Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 16 - Evidence - June 12, 2007
OTTAWA, Tuesday, June 12, 2007
The Standing Senate Committee on Transport and Communications met this day at 9:32 a.m. to examine and report upon 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 David Tkachuk (Deputy Chairman) in the chair.
The Deputy Chairman: Honourable senators the reason the title of our study is so long is because this is Canada. This study started with west coast container ports and it evolved from there. Hence, we have a long-titled report and it is proving to be extremely interesting.
We have with us today, Jim Buggs, General Manager, Car Management, Canadian Pacific; Claudio Minello, General Manager, International, Canadian Pacific; Paul D. Waite, Vice-President, IMX, which is intermodal excellence, CN; and Cliff Mackey, President of the Railway Association of Canada.
Cliff Mackey, President, Railway Association of Canada: Thank you, honourable senators. I will make brief comments. I have a hard copy presentation entitled ``Ensuring Canada's Prosperity Through Facilitation of Global Trade.'' My intent is to provide contextual information and leave to my colleagues the more specific questions of intermodal and rail operations.
The Railway Association of Canada, RAC, as I believe you know, is an organization that represents about 60 operating railways across the country, essentially all of the operating railways in the country. We are here today to speak on their behalf.
This slide contains a chart of the railway network, the Canadian Class 1 and short line railway network in North America. The Canadian railway network is a continental network; it is not just a Canadian network. It touches three coasts: south to the Gulf of Mexico, east to the Atlantic Ocean and west to the Pacific Ocean. That is an important point to keep in mind when considering trade flows and intermodal traffic in particular.
Let me move generally to why this issue of containerization and intermodal shipping is with us today. Page 4 gives you background on international trade flows. It shows the top 10 exporter-importers in the world and their performance for 2005. It is important to note the imbalance of trade on the U.S. side, a huge trade deficit compared to most other G8 countries. That is primarily driven by energy imports and, by cheap Chinese manufactured goods flowing into the U.S. market.
In Canada, we are the reverse and the reason is we are a net exporter, particularly of resource commodities and energy. These trade balances are reflective of what has happened in globalization in the last number of years.
Let me move to the next slide on page 5. I want to take a few minutes to talk about what has happened to global production processes. I want to emphasize that the location of production has shifted dramatically in the last 10 years. It has been driven by the ubiquity of very sophisticated and highly productive manufacturing technology. The new plants being built in China, India and other places are just as sophisticated from a technological point of view as any other plants in the world. Combine that situation with cheap labour and it becomes a very compelling argument as to where those plants will go from the point of view of business strategies.
The next chart shows the implications of that change for transportation. Transportation has traditionally been seen as a derive-demand good; that is, we derive our demand from manufacturers and others, so we are secondary demand in the system. Many experts are now beginning to question that basic concept. They are now talking about integrated transportation demand. Transportation has become such an integrated part of the production process and the value creation process in the global world that it is increasingly seen as completely integrated with the decision-making. From a policy point of view, we think that you have to take an even more careful look at transportation in terms of economic policies going forward than you have ever done in the past.
The next slide gives you a sense of where the value proposition seems to have gone in the past few years, if you look at it from the point of view of someone who produces something. They continue to be very high value-added propositions if you are in the front end of the process: such things as research and development and branding and design. There also seems to be high value-added if you are in the back end of the process: such things as sales, service, marketing and distribution. The global logistics changes that are emerging are very profitable.
Manufacturing seems to have been the part of the process where we are starting to gain great rents simply by the combination of technology and low labour rates in various parts of the world. That is what is going on as best we can understand it. That is one of the major factors we think is driving the fundamental change in terms of the shift in global productions around the world.
I will move to the next chart. How can we put that into some sort of transportation logic? This chart shows what has happened to logistics cost, inventory costs and cycle times, which drive our customers in one way or another, particularly in the multi-modal business. Since the 1960s, there has been a dramatic reduction in those costs and the productivity gains. That reduction has made way for the Wal-Marts and the Canadian Tires of this world. That is another thing that is driving the system. The productivity and the competitiveness of our transportation systems are at the heart of the competitiveness of the whole economy.
Moving on to the next chart, and translating that into containers, because I know that is the specific interest of the committee, on page 9 you will see a demand forecast for containers.
We had a meeting yesterday with respect to demand on forecasting transportation and almost every expert there said that it is likely they have underestimated the future demand for multi-modal and container shipping.
The next slide shows the existing major network of rail and port interfaces. These are the Maritime ports. You can see by the size of the circles on the next slide where the major Maritime import and export ports are in North America: Montreal, Halifax and Vancouver are the big three in Canada. Prince Rupert is not on this map, but I suspect it will be in a couple of years. Long Beach is the largest port in North America. You can also see the rail connections. This is the reality as we know it today.
Slide 11 shows the emerging concept of land bridges, which connect to the major Maritime ports. Increasingly, we are starting to see trade flows going from one side of North America to the other. A number of future concepts could see some of these land bridges evolving north-south and well as east-west. Prince Rupert could be an example of a future north-south land bridge because it is moving product from the west coast down into the U.S. heartland in a north-south direction.
What does all of this container traffic mean? One of the major problems is starting to emerge. This next slide illustrates the Port of Vancouver from 1997 to 2006. It shows the inbound and outbound flow of containers. As you can see, up until 2001, the Port of Vancouver was a net exporter as opposed to importer. Now it is a net importer of goods and that is primarily because of multi-modal and container activity.
The other major thing this chart shows is that we are starting to see increasing volumes on empty containers going out as opposed to full containers coming in. The balance between empty and full — my colleagues may speak more on this subject — is becoming an issue with the industry. However, if you speak to the shippers and the owners of the containers, they are not as concerned. They are building that into their pricing. They want those containers back in China as fast as humanly possible so they can fill them up again. There are differences of view when it comes to that issue.
If that is the reality, I will talk about what more needs to be done. Port rate rationalization and port deficiencies are critical in the new global production world we live in.
In chart 14, we focus on the maritime ports. Please do not forget the inland transmodal hubs and terminals. They will probably be critical to the efficiency and the future of the system. Long Beach is already very close to its critical congestion point. They have done a few things in the last year or so, but it is a big problem.
How we will be able to manage that increasing flow of traffic in areas where we are, by nature, restricted because of the geography will be an issue that the whole industry will be challenged with in the next 10 years or so. This slide gives you an idea of where many of the inland ports and terminals are located, the biggest is in Chicago.
Greater technology and further improvements on the inland side is something that we believe is an opportunity that will come to pass in the not-too-distant future. That is an area we would like to flag.
The fundamental change in global production is it has happened and it is driven by sound global economic business principles. It will not shift back. Transportation is even more critical in terms of an enabler in this new world than ever in the past. We need to make sure we integrate it carefully in our policy frameworks and think about its productivity, efficiency and effectiveness when we think about any kind of government economic policy, be it micro, macro, fiscal or tax. If we miss that fundamental point, we will do harm to our citizens and ourselves.
Claudio Minello, General Manager, International, Canadian Pacific: Thank you for inviting us to appear today. I would like to reflect on Mr. Mackey's presentation. One thing is for sure: Off-shoring has happened. We saw the first wave in 2002, and we saw it in a tsunami of containers coming to the Port of Vancouver like we have never seen before.
I remember that year well. My business grew at the Port of Vancouver by 22 per cent. Normally, at the time we were growing at 4 per cent to 5 per cent a year, which is four or five years of capacity in one fell swoop. The same thing happened in 2003 and 2004. It was not to that pronounced level, but we did experience double-digit growth. Within the last couple of years, we have had close to double-digit growth at the Port of Vancouver.
I want to provide you with an overview of our business. Everything is moving upwards and not downwards, as this slide indicates. CP Rail is a network of 13,000 or so miles of rail with 15,000 employees. We service the two major gateways in Canada, the Port of Montreal — I know you have recently met the CEO, Dominic Taddeo — as well as the Port of Vancouver.
We want to focus on the global piece of the pie, which is growing. It indicates a growth of 37 per cent. This includes grain, potash, coal and obviously the container business that goes offshore. The global business is the fastest growing piece of our business. On the intermodal side, I am responsible for the international piece.
International is normally described as anything that starts with a vessel or ends with a vessel. It is an import or export. The international line of business at CP Rail is probably the fastest growing business sector that we have right now.
Obviously, most of the growth we are seeing is coming through the Port of Vancouver and moving across Canada towards Montreal and Toronto, and some of it to Chicago. We see that the Chicago growth will eventually start to pick up, and we will have much more U.S. mid-west traffic moving to and from the Port of Vancouver.
With respect to our vision at CP — Fred Green, our chairman, always starts his presentations this way — we want to be the safest and most fluid railway in North America. Last year the statistics indicated, because of the reduction in train accidents and safety measures we have put in place, that we were the safest of all the Class 1 railways in North America.
On the fluidity side, we had terrific numbers last year, one reason being that our train speeds were up something like 13 per cent or 14 per cent and terminal dwells were down. Our network is moving well, but along with the stakeholders operating in the Vancouver area, we are looking to increase capacity. We have all done some work to date and taken some actions. We can work individually, but working together is the answer. If, for example, the railway expands and terminals do not expand, then the bottleneck becomes the marine terminals and not the railway. We must work together to expand the gateway out of Vancouver.
In 2005, CP spent close to $180 million to expand our rail network between Moose Jaw and Vancouver. We put in some sidings, train control mechanisms and crossovers. We extended areas to be able to run trains at a faster speed, and we grew our operating capacity in that corridor somewhere in the neighbourhood of 12 per cent to 16 per cent. Capacity is a fluid number. On paper, you say you increase by 12 per cent, but with operational efficiencies, you are probably in the 16 per cent range. We did that in 2005. As we were doing that, we were preparing ourselves to face what Mr. Mackey said was a growth of containers coming through the Port of Vancouver, which seems to have been under-forecast.
We are working closely with the terminal operators, and Centerm just completed an expansion in July of last year. They grew their terminal footprint and added a key component. We are the envy of many ports around the world. If you have time to visit some of the ports in your studies, we are the envy because we have on-dock railway, which is an efficient way to move containers from a ship to Toronto because the containers are loaded at the terminal itself.
The Port of Montreal was one of the innovators of on-dock railways; they have had it for 100 years. Many terminals around the world would like to have our system to load right on the docks. We do not have to send it to an off-dock, or an ICTF. Keep in mind that to be competitive we should not handle the product too often. The more times we handle the container, the more frequently it gets shuttled out, and the more back and forth that you have, the less competitive the business becomes.
Centerm spent about $160 million. The first thing they did was put in four 2,000-foot tracks right on their terminal. They added RMGs, or rail mounted gantry cranes, that are efficient in moving the containers to the track. They put in two super post-Panamax cranes which can handle the largest vessels that are now sailing. Vessels of 8,000 TEUs, when they are full, have 22 containers right across their bow, so you need a special crane to go out there and reach the last one at the end.
TSI is responsible for both Deltaport and Vanterm. They have also spent a lot of money and will spend much more in the upcoming years to expand their capacity. They have new post-Panamax cranes, they have added RTGs, and they are adding important systems to operate the terminal. All of this operating efficiency is driven by the investment from our partners, which are the marine terminals, and we do it collectively. As we do it collectively and grow the capacity, we are better able to handle efficiently the flow of traffic that we will see — we are seeing it right now — through Vancouver.
Jim Buggs, General Manager, Car Management, Canadian Pacific: As Mr. Minello mentioned, Canadian Pacific does our container business through the Port of Montreal, where we have a fluid situation, and the Port of Vancouver. Everyone is aware that the Port of Vancouver is in a geographically challenging situation. It has natural physical boundaries surrounding the city; it has rapid growth as it is a desirable place to live; and it is Canada's major port.
The city has grown up and with all the growth in containerization, it is an intricate transportation system in terms of trying to navigate from the ports back into North America. A number of things have been announced already, and we congratulate the federal government on an excellent start. Some of the examples are the Pitt River Bridge, the Roberts Bank corridor, the South Fraser Perimeter Road and other projects.
The key thing is that those are just a start. They are not the end. I am sure I am saying the obvious, but I want to reinforce that. In terms of things that absolutely need to be done, one is agreement on a long-term master Lower Mainland port plan. We have heard from the people here, and I am sure it is consistent with what you have read and heard from other experts and meetings. Growth is here and growth is coming. We absolutely need a long-term plan.
We need transportation corridors. There are always conflicts between coexisting in the community and doing transportation business through there. We have heard it in a variety of ways in terms of noise and proximity to rail lines. The freight has to move, and we have to coexist with the community. There must be a viable plan on how that will work. A number of grade separations have been announced in Delta, Surrey and Langley; these are excellent things, and all are important. Even more and above that, we will need to do more of these on an ongoing basis.
Once we have this plan and as we go through it, we need to communicate. It is one thing for smaller groups of people, whether government or business, to have a view of that, but we need to communicate it to the community. It is vitally important that the community understands what is going on and people can plan accordingly.
While it is great that we have announced major projects, now we have to get them done. As we all know, announcing them is wonderful, the commitment to them is great, but these are things that must be done right now. The Port of Vancouver is approaching capacity and these projects take years to do and the longer we wait, the longer we get involved in studies and whatever needs to be done, the more we will delay our ability to grow and capture our appropriate share of the business, and the jobs associated in that business.
Mr. Minello: I would like to touch on Vancouver's future and explain how the stakeholders, especially at Deltaport, are growing the footprint to handle the opportunities in the next 10 to 15 years.
I would like to remind everyone that the economic impact of the Pacific Gateway is substantial. The gateway transportation industry has an annual payroll in excess of $3.6 billion and pays some $3 billion in taxes every year. It is a big deal. At least 75,000 individuals are directly employed by the gateway. When you take the indirect employment, that number moves up to about 139,000. It generates approximately $8.4 billion in GDP and $19 billion in economic output. These are very substantial numbers.
In order to keep the momentum going, our friends at TSI are making significant investments. I was at Deltaport last Thursday to look at the ongoing work on Berth 3, which will add roughly 21 hectares to the existing footprint at Deltaport. That will bring the site to around 86 hectares.
Environmental approval was received in late 2006 and my colleague, Mr. Buggs, mentioned that we need to get these things going a little earlier if we want to maintain and keep the good flow of containers through Vancouver. I know from my talks with VPA and the stakeholders that it took awhile to complete the environmental approval. We must shorten the time it takes. We have to be diligent, we have to protect our investment, we have to follow the rules, but we can do it in a shorter time frame.
With regard to Terminal 2, the Port of Vancouver just released a request for expression of interest. I received a copy of it yesterday. I believe they are trying to evaluate all of the players who will bid on the process at Terminal 2. We want to get this terminal up and running as soon as possible. The goal is to complete the first phase by 2012. That will add some 700,000 TEUs of capacity to the Port of Vancouver. As a reference, the Port of Vancouver moved about $2.3 million TEUs last year. It is quite a project.
Two key projects will be the north and south Fraser perimeter roads that must be in place by 2012 in order to facilitate the movement of goods. I urge the committee to improve our EA approval system for this project and expedite that system, albeit with due diligence, as quickly as possible.
Mr. Buggs: Our last slide shows the railways that will be operating in and out of Vancouver over the next decade. We are looking at approximately $2 billion in investment. You can see the split cars, infrastructure, terminals, et cetera. There is an enormous amount of money relative to what is required from the railways relative to the investment. Clearly, with something like this, we have concerns and we must be comfortable in the environment in which we will spend that amount of money.
One of the key things we are always looking for — and not just ourselves but any business — is a stable environment; in this case a regulatory environment where you understand what you are getting, and what environment you are dealing with relative to the significant investment.
Canadian ports, and all the associated jobs and spin-off economic benefits, are in a highly competitive situation. Those container ships can dock anywhere. A container, for example, going from the West Coast to Toronto does not need to come through Vancouver. The container can come through any of the U.S. ports. This is an important thing that we need to understand relative to the tax environment and the fiscal and economic environment in which we live.
We need the capacity. That is not just in terms of rail capacity but also of the local infrastructure required to make that happen. There are more specific things that we could do in terms of helping making us more competitive, like loosening the cabotage regulation. These are the rules related to the movement of foreign containers within Canada in terms of going back and in terms of flexibility in moving freight. For example, an import container comes in and how we move it back and the regulations in terms of filling that container.
We also need to step into some things and the biggest one is the land utilization and transportation corridors. We can have the best intentions and plans, but if we have not thought far enough ahead and set aside transportation corridors that will allow us to move the capacity and the volumes in future years efficiently, we will be behind the eight ball.
Paul D. Waite, Vice-President, IMX, CN: I am Vice-President of CN Intermodal. I am responsible for all of CN's intermodal marketing and operations. It is a $1.5-billion piece of business and approximately 20 per cent of CN's revenues. Similar to CP, it is the fastest growing segment in CN.
I have done a number of things at CN. I have been there for 30 years, ranging from IT to engineering, to sales management, to strategic planning and to market management. However, for the past five years I have led CN's Intermodal Excellence program, or IMX. A business turn-around strategy made intermodal profitable. We never had any issues growing intermodal in the past; we just had a difficult time making money at it. It got to a point where we really could not justify further investment in intermodal so Hunter Harrison motivated me and told me I had to turn this thing around or we would get out of the business, and he meant it. The good news is we did manage to turn it around. It is now on sound financial footing and we are moving forward with it.
I am grateful to be here today to address this panel. My opening remarks will highlight three areas of concern regarding the current state of intermodalism in Canada, specifically areas over which the Government of Canada has influence.
As you are well aware, CN has railroads all over North America. Our network stretches from soon to be Prince Rupert on October 1 of this year, Vancouver to Halifax, from Chicago down into New Orleans. We touch many ports. We have ports on the Atlantic coast, on the Pacific coasts and ports on the Gulf coast.
The nature of the business is one of matching imbalances together for overall efficiencies. The dominant direction for international freight is from port to Central Canada: Whether it is Vancouver, Prince Rupert, Halifax, Montreal, or New Orleans, it is going into the heartland of the United States or Canada. The ratio is that there are three imports for every one export. There is a natural imbalance that Mr. Minello alluded to in his presentation.
From a steamship line perspective, that means they have to bear the costs of moving that empty container from the Central Canada or the U.S. heartland back to the coast. In intermodal we have to find ways to mitigate that cost for the steamship lines. This is where we get into the whole cabotage area, which is of interest to us because this is our fastest growing segment of the business.
That container is made empty in Toronto. We want to load that with domestic freight back to the direction of the port. At present, we are only allowed to do one move in the direction of the port. If that container is made empty in Calgary, which is where a lot of the freight tends to go because that is the distribution centre of Western Canada, we now have to move that container empty from Calgary to Vancouver or Prince Rupert. We are not allowed to refill it.
We are always challenged to service Newfoundland and Labrador because it is a very expensive place to service. However, if we could move a box from Central Canada, fill it with Canadian Tire freight, a steamship box, move it to Newfoundland and Labrador and then return it to Halifax that would be a nice fit. The present regulation does not allow us to do that. If we were to change or harmonize the regulations with the United States, Newfoundland and Labrador would benefit. It makes a lot of sense to do that. We are going beyond the port and back.
The Deputy Chairman: Could you explain that? What prevents you from doing that?
Mr. Waite: First, we are allowed only one move.
Mr. Minello: That is in the direction of the port.
Mr. Waite: We cannot go beyond the port. In this case, Newfoundland and Labrador is beyond the port. However, it would be a wonderful opportunity if we could optimize the supply chain. Canadian Tire would love to do that, but we are not allowed to do so.
The next point is one that has become an issue for us since we embarked on precision railroading and intermodal excellence some years ago. The key to CN's success is about balancing our crews, locomotives and cars. If they get out of sync, it kills us. It is no different than an airline. They must come in and go out loaded. We have to turn the asset and make it sweat.
My concern centres on other pieces of the supply chain, which operate only five days a week, or one day shift a day. Both CP and CN operate 24 hours a day, 365 days a year to keep Canada's freight moving. It is a terrible thing to race across this great land of ours to be held up at a terminal because of gate hours, concerns about overtime premiums or work rules established over 50 years ago. For example, we lose three to four days of production in Vancouver every year around Christmas holidays because of shutdowns. In Vancouver, we also lose one-half day a month of production because there are union meetings on Wednesday and they shut down the whole terminal. The vessels keep calling 365 days a year, 24 hours a day, and terminals shut down.
You can imagine if you are hauling four or five trains a day how fast you can get congested when these shut downs happen. We need to look seriously at these issues. You do not have to throw capital at it; there is latent capacity. We have built a church for Easter and the rest of the year it is empty.
We learned this in intermodal when we look at our Brampton intermodal terminal. Five years ago, we were looking at either expanding or building a new terminal at $110 million or $115 million. The real issue was we were only using it five days a week and during the daylight hours. We were not working nights or Saturdays and Sundays. We did not need to build a new terminal. We smoothed the freight and worked seven days a week, 24 hours a day. That terminal is still good and we are expanding it. There are lessons to be learned and ways to optimize the supply chain. We just have to work closely together and synchronize what we do and run it seven days a week, 24 hours a day.
Finally, I would like to speak a bit about some of the issues that face us, and hopefully will not come to a head in the latter part of this month. I want to talk about First Nations' concerns in Canada, particularly as they relate to interruption of critical lanes and badly needed terminal development.
CN looks to the Government of Canada to continue its leadership role in dealing with and settling First Nations' concerns and issues. This is a real threat to CN lines in Canada. There is talk the First Nation bands near Prince Rupert will attempt to prevent the new container terminal from opening.
I bring this up not to downplay the concerns of the First Nations people, but rather to point out the extensive damage we are doing to our reputation overseas and as an effective Pacific Gateway. Whether in Europe or Asia, the steamship lines always mention the uncertainty of the trucking situation in Vancouver, the blockades or the washouts. These people can call on Los Angeles-Long Beach, New York-New Jersey, Norfolk; they have choices. They do not need to call on Vancouver, Halifax, Montreal or Prince Rupert. Having that uncertainty in the back of their minds plays a role in their decision-making process. One of those issues is raised in every discussion we have with the steamship lines.
Senator Phalen: I have heard that 25 per cent of CN revenue is containerized freight.
Mr. Waite: Yes.
Mr. Minello: On the domestic and international side it is 29 per cent for CP.
Senator Phalen: Mr. Waite, an article in the May 29 edition of the Halifax Chronicle-Herald announced a plan to construct a container terminal at Canso. The article mentioned that the Canso port would be serviced by transfer lines connecting the Cape Breton and Central Nova Scotia Railway to Truro where the containers would be transferred to the CN line. The article also says that CN is interested in the project.
Can you tell us if CN will be involved in the projects at Canso? What construction would CN have to undertake to accommodate the containers from Canso to Truro?
Mr. Waite: If that container terminal proceeds — which I think it will — it will not be open until 2010 or 2011. It will handle up to 2 million TEUs, which is a considerable size.
At this point we are in discussions with the group. We have met with them a number of times and they have great interest in CN participating in it. It would be premature for me to indicate the nature of those discussions. However, in terms of infrastructure, we are underutilized in the East, no question about it. I could run 20 trains a day from Toronto to Halifax. There is no constraint from a network perspective. Likewise, our Montreal terminal is only a few years old. We are expanding the Brampton terminal in Toronto where a preponderance of that freight will go. We are expanding our Chicago terminal because much of that freight that could call on Melford could end up in the U.S. mid-west like much of the freight out of Halifax. We are well positioned to take on that freight.
Halifax is only at half of its capacity. It is handling about 500,000 TEUs and could handle close to 1.2 million TEUs. There is a great deal of latent capacity out there and we have a lot of work to do before 2010.
Senator Zimmer: My question is for either Mr. Minello or Mr. Waite. Can you outline for the committee how co- production — running on each other's lines — arrangements have affected your service in Vancouver? Have you made similar arrangements in serving other ports?
Mr. Minello: Co-production has been a great success. The Vancouver Port Authority has refreshed a Moffatt & Nichol study that shows that our efficiency in that area increased by about 32 per cent. The way I explain is instead of having two taxi companies calling on one area bumping into each other, CP handles the Lower Mainland Vanterm and Centerm business. CN handles the bulk side of the business on the north side of Vancouver. It has worked out very well. The terminal operators are very happy with our success. Vanterm used to handle in the neighbourhood of 12,000 feet of rail a day. We are doing 18,000 to 20,000 feet a day now. The mathematics shows a 50 per cent increase. We did not change anything. We did not add any tracks; it is just better efficiencies. At Centerm, with the new tracks, we are going gangbusters. Last weekend we did 12,000 feet whereas we used to do 4,000 or 5,000 feet per day. It has worked out well.
You asked me if we handle it anywhere else. At the Port of Montreal where we also do business, the port authority has its own railway. It is sort of like one taxi servicing the terminals out there; the same procedure we did in Vancouver. We do not need to have a co-share there because it is already done for us.
Senator Zimmer: When we were in Vancouver we heard from a public policy consultant who asked us a question, which I will paraphrase. He asked if it is not reasonable for Canada to impose a level of service conditions on the railways when it provides public funding for various railway improvement projects to anyone. What are your thoughts on that comment?
Mr. Waite: We are in dialogue with the ports on a daily basis. We make a commitment to switching X number of feet of cars into their facilities on the basis that they can produce that number of cars outbound. There is it no point in us giving them more cars than they can load. It is one of the things we do on a daily basis.
To come up with some level of service, we have that today. For example, if Deltaport says they will do 17,000 feet or 18,000 feet of CN today, we ensure they have 18,000 feet of cars. What becomes incumbent upon the rail is that we do what we say what we are going to do, given the time we say we will do it. Obviously, you have to coordinate labour. Sometimes, that can be challenging given the situations we have to deal with, be it washouts, derailments, et cetera. That works fairly well, with the exception of probably December and January of this past year, where there was just a confluence of challenges, whether it was high winds at Deltaport, where they could not load trains or unload vessels; or washouts, or snow. That was a very bad period. There was then the shutdown to which I alluded earlier over the Christmas period, where you lose up to 80,000 feet of production. That equates to about 10 trains. It backs up very quickly. I think we do have those kinds of commitments today.
Mr. Mackey: The key answer to your question is the word ``competition.'' That is really what, from a public policy point of view, you should strive for in your policy frameworks. The more competition out there, the more we will be incentivized to serve our customers in every context, all over the country. That is how the market works.
If we go back to the idea that, somehow, some government or regulatory body should get back into the business of regulating either rates or service levels, then we are headed back to where we came from and we all know what that meant for productivity. It just was not there compared to what we have today.
The Deputy Chairman: I like to see more competition.
Mr. Mackey: That is in the eye of the beholder. If you read the recent OECD report from 2005, they assessed rail competition worldwide and their conclusion was that Canada has the most competitive rail system in the world in the sense of the amount of competition because we have two Class 1 railways that run through most of the country. That is very unusual. Even in the United States, the way in which the Class 1s are divvied up geographically, you do not see a lot of competition or interface between them. You see more of that in Canada than you do in most places in the world.
Senator Zimmer: When the committee was in Vancouver, we were told — and you raised this point Mr. Minello, about the workforce — the figure for full time is 75,000 and part time was 139,000. We were told that in four years, 50 per of the railway workforce will be eligible for retirement. Is that number accurate? How are you working to address this issue, if that figure is true?
Mr. Minello: They told you 50 per cent of the railway workforce was ready to retire within the next five years?
Senator Zimmer: That is what they told us.
Mr. Minello: I am not sure that is accurate. It sounds a little high but I do not have the exact number for you.
We do what we always do. For example, in 2002, when the tsunami of containers came on board, you must have read that in the United States UP had an issue because they did not have enough crews to handle the volume. The crew situation for CP was not an issue. We have regular programs where we qualify people to come on board. As a matter of fact, because of our fluidity last year, and because of the strides we have taken on the railway to improve it with the expansion, we had an issue where we had too many crews at one time. We had them sitting at home. During last year's ``winter from hell,'' as I call it — it was the worst winter that we had on record for 50 years, for sure — we brought those fellows back to work the railway. You were talking about service. We brought on 20 per cent more cars and added 55 more locomotives.
The railway business is very capital intensive. Let us not forget that. It is the most capital-intensive industry that I know. We spend 20 per cent of our revenues on capital. For us to have locomotives, cars and crews sitting idle, that is a no-no, big time. You are talking about service. It is inbred that we have to spin cycle our assets. I do not see a problem with us being able to qualify people or having the assets on board to handle the upcoming freight. We just have to get it done together and collectively.
Senator Zimmer: We heard this before, and it was about allowing only one move after you deliver. What is the rationale on that? I know it is in the legislation but is that because of competition with the trucking industry? Is that the reason?
Mr. Waite: It was the concern of the trucking industry, I believe. Surprisingly, what is most interesting is that they are the guys that use them now. They are the people that want to use these boxes. Clarke Transport and TransX want these boxes. The very people we were trying to protect are the people who want them now. It has changed dramatically.
Senator Dawson: Am I to believe that we are not sitting tomorrow so we will be dealing with the Industry Canada user fee draft report today, or is that delayed?
The Deputy Chairman: I would like to deal with that today so we can clean it up and then we do not have to meet on Wednesday. Otherwise, we meet Wednesday. That should give you all some incentive to move this right along.
Senator Dawson: That was my objective.
Senator Merchant: We on the Prairies are concerned about two things. First, we are interested in the inland ports. What are the locations of major facilities where container transloading, from either rail to rail or rail to truck, take place on both CN and CP networks? Second, would you support an inland logistics port? Is there something the federal government can do to play a role to make this happen? Do you have some idea of a good location? I will not tell you where I am from until I hear your answer.
Mr. Waite: I have taken part in a number of meetings and sessions regarding inland container terminals. Obviously, there is a great deal of interest in them these days, in particular in the Prairies.
One of the things that people have to understand is container economics. CN does not control the container; the container is owned by the steamship line. It is up to the steamship line where he wants his container. You heard Mr. Minello say earlier that by and large they want their containers over in Asia because that is where they make their money. They do not make money on a $600 grain load out of Regina or Moose Jaw that may or may not be going back to where they want it. It could be going to inland China somewhere, where that box is there another three or four weeks being loaded or unloaded. Many things come into play when you are looking at container ports.
We are not opposed to loading a container in the Prairies; we think it is great. We need to find a way to make it work for the steamship lines such that they want their boxes repositioned into Regina, Moose Jaw, Saskatoon, and so on. That has been the challenge. It is as simple as that. We have no issue with it. We have terminals in Saskatoon. We would prefer Saskatoon; that would work better for us. CP would probably refer Regina because of the nature of their network. When it comes to intermodal, you want the terminal to be as close as humanly possible to your core network and not a secondary line. Intermodal runs basically on the 401. We do not go to the out-of-the way places on secondary lines, although I have had some. For example, there is Rouyn-Noranda — not that I have anything against that place. It is beautiful. It is a great place to smelt copper, zinc and lead, but it is not where you would want a container terminal.
Mr. Minello: I echo the same sentiments. In all business decisions there must be a rational business case to put in a new intermodal facility. We run a hub and spoke approach to things. We have terminals in Regina and in Saskatoon. We are already trying to develop a more efficient system—having little satellite terminals everywhere will increase car cycle times. It is not as efficient as a system with a hub and spoke approach.
The lines must make money and we are just the movers of their containers. If they can make money, then the containers will be delivered and if they cannot make money, then the containers will have a hard time being delivered. It is basic economics.
Senator Merchant: What about the difficulties with accessing empty containers in the Prairies? I would imagine that for specialized containers with high-value contents you will start surcharging. What will happen to our products?
Mr. Minello: Access to those containers is a function of the lines wanting those containers to be there. For example, we deal with Hapag-Lloyd Container Line, which is the fifth largest line in the world. They have an ongoing project to see more of their containers move into the Prairies, and we are facilitating that. Other lines look at their economics and would rather send their containers empty all the way back to Vancouver so they can get the head-haul move from Asia. First, they spin cycle their assets more quickly; second, they need fewer containers to run their operations because of the first; and third, in their economic rationale they are making more money doing it that way.
We are the carriers and we take the orders. They will say, give me 20 containers to Saskatoon so we move 20 containers to Saskatoon. We cannot control where the containers go because it is up to the line. Obviously, it is up to the people paying for the service to work out an economic scenario that makes sense for everyone.
Mr. Waite: The other thing we try to do to help the lines reposition the containers into places like Regina and Saskatoon is through domestic reload. Once again, you are limited to the consumption area of Saskatoon or Regina. That is the upper limit, which means that I could put 200 containers a week there using my partners, the trucking companies, or Kraft or Nabisco, but that is the extent of it. I can make those containers available in places like Saskatoon or Regina. It is not that we are not trying because we are trying.
Mr. Minello: You must remember that most of the containers in the Prairies are specialty containers. The domestic business runs in 40-foot containers and the specialty grain containers are only 20 feet long. The mix of containers is different as well and it becomes complicated.
Senator Dawson: Mr. Waite, you mentioned that you built the church for Easter. We heard about the sharing of railway capacities and more exchanges because you operate 24/7. At times, you still have rail capacity that your ``competitor'' could use.
Is there any way we can encourage the government to loosen up regulations and encourage modifications to make it easier for you to share capacity. We have heard complaints about the dual monopolies. In some markets, you operating alone and in some you operate within a competitive environment, of which Montreal is a good example. When they appeared before the committee, they said that they like having both of you there because it keeps both of you in a competitive environment. If one performance weakens, the competition will get the business.
Are there regulations that stop you from doing that more and what could we recommend? On the issue of the one- way or one-time container could you suggest relevant wording for our report that would address the issue in a specific way, either the bill or the regulation to which it applies. We would appreciate some support from you on that. It seems to be a consensus but if the rule is not being changed and everyone thinks it should be changed, then we will try to change it as quickly as possible.
Mr. Waite: It comes down to harmonizing our cabotage rules with the American cabotage rules.
Senator Dawson: I would appreciate your help with that in the document.
Mr. Minello: We will send suggestions to the committee.
Mr. Waite: In terms of co-production, we are talking everyday about other areas where we can co-produce. This is a hot topic. If there is an opportunity to do more, we will do it. Hunter made reference recently to the fact that we are still looking at other opportunities. It is working well now and we are very happy with it. As you know, if one of us has a rail outage, we can run on the other's railroad. There is a good working relationship when it comes to co-production. I do not know if that was the case 15 years ago. In those days, we could not agree on the time of day, but it has changed in the last few years. Nothing jumps to mind in terms of specific legislation.
Mr. Buggs: In terms of planning, there is no regulation prohibiting us from doing that. Relative to the infrastructure planning that we talked about before, these are the kinds of things that would be factored into that so that we have corridors laid out and CN and CP can have efficient access to ports in a friendly way with the communities.
Senator Dawson: In Vancouver, some of the port people said that you did not seem to have contingencies for winter weather conditions. Complaints against the railways in winter will always happen in Canada. Could part of that be done with better cooperation between both of you, while ensuring that we do not put in any obstacles?
Mr. Waite: As I mentioned in my comments, it is a team sport. We all have to work together, especially when we have the kind of winter just past. Mr. Minello called it a ``winter from hell,'' and it was darned close to that. Just about everything that could go wrong did go wrong, whether high winds, snow, washouts or mudslides. Contrary to popular belief, we have contingency plans. Mr. Minello talked about the extra cars that he brought on locomotives and we staged cars in anticipation of the January weather, when we know we will have issues. We strategically stage cars in Eastern or Western Canada to provide for that. Sometimes you just cannot account for a three- or four-day high-wind or mudslide outage that makes it impossible to load, although the containers keep coming. We work closely with CP when these challenges arise but they only have so many windows when they can allow us to run our trains and the reverse is true, so we try to coordinate.
Mr. Mackey: One major thing that governments could do is take a careful look at the question of land use planning. When we look across the country at where we have community relationship problems, we see that there are not as many in Ontario as there are in B.C. Why is that? Ontario has a specific set of land use planning guidelines that municipalities, us and everyone in the business is required to follow when considering expansion, rail lines and production, et cetera. Therefore, community problems or issues are dealt with up front, which is where they should be dealt with.
Unfortunately, most provincial jurisdictions do not have such guidelines and it is more of a free-for-all. We have seen some pretty irresponsible planning decisions being made at the community level across the country. If we are to make co-production work and run longer trains, which are critical to the future economic welfare of the country, then land use needs to become a more important part of the front end of the process and that requires public policy discipline.
Senator Munson: The committee heard that mega vessels are coming online soon, as you talked about, and increasing capacity dramatically. Witnesses representing shippers from British Columbia and Saskatchewan told the committee that exporters in their regions were having a great deal of difficulty accessing empty containers for their forest product and agricultural shipments. Might the situation improve for Canadian shippers if shipping rates fell dramatically, as more container vessel capacity is pressed into service?
Mr. Minello: If I heard you correctly, if shipping rates fell?
Senator Munson: Yes, go down — would it make it dramatically cheaper?
Mr. Minello: The economics are such that the line must make a dollar moving those containers inland. If the rates fall, in my opinion, they would avoid that inland terminal and move it directly to Asia, if they could.
The shipping line business works in cycles. When they make money — and I have been around for 10, 12 years now — they build ships in groups. They do not build just one ship; they build six, eight or 10 and they normally come online back to back. Last year and the year before were not such great years for them, but as the capacity and the demand meet up, they start making money again.
If the prices fall on the ocean side, normally it is bad news for inland locations. I was not being facetious when I asked what you meant; I was just trying to understand the comment.
Senator Munson: Is that a shared view?
Mr. Mackey: Yes.
Mr. Waite: One of the things you hear often these days in talking to these large steamship lines is that they do not want to move their boxes inland. They would just as soon deal with the local market. They call Los Angeles-Long Beach and discharge that entire vessel there. They love that; they prefer not to have the box move inland at all. In fact, Maersk has been talking about putting a surcharge on for inland movements. They just do not want to move it inland.
Senator Munson: What is your view on where the markets for the mega ships will be, and why?
Mr. Minello: Europe and Asia are natural markets for the large ships. The 12,000 TEU vessel that is on board now, the Maersk vessel, is in the Europe-Asia trade, which is the major trade link. Normally what happens is once you get those vessels up and running, you cascade your smaller ones to Los Angeles-Long Beach. It will have eight 10,000 TEU ships; Vancouver will see probably six 8,000 TEU ships. The local market you are servicing drives that decision-making process.
Senator Munson: The committee has heard that inspecting containers at origin is a more efficient way to manage security concerns than inspecting them upon arrival at their destination. In addition, many witnesses have said that the U.S. will determine global container security requirements in the future.
What security measurements are in place for containerized rail shipments; and do you anticipate that major changes to security requirements will affect your operations in the coming years?
Mr. Mackey: Unlike many modes of transportation, if you are talking about containers going to the U.S., essentially 100 per cent of them are screened through a system called VACIS. That has been true for quite some time.
The other thing that has been true for quite some time, unlike trucking, is that the electronic e-manifest systems that are being talked about these days have been a standard procedure on the rail side for some time. All rail operators in Canada who move freight back and forth across the Canada-U.S. border are both qualified under the U.S. e-manifest system and under the Canadian e-manifest system; it is called ACE up here and C-TPAT in the United States.
Our border security vis-à-vis the U.S. is very good. Frankly, it is a significant competitive advantage to us at the moment when people are looking at moving freight across the border. We can move a train across the border in a space of literally minutes. If you took the equivalent freight and tried to move it by truck across the border, I do not know how many hours it would take.
Senator Munson: What do you make of the argument of inspection at origin?
Mr. Mackey: We support inspection at origin as the right way to do it. We believe in certified shippers and freight forwarders as the efficient way to do it. If you try to interrupt the flow, as was said earlier, once it gets into the system, you are introducing very significant inefficiencies into the process. To the degree to which you can deal with the security issue at the front end, it should be done. That is not always possible, depending on the origin of the freight, but in many cases it is possible.
Senator Eyton: We are learning as we go along, and one of the things is that we are dealing with the situation of impossible growth. We have manufacturing shifting significantly to Asian countries, in particular — China, India and other parts of Asia — as well as other parts of the developing world. There is a chart here on page 5 of one of the handouts we got today that shows the growth of container traffic. If you look at that curve, there is a tremendous challenge.
To both CN and CP, what does freight represent of the overall revenue of the two companies? What does container traffic represent as a percentage of overall freight and what are the trend lines?
Mr. Waite: In CN's case, as I mentioned, we are $1.5 billion of the $7-odd billion of CN's revenues; 20 per cent of the revenue is containerized freight. It is growing double digit.
Senator Eyton: I wanted overall freight first, and then containers second — as a percentage of overall freight.
Mr. Waite: It is 20 per cent. In terms of growth, the rest of the company is probably growing at around 4 per cent or 5 per cent; intermodal is double digit — 11 per cent to 13 per cent — but basically double digit. Some of that is coming at the expense of the stuff that formerly moved in boxcars or hopper cars. It is an ongoing process, it seems. Shippers want smaller order lots and more frequent orders, so it lends itself to containers. We are seeing some of that, too — some cannibalism from the carload world into containers.
Mr. Minello: At CP, intermodal is 29 per cent of the total revenues; it is about $1.3 billion. It is the fastest growth sector in our business. It is growing at close to double-digit rates every year. That is why we are preparing for that growth.
We are investing. We put in 6,500, double-stack cars since 2002. We brought on 500 locomotives; we trained over 1,500 crews to handle specifically the intermodal business.
Senator Eyton: I see it simplistically; I do not have the knowledge that you have. However, I see the newly emerging manufacturing companies getting larger and more important; I see more and bigger ships bringing more of this product to ports; I see ports that, however you cut it, are limited. They can add capacity and do things a little smarter, but they are limited.
I see railways in much the same way. You have railway lines and you can do things a little smarter and better, but you are also limited as well. Given the kind of growth we see in the graphs, and that you talked about, there is a challenge.
One of the challenges is to try to grow to meet that additional demand. You have talked about that, but it seems to be limited. The other way is to ration with freight rates. Could you comment on what has happened to freight rates, particularly for containers because that is what we are looking at, and what are the trend lines? Let us take the rates from Vancouver to Winnipeg. What is happening for a delivered container FOB Winnipeg?
Mr. Minello: I will just touch on a few things. First, there is a challenge, but CP VPA, Vancouver Port Authority, and the marine terminal operators out there, see these as opportunities. This is why we are investing billions of dollars to make sure that we always stay ahead of the growth curve and this is why, once Terminal 2 and Berth 3 are complete; you are basically doubling the total capacity at Vanterm and Deltaport right now. We will stay ahead of the growth curve as long as we continue to invest and have the proper regulatory environment.
Senator Eyton: I am talking about the cost of delivering a container, Vancouver to Winnipeg. What was it last year and this year and what are the trend lines?
Mr. Minello: As Mr. Waite mentioned, intermodal, we never had a problem bringing on business. The business was there; it was always available. The challenge was to make it profitable, to make it a capital investment-grade business. We have done that now. Over the last couple of years, we have raised our rates in order to pay for the $180-million expansion of the railcars and the locomotives. Our rates have increased 4 per cent or 5 per cent over the last four years, which is the norm in the industry. We make no bones about it; we need the money to pay for the investment we are generating.
Senator Eyton: Give me an example of a container from Vancouver to Winnipeg. What did it cost two years ago and now?
Mr. Minello: Two years it probably cost $1,500, $1,600; now it is maybe $1800, $1900.
Senator Eyton: Is that increase similar at CN?
Mr. Waite: Our pricing strategy at CN has been pedestrian. We would rather make a little for a long time. Our rate increases have been 3per cent or 4 per cent for the last four or five years. We did not have a lot of legacy deals. You might have read where you have seen staggering increases in the U.S. on intermodal. What would happen is the UP would sign a deal with Costco or some large ocean carrier for 10 years with very few escalations, if any. When these deals came due, there was a huge hit.
We at CN do not have long-term contracts. The longest contract we have is probably three years. There are escalations built in based on a cost of living or some index.
You were talking about the growth and concerns relative to the infrastructure. We are lucky: we have this beautiful place called Prince Rupert that on October 1 will open up capacity for 500,000 TEUs and by 2010, 2 million TEUs. We have Melford and Halifax. Halifax has the ability to double in size without any investment at all. We have Melford that can do 2 million by 2011. We are positioned well. I look at New Orleans, Mobile and Gulfport and all those ports are empty. I could run 20 trains a day between Chicago and New Orleans if I wanted to. There are many opportunities in our network to seize the day. I am not concerned at all.
Senator Eyton: You do not see a crunch, say, 10 years out?
Mr. Waite: I do not.
Mr. Minello: That is why we are working together, to stay ahead of the curve.
Mr. Waite: As long as we can deal with the environmental issues, stage two of Prince Rupert. Stage two of Prince Rupert takes you to 4 million TEUs, but there will be challenges there in terms of the environment, et cetera; we must be cognizant and to the extent we can accelerate that processes, I think we need to take a long look at that.
Mr. Buggs: The exception is the Port of Vancouver. The other ports have capacity, but there are issues with the Port of Vancouver, where clearly much of the traffic wants to go for economic reasons. We have many people, many private enterprises and government bodies working to develop a plan, and obtain proper funding and asking for the proper conditions to succeed.
The Deputy Chairman: While we are talking about Prince Rupert, Vancouver is in a populated area. That is where they want to dump the box. It is in a populated are so part of it is distributed right there rather than having to go inland or a million miles away?
Mr. Minello: It is critical that the projects that we outline — Berth 3, Terminal 2, the efficiencies at Centerm — all gel. We need support from the government for grade separations to make sure that the environmental process is shorter than what we saw at Berth 3 to facilitate the growth that is coming.
Senator Eyton: Are you satisfied with the policy-making framework that is in place? What we are talking about is a system, and we have heard it a hundred times that the weakest link that will determine the efficiency of the system. It requires the shippers, ports, railways and truckers and the government get together and try to establish a framework that is sensible, does what it has to do, is fair to the parties involved and gives them something in return. I do not accept that every container has to make a buck; some can make two bucks and some none. On average you have to make money.
Are you satisfied with the framework? Is there some way this committee could recommend a better approach to policy-making as it relates to this particular challenge.
Mr. Mackey: I would say that there are three areas that you would be well advised to take some time on. I mentioned the whole question of land use planning. If you want an example of how not to do it, we can take you out and show you some places in the Lower Mainland that would make your blood run cold if you were a municipal planner. That element of the public policy framework, if we are going to succeed, is absolutely critical. I know that this is perhaps slightly removed from the federal jurisdiction, but in other modes, for example air, there is specific legislation on the books that allows for federal government intervention when it comes to encroachments on airports. No such thing exists for the rail networks of the country.
Second — this is an old hobbyhorse but our tax and fiscal structure is not investment-friendly; it just is not. When you compare our overall tax rates with the tax rates of our U.S. competitors, we pay almost twice as much as our U.S. colleague's pay. We tax investment and we really need to do something about that. The tax and fiscal framework is not aligned with getting this job done in as efficient a way as we could.
Third, there are some anomalies in the trade rules, the cabotage one is the most egregious. We need to look on the regulatory side and there was a question asked earlier on the security side.
If we do not implement future security requirements — and they will come; unfortunately the nature of the world we live in demands it — in an effective and efficient way, we could cause enormous costs and inefficiencies in the system. I would flag security, trade regulations, land use and the fiscal side of the fence. Those would be the big three for me.
The Deputy Chairman: We heard testimony in Vancouver which was very critical of the railroads and we also heard testimony over the last while that we do not have a system but an aggregation or an amalgamation of public and private interests to move our products and they do not talk to one another.
The ports do not talk to the truckers and the truckers do not talk to the railroads. Is that true? Did you read the testimony we received in Vancouver? We could not find one happy customer in Vancouver. I will allow you to talk about that and maybe answer some of their issues. In particular, there was the issue of moving goods that had built up during bad weather with no initiative by the railroad to find a way to move that traffic and catch up. It may have been your problem. Perhaps they did not realize your problem. Nonetheless, that was our testimony.
We then had another issue. The mayor of Delta was extremely critical of railway expansion. That seems a communication and community problem not addressed by the railroads. Should it be addressed by them? Governments cannot do everything. The people making the money have to comment on this.
Perhaps you can comment on those issues and then we will adjourn.
Mr. Waite: I did not understand the problems when I read the testimony. The timing could not have been worse. It was that ``winter from hell'' period when they testified. Obviously their views might have been obscured, if based on that. Did you talk to the ports of Halifax or Montreal? The Port of Halifax is operating very well.
The Deputy Chairman: The Port of Montreal was happy. We have not talked to the Port of Halifax.
Mr. Waite: In Vancouver, there was a confluence of things over a two month period that we all shared; weather, labour issues and high winds. Many things went wrong in Vancouver, but for them to suggest or imply that the railroads collectively sat on their hands during that period, is misleading. We did many things. We added cars and trains. I personally trucked freight from their terminals to my terminal and put it on domestic trains. We worked with the ocean lines to divert calls to other ocean terminals that were used less, such as the Fraser Surrey Docks.
One comment or observation was, we do not talk to each other or work as a team. That was probably true three or four years ago. We learned, particularly through this last winter, that united we stand and divided we fall. The closer we work together with truckers, ocean terminals and steamship lines, the more success we will have. We do this daily. CP is not different. We work with all of the constituents now. If anyone falls the others suffer. We learned that the hard way during December and January. We synchronize our operations on a daily basis. If a vessel is late, we tweak our operation. If there is a union meeting on a Wednesday, we tweak our operation. Likewise, if we have a challenge they must tweak their operation. The more we do these types of things the better off we are.
A couple of years ago we were not doing that. Halifax is a good example. About three or four years ago we had many challenges. We spent more time pointing fingers at the ocean terminals, lines, railroads and the truckers. You do not see that now. We do not have a confrontational relationship. What are we going to do to fix this? Let us not debate on how many cars we have because that usually happens when there are not enough cars. You can only load so many cars a day so I cannot give you more cars. Things have improved immeasurably over the last few years.
Mr. Minello: I echo those sentiments. It is like anything in life where you remember the last party you were at or the last car accident. You do not remember the in between times when thing run smoothly in your life and it is business as usual. From April of last year until about January, we had no issues at all. I ask the committee to go back to Vancouver and poll the users for their reaction since ``the winter from hell'' has come and gone. I would be very interested to hear their comments today.
We threw everything but the kitchen sink, at last winter. The Trans-Canada Highway, between Spencer's Bridge and Lytton, was out for 10 days. We rebuilt our track in four days. The Trans-Canada Highway did not do that. Unfortunately, with the series of events we had, we were barely able to keep our head above water. It is to be noted in the minutes of this meeting, that CP railway through that time frame, handled double-digit growth in Vancouver through the worst winter in the last 50 years. We have to take things in context. If you are going into a situation where people are hot because of the winter, you will hear those comments. I challenge the team here to go back to Vancouver and ask the users how we have done since the winter.
Senator Eyton: I was diverted by Mr. Mackey's response. I asked about the framework for discussion and resolution for planning to meet the increased demand. Mr. Mackey gave us three objectives.
Are you satisfied with the framework to discuss and resolve together an appropriate strategy and investment that will respond to the demand? The parties necessarily are the federal and provincial governments, ports, railways and truckers. Is there a forum or arena where you can work together to meet that challenge? How effective is this forum or arena?
Mr. Minello: The Vancouver Gateway Committee is comprised of senior executives of the major users and stakeholders including Fred Green, Hunter Harrison, Norm Stark who runs Deltaport and Vanterm, Darcy Clarkson of Centerm and truckers. We have an action oriented forum. Our senior leaders are committed to action plans. Fred Green says we need action. We put our money where our mouth is. We and the terminals have invested in capacity. Cooperation is better now, than in the 10 years that I have been involved in Vancouver. What we are able to do is fantastic. Yes, we do have a forum and a framework to manage our own business in Vancouver.
Senator Eyton: Can we go east, now? I understand the Vancouver gateway is all right.
Mr. Minello: I deal extensively with Montreal. I meet Dominic Taddeo and his team regularly. Mr. Taddeo undertook a study involving the Port of Montreal. We were intimately involved with the study. The port railway and my operating team work on a daily basis with two conference calls every day. Everything is operating cooperatively at the Port of Montreal. We stay very close to each other.
Senator Eyton: Is Transport Canada involved in this?
Mr. Minello: Is it involved in the port study?
Senator Eyton: Is it involved in discussions about your initiatives?
Mr. Minello: They are in Vancouver but not Montreal because there has not been much to discuss there.
The Deputy Chairman: This has been a very interesting session. What we try to do with this committee is provide an avenue and place for your industry to be comfortable and for us to develop knowledge about this industry that is better than that of our counterparts. We appreciate the time you have taken to be here this morning.
Senators, we will take a two-minute recess. You have been distributed two documents, one from Industry Canada, a clarification of an answer to a question posed by Senator Eyton.
There are then two observations. Senator Bacon and I have gone over it. We are both in agreement that the long one is a good observation. I will suspend the meeting for two minutes to allow you to read it. We will then come back and decide on it.
Do you want to have the meeting in camera or do you want it open? Honourable senators, I am in your hands.
Senator Munson: It does not matter to me.
The Deputy Chairman: If it does not matter to you, then it will not be in camera; it will be open.
Senator Bacon and I liked the long one but I will leave it in your hands, honourable senators.
Senator Munson: The longer version meets our concerns in a forthright manner. I support it.
The Deputy Chairman: Do you want to go through it as a whole or paragraph by paragraph? Are you fine with the long version, Senator Eyton?
Senator Eyton: I am.
The Deputy Chairman: Senator Dawson?
Senator Dawson: I am.
The Deputy Chairman: It is unanimous, then?
Hon. Senators: Agreed.
The Deputy Chairman: So done.
The committee adjourned.