Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 6 - Evidence
OTTAWA, Wednesday, February 13, 2008
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-8, An Act to amend the Canada Transportation Act (railway transportation), met this day at 6:22 p.m. to give consideration to the bill, and 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 (Chair) in the chair.
[English]
The Chair: Today we will continue our examination 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 first witness this evening is Jeff Burghardt from Prince Rupert Grain Ltd.
Jeff Burghardt, President and Chief Executive Officer, Prince Rupert Grain Ltd.: Thank you. I am aware that the committee was in Prince Rupert a couple of weeks ago. Unfortunately, I was out of town; otherwise, I would have welcomed the opportunity to present to you at that time.
I will provide the committee with a brief recap of our company. Prince Rupert Grain is primarily an export, trading and terminal handling company. We operate the largest grain export facility on the West Coast of Canada. We will export approximately 5 million tonnes of grain this year through our facility in Prince Rupert. That represents about 35 per cent of all West Coast grain traffic. Depending where final volumes end up, between 15 per cent and 20 per cent of all Canada's grain exports will move through our facility.
We are a large, modern, efficient terminal that continues, year after year, to be better and better appreciated by shippers of bulk grain and overseas customers. We spent a period of time in the late 1990s overcoming changes to the Western Grain Transportation Act, WGTA. When Prince Rupert Grain was built in the early 1980s, one of the provisions within the Western Grain Transportation Act was that there would be parity on freight rate structure whether you were going to the Port of Prince Rupert or to the Port of Vancouver. That was designed to not punish a new gateway or corridor with a higher freight rate and not have it utilized.
Those provisions were lost in 1996 when the WGTA was repealed. Immediately, it became 20 per cent more expensive to ship grain through Prince Rupert than through Vancouver. It has taken us a number of years to overcome that but I am pleased to report this evening that, with those statistics and our volumes, we are now back in a position such that our business is significantly more established and, in my view, on a sustainable course. We offer the lowest rail freight structure, and the lowest rates for terminal throughput handling and conditioning of grain of any West Coast facility. As well, we have substantially overhauled our labour arrangements in Prince Rupert.
We have chosen to break away from all of the coast-wide employer association groups and to bargain directly with our employees in a direct employer-employee relationship. Certainly, the employees and the associated unions were somewhat fearful in 2002 when we introduced this. However, we have successfully negotiated through two rounds of bargaining without labour disruption and the fact is, the employees in Prince Rupert earn a higher wage than employees in Vancouver, and yet we have accomplished a higher productivity rate. We are an example of what is possible by greater utilization of the Port of Prince Rupert and the Northwest Corridor.
I know you are here this evening specifically to discuss the containerization aspects across Canada. However, I see from the agenda that the committee is close on its deliberations of Bill C-8. There are a number of provisions in the bill that we support and I would encourage the committee to see Bill C-8 through to its conclusion.
Bill C-8 represents a tremendous amount of movement on the part of a number of people. The shipping community, the Western Canada shipping community and the railways have all said that this bill is a right step. It would be unfortunate, after so many years of dialogue on that specific point, if there were another setback.
I appreciate the efforts of CN, Canadian National. They have done a tremendous job over the last number of years to encourage traffic to move off the West Coast. They have been a tremendous, commercially based organization and are a tough group to do business with in terms of what they demand, their efficiency, their productivity rates, and how they value their asset base. They are a big part of the success of our company and of what is happening in the Port of Prince Rupert. If they are on board with this, we should try to see the bill through to fruition.
With regard to the possibilities around containerization, the clerk circulated copies of a report that I had the opportunity to co-author with two colleagues for the Minister of International Trade, the Honourable David Emerson. The report was largely designed around container flows and what Canada needs to do to improve its container traffic through the country. The time is such that we need to be bold in our vision for where we want container traffic to go. There is a tremendous opportunity in Canada to be a great gateway for bringing products from Asia into the heartland of North America.
Many of those products will be destined for the American marketplace, but the urban markets of Canada will be well served if we decide to take a larger share of the import of container activity off the West Coast of all of North America. In developing that broad vision, we need to go beyond the characterizations that, as long as we are just a little better than the Ports of Los Angeles, Long Beach and Seattle, people will do business with us.
There is tremendous underutilization within the northern corridor and the Port of Prince Rupert. The infrastructure investment required for it to take on a significant share of container traffic is certainly a lot less than what is required in the Port of Vancouver, and that must not be lost. If we want to have that larger market share, we need to facilitate infrastructure investment. When you do that, of course, right away, whether through the port authority structure or commercial investment, there is an expectation that the federal government will provide the basic marine infrastructure for any of those facilities to be built upon.
As soon as that question is asked, you have to ask where the best value is for that taxpayer money to be spent. In answering that question, I would put to you that we need to rationalize the expenditures between the Port of Prince Rupert and the Port of Vancouver.
If we look to utilizing the excess capacity that exists on the northern line, you will add value to goods as they enter the country as well as when they leave if you try to take advantage of that existing excess capacity before we necessarily consider all investment in Vancouver. As a result, Canada needs to be thinking broadly in terms of facilitating that northern investment, and at the end I believe it can be accomplished with less taxpayer dollars having to be spent.
It also means that we need to be thinking broadly in terms of our labour environment. I purposely mentioned to you very briefly the example of my company and what we have done. As my colleagues and I travelled the world looking at other container operations and marine structures in various ports, we were struck by how people have dealt with their labour situations. It is no secret that the longshore marine maritime employer model in Canada and the United States is an expensive one. People have found ways in other jurisdictions, in other countries around the world, to deal with it differently. They have taken on the high cost; they have found ways to improve their productivity rates beyond the West Coast of North America; and in many cases they have even moved to automated systems to avoid many of the existing bad practices in that longshoreman maritime employer model. Certainly, we need leadership from the federal government in overhauling that side.
The other area required for boldness is railway balance. Certainly, Bill C-8 offers a good step toward that. However, if we are to move containers effectively into the heartland of North America, shipping companies from overseas will demand higher performance from our railways.
I would offer to you one example that was shared with us. The Maersk shipping line, which throughout the world has between a 30- and 35-per-cent market share, last winter suspended all of its delivery contracts into the heartland of North America. It said to its customers, "We will gladly deliver to the Port of New York, Los Angeles or wherever; we will deliver to tidewater, but we will not take responsibility for delivering into the heartland of North America." They said that was because of the unreliability of rail service.
As we look at our Canadian carriers, I suggest that they are better from a service standpoint than the American carriers, but they are not so much better that container companies do not look to other investment opportunities in other parts of the world now before they look to the North American opportunity.
This is the main point I would like to establish with you this evening. We need to do all of these import activities and attractions so we have the opportunity to balance that with the export of Canadian products through that same gateway. If we do not attract significant volumes of container traffic into Vancouver, Prince Rupert and, arguably, Halifax, we will not have the opportunity to fill the containers that are coming into this country and transiting back empty with products from Canada. Surely, if we are going to have a strong Asia-Pacific Gateway vision and strategy, it has to end with us improving the amount of products we send out of the country, and that will not happen unless we do some of the things I am suggesting. It is no good if we only import product into Prince Rupert, because all we will then have is lineup after lineup of trains moving across the Prairies and offloading in Chicago and Memphis. There has to be some backhaul opportunity created, whether in agricultural products, forestry products, manufactured products such as furniture, or petrochemical products coming out of the oil sands.
Container companies and railways want to deal in large volumes. They are not interested in being a small export opportunity. They will not stop for 10, 20 or 50 containers; they want unit train sizes. That is how they are used to doing business and that is how they will demand it be done.
I suggest the time is right for us to be bold and say, "Let's facilitate strong infrastructure investment; let's facilitate the underutilized capacity of the northern line." I know that you heard from other people in Prince Rupert who are suggesting there are tremendous opportunities there. I support those initiatives, and I believe that if we try to run some balanced approaches between the southern gateway of Vancouver and the northern gateway, we can surely facilitate this higher level of container traffic.
If all of this can come about, I can tell you that my company is certainly prepared to invest in Prince Rupert to load containers, to stuff them with agricultural products, to not only ship bulk products but to look to the specialty grain markets and the malt grain markets and have that established in Prince Rupert and move offshore from there.
There are opportunities. We know that if we can develop some size, some activity and some volume, those things will materialize. I encourage us to think of those things as we move forward.
The Chair: Thank you, Mr. Burghardt.
In your report you recommend that oversight of B.C. ports be shifted from the federal to the provincial government. Why would a shift from federal to provincial oversight improve the operation of B.C. ports? Given the fact that B.C. ports are agents of the Crown, do you envision a change in the Canada Marine Act to allow for this change?
Mr. Burghardt: There is no doubt that accomplishing this is quite a task. We were taken by the shared land-use responsibilities that exist between municipalities, the Province of British Columbia and those Crown agents, the port authorities. In trying to plan marine infrastructure investment there is not only the dockside investment that must be considered. The upstream road and rail investments and the inland container terminal activities need to be facilitated by responsible and complete land-use management and long-term planning.
Over the years, I have seen that the provincial government is taken by wanting to establish this large container traffic as a way of seeing more manufacturing and more value-added exports opportunities that I spoke of earlier.
Somehow, we need an entity that has complete responsibility for all of those aspects. Should it be run by the province? Should it be run by the federal government? I suppose that is open for debate, but we cannot continue to have two groups trying to get together on this. There have been over the years too many disconnects, and I think that is what we are appealing to.
The Chair: You refer to systems in various jurisdictions around the world. Which ports provide the best examples of governance models for Canada's ports to follow?
Mr. Burghardt: There are many varied models. One of the challenges of the democratic states of the United States and Canada is that we must be participatory of all interests. There are other jurisdictions that move ahead more rapidly.
Certainly, when you look at some of the China and Singapore developments, they are able to streamline their infrastructure needs by realizing they have a larger trade need than considering longstanding environmental review processes and outstanding First Nations issues. They would suggest for us to move ahead and move the actual infrastructure investment to the front of the list in terms of priority.
In terms of specific governance, however, I must say that the port authority model in Canada is a good one. The notion of having user representation — albeit at arm's length — at the ports is a good one. It is one that, certainly in B.C. between Vancouver and Prince Rupert, has evolved over the last 10 years to where there is good representation and good governance on those port boards.
I do think — and the report speaks to that — that there is a further opportunity for amalgamation of port authorities in B.C. If we fully realize the opportunity that is in front of us for an import of containers, there is a lot of merit in considering two port authorities behaving as one. I think that is complementary to the notion of one entity from a land-use base having a more controlling function.
The Chair: You also stated in your report that Australia was the best example of a port regime for Canada to follow. Can you tell the committee what the key elements are in Australia's labour policy and regime at their ports?
Mr. Burghardt: The key notion there is that Australia, through its five or six ports — arguably smaller than what will happen in North America — has the classic maritime employers association model, whereby there was an employers' association, and the dock-side labour was hired out of a hiring hall on a daily and as-needed basis to service whatever the particular loading of vessels was that day.
They chose to do away with that and develop specific employer-employee relationships, so that over time, they were able to build loyalty to one dock, one company and one set of employees. It allowed them to offer an environment where the employees could be more flexible in their job assignment. The trade-off for the employer was that they had to offer full-time employment to those people, rather than just having the luxury of requesting employees for one or two days a week and take them out of a hiring hall when needed. On the other hand, they will employ full time, but there is a varied list of activities to be performed.
Therefore, the productivity rates of the individual facilities greatly increased, and you could train people in specific team assignments for how to specifically load and unload vessels. This, I think, is the major attraction for the West Coast of Canada.
We still largely use hiring-hall practices. It is a tremendous impediment to true 24-hour, 7-day-a-week operations. It means that if you hire someone for that midnight to 8 a.m. midnight shift once a week or on weekends, you are paying two or three times the value for what that cost would be to operate on a day shift.
If you make the commitment to employees to be there week round and year round, you can offer a more steady employment rate and more steady labour costing. It is a strong word, but it helps to eliminate the culture of greed that comes with severe overtime costing and severe manning restrictions that all exist in a dispatch hiring-hall model. We need to think about those things if we want to say that we will be significantly better than our American counterparts.
You are starting to see it already happen at some ports in the United States. People are avoiding West Coast U.S. ports and building new significant ports in Savannah, Georiga, and Norfolk, Virginia. Even if you look at some of the reforms going on at the Port of New York, they are avoiding the high cost of West Coast labour.
We have tremendous examples to learn from in Australia by following some of those principles.
The Chair: What are the most significant labour issues that must be addressed to improve the competitiveness of West Coast ports — that is, the outdated practice of using hiring halls?
Mr. Burghardt: There are also significant overmanning issues. Those overmanning issues result where the productivity rates for specifically moving containers off a ship on to the dock or a rail line and off the port are not what they are at other port facilities.
We have circumstances, both on the bulk side and on the container side, where people are working for less than four hours a day and being paid for eight hours a day. That practice has to end.
I do not mean to lay this all down at the ground of labour or longshoremen. The employers have allowed these conditions to exist for a number of years. We have never allowed there to be a significant disruption of the labour services on the West Coast. Sometimes it takes a significant labour dispute to reorganize how that happens.
I would surely hope that is not necessary and that people would recognize these are unproductive practices that need to be changed. They did in my company and we said, let us cooperatively find a way to go about improving it. The overmanning is rampant.
The notion of not only hiring hall but the fact that people are not physically dispatched to their place of work until the beginning of the shift is another significant impediment. At 8 a.m. you are told to report to a dock that might be 20 miles away from the dispatch hall. We pay people to be in transit in a highly urban area such as the Port of Vancouver. One day they might get there in 15 minutes, but the next it might take two hours. In the meantime, the work is not proceeding at the dock.
Those are some examples. I know we were bold in the report by saying that we should end the employers' associations. Employers' associations are voluntary. By law, I recognize that. It is very altruistic of us to suggest that in the report, but we are trying to say that both the employer and the union have not wrestled these issues to the ground.
If you can develop specific employer-employee relations where you can work with a group of people for an extended period of time and get them concentrating on a common set of objectives, it is not unlike any business; it will do better and be more productive.
Senator Oliver: I have a couple of observations, and then I want to ask you a question about privatization and the Canada Border Services Agency.
My first observations when I look at the appendix to your report are that I see consultations, meetings and locations — in Australia, Melbourne; in Canada, Calgary, Montreal, Ottawa, Prince Rupert, Toronto, Vancouver, Victoria and Winnipeg; in China, Hong Kong and Shanghai; in the Netherlands, Rotterdam and The Hague; Singapore; Dubai; the United Kingdom and so on.
I do not see Halifax, Nova Scotia, the Atlantic Gateway. We were just there last weekend. As you know, they are very interested in having containers come up the Suez Canal, along the Mediterranean and into there. We learned when we were in Prince Rupert that they can put a container on CN Rail there and get it to Memphis in less than 100 hours. That same container could arrive in the Port of Halifax and get to the same Memphis in 92 hours. Halifax is vying to become the Gateway of the East. Why would you not have gone there — at least to visit? You visited a number of American East Coast ports.
Mr. Burghardt: Yes, we did. We visited the American ports to understand other jurisdictions in the Canadian marine model, which is consistent, whether you are at the East Coast or West Coast.
The most practical answer I can give you is that we were asked by Minister Emerson, the Minister for the Pacific Gateway. That is the primary reason we ignored, perhaps at our own peril, the Ports of Halifax and some of the other eastern seaboard places.
Senator Oliver: You began by talking about your own company, your grain company. You move about 5 million tonnes of grain a year, which is 35 per cent of all the West Coast grain. What does your company own? Does it own the grain terminals? What is your business? Someone else brings in the grain from Western Canada, they put it in your terminals, and then you put it in another container and send it out? Is that your business model?
Mr. Burghardt: Our business is mixed. We are an accredited exporter for the Canadian Wheat Board. We are authorized to make overseas sales and we do. We also handle grain for other people. We are a public warehouse and we condition and store grain under the terms and conditions of the Canada Grain Act.
Primarily, we are interested in operating a terminal facility in Prince Rupert that receives, conditions, stores and then ships grain overseas. Our business is not always as the owner of product, but it can be. We are an agent of the Canadian Wheat Board. We also move third-party shipments for other grain companies that are established throughout Western Canada.
Senator Oliver: Your main profit comes from grain storage?
Mr. Burghardt: Our main profit will come from the throughput of grain and also the sales of grain that we make overseas as an accredited exporter.
Senator Oliver: My next question is about privatization. Prince Rupert would like to be privatized. I am wondering what your view as an expert in this area is on whether all these facilities should be privatized. Should the government get out of them?
Mr. Burghardt: You mean for the port authority as it is structured to be privatized?
Senator Oliver: Yes.
Mr. Burghardt: Privatization carries a huge responsibility and there is limited land access that is appropriate for marine industrial development. I do not think you can just say you are going to privatize all those lands.
There is room to commercialize how the investment process takes place within the port authority structure. I would prefer to see a situation whereby we are more nimble on the investment side, whereby we invite in world-class commercial interests to do the investment on a long-term lease basis. However, we do not give up the right to land that is at tidewater for the long term.
We operate within the Port of Prince Rupert with a long-term, 60-year lease. That is our business. We are on federal land. Certainly, we are always looking to improve the terms and conditions of the lease and what it costs us, but it would be wrong for us to own that and to, in some way, inhibit access to other shippers for that scarce land.
I do not think we need straight-out privatization. We need long-term leases that have commercial capital lease features that are well structured and offer a fair rate of return that are not punitive for the investment made by the federal government on the lands. We also need to not have situations where, in my view, port authorities spoon-feed the investment opportunity. They want to be involved with every single aspect of the specific investment opportunity.
If we were bolder, you could go, I believe, to Dubai Ports World tomorrow, to Maersk Line shipping or to Hutchinson Port Holdings in China and say, "Here is a track of land in Prince Rupert. It is big enough to handle 2 million containers a year. We would like you to invest in it. We will give you a 90-year lease with the following terms and conditions. Please come and build it."
Today, the port authority would rather get involved down to the level of detail of asking, "Where does the land post go? Where does this wire go? How should we build this area?" These people are world-class experts. Let them do it; let them facilitate the trade and do it on a commercial basis. That does not have to be, in my view, full privatization. However, it would move us faster to being a world-class participator in container traffic.
Senator Oliver: I have a question about the Canadian Border Services Agency. They have been a headache for a number of people. Do you have any suggestions for how you get around their lack of flexibility?
Mr. Burghardt: It is difficult because, from a North American standpoint, we want a security umbrella that is consistent across all of North America. I know there is a tremendous amount that gets talked about in terms of sovereign interests, but I would suggest that the Canada Border Services Agency should invite U.S. Department of Homeland Security and U.S. Customs and Border Protection officers to participate fully at the import point in Canada. In that way, when goods arrive here, they truly can pass into the United States without a further check and examination.
Senator Oliver: What if something happens en route?
Mr. Burghardt: At that point, the U.S. officials have fully sanctioned and green-lighted it. They have had full access to the full provisions of any import activity. They can have no complaint about what has happened en route because they have participated in the clearance methods.
We should get away from looking at things twice or three times. Let us look at it cooperatively once and agree on a standard and be done with it.
Senator Zimmer: Thank you, Mr. Burghardt, for your presentation. I am sorry we missed you in Prince Rupert.
The first question I want to ask is about First Nations issues. Your report cites the fact that urgent action is required to resolve First Nations issues.
Can you tell this committee what the major impediments are to resolving these issues and what would it take to facilitate the process? Is the concept of partnering with the First Nations a viable option for solving these issues?
Mr. Burghardt: I do not profess to be an expert there. In some ways, I am like many others who notice that it gets in the way of the commercial investment.
I did not notice that the Tsimshian tribal groups met with you in Prince Rupert.
The seven First Nations communities around Prince Rupert that are affected by this new container development have 95-per-cent unemployment rates. Drug, alcohol and physical abuse continue in all those communities. They may only be 30 miles by water from Prince Rupert, but they are certainly far away from what we would characterize as even a 21st century town of 15,000 people in terms of opportunity.
Regarding the investment before us in terms of container development, we have talked for a long time in Prince Rupert about opening up land and road access to the Tsimshian peninsula, which would access four of the seven communities and provide an easier way for them to participate in the development in Prince Rupert.
Prince Rupert is not starving, but it is in need of a larger labour force if we are to pull off all this container development. In my company we have been hiring people for the last two or three years. Our employment rate for First Nations communities is up to 17 per cent, but that does not mirror the 50-per-cent population that really exists in our immediate community.
Senator Oliver: Is that one seven?
Mr. Burghardt: Yes, one seven. We need to find a way that allows them to integrate better in the immediate economic opportunity. I suggest that road and rail access is part of that.
If we look at the overall investment required, Phase 2 of that container development is $758 million. If we could find a way to spend perhaps $50 million to $70 million in providing road and land access for them, I think the First Nations would be very appreciative. They want the ability to develop their Tsimshian peninsula. They do not have it today as long as it remains isolated, so we should not begrudge the opportunity of perhaps some significant financial support as part of this Phase 2 of development.
It strikes me that that investment still represents a smaller overall contribution than what is suggested to achieve the same type of container load rates in the Port of Vancouver.
Senator Zimmer: Yesterday, I was proud to present Bill C-8 for second reading, as a critic of that bill, and everyone is on board: shippers, all parties in the other place, the Wheat Board, and when I spoke to CN, they supported it. They had some issues to deal with but said: Get the bill passed and we will deal with it after that. Our wish is to get it done as quickly as possible so that the parties and the individuals can flourish. We are working hard to get this done as quickly as possible.
When you studied the railroad services to the ports, you recommended that there be a full implementation of dispute resolution mechanism to level the playing field between the railroads and the users. The Canada Transportation Act contains dispute resolution mechanisms such as final-offer arbitration, which is similar to professional baseball where each side gives a number which makes them come down to giving a number realistically.
What could you suggest to enhance these provisions?
Mr. Burghardt: We developed an lot of this in the spring of 2007, and we feel that the removal of the commercial harm provisions largely accomplished in Bill C-8 accomplishes a lot of what we were suggesting in an effective dispute resolution mechanism. We believe the use of quality mediation is also a feature of that dispute resolution mechanism — one where mediation could be used ahead of the final offer and perhaps would facilitate better dialogue between shipper and carrier — and are maybe ways of enhancement, but a lot has been answered in Bill C-8 already.
Senator Zimmer: As you know, I am from Winnipeg. You have had a couple of stints there. I want to give you that hint because you will be graded on your answer to this question.
In your report, you recommended that a system of inland terminals be developed. To what extent could increased use of inland terminals enhance the efficiency and capacity of the container transportation system in Western Canada, and could you tell us where the new terminals should be and why?
Mr. Burghardt: I do not know that we can be specific, but I cannot imagine one not being in Winnipeg.
Senator Zimmer: Thank you. That is the right answer.
Mr. Burghardt: The point is that the container lines and the railways need points of origin with significant volume and traction. There are a number of communities that believe they should all have inland terminals. That is not likely to happen. We are likely to have three, four, five, six gathering points along both the CN and CP lines where you gather potential export product, efficiently put it on a unit train and move it to the port place.
The other area that inland terminal action has to take place is probably somewhere between 200 and 600 miles inland of, say, the Port of Vancouver. If we are to grow the container traffic, all of that growth will be destined for markets outside the Greater Vancouver region. We spend a lot of time moving containers from a dock in Vancouver to a loading facility 15 miles away, to get it onto a railcar that will move over the mountains to come back in a Canadian Tire container to a store in Chilliwack or in Kelowna. A lot of congestion in the Port of Vancouver is created by the conflict of how these containers move that are not necessarily directly involved in the Port of Vancouver.
We ought to find a sufficient way to say every container that is not used in Vancouver should get on a train as quickly as possible, be moved to a more rural, less heavily densely populated area, and allow that area whatever value-added or change that needs to take place happen, and to then move it on.
Those are the two inland terminal things we see happening.
Senator Zimmer: Could you expand your thoughts also about the Port of Churchill Gateway. I know the rail system is second rate at the moment, but in my speech yesterday I suggested they look at that gateway system — not only from the polar route, but the icebreakers and the warming climate, and also improve that rail system — as it could be a connection into the inland terminals through the gateway and across the polar route.
Could you give us your thoughts about the Churchill Gateway?
Mr. Burghardt: Churchill, as you have contemplated in terms of a polar connection through to Russian destinations and other far northern Asian destinations, has a lot of potential as we consider the opening up of some of that Arctic marine highway. That is valid and should be considered.
The other point is that if we are going to export agricultural products in a value-added way — the hay and canola products that are continuing to be value-added in the Province of Manitoba — the closest port destination is Churchill. You cannot ignore that the sooner you put something on a marine basis, the more economic and environmentally and carbon friendly it will be, so we should consider it. It does have a role if we are to expand our export opportunities by containerization.
Senator Zimmer: What you are saying is if we can create that transportation system to the polar route and over, it will somewhat dictate the markets and crops grown in Manitoba which could service that.
Mr. Burghardt: I think it would, yes.
Senator Dawson: Since listening to the honourable senator's speech yesterday and to you talk about Bill C-8, I think that probably the sooner we can get to Bill C-8 the sooner we can pass the bill. This committee likes to cooperate with the government; this house likes to cooperate with the other place in passing legislation as quickly as possible.
That being said, we do not like it shoved down our throat.
I agree with Senator Oliver on the question of privatization. You say that we should amalgamate or have an umbrella organization above Prince Rupert and Vancouver. When we were in Vancouver, we had the unions complaining, we had many cities complaining about "not in my backyard." You had unions complaining. We went to Prince Rupert. Everyone is in love with the port authority. Everyone wants things to be done. Here you have an environment of cooperation where privatization is a realistic objective, and all of a sudden you would have this forced marriage in which you would have Prince Rupert having to cooperate. The marriage is not over in Vancouver yet. Adding another party to that wedding would probably make things difficult.
I have difficulty in seeing, from your perspective in Prince Rupert, how you think that big, bad Vancouver, in the situation it is in, would help your decision-making process because you would have an umbrella over it. Privatization is potentially possible in Prince Rupert, but certainly not possible if you are getting into this forced marriage relationship with the Vancouver Port Authority.
Mr. Burghardt: There is room to debate this point. If we are to maximize the Prince Rupert opportunity, we are expecting a huge amount for the Prince Rupert Port Authority to be able to effectively manage all that is before it in terms of that opportunity.
Is it necessary to compete for product between the two? Yes, I share your observations about how some groups view the marine activity in the Port of Vancouver as a negative, but shippers who have facilities in Vancouver are there. They do not have the choice of immediately saying, 'I will just ship out of Prince Rupert'.
We have to find a way for the new volumes to flow in a way that shippers could appreciate using Prince Rupert as opposed to having it being necessarily forced upon them.
I would suggest that one group with one set of land-use planners, one set of engineers, one set of legal counsel, one set of administrators and one set of accountants, can be a lot more efficient if it says: My objective is to maximize West Coast throughput, period. I am not interested in whether Vancouver wins or Prince Rupert wins. I am interested in who can do the best job. That Prince Rupert enthusiasm, in my view, will carry a long way for there to be opportunity.
If we continue to separate the Port of Vancouver, we will be here just as much as the Port of Prince Rupert is, asking for investment and infrastructure dollars, and government will be put in a position of where we maybe do not utilize taxpayer money to create value on goods leaving the country; rather, we will be adding cost.
Our jurisdiction in Western Canada is not so big that it cannot be effectively managed under one authority. The Port of Los Angeles is three times the size of what we do in Vancouver and Prince Rupert already. Why do we need this separation?
I have lived and my business has operated in Prince Rupert for over 15 years. I believe — and I have to be careful how I express myself in this small community — that the Prince Rupert Port Authority is well meaning, but they are not skilled enough to be the world-class container operator, the world-class port group, by operating unto themselves. They could do well by inviting in the expertise of larger people and participants. I think it could facilitate some of this commercial privatization effort even faster.
Senator Eyton: It struck me as ironic that we sometimes are not entirely efficient. We went to Prince Rupert and talked to people there and you came here. That was too bad. We had a very good visit to Prince Rupert and we learned a great deal.
We talked about potash, wood chips, coal and sulphur. There might have been some mention of grain, but it was kind of in passing. I am curious. I see your credentials and you are a grain guy. Are the grains you are talking about all shipped by container?
Mr. Burghardt: No. Our grain is all bulk grain at this moment. We off-load everything by rail and ship on ocean carriers, bulk — 50,000-, 60,000-ton bulk vessels at a time. None of it going out of Prince Rupert is containerized right now; it is all bulk traffic.
One of the reasons you do not hear much about the grain side in Prince Rupert when on your type of visit is that we have been the mainstay of the tonnage traffic in Prince Rupert for many years. Prince Rupert was only a grain and coal-handling facility. The coal business was even more depressed in some of the examples I gave than the grain business at the beginning of my presentation.
We are the long-term, established, what I would say "backbone" currently of the Port of Prince Rupert. We represent well over half of the tonnage that moved through that port in the last five years. All these new opportunities and container activity are a tremendous enhancement to making the Port of Prince Rupert a full-service port. We certainly support and want to see these other activities happen so that we are not the sole person responsible for the infrastructure, tax base and all the other things that happen to a major industrial player.
Senator Eyton: You are not really directly involved in containerization, but you see the benefits should it be more successful.
Mr. Burghardt: We believe we will become more involved as the container market increases out of Prince Rupert. We definitely want to expand into loading containers. There is no question we would do that.
Senator Eyton: I read yesterday the executive summary of your report that appeared in The Globe and Mail. I thought it was eloquent and quite persuasive. The overwhelming conclusion of your report and of The Globe and Mail was that Canadians are far too timid and have far too little vision, given the opportunity and the circumstances.
Do you want to comment and suggest how we could change ourselves so we can answer the challenge and get that opportunity?
Mr. Burghardt: As was suggested in some of my earlier comments, we need to find ways to better facilitate what probably is foreign investment at the container dock level in both Vancouver and Prince Rupert. We need not to think in terms of incremental terms of adding half a million container capacity at a time. We need to think of how do we add 2 or 3 million container capacities in one fell swoop.
In order to do that, we have to invite some of the world-class container operators to directly participate in that infrastructure development. It means that we have to not want authorities to spoon-feed the investment. It means that we need to say: "Here, Dubai Ports World, here, Maersk, APL, here is a track of land. We have made sure it is dock-ready for you. Go out and build a world-class facility and use your market capabilities to attract the product into the country. Do not feel that we have to be arm-in-arm the marketer. Do not feel that we have to be arm-in-arm the operator."
The Canadian style is to do that. It is not nimble or fast enough to recognize how quickly this container traffic is moving throughout the world right now.
Senator Eyton: Picking up on that, there were a lot of numbers cited, emphasizing the timidity and quiet soft approach of Canadians. I would have thought, as a market guy, you always look for a place where your services are required, and there is a scarcity of those services.
If I look at Asia, Shanghai and Singapore, it seems there will be an oversupply of container capacity, partly in the context that the number one destination, for now and for some years to come, is North America, which represents the largest single market. That North American market is not matching the outbound. I can see a wave of containers looking for a home. I would have thought it would be a splendid opportunity to stay behind the curve and receive containers. We must be a preferred destination for containers because we should have bigger margins than the guys on the other side who are fiercely competing for container traffic.
Does that make sense?
Mr. Burghardt: That is a lot to consider quickly. A number of people have looked at where the West Coast container traffic growth opportunities are in the next 20 years. The opportunity is for Canada to capture a bigger proportion of what you say is a declining rate of growth in North America for imported traffic. The congestion exists, whether it be L.A./Long Beach, Oakland, Seattle or Portland. We need to become the first port of choice in British Columbia. In doing so, I think that over the long term, as markets rationalize, there will be a greater opportunity for us to have access to the export of products out of this country. We are evolving in Canada and in the United States, from an agricultural standpoint with ethanol and petrochemical by-products. We will not always be dragging behind in terms of the manufactured products that may leave the country. The notion in being bold is to say, "Let us be the beachhead that moves more of this product and creates the opportunity for value-added products to more efficiently get back out of the country." If all of those containers only stay in the lower 48 and transit across the United States only, we will never get those empty containers to come to Canada and offer real opportunity for the industries along the gateway networks in Canada.
There is a danger that we might facilitate the demise of our standard of living if we do not allow this container traffic to come to Canada. By that, I mean that you are correct that the rate of growth between the Asian and Indonesian and African and Middle Eastern markets is probably higher than Canada. The container companies will say, "If you do not get your act together on the West Coast of North America, we will ignore you completely. We can stay quite busy, thank you, with developing these other larger markets." We need to show that our container activity can be as productive as what it is in these other circumstances. That is why the labour situation is as important as it is. That is also why we need to move from handling 20 containers an hour on the West Coast to handling 37 or 38, which is accomplished in Australia, Dubai and Singapore. Otherwise, we will not have the access to those goods on which we pride ourselves as part of our standard of living.
Senator Eyton: I do not want to take too much time, but your report and comments suggest that you favour provincial jurisdiction as a way of regulating the port activity. Looking at it from a little further away, for example, I think we saw numbers showing that containers coming into Vancouver and Prince Rupert by and large went mostly farther east, a long way away. About 10 per cent dropped off in British Columbia; another 10 per cent in the Prairie provinces; 40 per cent in Ontario and Quebec; and the rest went into the States.
In addition to the kind of dollars that are required — that is, in Prince Rupert we heard the number $110 million; another $600 million for the second phase; and another $1.1 billion or $1.2 billion for the second berthing — it seems that this is a gigantic enterprise. It is not provincial; it should be a national dream and a national vision that requires a national presence in order to try to coordinate that and to achieve the objective.
Mr. Burghardt: You cannot argue that the implications are national, that is for sure. For a long period of time, the British Columbia government had more vision than necessarily the federal government did around the opportunity to expand this Asia-Pacific traffic. For a significant period of time, it was the provincial government that said we need to grow to where Vancouver and Prince Rupert are handling 10 million containers by 2020.
The coordination of marine, road and rail, and land-use planning is separate. The federal government looks after marine and rail; the province looks after general land use, road access, and many of the support activities that are required for a port to be effective. I think we say "provincial", but we also mean one entity that can truly control the long-term land-use function and assure that we make decisions that are complementary in all those different modes.
It is my own view that we would not have a federal Asia-Pacific Gateway initiative formally established if it had not been for the prodding of the British Columbia government. That being said, today there is a lot of enthusiasm federally for that to occur. It may be that the federal government can provide the vision and leadership for us not to miss this opportunity, but it will require a faster pace of action than what we have seen in that vision and action from the federal government up until this point.
Senator Adams: Someone asked you a question about Aboriginal people. There are seven nations there. I was on the fisheries committee and we met with them in Prince Rupert. They have commercial fishermen who have a problem with some of the regulations that were changed by DFO, the Department of Fisheries and Oceans.
You talked about transportation by rail and by road. One of those areas is subject to a land claim that is being negotiated right now with Indian and Northern Affairs. Is anything happening with those seven nations in Prince Rupert? You also talked about $70 million and the forestry industry and how those nations are able to supply you at Prince Rupert. I would like to find out a bit more about the $70 million for those First Nations that you have been negotiating with at Indian Affairs or with the Government of Canada.
Mr. Burghardt: I could not comment on the exact progress for the Tsimshian group directly with Indian Affairs. As part of the port development, it is not just a Transport Canada issue; it is a full-fledged federal government issue and responsibility as to final resolution. That much, I am aware of.
As I mentioned, in regard to some of the land and road access issues, you may have noticed in your visits to Prince Rupert that we are a coastal town that is immediately landlocked by mountains. Interestingly enough, the only land available for residential and further development moves west from the mountains into two areas, an area called Digby Island, which is the airport where you landed and also immediately north of there, the Tsimshian peninsula. Road access to the Tsimshian peninsula and then a small causeway built to Digby Island would create the opportunity for two things: good residential land access to allow, as Prince Rupert grows with all of this port activity, an affordable land base for people to live on. We are out of land in Prince Rupert, if you can believe that, but we are.
The second thing that it will do is introduce the smaller communities and allow them to integrate more easily into our education system in Prince Rupert, namely, the community college and high school systems. They will see where they can have the opportunity for tourism development, which has already started to happen on a limited basis due to some of our cruise ship and ecotour activity created out of that, but it needs to go further. It needs to be not just air access or expensive water taxi or ferry access.
To me, the opportunity where you say "Let us open this area up so you can be more participatory" does not necessarily mean there is a direct trade-off with the container activity, but it recognizes that some economically viable opportunity has to take place in those areas.
Senator Adams: It will be developed in the future, but is there a conflict with those organizations in the port?
Mr. Burghardt: I do not believe so, no. I do not see a conflict.
Senator Adams: In the meantime, we have a lot of supplies coming through Churchill up to Nunavut, and I am glad some of Senator Zimmer's questions were about the future of Churchill.
Senator Oliver: When you were making your presentation, you said that, when these large shipping companies from Asia look at Prince Rupert and the West Coast of Canada and consider whether they want do business there, they will demand much higher performance from our railways. You went on to say that right now our railways — we are looking out of Prince Rupert at CN — are unreliable. Can you tell me what is "unreliable" about it and what things have to change to make it reliable in the eyes of big shipping companies from Asia?
Mr. Burghardt: There has to be a more regular and predictable service and delivery time for the arrival of those containers at inland destinations. That is really the nub of it. When the container ship arrives, it has to be predictable that in four days, or five days, the containers will be in Winnipeg, Chicago or Memphis. Today, those types of guarantees of service are not available. Certainly, CN is making good inroads with what they are demonstrating with the initial Prince Rupert container development. They are doing that very well, but that is the exception since November 1 of this past year. Prior to that, Asian carriers were completely frustrated with the predictability of container arrivals at inland destinations, whether it was Vancouver, Los Angeles or Seattle. That is the very specific thing that needs to improve.
Senator Oliver: When we were in Prince Rupert, I was of the impression that CN could guarantee now a container going from Prince Rupert to Memphis in about 92 or 93 hours.
Mr. Burghardt: That is a fair standard.
Senator Oliver: That is pretty reliable.
Mr. Burghardt: They have performed very well since November 1. I just would offer to you, senator, that our observations were made prior to that being in operation and prior to people seeing what that northern corridor initially has been capable of from a container delivery capability.
Senator Zimmer: You touched on this question. It is another hat. You uttered the word "tourism". It is another opportunity to increase activity in that area. When I was in Whitehorse last year, I was amazed that during the summer they have three 747s come in with tourists from Germany. I do not know what they are looking at, but they use the market, they open it up, and they have every week three full 747s. What are your thoughts on adding to market area and the involvement of tourism in Prince Rupert?
Mr. Burghardt: I think when they go to Yellowknife they are looking at the northern lights. That is a big thing for the Asian marketplace. They love to see the northern lights.
In Prince Rupert, we have good tourism opportunities in terms of sport fishing, First Nation Aboriginal culture appreciation, and on the ecotour side as well. The wildlife that exists throughout the coastline, the vegetation and coastal forests are well appreciated by people from all over the world. Since our cruise ship activity has been established, and we now have large 2,000-passenger cruise ships arriving at the Port of Prince Rupert twice a week through all of the summer months, people absolutely appreciate the opportunity to see those types of experiences. Those, I think, have a lot of further growth potential in them.
Senator Zimmer: Viewing the whales could be seen as a huge tourist attraction.
Mr. Burghardt: Absolutely. My daughter was a guide on a tourist boat this summer that took 100 people at a time, and that is all they did — go look at whales and bears.
The Chair: Thank you for your presence here, Mr. Burghardt. We do appreciate the information you furnished this committee with.
Mr. Burghardt: Thank you for the opportunity and for being so thorough in your questions. I have enjoyed discussing them with you this evening.
The Chair: Thank you.
Before we start our meeting on Bill C-8, I want to table letters that people sent to us about Bill C-8. Of course, they want Bill C-8 to pass as fast as possible. They are following some examples that they have. However, we know what to do here at our committee meetings. These are being distributed.
I want to say before starting that I am sorry the minister could not be here. I know he is busy and it is on short notice but usually, when ministers want to have their bills passed, they attend meetings of the Senate. I just thought I would feel better saying that.
We welcome you, Mr. Jean, to our committee. It is not easy to be a parliamentary secretary, but it must be easy with Minister Cannon whom I know well.
We welcome the officials with you.
[Translation]
Welcome, Mr. Langlois. Yours is a familiar face at our committee. We are first going to hear from the parliamentary secretary and then the senators will have questions on Bill C-8.
[English]
Brian Jean, M.P., Parliamentary Secretary to the Minister of Transport, Infrastructure and Communities: The minister sends his regrets. He has an operations committee meeting tonight and, as such, was unavailable but did want to appear. I can tell you for sure what an honour it is for me to be here today to present this bill, which is so important to the future of Canada. I know Senator Dawson actually told me I would be under fire tonight, so I filled my glass full of water just so I could douse that if the need arises.
I am pleased to appear before you in relation to Bill C-8, which makes improvements to the shipper protection provisions of the Canada Transportation Act, or the CTA, as you all commonly refer to it. With me from the department are Helena Borges, Director General of Surface Transportation Policy, and Alain Langlois, Legal Counsel.
Bill C-8 was preceded by two other acts related to the CTA — the International Bridges and Tunnels Act, which was passed in February 2007, and Bill C-11, which was passed in June 2007. Bill C-11 amended a range of provisions, including those dealing with the Canadian Transportation Agency, air transport, railway noise, commuter rail, and transportation mergers and acquisitions.
You may recall that when Minister Cannon appeared before this committee on Bill C-11, some members asked him about the status of the rail freight bill, which is so important to many Canadians. The pending freight bill was important then and it is even more important now.
Bill C-8 is the long-awaited rail freight bill. It reflects extensive consultations dating back to the statutory review of the CTA completed in 2001. In more recent years, there have been intense consultations with railways and, in particular, shippers representing all sectors of the economy. Bill C-8 is the combination of much hard work by Transport Canada officials and industry representatives.
You will note that this hard work is reflected in the unprecedented level of support for the proposed amendments, including the letters you have received. The bill has such a strong level of support that I am hopeful it can be dealt with as quickly as possible by this committee and by the Senate.
I know you are all aware that the bill received all-party support in the House of Commons, and passed clause-by-clause consideration in that house's transport committee in a record 15 minutes.
I mentioned that the bill improves the shipper protection provisions of the CTA. Shippers have been waiting many years for the government to rebalance the legislative provisions of the act.
This will improve their leverage in their negotiations with the railways and should lead to improvements in railway rates and service, as Senator Oliver asked earlier.
The bill will also provide regulatory stability for the railways by finally putting an end to the ongoing debate that has taken place over the past seven years. I believe the railways are looking forward to the passage of the bill so they can focus their efforts on improving service and moving the growing volumes of international trade that are so important to Canada. The railways acknowledge that approval of the bill is inevitable and are not opposing it.
I know that you are very familiar with the unprecedented growth of trade with the Asia-Pacific region and the government's ongoing efforts to strengthen our global competitiveness through the Asia-Pacific Gateway and Corridor Initiative. Passage of this bill is a key priority of this initiative and will be welcomed by our exporters and importers.
I will briefly mention a few of the more important provisions contained in Bill C-8. Currently, the Canadian Transportation Agency must be satisfied that a shipper would suffer "substantial commercial harm" before granting regulatory relief to a shipper. Not surprisingly, shippers feel this is an unnecessary and unwarranted barrier. This provision is being repealed.
Ancillary charges have also become an issue between shippers and railways in recent years. These are charges, other than freight rates, for such things as demurrage, cleaning cars or storing cars on railway tracks. These charges are aimed at encouraging good performance by shippers. Most shippers understand this but are often annoyed because the charges are excessive or they feel the conditions are unfair.
A new provision contained in Bill C-8 will allow one or more shippers to complain to the agency. The agency can order a railway to revise the charges or conditions if it determines they are unreasonable.
One of the most popular shipper protection provisions is the final-offer arbitration or FOA. A shipper can apply for FOA if the shipper is not satisfied with the freight rates or associated conditions for moving traffic. Under this particular process, the arbitrator must select the offer of either the shipper or the railway, without any modification.
This process encourages the two parties to compromise or risk losing the arbitration. It also often leads to a settlement before the arbitrator makes a decision.
Bill C-8 would allow a group of shippers to file for FOA. This reduces the cost to individual shippers and allows them to act collectively rather than being singled out. To encourage commercial solutions, the shippers must demonstrate to the agency that they have tried to mediate the matter with the railway, as a precondition to accessing group FOA.
I also want to mention that when the proposed amendments were originally tabled in May 2007, a commitment was made to initiate a review of railway service to commence within 30 days after the bill was passed.
This two-pronged approach, CTA amendments plus a review of the railway service, is the government's approach to addressing complaints about railway service. There is strong shipper support for both initiatives and passage of this bill will allow us to move ahead with the review.
Before closing, I would like to emphasize a few points. First, there is no opposition to this bill. It had the support of all parties and, as I said, it cleared clause-by-clause debate in a record 15 minutes.
Second, the only amendment was initiated by the railways, proposed by the government, and supported unanimously by shippers and the standing committee in the House.
Third, senators in both parties support the bill. Many of you, I know, have been contacted by railways and shippers; both groups support the bill as written and want quick passage.
Finally, there is also that other consideration — speculation that there may be an early election. Shippers will be devastated if the bill dies on the Order Paper yet again, given the hard work and effort put toward reaching a consensus, and the fact that there is virtually no opposition to the bill.
Madam Chair, as I mentioned earlier, shippers have been patiently waiting for improvements to the shipper protection provisions. I am proud of this bill and the unprecedented support it has generated. I encourage the committee to deal with this bill as quickly as possible so that shippers can finally enjoy the fruits of their labour.
The Chair: We intend to do our job properly.
The provisions in clause 1 propose to remove the substantial commercial harm test as a prerequisite for filing for a competitive remedy from the agency. One competitive remedy that would seem to be made more accessible to rail shippers by these provisions is the competitive line rate, the CLR remedy.
The agency has never received a request for a CLR. However, it is thought that the main reason for this is the requirement for the shipper to have a prior agreement with the connecting railway and not the substantial harm test. Why does the bill not address the need to remove the requirement that a carrier have an agreement with another carrier to access the CLR remedy, as the CTA review panel recommended in 2001?
Helena Borges, Director General, Surface Transportation Policy, Transport Canada: In previous versions of this bill, which were Bill C-26 and Bill C-44, there was a provision to basically rewrite the whole competitive line rate provision — it was called the competitive connection rate — on the recommendation of what the panel recommended. We received numerous complaints from both sides, from the railways and from the shippers; and after a lot of discussions with them, we asked what we could do to make it work. Their ultimate recommendation was to stick with what we have now. They unanimously supported withdrawing it when Bill C-58 was tabled.
All the provisions in this bill were discussed with the shippers. That one was an unanimous decision by both sides, that we were better off leaving it alone because there was no way to come to agreement on how that provision could be made workable, after we tried quite hard to make something workable.
The Chair: They agree with clause 1. Okay.
Clause 2 proposes to amend section 119 of the CTA by extending the notice period prior to a change in a tariff for the movement of traffic from 20 to 30 days. Is giving rail shippers 10 extra days of notice of a change in tariff a substantial benefit to them?
Mr. Jean: It gives more certainty in the marketplace to plan for the future. Certainly, from a commerce perspective, an additional 10 days would give them the ability to plan for the future. I would ask Mr. Borges to make any other comments she would.
Ms. Borges: Mr. Jean is correct. Again, this was one of the recommendations put forward by the shippers. We asked whether the 10 days was sufficient, should we look at more? Their view was that the 10 days sufficed; 20 days was a bit short. Now with the automated systems, that they are getting everything electronically, they are able to react faster so they are perfectly happy with this. This was the shippers' proposal.
The Chair: Clause 5 addresses a gap in the legislation similar to the one addressed in clause 4, which leaves a railway line unregulated after a lease on the railway line has ended. In respect of grain-dependent railway lines, this clause serves to clarify that the track owners wishing to discontinue service on grain-dependent rail lines after a lease ends must make annual compensation payments to the municipality or district.
Although the municipalities and districts will receive some compensation if a grain-dependent line is discontinued, would you not agree that residents could still be worse off?
Mr. Jean: I cannot imagine they would be any better off, losing that particular industry from their town, depending on the size of it, but certainly it could have an impact.
Ms. Borges: For the grain-dependent branch lines, really the only product they handle is grain. This provision was actually instituted earlier to ensure that — as the grain industry shifted and some of the product was being carried by truck as rationalization occurred in the country with elevators — the railways, when abandoning a line, compensated the community to ensure those roads would be able to handle the truck traffic.
These lines are not used by any other kinds of services that the community depends on. For example, in urban areas, there are commuter rail operators and such, so there is a different process in place for that. We amended that through Bill C-11.
In this case, we believe that they are well off and we have not had complaints about the process or the compensation. I think it is welcome. This provision is actually closing a loophole whereby, in the case where a lot of lines were transferred from being leased — they were not sold, they were leased and were transferred from either CN or CP to a short line — if they stopped service at some point and that line then went back to CN and CP, the railways were not obligated to follow the formal discontinuance process, which provides the province and municipalities an opportunity to acquire the line, if no one wants it for commercial purposes.
In recognizing that deficiency, we are trying to close that loophole so when the line reverts back to CN and CP, if they do not start service, the line is offered up to the province or the communities. In fact, it is a benefit to the communities that they can keep it if they wish.
Senator Oliver: I would like to ask a question about final-offer arbitration and mediation. Clause 7 offers an opportunity for parties to final-offer arbitration to suspend the proceedings and take the matter before a mediator. It also offers shippers an opportunity to submit a common matter jointly for arbitration.
What is the advantage of offering mediation in the midst of a final-offer arbitration process when mediation is an option prior to final-offer arbitration under section 36.1 and 36.2 of the CTA? Why mediation?
Alain Langlois, Legal Counsel, Legal Services, Transport Canada: The first portion of the answer is technical. The mediation found in 36.1 is only mediation in respect of matters over which the agency has jurisdiction. FOA is not a proceeding before the agency so it falls outside the scope of the agency jurisdiction.
The concept of mediation was included in the FOA. In clause 7, the mediation is allowed or is put in for shippers and railways to mediate after arbitration has commenced. Under the current legislation, the arbitrator has to issue a decision within 60 days; it is a mandatory obligation under the legislation.
If shippers and the railway want to sit down and discuss or mediate, there is absolutely no time for them to proceed and do so because the arbitrator has to issue a decision within 60 days. Clause 7 was included to allow shippers and railways, after arbitration has commenced, if they had not had a chance to mediate before, to sit down and try to resolve the issue.
I can tell you from experience, having practised at the agency for a long time, a lot of discussion occurs after the final-offer arbitration is filed and the timing —
Senator Oliver: After it gets started?
Mr. Langlois: Yes, usually the filing of an FOA triggers a willingness on the part of both parties to mitigate the risk of a negative decision. The issue is that there was no time for them to do it, so they had to negotiate at the same time they were going through the arbitration process. This will allow them to stay the arbitration while they negotiate and, if they cannot agree, the arbitration can resume.
Senator Oliver: They would have to have a brand new set of people to do the mediation. The mediator could not be the arbitrator and each side would need their own representatives for the mediation separate from the arbitration, I would presume.
Mr. Langlois: Yes. It is important that the arbitrator is never the mediator. Under the act, the agency has to appoint an arbitrator and that is usually someone found on a list sent out by the agency. They have an obligation under the legislation to send out a list of names. They usually appoint a lawyer from private practice to do the arbitration. Someone else would be the mediator. The arbitration would be stayed before the appointed arbitrator and the mediation would proceed. If the mediation is unsuccessful, then the person appointed arbitrator would resume.
Senator Oliver: The final-order arbitration gets started and they have only 60 days to do it. They are into their 20th day and decide to pause, appoint a mediator and each side begins that process. On the 59th day, the mediation is successful. Does the mediator prepare an order that he gives to the arbitrator so it becomes an arbitration order?
Mr. Langlois: The shipper withdraws the final-offer arbitration.
Senator Oliver: It will be a mediated final order.
Mr. Langlois: Yes. Although I have never seen one, I have heard the terms of the settlement agreement whereby the shipper agrees to withdraw the arbitration request to the agency and the arbitrator.
Senator Oliver: Thank you.
Mr. Jean: If I may, under the FOA provision, as a litigator in Alberta I found a similar process — the offer of judgment of formal offer under the rules, to be very helpful in settling matters without going to litigation. I found this particular legislation similar to that and it will avoid litigation and help parties get along in the future as well, which is a form of duopoly we have in Canada.
[Translation]
Senator Dawson: Mr. Jean, I would like to read the letters that have been distributed to us. Some paragraphs contain an amazing coincidence.
That Bill C-8, an Act to amend the Canada Transportation Act (railway transportation), be deemed to have been read a second time, referred to committee of the whole, reported without amendment, concurred in at report stage, read a third time and passed.
Everyone has written the same thing. I can understand the urgency. Let me tell you at the outset, I want to cooperate to get the bill passed as quickly as possible. This has gone from Mr. Collenette to Tony Valeri to Jean Lapierre to Lawrence Cannon.
I can tell you that you have my full cooperation in getting the bill passed, but, Madam Chair, I always hate being taken for granted. I find that this similarity — I do not know where it is coming from but it is surely not from our side — looks like they think we are idiots. It is a little insulting. I agree that the support is clear. I was swayed by Senator Zimmer when he said in his speech that everyone agrees with this bill.
Senators have a job to do; for us to be told that we have to pass the bill in 15 minutes because that is what they did in the other place perhaps shows some lack of respect. They do a lot of things in the other place that we do not like to do. If you want statistics on that, I have them.
[English]
They did it in 15 minutes. We got one on Kyoto in 45 seconds but I do not think that is the way we should do legislation. Legislation deserves to be studied and amended. I had a disagreement with some members here when I suggested two amendments to a bill. Some said that the bill would die but it still passed. It is a better bill, not because of me but because of this committee. Our role as senators is to look at bills and ensure sober second thought on proposed legislation. After sober second thought, I will support your bill. It is insulting that a process be set in motion to put that kind of pressure on the Senate.
That being said, I would support everything Senator Zimmer said in the Senate yesterday. As quickly as you want, Madam Chair, we can look at this bill and try to get it passed. The threat of an election was the case 18 months ago, six months ago and again two days ago. We were a minority government when Senator Lapierre supported the bill and said that the sky would fall, but the sky did not fall and companies are still working. Trains are not on time, but that is another issue. We want to be considered partners with the department and when gestures like that come forward, it can be insulting.
In the spirit of cooperation, it is legendary in this committee, and with respect for colleagues on the other side, I will be more ready and available to sit any time you want on this bill and go clause by clause.
Senator Oliver: In fairness, the in-depth questions put by the Chair tonight went to the essence and that proves the Chair is doing her best to ensure that this gets more than sober second thought. They were excellent questions.
Senator Dawson: So were yours, Senator Oliver.
Mr. Jean: I would agree, Senator Dawson. I can promise you I did not write those letters. Although I do have red hair, I am not Chicken Little. Certainly, you have a job to do just like we have a job to do in the other place. I respect that greatly.
The Chair: That is music to our ears.
Senator Mercer: You might face some frustration from my colleagues in the same party as Senator Dawson and because other people seem to think we should be rushing through this. Bill C-8 happens to be here tonight and you happen to be in front of us. We wish that when you go back to your caucus meeting in two weeks' time, perhaps you can remind them of our frustration.
I, too, support the bill. In your presentation, you talked about most shippers understanding that ancillary charges are aimed at encouraging good performance by shippers. Could we put a clause in the bill about good performance by the railroads because, as we have discovered in another study, it is not always the case that they deliver railcars in a timely fashion to exporters and importers.
You said that the agency can order a railway to reverse the charge or conditions if it determines they are unreasonable. Has anyone defined the word "unreasonable" in this context?
Mr. Jean: The courts have case law on the term "unreasonable" in many different situations in legislation. We had vast discussions on this in the other committee. It is a good question.
Mr. Langlois: I remember a couple of months ago on Bill C-11 and the noise provision explaining "reasonable" versus "as little as possible." That is why this will be short.
Under the CTA, with everything the agency is asked to do in terms of examining the threshold, whether railway or airline, the test is reasonableness. There is tremendous case law, both in the Supreme Court and at lower levels, including at the agency, that explains or interprets what is reasonable. It is a concept that the agency actually understands and applies daily.
For example, under the airline provision of the act, the agency is entitled to look at whether terms and conditions found in airline tariffs are reasonable. They do that on a daily basis. The intent was to replicate the test that they currently apply in the airline industry and every other mandate they have under the legislation.
Senator Mercer: I have one final comment with respect to some wording in the presentation. I was annoyed that most of the people who contacted us talked only about the Asia-Pacific Gateway in terms of the corridor initiative.
As a Nova Scotian — and there are three of us on this committee, Senator Oliver, myself and Senator Phalen — the wording should be inclusive. We should be talking about the Ports of Montreal and Halifax and Quebec City and so on. Those words, "Asia-Pacific Gateway and Corridor" are not inclusive. You will notice some of the letters we have received are from the Port of Halifax, which has spoken in support of this bill. I would ask that, in the future, you be a little more sensitive. We are feeling rather vulnerable these days.
Senator Adams: I am familiar with CN. Personally, we have a conflict of interest if they own some of the companies and complain to other shippers. I want to build a garage for my house in Rankin Inlet. I bought a Quonset.
This was around the middle of May, the long weekend. I was in Toronto where there was a big CN station. To find out there is only one person there receiving calls from shippers, from anyone who wants to ship from Toronto anywhere up to Winnipeg and Nunavut.
Finally, I got back after a long weekend and only got the answering machine. We called them after two days. He says he had not gotten through all of his messages from all the people requesting shippers. There was only one person working in Toronto for CN in the department.
Senator Mercer: One answering machine, anyway.
Senator Adams: It is the long weekend in May and you have people there who want to ship and make sure it gets up to Churchill and does not miss the barge. It may be the last barge that gets into Rankin Inlet. It took me two weeks to get an answer back.
If the bill passes, will there be more people there telling them to do a better job?
Mr. Jean: I cannot confirm that.
I did want to address something that Senator Mercer said earlier in relation to level of service. Obviously, I cannot control CN's personnel files.
I wanted to address the fact that the act already contains level-of-service provisions to address rail service. Indeed, you will see that that is addressed.
As well, I wanted to mention that, as the Member of Parliament that represents more Newfoundlanders than any other member in the House, I am proud to represent Atlantic Canadians. I understand what you are talking about with the Pacific Gateway initiative. I am from Fort McMurray, by the way.
Senator Mercer: I gather that Fort McMurray is the second-largest city in Newfoundland.
Mr. Jean: Indeed.
Senator Adams: The problem with CN, the short-land shippers, is you do not have any control of what that piece is coming into. We have to arrange everything ourselves with other shippers from CN to the destination. Roads only go so far from Winnipeg or Vancouver. They cannot go up to Churchill. Any other shipment from Winnipeg down in Churchill, and we have to do it ourselves with another company. That is the only difficulty I have with the CN.
Senator Tkachuk: I wanted to point out so that you know, Mr. Jean, love is not in the air here.
Senator Mercer: Tomorrow is Valentine's Day.
Senator Tkachuk: I think we do all support this bill and we want to get it through as quickly as possible. Also, I think it would be fair to point out — just so there are no misconceptions — that the bill was actually three days before committee in the House of Commons, but it was only clause by clause, which took 15 minutes. We routinely do that in the Senate. For the benefit of Senator Dawson, I do not think Mr. Jean was trying to push us along at too mad a pace. It was clause by clause that was 15 minutes, not the bill itself.
Senator Zimmer: I am proud to be the critic of this bill, but my remarks last week were anything but critical. I did my own research on this bill. I had heard all parties supported it, so I contacted mainly the house leaders of all parties. In fact, they were all supportive. I contacted the Wheat Board; they were supportive.
I talked to the vice-president of CN. They indicated that, although there were some issues they had some problems with, they said to pass the bill. They have waited far too long. Let us get it through and we will deal with it after. They were 100 per cent in support.
While we have to ensure that democracy and a fair hearing occurs, which we are doing, I hear no objection, and — as my honourable colleague eloquently stated — we want passage as soon as possible. Shippers and others have waited far too long for this bill.
Madam Chair, I do not know where we go from here. If what we are able to do, according to the rules, is to go to clause by clause right now, I would be prepared to do that.
The Chair: I am ready for it.
Mr. Jean: I would like to say what an honour and privilege it was appear before you tonight. Thank you.
The Chair: Give my best to the minister.
Mr. Jean: I will.
Senator Tkachuk: Pass along her message, which is shared by all of us.
Senator Eyton: Given your performance tonight and the quick passage of this bill, the minister will send you all the time.
The Chair: Is it agreed that the committee move to clause-by-clause consideration of Bill C-8, An Act to amend the Canada Transportation Act (railway transportation)?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the title stand postponed?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 1 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 2 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 3 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 4 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 5 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 6 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 7 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 8 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 9 carry?
Hon. Senators: Agreed.
The Chair: Carried.
Shall the title carry?
Hon. Senators: Agreed.
The Chair: Carried.
Is it agreed that this bill be adopted without amendment?
Hon. Senators: Agreed.
The Chair: Carried.
We do not have observations, but is it agreed that at the next sitting of the Senate I report this bill with no amendments and no observations?
Hon. Senators: Agreed.
The Chair: Carried. This bill will be tabled tomorrow.
The committee adjourned.