to unload the vessel. These ships are the most in demand everywhere around the world. There are very few of them available on the market.
The other consideration in going down that road and acquiring a vessel that costs $50 million to $60 million is that you need guaranteed markets and guaranteed volumes. At both the international and domestic levels, we have often had to operate in a spot-market context. Shippers want so many tons of cargo taken from a given point as quickly as possible to another point to arrive at a certain time on a certain day. Ships are not bought for spot markets. There need to be long-term commitments. Shippers need to commit and show loyalty to a given mode of transportation. Right now, however, it is a race. There is competition among the various modes. And marine transportation, it must be said, is not the most flexible for turning on a dime. So the container ships that people see on the St. Lawrence are heading to Mr. Taddeo's port in Montreal. Those heading in the other direction, and there are some at the Quebec City Port, near boulevard Champlain are containers carried on vessels going to Falcon Bridge in the North. So it is mining equipment or construction material for workers' accommodation in the North.
[English]
Mr. Corfe: You asked where we are. Transport Canada has had short sea shipping on their radar for just over four years. About four years ago on the seaway, we co-chaired a group of interested parties to look at how we could get container traffic on the system. We partnered with the Ports of Halifax and Hamilton, a couple of American ports because the seaway is a binational operation, and with some of the ocean and domestic carriers. We came up with a business case of what it would take and we identified some of the barriers that would need to be addressed. With Transport Canada, we identified the cost of the system as a barrier, the 25 per cent pilotage seaway toll. We identified the environmental benefits and the social benefits that come with this kind of movement. The environmental benefits of feedering for example, from Halifax into Montreal or into the Great Lakes are not factored into the equation. The businessperson making the decision does not see those costs or take alliance with those benefits. We talked about some of the environmental costs of such issues as greenhouse gases, pollution and congestion. We talked about how to factor them into the equation. Ms. Trépanier is right; it is the chicken and the egg. You cannot get a ship and say, "Okay, now fill it up with containers." You have to have a way of ensuring that the market is there.
There are ships available. I would suggest that if there were a change in the policies there would be containers coming out of Halifax into Montreal, coming out of Halifax into the Great Lakes, coming out of Montreal to Toronto. Both Montreal and Toronto are equipped with container equipment. Montreal does a million-plus TEUs already. TEUs are twenty-foot equivalent units. Rather than using Highway 401 to move containers to Toronto and the Ontario market, short sea shipping is an ideal opportunity. The costs do not work out because of things like the cost of the Canadianization of the vessels, the pilotage. We need some way of getting past those barriers to entry. They were identified three years ago; we are still working on them.
[Translation]
The Chairman: Cabotage issues have an impact on Canada's room to manoeuvre regarding shortsea shipping. And the Canadian government cannot act alone because of free trade. But since 2005 the United States has agreed to discuss these issues. Do you have any idea where discussions are at between Canada and the United States? Do you think it is possible to make the cabotage rules more flexible in order to be able to promote shortsea shipping?
Ms. Trépanier: I think it is possible but, once again, having attended a number of conferences with the Americans either in the U.S. or in Canada, I have the feeling that the priority is gridlock and not environmental considerations. When you look at the High-95 that crosses the United States and you see how complicated it is to get into the Port of New York and how the cargo is moved around in those areas, people are going to be interested in this by default. The problem will be there. This is what I keep saying about the European example. When we look at the situation on the West Coast, why do we need to wait until the problem affects us? Let us take a proactive approach rather than a reactive one for once.
As for the Americans, I do think that they will cooperate. They will look to see if they have a problem and they will solve it; they will take advantage of the opportunity. Then they will impose their solution on us. I think it would be better for us to be more proactive and to say that since we are playing together, we need to set the rules together.
The Vancouver conference was aimed at developing such a continental approach. As we know, since the events of September 11, a continental approach is inevitable. Whatever one side decides has an impact on the other side. The same is true for markets. We live in a free-trade context. But it seems that, despite all these commitments, we are still bumping up against obstacles, impediments and hurdles whereas in the various forums everyone is theoretically in agreement. That is the conclusion that I am expecting on feasibility.
The crucial thing for the Quebec roundtable is that the service should either go to or come from any port in Quebec. It would go anywhere on the continent. It could go down to Florida. When I hear that truckloads of granite leave Lac St-Jean and go all the way to Florida, I say that fortunately, these are not perishable goods. We can wharf a ship and then we can take a few and help you out. We can do this kind of thing. Nevertheless, we must review our methods and our economic approach. People often think that sustainable development only has to do with the environment. To the contrary, sustainable development must take into account the economy, the environment, and the availability of resources of future generations. I think that these are some of the deciding factors.
[English]
Mr. Corfe: The seaway by design is binational. When the seaway was created, it was created in a binational format. We are intricately involved in what is going on with respect to the U.S. To be fair, we have barriers and they have barriers as well. The Jones Act is one barrier that is not likely to go away. The other barrier is the harbour maintenance tax, which is a charge on the value on the good coming into U. S. ports. There is action in the U.S. Congress with respect to eliminating the harbour maintenance tax for short sea shipping. There are some barriers and there is some movement.
Ms. Trépanier said that it has to be seamless. Since 9/11, security is important. We do a very good job with the U.S. with respect to clearing vessels into the system. They are cleared before they get into the seaway in Montreal, for crews, for last ports of call, for cargo. The clearing of vessels is done in a way to keep the economy running as seamlessly as possible. There is a great deal of cooperation. It is when you get into the other areas that, as Ms. Trépanier says, they are on the same page at a conference, but when they go back and face the realities of their communities, their constituents, it changes.
[Translation]
Ms. Trépanier: Excuse me, Madam Chairman. Let me add something. United States trade unions are putting up a resistance to what they imagine to be a terrible invasion by foreign manpower. This has an enormous influence on policy.
[English]
Senator Tkachuk: Can you give me the amount in dollars that the 25 per cent represents?
Mr. Corfe: To be honest, I do not have figures for you, Senator, but it is not much. In our submission we showed the number of Canadian vessels in service, which has fallen considerably in the last 20 years. We were down to 111 Canadian vessels in 2005. The last seaway-sized vessel equipped to carry 870 truckloads of goods was built in 1982. There are few requirements to replace the fleet and the companies are holding off as much as they can because of this charge. If you put $40 million into a vessel, you are going to pay $10 million more to bring it into Canada. I do not have the figure, but I can imagine it is not very high because few Canadian vessels are built overseas. There are some, but not many.
Senator Tkachuk: If this disincentive were removed, you believe it would increase the traffic. Do you have an estimate of how much it would increase the traffic?
Mr. Corfe: Halifax is a port that is going to see the opportunities of growth in containers. Montreal is the same; the only difference between Halifax and Montreal is you can get bigger vessels into Halifax than you can Montreal. If you want to move the containers that are going to be coming on our shores — either east or west — you are going to have to have capacity. Our belief is that the rail capacity is pretty well used up. Certainly if you talk to the users of rail services, they will say that the service is not very good because of capacity issues. You can always build more roads, but the truth is, there are cross-border problems and truck driver availability is restricting.
We are going to be looking for capacity and we have that capacity on the seaway. We can move another 40 million tonnes of cargo every year on the seaway. We could move 250,000 to 300,000 containers out of Halifax or Montreal through the seaway into the heartland of North America with the infrastructure we have now. It might take a little bit of money, but not much. The capacity is there, the availability is there and the market is starting. To comment on Ms. Trépanier's remark, it would be nice to be ahead of the curve for once.
We have been in serious discussions with the big carriers, Hapag-Lloyd and Maersk; they are just looking for what they call another string to their bow. In Halifax, it is CN or the road; in Montreal, it is CP or the road. CP is talking about going on strike this week. CN was on strike a couple of times this year. Suppliers are looking for other routes, other opportunities, other relief valves, if you like, and that is what we are saying. The seaway can be another string to the bow, it can be a relief valve, it is not going to be the primary mover of containers but it is a capacity we can throw in the mix to help.
Senator Tkachuk: You mentioned seaway tolls and marine services. I assume that seaway tolls would be used for operating costs, but I do not know that for sure. Please give the committee your recommendations concerning seaway tolls and marine services.
You said, "In making these policy decisions, the social and environmental benefits of shipping along the seaway must be integrated into the total cost equation." A line like that always screams "subsidy," at me and so I want to know if I am on the right track. Railways claim they are more environmentally efficient.
Please expand on the social and environmental benefits. By social benefits, you mean that there is less noise and fewer trucks on the roads; I am not sure what you mean.
Mr. Corfe: On the cost side, Senator, the Coast Guard marine service fees, total about $40 million. They are charges that came in the mid-1990s, and which the industry has been trying to get away from since then. The fees are a burr under the saddle of the industry. Many of the fees are charged on the East Coast while not charged on the West Coast. I come back to my point that the St. Lawrence Seaway and the river is really our fourth coast and yet we do not treat it like a coast. We need about two-thirds of the money we charge in tolls to run our operation. The rest goes into the capitalization of the structure. We are suggesting that we should set our tolls at a level where they would cover our operating costs and have the government, who owns the infrastructure, pay the money to upkeep the infrastructure into the future.
Senator Tkachuk: You mean the capital costs.
Mr. Corfe: Yes, the capital costs. That is the seaway's position. The industry position is that it should be a freeway. If we want to encourage use of this water transportation, short sea shipping, it should be a freeway, it should be like the truck on the road; you pay a license and off you go. We are caught between two things. Our position is that we should have the revenue from tolls to cover the operating costs. The industry though would tell you that it should be a freeway. If you want to encourage people to do the right thing, use this mode of transportation where it can be used, it should be the same as the road; it should be a license to operate on the freeway and no other charges.
With respect to the question of economic and social benefits, the point that we would like to make is that the person who is booking the cargo is going to look at the cost from A to B of that cargo. For the most part, the person will not look at the environmental impact of moving via that route. The only entity that can bring that to the table is the government. I do not think it is a question of subsidies; it is more a question of incentives to do the right thing for society as a whole as opposed to just for the bottom line.
I think Senator Eyton referred to the shareholders of CNR and CPR. If you are making decisions with the shareholders only in mind, you are going to do the thing that the business case drives you to do. What we are saying is there are many factors here in the environmental and social aspects that do not come to the table when the businessman makes his decision. How can we structure it such that people make the right decisions when they are moving cargo, as opposed to the decisions that benefit their corporation?
Senator Tkachuk: The only way you can do that is either through subsidies to entice them to use the seaway, or through penalties for them to use trucks or railroad; in other words, some kind of a tax. We had the 25 per cent tax to provide incentives, but it failed because the market did not agree with it.
We are talking about forcing people to use a particular mode of transportation based on costs that people are not able to fix. It is not enough of an incentive that there will not be as much noise down by the railroad track or by the highway.
Mr. Corfe: Yes, the social impacts, certainly in the noise area, are more tenuous.
Senator Tkachuk: That is just opportunity for government.
Mr. Corfe: If you use the generally quoted figures on greenhouse gas emissions by marine vessels, they are one-half for the same movement of freight in rail and about one-tenth of those of trucks. There is an opportunity to do some linkage if the government so wished.
Senator Tkachuk: Just so we cut to the chase and we take that environmental and social cost and put it aside, can you make an economic argument for using the seaway over rail and truck?
Mr. Corfe: The business cases we have done are coming closer all the time. As I said earlier on, three years ago we were a couple of hundred dollars a container out. We brought it down; in our last discussion with some of the liners, we were down to $60-$70 a container. The things like the 25 per cent tax, the seaway tolls, and the pilotage would level the playing field.
Senator Fox: I have a few questions for Mr. Corfe and Madame Trépanier. When you talk about operating at 60 per cent of its capacity, what is the historical average? Are you going up, are you going down? Was it ever much higher than 60 per cent?
Mr. Corfe: If we go back over the history, it has been a lot higher. In the mid- to late-1970s — the seaway came into being in 1959 — the cargo volumes were 76 to 77 million tonnes, last year we were at 47 million tonnes.
Senator Fox: Have the impediments or the challenges grown over time? Is that why it is going down?
Mr. Corfe: The market has changed. The seaway was built for bulk cargo; it was built to bring in iron ore and to take grain out. Those markets have changed. The efficiency of steel making has changed; we are moving one-half the iron ore we moved 20-25 years ago. The grain market has changed.
Senator Fox: What percentage of lack of use of capacity would you attribute to market changes and what percentage to the impediments that you have mentioned?
Mr. Corfe: I think the best way to answer that is that the reduction in cargo comes from market changes and we have not been able to capitalize on the new market. The new market is containers. We have not found a way to break into that market. General cargo, containerized areas, is about 8 per cent to 10 per cent of our volumes. In our estimation, we need to grow that to 25 per cent or 30 per cent.
Senator Fox: You say that you can ". . . enhance fuel efficiency and reduce citizen commuting times to and from work." You must be referring to Highway 401, because I cannot imagine you are talking about the traffic around Regina.
Mr. Corfe: If we look at trade corridors or the gateway from Quebec to Montreal and Toronto to Hamilton and into Windsor, that corridor moves a lot of cargo and is home to many commuters.
Senator Fox: Is that because of the lack of ring roads?
Mr. Corfe: That is right, yes. It is the amount of trucks on the road, going around. In the GTA, for instance, there is a large volume of cargo just going around whereas the water route could be used.
Senator Fox: I suppose it makes the owners of Highway 407 quite happy.
Mr. Corfe: You do not see many trucks on Highway 407.
Senator Fox: You do not.
Mr. Corfe: No, they will not pay to use it.
Senator Fox: They will not pay the toll.
Mr. Corfe: No, I use Highway 407 regularly and I seldom see trucks.
Senator Fox: You say the second barrier to maximizing the seaway's potential relates to a regime of antiquated pilotage regulations. I assume you are referring to the pilotage fees. How expensive are the fees and are they relevant in this equation?
Mr. Corfe: They are relevant. When you have a full-sized seaway vessel that is carrying bulk cargo, 28,000 tonnes, the unit cost of adding another cost to it is divided by 28,000 tonnes. When you talk about general cargo or containers, you are talking about smaller vessels with the same charge, so your unit cost is going up by two or three times. If you are only moving 10,000 tonnes or 8,000 tonnes on that vessel the unit cost is increasing by a factor of three.
Senator Fox: And you are arguing that the compulsory pilotage is actually outdated?
Mr. Corfe: Yes, in certain areas. We have compulsory pilotage on the river and Ms. Trépanier may have a comment on that, where we have Canadian vessels that go up and down the river; that is their livelihood. We have compulsory pilotage in the centre of Lake Superior, Lake Michigan, Lake Huron, Lake Ontario, Lake Erie, which is like being at sea, which in our estimation, is not required. You were at the Port of Montreal; you saw their technology. We on the seaway were the first to put in the AIS system, automatic information system, which is a satellite tracking system. You know exactly where the vessels are from a control point. The vessel knows where it is, and it knows where other vessels are, so the technology has changed, but our pilotage thinking has not changed in line with it.
Senator Fox: We talked about tolls and marine services and I may have missed part of your answer to Senator Tkachuk. If you reduced or eliminated tolls and marine service fees, it would require a subsidy from the government on the overall operations of the seaway. Would this subsidy open us to some kind of retaliatory measures or counter-measures of some kind, by the trucking industry in the United States?
Mr. Corfe: First, the U.S. took the tolls off their locks in 1986. They faced that hurdle and they see us charging for a service for which they do not charge.
Our position, as the seaway corporation, is that we do not want to be in the subsidy business. We want to split the operating cost of running the day-to-day system from the infrastructure upkeep cost. We believe that if we have a toll structure that covers our operating cost that would be the most sensible way. The government owns the infrastructure and the management corporation runs it. We believe that the future cost of maintaining that infrastructure should be a government cost. In that way, I think we get out of the subsidy argument.
[Translation]
Senator Fox: Ms. Trépanier, you spoke of the environment, and currently, we hear that everything is just fine and that marine transportation plays a role of the white knight when it comes to reducing greenhouse gas. Does the use of ships not create other pollution problems for our rivers and waterways?
Ms. Trépanier: This is an excellent question. As a matter of fact, this is the reason why we took up the initiative. We modestly concluded that we had been right over the years in saying that our greenhouse gas emissions were lower than those of other modes of transport in terms of tons per kilometre. This does not mean that we do not produce other emissions that have an impact on health. As for instance, knocks, socks, and various kinds of nitrogen. I have often said that although we are good, we cannot rest on our laurels. We can be overtaken by others, which is very good. I think that it makes life more interesting. Industries also need this kind of motivation.
Senator Fox: What is the purpose of the program, and who does it include?
Ms. Trépanier: It is a voluntary program that includes company executives and presidents. As a matter of fact, we decided to invest in the top. We can intervene at the top. For instance, if someone is a member, then I can address the person in charge of the environment for the Seaway Management Corporation, and they will accept my advice to make a smaller ecological footprint. I can advise them to implement such and such a program. The person goes to see their boss, but the boss is busy on that day. The boss replies: yes, yes, just leave me a note. However, if we bring all the presidents and CEOs together in one room and tell them to promote a given option, they return to their companies and really get things done. In this way, we have a much greater impact.
Secondly, we constantly seek to improve, to take note of our shortcomings and to step up our efforts in eradicating them. This is how I would sum it up.
Senator Fox: Thank you.
Ms. Trépanier: You are welcome.
[English]
Senator Zimmer: While in Vancouver, we heard about an increase of traffic from Asia. A recent study at the University of New Brunswick states that container shipping between North America will increase by 75 per cent over the next decade. My third comment concerns the planned expansion of the Panama Canal. We are getting pressure from the east, from the west and from the south.
I come from Manitoba and I think you know where I am heading: to the North ports. We are looking at all parts of the world but we are not looking at the North. Ms. Trépanier, you mentioned the Arctic and as soon as you mention Churchill all of a sudden, "well, the ice." With climate change that may cause other problems. The Americans say we cannot go there because of security. The Russians laugh and say, "Come on, we've been there 50 years under the ice." That is a reality.
We have pressure coming from all over the world. We have to take into consideration the northern polar route. The Americans would prefer that we fly right over Canada, deposit the containers and equipment into the U.S. and truck it back.
Do you see how realistic this venture would be to open up the Arctic and the polar route?
With climate change, would it be a reality — maybe not right now, but in the near future — of becoming another port to relieve pressure around the world. What is your opinion?
Mr. Corfe: There is good and bad to climate change. If you look at it in this context, climate change could at some point open up a port like Churchill for more than the three or four months it is open now. When the seaway opened, it was open for eight and a half months. Now we are pushing nine and a half months and looking at 10. With climate change, the seaway may well be able to open 10 months a year. There are some good points about climate change. The bad point, of course, is what else comes with it.
I honestly do not have an opinion on whether it would be possible to open a polar port as you suggest. The point is that we are going to have to look at every possible mode of transportation, all the capacity, and put it into the equation. When the Panama Canal opens its third line and when all the lanes are moving — because they do not want ships waiting three or four days at anchor at Long Beach or Vancouver or wherever — 10,000 TEU vessels through the Panama Canal, hitting the East Coast, they are going to be swamping the market as well. We are going to be looking for all the capacity we can put into the mix and maybe Churchill is part of that capacity.
Ms. Trépanier: I was asked that question last week in Ottawa. I think the three key things are that when we talk about climate change we think about warming, which is not necessarily a durable thing. It is unpredictable and tricky to know and understand when and if the ice will break. The Canadian companies that are in the Arctic are facing navigation challenges because of that unpredictability. The passage is changing and it is difficult to navigate; it is uncertain. When we talk about the Northwest Passage, we think of the cost of icebreakers. The Coast Guard does not have money for icebreakers. Why would they have money to open the North? Second, the unpredictability might change, it might look shorter to use that passage for some ships, but the ships might be stuck in the ice for a while and we are still talking about just in time, here. The shipper wants to know when it will come. I am sorry, perhaps that is not the answer you want to hear, but that is an honest answer.
Senator Zimmer: No, we do this all the time; I am just trying to dream a little further into the future, in technicolour.
Senator Eyton: We all are proud of and I think pretend to know the seaway. What is the seaway and essentially where is it located, geographically?
Mr. Corfe: The seaway proper starts in Montreal at St. Lambert. If you come in the Gulf of St. Lawrence all the way to Montreal you have year-round navigation into the Port of Montreal, as you know, and you have descending water levels, down to about 35 feet. The seaway starts to take traffic west of Montreal, so we move from Montreal through the St. Lawrence River into Lake Ontario and that section is what we call the international section; there are locks on the Canadian side, five, and two locks on the U.S. side. It opened in 1959. The international section of the seaway takes ships from the St. Lawrence River at Montreal through to Lake Ontario. The second portion of the seaway is the Welland Canal, which links Lake Ontario and Lake Erie and moves ships over Niagara Falls. We have a series of eight locks on the Welland Canal. The present Welland Canal is the fourth Welland Canal, which opened in 1932. The first Welland Canal opened in 1829, so the fourth Welland Canal has been in place since 1932. We are celebrating its seventy-fifth birthday this year. That series of eight locks lifts the vessels up from Lake Ontario to Lake Erie. In the section between Montreal and Lake Ontario and the section between Lake Ontario and Lake Erie, we allow vessels carrying up to 29,000 tonnes of cargo to move into the upper lake. They can go as far as Duluth on the U.S. side, Thunder Bay on the Canadian side, and all that trade in that area is opened up to the rest of the world, if you like.
We have four locks in Quebec, two close to Valleyfield at Beauharnois, two on the South Shore. We have two U.S. locks and then we have the rest of the locks, the other nine locks are in Ontario.
Senator Eyton: The ownership of the seaway is in fact the locks and maybe the runways going into them.
Mr. Corfe: The locks, channels and the bridges make up the infrastructure, if you like, yes.
Senator Eyton: Does the federal government own it?
Mr. Corfe: Yes, it is owned by the federal government.
Senator Eyton: Who is responsible for it within the federal government?
Mr. Corfe: Transport Canada is responsible for the seaway.
Senator Eyton: Who has title to the locks and the runways?
Mr. Corfe: Her Majesty has title to the locks and the runways. It is the government. From 1959 to 1998, it was a Crown corporation. The St. Lawrence Seaway Authority was a Crown Corporation, much like CN. It changed in 1998, the infrastructure stayed with the government but a management corporation was created.
Senator Eyton: That is when the St. Lawrence Seaway Management Corporation came into being?
Mr. Corfe: The management corporation.
Senator Eyton: Is it your job to manage the locks?
Mr. Corfe: Our job is to operate on a commercial basis, to encourage growth of the system and to coordinate activities with the U.S.
Senator Eyton: And that company is owned by Transport Canada.
Mr. Corfe: It is a not-for-profit company. We have a nine-member board: five from industry, three from government, Ontario, Quebec, federal, and me, making up the board that manages the corporation.
Senator Eyton: To whom do you report?
Mr. Corfe: Our accountability is the board. We have a management agreement with Transport Canada. We have a 20-year management agreement, a legal document of how the system will be managed.
Senator Eyton: And that started in 1998.
Mr. Corfe: Yes.
Senator Eyton: Yes, okay, so you have about 10 more years.
Mr. Corfe: We are into 10 years, yes.
Senator Eyton: Is there any capacity for containers going in through the seaway? I want to get the progression of ships, size of ships measured in TEUs, for the St. Lawrence Seaway, Montreal, and I suppose Halifax. What is the maximum size of vessel that can come into a port?
Mr. Corfe: Halifax can take the biggest vessels in the world.
Senator Eyton: Can Halifax take in the Maersk line?
Mr. Corfe: The Maersk's, 11,000 or 12,000 TEU vessel that is just been launched supposedly will be able to berth in Halifax. Halifax is 55 feet of water, which is really the amount of water that a vessel needs when it is fully charged. Montreal and I am guessing a little bit, could berth probably 4,000 TEUs. A vessel coming into Montreal depends a little bit on the water levels. They have about 35 to 37 feet of water and 3,600-4,000 maybe 4,200 TEUs. A vessel that would then move into the seaway either from Montreal or from Halifax, the capacity of that vessel would be up to about 1,000 TEUs.
Senator Eyton: That is quite a difference.
Mr. Corfe: It is quite a difference and that is why the market we are suggesting is transshipment, say, from Halifax or Montreal. If you take 12,000 TEUs off a vessel that is 71 kilometres of rail train. One of the options open to us is to transship to a seaway-size vessel carrying 800 or 900 TEUs or a smaller vessel carrying 300 or 400 TEUs for a particular market.
Senator Tkachuk: Just to do the comparison a little further, is there any difference in length of time to take a truck or a train to ship it to Chicago from Montreal.
Mr. Corfe: There is a difference in time. In theory, there is a difference in time with respect to that. Yes, the train — and I am going a little big off from memory here — the train from Montreal to Chicago is probably 36 hours.
Senator Tkachuk: I think you are right. Is that not that what we were told? Thirty-three hours and they are hoping for 24 hours. Thirty-three and wishful thinking.
Mr. Corfe: A seaway vessel, we are probably talking four days.
Senator Tkachuk: Four days, but you have 1000 containers.
Mr. Corfe: Well, yes, that maybe you would not have otherwise. The last thing we are suggesting is we are the be all and end all. We are not the solution; we are part of a matrix of solutions.
Senator Tkachuk: So, where it does not depend exactly on the one-day or a two-day, you could handle it.
Mr. Corfe: "Just in time," is worn out as a phrase. What people are looking for more and more these days is reliability, certainty of delivery. "You are going to be there Tuesday morning at 10, are you?" "Yes, we are going to be there Tuesday morning at 10." It is that kind of change. Obviously when you are moving from Shanghai or Hong Kong to Chicago or Toronto, it is not the 36 hours or the four days at the end that is important, it is the overall time. Overall, we can be relatively competitive. We can certainly be more dependable, particularly since the problems we have been incurring with border crossings.
Senator Zimmer: What are the logistics? How do you do it? If you are going from the larger ships, do you have to go from the ship to the port, back to the ship or can you do it straight from ship to ship?
Mr. Corfe: You can do it either way. Ideally, you do ship to ship. Ports like Hamburg do this on a regular basis, like Hamburg, if you know those containers are going to go to that market. You can do ship to dock, dock to ship. Obviously, that is twice the handling.
Senator Zimmer: Right, but ship to ship is a lot faster.
Mr. Corfe: Yes, it is much faster.
[Translation]
The Chairman: Mr. Corfe and Ms. Trépanier, thank you for coming, we appreciated it very much. Your statements will enhance the report that we will be producing this fall regarding this issue that is important for the Canadian economy and for the consumers.
[English]
Honourable senators, we will now adjourn. Thank you all very much.
The committee adjourned.