Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 14 - Evidence - October 25, 2016
OTTAWA, Tuesday, October 25, 2016
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:57 p.m. to study the effects of transitioning to a low carbon economy.
Senator Richard Neufeld (Chair) in the chair.
[English]
The Chair: We'll begin. First, let me apologize to you gentlemen that we have held you up this long. Sometimes some people get carried away in the Senate, and it takes a little longer to recess. But we are usually out in time to start at five o'clock. I apologize profusely for the late start, and we appreciate that you're staying around.
Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I represent the province of British Columbia in the Senate, and I'm chair of this committee. I would like to welcome honourable senators, any members of the public with us in the room and all viewers across the country who are watching on television. As a reminder to those watching, these committee hearings are open to the public and also available via webcast, on sen.parl.gc.ca. You may also find more information on the scheduled witnesses on the website, under "Senate Committees."
I will now ask the senators around the table to introduce themselves. I'll begin by introducing the senator from Quebec, Senator Massicotte, the Deputy Chair.
Senator MacDonald: Michael MacDonald from Nova Scotia.
Senator Seidman: Judith Seidman from Montreal, Quebec.
Senator Patterson: Dennis Patterson, senator for Nunavut.
The Chair: I'd also like to introduce our staff, beginning with the clerk, Lynn Gordon, and Maxime Fortin, who is just starting and learning, working with Lynn in training, and our two Library of Parliament analysts, Sam Banks and Marc LeBlanc. Today marks the nineteenth meeting of our study on the effects of transitioning to a low-carbon economy, as required to meet the Government of Canada's announced target for greenhouse gas emissions. Today, we have witnesses representing the Railway Association of Canada and also VIA Rail. I'm going to ask you gentlemen to introduce yourselves and tell us your positions, and I guess we're going to start with VIA Rail first so that they we can make some connections. We'll do VIA Rail and ask the questions so that they can leave, and then the Railway Association will stay with us.
Either side, who wants to start?
Michael Bourque, President and Chief Executive Officer, VIA Rail Canada: Honourable senators, the Railway Association of Canada is a trade association that will be celebrating its one-hundredth anniversary next year. We represent 60 railways in Canada.
Michael Gullo, Director, Policy, Economic and Environmental Affairs, Railway Association of Canada: I'm Michael Gullo, Director of Policy, Economic and Environmental Affairs with the Railway Association of Canada.
Yves Desjardins-Siciliano, President and Chief Executive Officer, VIA Rail Canada: Yves Desjardins-Siciliano, President and Chief Executive Officer of VIA Rail.
Bruno Riendeau, Director, Safety and Environment, VIA Rail Canada: Bruno Riendeau. I'm the Director of Safety and Environment.
Pierre Le Fèvre, Senior Advisor to CEO and Chief Executive Officer, VIA Rail Canada: Pierre Le Fèvre. I'm the Senior Advisor to the CEO on strategy and planning.
The Chair: Thank you very much, gentlemen. We'll begin with Mr. Desjardins-Siciliano. I believe you have a presentation. Then we'll go to questions.
[Translation]
Mr. Desjardins-Siciliano: Mr. Chair, ladies and gentlemen, we thank you for your invitation to appear before your committee. My name is Yves Desjardins-Siciliano and it is my honour to serve the Government of Canada as president of its passenger rail service, VIA Rail Canada. I am happy to appear before you today, accompanied by my colleagues Mr. Le Fèvre and Mr. Riendeau.
[English]
VIA Rail is a non-agent Crown corporation that operates the country's only national intercity passenger rail service on behalf of the Government of Canada. It reports to Parliament through the Minister of Transport, the Honourable Marc Garneau, who is also one of VIA Rail's top parliamentarian users of rail service between Montreal and Ottawa.
Our trains run through some 400 communities in Canada, from coast to coast to coast. Our rail network comprises over 12,000 kilometres of rail, largely owned and operated by freight railways. Our mandate is to provide a safe, efficient, reliable and environmentally friendly transportation service that meets the needs of Canadian travellers. We are proud to say that VIA Rail is the only fully accessible intercity mode of transport for all Canadians, including Canadians with disabilities.
To better serve our customers, we have over the past months shifted to a much more customer-centric approach that has already proven results to be successful for VIA Rail and led to simultaneous increases in both ridership and revenue for the first time in many years. In fact, VIA Rail has posted revenue growth from one quarter to the next over the past 30 months. This includes a 9.3 per cent increase in revenue and a 7.2 per cent increase in ridership, percentages that have not been experienced at VIA since the 1990s.
This pace of growth, however, would be difficult to maintain over the medium and long term since our rolling stock is approaching its expected useful life and therefore needs to be completely replaced. Furthermore, the current rail network — as I said, mostly owned and operated by freight railways and therefore shared by boat, freight and passenger trains — cannot accommodate the demand for more frequent, faster and reliable passenger train service as required by Canadians in a modern economy.
[Translation]
Such an operational context offers us few perspectives to increase the effectiveness and reliability of our service and the benefits that derive from that to protect our environment and preserve our energy resources. This means that the leeway we need to provide Canadians with a more modern and sustainable service is excessively limited.
My colleagues and I chose to consider and transform this situation into a unique opportunity to give Canada a sustainable transport solution, with the creation of a passenger railway service in the most populous corridor in Canada, the Windsor-Quebec corridor.
Beyond our efforts and creative solutions to improve our service, reduce government subsidies and our own environmental footprint, our most promising project is the introduction in the corridor of a high frequency train service over the next five years.
This new train service would be operated on a distinct passenger train network in the central region of Canada, which today has a population of some 20 million inhabitants.
[English]
Having our own tracks would position us to increase and in fact triple our departures in the Quebec City-Windsor corridor, reducing our running times by at least a third of their current running times and offering a more reliable service, which means 96 per cent and above punctuality and ultimately a mode of transport that is clearly better for the environment.
High frequency rail, as we call it, HFR, offers tremendous flexibility that will incite more people to opt for the train instead of the car, as you will have a train service available every 45 to 60 minutes, on the hour, from 6 in the morning to 12 at night. It offers the opportunity to eliminate our need for public funds to finance ongoing operating deficits, which has been historical at VIA and reached $320 million last year.
It will help to reduce road congestion, which costs the Canadian economy almost $10 billion a year, according to some studies, in productivity lost in the Montreal-Ottawa-Toronto triangle alone. Sixty million trips are taken yearly among Quebec City, Montreal, Ottawa and Toronto. In 82 per cent of those trips, Canadians choose to drive.
As you know within the transportation sector, privately driven cars and trucks are the biggest contributors to global warming. Our assessment indicates that the overall budget for this project would be in the order of $5.2 billion. The minimum investment required from the federal government could be limited to the renewal of the corridor fleet, the oldest in North America, to the tune of about $1.2 billion. Other funding needs for this project could be sourced from private or public investors, some of which have already expressed an interest.
[Translation]
In addition to our commitment to a greener economy, controlling our infrastructure is one of the main reasons that incited VIA Rail to propose a high frequency train as the solution to improve the effectiveness of the railway transport system.
And so, we are happy to be here today to show you how a high frequency train on a dedicated passenger network would allow VIA Rail to contribute to the extent of its capacity to Canada's transition to a less carbon-based economy.
Our high frequency train initiative presents undeniable advantages on two levels. First there will be an economic advantage, thanks to the jobs that will be created by its construction and operation, as well as those generated by the economic dynamics resulting from the increased mobility of the population. This will translate into productivity gains. Especially, our plan will mean a substantially reduced ecological footprint, both for the operations of VIA Rail and more importantly, for the transport of its passengers.
VIA Rail will thus become an even more sensible choice for travellers, as it will offer a renewed and simplified travel experience, one more concerned with the health of our communities. In addition, we believe that this project is in keeping with the objective of the Government of Canada to develop a truly sustainable transport ecosystem.
[English]
Allow me to demonstrate how this ambitious project will translate into real gains for our environment. We estimate that offering this new, more modern service will see our traffic rise among Quebec City, Montreal, Ottawa and Toronto from currently 2.6 million passengers to over 7.2 million passengers annually or approximately 5 million fewer car trips on our roads every year.
Sixty per cent of transport-related GHG emissions today can be attributed to car users, and 82 per cent of all travel among Quebec City, Montreal, Ottawa and Toronto are by car. With a three-fold increase in both passengers and departures, we forecast an approximately 98 per cent drop in VIA Rail's own carbon dioxide emissions plus the equivalent of 12.5 million tonnes of GHGs being eliminated, which is currently being produced by cars. The event of high frequency rail could be equivalent to reducing the Canadian car pool by as much as 2.8 million cars, which is just above 10 per cent of the Canadian car pool.
Finally, as we speak today, VIA Rail is pursuing various initiatives and working to reduce its environmental footprint in a number of ways. On the energy efficiency front, we expect to have a large part of our network electrified, thus significantly reducing our own fuel consumption by as much as 98 per cent. We're also using telemetry to better manage our fuel consumption and enhance the skills of our locomotive engineers.
[Translation]
Determined to contribute to Canadian efforts, VIA Rail participated in the forums organized by the International Union of Railways in the context of the climate change summits in New York in 2014, and in Paris in 2015. A few days ago, and for the third consecutive year, VIA Rail took part in the Vienna preparatory meeting in view of the UN summit on climate change, to be held in Marrakech next November. At the COP21 meeting in December 2015, together with 65 IUR member railways, VIA Rail committed to reducing its carbon footprint and to supporting this international evolution of passenger transport toward more sustainable transportation modes.
We believe that VIA Rail service is part of a global solution to counter the effects of climate change. It provides an affordable alternative to the automobile, and supports the transition we must all make, both individually and as a country, to a more sustainable public transport system.
I'd like to thank the committee for having given us this opportunity, and I hope we can continue to count on your support, as senators and members of this committee, for our corporation.
My colleagues and I would now be pleased to answer your questions.
[English]
The Chair: Thank you. We'll begin our questions.
[Translation]
Senator Massicotte: Thank you, Mr. Desjardins-Siciliano. Your very interesting presentation focused mainly on the benefits of a railway system based on the protection of the environment. I have a few questions for you in this regard.
No one can predict the future; we don't know if the government or the financial institutions will be there to ensure an 80 per cent contribution. You have an existing operation which contributes to greenhouse gases. What efforts are you making to reduce that impact today? Has your emission of greenhouse gases been reduced, and can you cite a percentage? Could you summarize your efforts to date?
Mr. Desjardins-Siciliano: Thank you, Senator. In 2008, thanks to funding from the Government of Canada, VIA Rail invested $140 million in the renovation of part of its stock of railway cars. In this way we reduced our consumption of diesel fuel from 60 million litres to 40 million litres a year, which represents a decrease of one third. Moreover, we improved engine efficiency so that each litre of diesel fuel consumed allows us to travel a greater distance. Today, we need 4 litres of fuel for a train to cover one kilometre, whereas in 2008, 5.5 litres were needed. This was done thanks to an investment of $140 million from the Government of Canada over seven years, and that investment will be made profitable through savings in the consumption of diesel. The reduction of greenhouse gases from these more efficient engines will be a permanent contribution.
That is a concrete example of how we can invest in renovation and modernization so as to make our operations more efficient, and reduce our carbon footprint.
Senator Massicotte: We often hear it said that the energy efficiency of public buses is nil. Buses are far from full. Perhaps the same thing applies to VIA Rail. I am one of your big clients. I often travel by train, and depending on the time and the destination, sometimes there are few passengers on board. The energy efficiency per user must be very low if it is compared to the use of an automobile.
Mr. Desjardins-Siciliano: The energy efficiency of any means of transport is based on its maximum use. So for a car, that is four occupants; for a train it is 66 occupants in a 66-seat railway car. It is the same for a bus. That is why energy efficiency is assessed by seat-kilometre. So in an electric train, energy efficiency or energy consumption is three grams per kilometre per passenger.
In a diesel train such as VIA Rail's current train, the figure is 22 grams. For a car, it is 67 grams. In the case of an airplane, you are looking at twice that quantity.
Energy efficiency is assessed by seat-kilometre, whether we are talking about a four-passenger car, a 66-seat train, a bus or a plane. In this example, you have the hierarchy of contributions to greenhouse gases. Of course it is based on maximum occupation, just as a person on the highway who is alone in his car is consuming more energy than the same car on the same highway with a family of four.
Senator Massicotte: You intend to invest in the new railway, and it is going to cost several billion dollars. Did you calculate costs based on the hypothesis that the clientele is going to increase by 300 per cent? If you do the calculations, what is the cost per ton of the reduced greenhouse gas emissions divided by your investment? Today we are talking about a $5 per ton tax. If we compare that to your proposal, what does that represent?
Mr. Desjardins-Siciliano: Today, the same network consumes approximately $40 million in diesel fuel yearly, which would be replaced by about $40 million in hydroelectricity. The savings are not financial, but rather in terms of impact on the environment. As for electric transport as compared to other types of energy, the savings are more societal, more macroeconomic than operational or commercial.
Senator Ringuette: We have been hearing about a passenger train in the Quebec-Windsor corridor for almost 40 years. You say that in three to five years you are going to have a high-frequency train service in that corridor. However, you have not said whether it will be a high-speed train.
We understand what high-frequency means, but why not high-speed? Why did you set a three to five-year timeline? Is it to make a decision, or to find capital for construction? I would like some specific details on this big project — which we have been hearing about for several decades and which is back again — to serve the clientele between Quebec and Windsor.
Mr. Desjardins-Siciliano: This proves that good ideas don't die easily. It is a high-frequency train and not a high-speed train. The suggestion is to operate the trains at maximum speed. Today, VIA Rail trains can go 110 miles an hour. However, they generally travel at 64 miles an hour because they operate on freight train infrastructure. Freight trains were not designed for speed or comfort, first of all. That is already a speed limit.
Secondly, we are part of a network. It's grade five math: if the VIA Rail train doing 100 miles an hour leaves Montreal one hour after the freight train leaves Montreal going 50 miles an hour, when will they meet?
When you are president of VIA Rail, they will meet too often, too fast, because they travel at variable speeds. So the idea is to allow VIA Rail trains to operate at conventional speeds in an exclusive environment where all of the trains would operate at full capacity at 100 miles an hour. That is the first point, and we will come back to it when we talk about the time frame. That is how we can make the service affordable using today's technology.
A second point I would like to raise is that a high-speed train is a substitute for the plane. It is a train that was designed to cover 500 kilometres and more. Under 500 kilometres, there is no point going 250 miles an hour, because by the time the train reaches that speed it will have reached its destination. A Canadian passenger train in the Quebec-Windsor corridor has to stop every 100 kilometres, more or less, in order to provide service to the communities. If all Canadians lived in Montreal, Ottawa and Toronto, we would not need trains. But people live between Montreal, Ottawa and Toronto. As I was saying earlier, 83 per cent of travel takes place in cars, and 64 per cent of that 83 per cent is from a location or going to a destination that is neither Quebec, Montreal, Ottawa nor Toronto. We have to stop in these places. That is why the train exists, to offer an alternative to the automobile. If there are no trains, you have to use the roads.
So a high-speed train is an expensive substitute for the plane. We are talking about at least $15 billion to $20 billion as compared to $5 billion, and about 10 to 12 years for construction rather than three to five years. The cost of the ticket is equal or superior to the cost of a plane ticket. Today, in Europe, it is more costly to take the high-speed train rather than the plane between Paris and London or between Rome and Milan.
According to the latest European statistics, the high-speed train is the most used train in Germany, and 9.1 per cent of train passengers take the high-speed train in that country. However, 91 per cent of train passengers in Europe still use conventional-speed trains, comparable to the regional trains of the Montreal Agence métropolitaine de transport (AMT), or the GO Transit trains in Toronto, or the VIA Rail intercity trains.
So the high-speed train is a good evolution of passenger service, but it is not a starting point for passenger service. As proof, Spain has invested a lot in high-speed trains and not in conventional-speed trains. When the offer of high-speed trains increased substantially, car travel also increased substantially. Why? Because high-speed trains do not stop 100, 200 or 300 kilometres from your point of departure. The average car trip in Canada, in the Quebec-Windsor corridor, is 260 kilometres. The average trip in Europe in the West European corridor is 240 kilometres. If you are travelling 240 or 260 kilometres, you are going to consider your car or a train if there is one. But if there is no train, you will always take your car.
That is why in Canada, 83 per cent of trips are done by car, and in Europe 72 per cent of trips take place in cars.
That is the difference between the high-speed train and the high-frequency train. Over the next three to five years, VIA Rail's approach will consist in capitalizing on the fact that between Quebec and Montreal, and between Ottawa and Toronto, there are freight train corridors that are not being used, or being used very little. The fact that they are not being used will allow VIA Rail to take possession of these corridors and to update them for speed and the comfort of passengers, and so offer a service, under its control, that will allow us to provide trains every 45 to 60 minutes, from six in the morning to midnight. That is why we are interested in these corridors, because there is an opportunity to take over these freight rail corridors that are not being used.
Senator Ringuette: I understand the math and the logic behind that. As a resident of New Brunswick, what improved service are you going to offer to Canadians east of Quebec?
Mr. Desjardins-Siciliano: That is a very good question. In 2015, we announced our intention to introduce daily service in New Brunswick, morning and evening, when people leave the office, between Campbellton and Moncton — and vice versa, obviously — and between Halifax and Moncton in Nova Scotia. This would be offered Monday to Friday, to allow people to leave Northern New Brunswick in the direction of Moncton, to go to school or medical appointments, and during the holidays, for commercial or personal reasons. This is in addition to the current service in the Maritimes which is a mixed-use service, that is to say a regional and tourist service, which we call Ocean.
In this environment, freight railways own the existing railway infrastructure. We have to obtain the permission to use the rolling stock we would like to use on that infrastructure, and we have to obtain the frequencies for these trains. In exchange for these frequencies and these permissions, we have to invest in the infrastructure to improve it.
These are negotiations that are currently taking place with our partners. We are hopeful that in 2017, we will be able to introduce this regional service.
Senator Ringuette: Regarding the $40 million in diesel fuel you mentioned earlier, if you had a route between Halifax and Quebec that would allow VIA Rail and its clients to reduce the length of the trip by five hours, there would be substantial savings in diesel and greenhouse gas emissions, which the committee is studying. Have you examined that possibility? In fact, the VIA Rail Halifax-Moncton itinerary, along Saint-Léonard, Edmundston and Rivière-du-Loup, would allow you to save at least five hours per trip. So there would be a five-hour reduction in greenhouse gas emissions, and there would be savings in diesel fuel costs. In addition, it would certainly be more interesting for clients if the trip were reduced by five hours.
Have you done all of these analyses for client service east of Quebec?
Mr. Desjardins-Siciliano: Yes. The route the senator is alluding to is an itinerary between Moncton and Edmundston, which goes along a route whose distance is four to five hours shorter than the current route. Unfortunately, it is in the woods, and the population of New Brunswick is along the coast.
Senator Ringuette: I'm sorry, but neither Edmundston nor Fredericton are in the woods.
Mr. Desjardins-Siciliano: No, but the railway service, unfortunately, does not go through the villages of New Brunswick. So in order to save time in the Halifax-Quebec or Moncton-Quebec corridors, we could use that route. However, we could not provide service to all of the villages along the coast up to Baie-des-Chaleurs. That is why to date the route we use is always along the coast.
The second element is that the vast majority of freight trains use the route you are referring to. The current congestion would be increased by the arrival of passenger trains.
This would require even bigger investments on that route. As you know, two years ago, CN had announced its intention to abandon the Newcastle subdivision; investments from the New Brunswick government as well as VIA Rail were required to keep the subdivision open. CN no longer needed it because most of its traffic had been moved to that route.
That is the source of the dichotomy we are experiencing. The most efficient routes are the most popular, naturally, both for freight trains and passenger trains. We must also provide service to the community locations. However, there was a time when we did both.
Senator Ringuette: Exactly. My colleague, Senator Mockler, will surely address this topic.
[English]
Senator MacDonald: Thank you for being here. I have so much interest in railways and VIA Rail. Whenever I go to Montreal, I try to take the train — and even to Toronto, if time permits.
I'm going to ask some questions on energy, but before I do, I have to make this point because Senator Ringuette touched upon it. If you're a Nova Scotian, you've pretty well been abandoned by VIA Rail since the 1980s. Everything east of Truro was cut out. The rail line ran every day. It was filled every day. It's not your fault; it was 30 years before you came there. But we have next to no service in Nova Scotia, and that was followed up by CN cancelling service east of Truro. Now we're fighting to keep a rail line that's been there for 125 years because the institutions in this country have abandoned us. There was a joke in Cape Breton in the 1980s when they shut the railroad down: "What was the difference between Sydney and East Berlin?" The answer was that you could still get a train out of East Berlin. It's not your fault, but I want to put it on the table.
I'm only making the point that I'm sure there are many runs in Canada that do not make money, and I am sure there are many runs in Quebec that do not make money, but they're not being abandoned.
The question I want to ask in terms of energy — and you touch upon it here when you mention the transportation sector and private-driven cars are contributors to global warming. The argument there is in this corridor — and it's a valid argument that if you get more people on the trains, it would help.
Large ships burn diesel, and locomotives also produce a lot of carbon. With large ships that are being launched today, there is a movement that's starting to catch on: They're being converted to LNG fuel or to natural gas engines. I didn't notice anything in here about the new stock coming in for locomotives that would burn natural gas or LNG. I'm curious if your people have looked at that and if you can give us any insight if you have looked at putting those types of engines in your new locomotives.
Mr. Desjardins-Siciliano: In terms of energy, we have to get back to the operating environment in which we live. As I indicated for the New Brunswick service, we need permission from the owner to operate any given type of material on their network. My colleague Michael will be able to talk to the LNG issue in regard to freight railways, but we've looked at and had discussions with LNG providers either for conversion of engines or LNG fuel providers. But until and unless freight railway owners themselves start using LNG-powered locomotives and allow, therefore, VIA to do the same, it would be a purely theoretical question at this point.
The network we're planning to build will be an electrified network — electrified but with hydroelectricity. But for LNG, we would be totally open to that, provided that is the way the owners of those infrastructures also decide to go.
Senator MacDonald: I realize LNG would require the infrastructure to service it, but natural gas has the infrastructure now that can probably service it. What about the conversion to natural gas engines?
Mr. Desjardins-Siciliano: I did not mean the servicing of the engines. I meant that any rolling stock that we put on third party infrastructure has to be approved by the third party owner. As I said, Michael can talk to freight railway policies, but today trade railways do not operate LNG locomotives. If and until they do, VIA would not be authorized to run LNG locomotives on their networks.
Senator MacDonald: In terms of the freight side of rail transportation, do you know if they are looking at LNG?
Mr. Desjardins-Siciliano: I believe they are.
Mr. Bourque: There are trials of LNG locomotives going on in North America. CN has an LNG locomotive. They are working out some of the issues that are both mechanical and infrastructural. Ultimately, the economics have to make sense to convert all of your fleet to that and to have the infrastructure in place.
Currently, I believe that business case is not there and the technology is not quite there, but it won't be long before it will be very close.
Senator Seidman: At the end of your presentation to us, you spoke about new technologies, and I'd like to pursue with you research and development in the rail sector. What is VIA engaged in and what is the rail sector engaged in as far as new technologies — both the development of them and the adoption of them?
Mr. Desjardins-Siciliano: In regard to energy consumption?
Senator Seidman: For example, you said electrification, but there are also biofuels and combinations, such as hybrids. There are various options. Is VIA engaged in research and development?
Mr. Desjardins-Siciliano: The renovations I talked about earlier that allowed us to save 25 per cent of our fuel and reduce our carbon footprint accordingly was really to bring an antiquated diesel locomotive part to what we call "tier zero." The next level is to go up to tier 4 diesel engines that, from a carbon footprint point of view, are much more efficient and less damaging to the environment. We are pursuing that avenue through the renewal of the fleet project that I talked about earlier.
Other than the LNG project or biofuels, which we looked at just to keep informed, but because our usage of any alternative is subject to permit by the owner of the infrastructure, we don't invest time and effort there.
Where we do invest time and effort considerably is in continuing to improve the efficiency of our use of the current locomotives through training and telemetry. Training is basically training our locomotive engineers to drive more efficiently, whether it be in moving to dynamic braking as a way of braking on train movements, or speed increases and decreases being more efficient — again, a bit like you do with your car in applying speed and reducing speeds.
We also measure their compliance and their fuel consumption in a way that we can take on from the better locomotive engineers the ways to train the other locomotive engineers and make them all more efficient. Half of the savings we've realized in diesel consumption has come from mechanical changes we've made to the engines.
The other half has come from operating the engines as they have been modernized. We cannot underestimate the necessity to train locomotive engineers to be more fuel efficient in their application of speed or their application of braking as they drive these trains.
So that is our venue of investment. We're very proud at VIA to develop the first GPS-based tracking system that allows us to provide in the cab of the locomotive engineer information that allows them to make braking and speeding decisions way ahead of the signalling that was the conventional way of driving trains.
As you know, train conducting in Canada is based on lights and signalling systems. So we have put on board, through iPads that are managed through a GPS system, advanced warning and signals that allow the driver to prepare to stop or speed in a way that is more efficient than even the current systems that are in place. That's where we're putting all our efforts.
On our dedicated track network, we would be able to move from the current light signalling system that we're all familiar with to an advanced automatic control system that exists throughout Europe, where there is an overlay of a computerized system that manages the way the locomotive engineer drives the train. And should he not conduct it according to the rules, the system takes over, which is a huge help in preventing accidents. But short of accidents, it is very helpful in maximizing the efficiency of the driving of the cab by the locomotive engineer. On our network we'll be able to deploy that technology because it will be under our management and decision to do so.
Senator Seidman: What you did mention that you're moving towards is electrification.
Mr. Desjardins-Siciliano: Yes, for that network.
Senator Seidman: Would you be able to describe to us what that involves and how many new diesel trains would be needed, for example?
Mr. Desjardins-Siciliano: Under the Fleet Renewal program, we're looking at replacing the current corridor fleet initially as a dual mode fleet, because the fleet will be going through both the freight territory trackage as well as our own dedicated electrical trackage. So it will be a bimodal fleet, basically. In some cases, when it's on a freight infrastructure, it's running on diesel, and when it's on our electrical infrastructure it will be running on electricity. That's how we come to the measurement of reducing our own CO2 production by 98 per cent on that corridor.
Senator Seidman: Just to clarify, they're hybrid diesel electric?
Mr. Desjardins-Siciliano: Diesel electric, therefore maximizing — most mileage will be done on the electrical network, and that's why our own production will come down significantly.
Senator Seidman: What infrastructure expenses are involved in terms of additional electrification?
Mr. Desjardins-Siciliano: Electrification of the Quebec-Montreal-Toronto-Ottawa corridor is around $1.5 billion.
Senator Seidman: How does that translate down the line to the consumer, for example?
Mr. Desjardins-Siciliano: Well, as I said earlier, the cost of energy will be fairly similar to the cost of diesel energy. It is not a variance on the operating cost. The real advantage is on the carbon footprint that we create. And obviously replacing a car-produced-CO2 footprint with a diesel-produced-CO2 footprint is efficient because it's only one sixth of the car footprint, but it's even more efficient if you move to electric because then it is about one twentieth.
So that's how the saving is. It's really on the carbon footprint aspect and not really on the operating cost of the train company.
Senator Patterson: Thank you for being here.
Just a quick follow up to Senator Seidman's line of questions: The federal budget of 2016 provided $3.3 million over three years to Transport Canada to support an in-depth assessment of your high frequency rail proposal.
Can you explain what are the parameters for the assessment of this proposal and how that is going?
Mr. Desjardins-Siciliano: I can't explain it. Obviously, it's Transport Canada funding, so the question should be directed to the department.
But from our end, we have been in constant discussion, as we always are with our shareholder, Transport Canada, and since July there have been extensive consultations reviewing the analysis of both costs and revenue projections and ridership projections of this project. So that funding was really meant to support government civil servants and consultants to come and review the work that VIA has done once in 2014 and has done again this year with another series of outsiders to validate both the cost and revenue side.
I am happy to report that on the cost side the numbers have come in line with the original numbers and the same thing on ridership. So we're finalizing the business case, and we're hoping to table it with our shareholders by the end of November.
Senator Patterson: Thank you. You said that the big advantage of this project is greenhouse gas reduction. I see that VIA joined the International Union of Railways to pledge support for goals set in the Paris climate conference and specifically seeking to reduce your GHG emissions 20 per cent by 2020 over 2005 and 30 per cent by 2030 over 2005.
Is the high frequency rail plan critical to meeting those goals, or can you do it with or without that plan?
Mr. Desjardins-Siciliano: Currently, we're standing at about 40 per cent on that goal of 50 per cent. We're getting close to it. But a new diesel fleet, which would be a tier 4 fleet, is critical to making that 50 per cent. So whether it's HFR or not — because those are two different issues — we need a new fleet, and we believe we can leverage that new fleet by making it more useful by having more people on it if you have a dedicated corridor. If we get a new fleet, it will be tier 4 diesel, which is more efficient than CO2 production, and that will allow us to make that 50 per cent target.
However, the other target set by the International Union of Railways is to double your ridership within that time frame, meaning to reduce the carbon footprint of travellers. We will never meet that target unless we have a dedicated railway, because although we like to boast that we currently are experiencing double-digit ridership-revenue growth and high-single-digit ridership growth, we will never make the doubling of the ridership if we continue to run in a mixed freight and passenger railway operation where you don't have enough frequencies to be useful, time to destination is longer going into Canada's one hundred and fiftieth than it was back in 1967, and the equipment is, in many cases, older that the CO of the company.
Therefore, unless you change those parameters specifically with frequency, first and foremost, you will never be able to double the number of passengers on board these trains because you're not around when the passenger needs to get on the train.
The perfect example of that in the corridor is there are no evening trains, so whether it's Montreal-Ottawa or Montreal-Quebec City or Toronto-Ottawa, Toronto-Montreal, there are no trains that allow you to catch a game or have a dinner or have a business meeting and get back home at the end of the evening. So that target requires dedicated infrastructure. But on the consumption side at 40 per cent today, if we move to a new fleet with a diesel tier 4 fleet, we will make that 50 per cent target.
Senator Patterson: Will you put freight on that line as well?
Mr. Desjardins-Siciliano: The lines we're looking at repurposing are currently running freight once a week or twice or once a day in some cases. So we would run freight, but we would control the traffic and would run it between the hours of midnight and six in the morning when there is no passenger traffic. That is the strategy there.
[Translation]
Senator Mockler: Mr. Desjardins-Siciliano, I have a small reservation to express regarding your comment about northwest New Brunswick, which you consider to be in "the woods". I do understand, however, that we are all human and that we like to use colourful language sometimes.
That said, I know my region very well and I'm sure you have visited it yourself. Based on the comments you have made in the past — concerning Campbellton, Bathurst, Moncton and Halifax — you conducted a feasibility study that took into account Rivière-du-Loup, Edmundston, Fredericton, Moncton and Halifax.
As the former Minister of Transportation of New Brunswick, it seems to me that most of the population lives in that region rather than in the north. I don't want you to eliminate what has already been found in the north, but have you done your homework recently? Has there been a feasibility study?
Mr. Desjardins-Siciliano: In 2014, CN announced its intention to abandon part of the Newcastle subdivision. We considered bringing the service to the line you mentioned between Moncton, Fredericton and Edmundston, if the line were to close.
By the way, I appreciate your generosity. I want to apologize to your constituents in the region. I have driven more than once with my young family in that area, and by "in the woods" I meant that we're in the woods compared to when we're driving along the coast. That said, I see your point. I certainly didn't want to offend my good Acadian friends, who will be annoyed with me next summer.
When we looked at the infrastructure, it was clear that the infrastructure would have required significant improvements to create sidings. It's the main line used by freight trains that have abandoned the line along the coast, which is too slow and winding for them. Therefore, the trains use the line in the "woods", so to speak, to increase speed. We would have needed to make major investments in the sidings.
Also, we would have needed to create stations because there aren't any along that line, except for the main historic stations in Fredericton and Edmundston. We would have needed to build stations along the intermediate line, because ultimately, as I said earlier, it's the main line for freight trains. There would have been ongoing congestion between passenger trains and freight trains. It was simpler and better to stay on the current line, where there are fewer freight trains, where stations have already been established and where we have ridership.
When the New Brunswick government decided to invest $25 million in repairing the railway, VIA Rail also invested $10 million at the time. Today, that section is still in place. We were able to increase speed in some instances, so the line was improved by a little over an hour. We think there's still room to increase speed in the Miramichi area. We're working with our colleagues and the owner on increasing speed.
Last week, I met with the current Minister of Transportation of New Brunswick to talk about the matter. We think we should first improve the service as it stands before starting to consider other services that will only raise costs without necessarily increasing ridership.
Senator Mockler: Let's say we had the chance to make ourselves clear regarding the "woods" issue.
[English]
Transport Canada and Environment and Climate Change Canada signed an MOU with the Railway Association of Canada, committing to reductions in greenhouse gases and criteria air contaminants.
The MOU is set to expire by the end of 2016. Are the federal government and the Railway Association of Canada working on a second MOU? That said, what was accomplished with the first MOU between 2011 to 2015?
Mr. Desjardins-Siciliano: I will let Michael talk to the renewal, but, with regard to VIA Rail's performance following that MOU, we have met the targets that had been set by us in order to comply with that MOU in terms of both our own fuel consumption, which went down by 24 per cent, and the intensity of our GHG emissions, which have gone down by 25 per cent since 2009. As for renewal, I will leave it to Michael to answer.
Mr. Bourque: Do you want me to tackle that now? We don't know. We are starting discussions with Transport Canada about the MOU. Our longer-term agreement, our five-year agreement, actually expired 2015, and then we extended it by one year for 2016. We're certainly willing and hopeful that we will sign a new MOU.
Senator Mockler: We live in a border town with the U.S. so we see trains in and out. Does the U.S. have stringent emissions, more than Canada, when you look at the global scheme of carbon emissions?
Mr. Gullo: It's an interesting question, but I think the short answer is no. I think there is a very strong foundation in both countries under the MOU. We've actually pointed to the regulations that exist in the United States for criteria air contaminants, so your NOX, your SOX, your particulate matter, all the air pollution stuff. Minister Garneau recently announced, on June 19, in the Canada Gazette, the Locomotive Emissions Regulations, which streamline CAC.
Now, carbon is a different story, so we are actually coming to the end of the third MOU that we've signed with the Government of Canada, where we set voluntary emission-reduction targets for carbon. That doesn't exist in the United States and neither does a regulatory framework to address carbon produced by locomotives.
Senator Lang: I would like to move over to the other issue, which is the question of economics and the viability of making an investment that we were talking about with respect to the high-speed commuter-type railway. I noticed something in the information that was provided by the Railway Association of Canada, and I think it's important to read this for the record: "However, since 2002, the exceptional growth of the commuter railway industry in Vancouver, Toronto and Montreal areas, and the need to offer commuter trains at non-peak times, has led to an increase of emissions. . . of approximately 9 per cent, while traffic has increased by 43.3 per cent."
My question would be: If it were a favourable decision to go ahead with such an investment and that investment were put in place, what are you expecting from the point of view of ridership and return in the question of the ongoing operation and maintenance of the new railway line? In other words, are you predicting that much more ridership that you can pay for the ongoing costs of the running of the railway?
Mr. Desjardins-Siciliano: Absolutely. Today, as I said earlier, between Quebec, Montreal, Ottawa and Toronto, we have 2.6 million passengers a year, intercity passengers, and we predict that, within six years of deployment, we'd be up to 7.2 million passengers. This being a fixed-cost business, clearly, this would provide a return that would be sufficient, as I said earlier, to cover operating costs, which, today, for that segment, hover around $200 million a year, and then would leave enough money for an additional return for shareholders. So we believe that the addition of frequency will provide the traffic required to make this a viable commercial concern, and that is in the Quebec City-Windsor corridor, where financial viability is available. It is not available outside of that corridor, whether it be in the Maritimes, in the western provinces or the long haul from Halifax to Vancouver to Churchill. Of course, that is meant to be a public service; it will always be a public service and it will never be profitable just because of the size of this country.
But we look at it a bit like a shopping mall, if I use Senator Massicotte's example. You need an anchor tenant. The anchor tenant in the passenger railway business in this country is the Quebec City-Windsor corridor. If you have that anchor tenant, then the rest of the participants in that network can benefit from the self-generated funds of that major, commercially viable segment. That's what is in it for New Brunswick, Nova Scotia or the rest of Canada. If we make this operation viable, those self-generated funds can then be redistributed to enhancing the lines out east or out west and reducing their dependency on government subsidies, which as you know, vary from government to government. Therefore, as the expression goes, it is not a way to run a railway. You need to have predictable financial resources over the long term.
We're talking infrastructure here. We're talking generational investments. In infrastructure investment, the size of a railway does not produce a return within 12, 18 or 36 months. Therefore, you have to have funding to go along with it.
To come back to Senator MacDonald's 30-year example, there were years in the 30-year history of VIA Rail where capital investment from the Government of Canada was zero. How can you run a $2 billion to $4 billion plant with no money to fix the windows, a leaking roof, a damaged locomotive or cars? So that is the nature of government funding.
When it comes to a commercial operation like a passenger rail service, where there is no acquired ridership, we need to convince riders, one rider at a time and one trip at a time. Therefore, the service has to be as good today, if not better, than it was yesterday. To do so, you need consistent flow of capital and consistent generation of revenue. If you don't have either through subsidies or investment from shareholders, of course you are not going to be successful. That is what the last 30 years has demonstrated.
So that's why, thanks to significant investments — I mentioned earlier the $140 million that went into retrofitting the locomotives in 2008 and 2012. We can talk about $400 million invested in upgrading the Kingston subdivision of CN Rail to allow for passing tracks. All of those investments are the reason why we have had a larger increase of riders in 2016 than we have had in the last 20 years. That is why in the last quarter we talked about 11.2 per cent growth in revenue and 9.6 per cent growth in ridership. It was the first time in recorded history at VIA that we have had that type of growth. That's because significant investments were made between 2008 and 2014.
It is a type of business that requires ongoing investment, so it either comes from the shareholder or from the user. It will only come from the user if you provide a service that is relevant, at a level of frequency and convenience that is such that more people use it. Otherwise, you'll always be short of money, and unfortunately, it will come to the sacrifice of New Brunswick, Manitoba and the regions. That has been the issue, and that is the challenge of running this company.
[Translation]
Senator Massicotte: I have a quick question to ask you. When you say the cost of diesel for future operations is equal to the cost of electricity, what are you basing yourself on? Is it the cost of electricity in Quebec or the cost in Ontario, which is 250 per cent higher than the cost in Quebec?
Mr. Le Fèvre: The problem is not the cost per se, which is much lower. The problem is that the maintenance of electrical infrastructure is much higher than the maintenance of diesel equipment.
[English]
The whole economy, which you would see on savings in fuel, you end up eating up in maintenance of what is essentially a second network to carry electricity.
[Translation]
Senator Massicotte: What are you basing yourself on and what numbers are you using when you say the cost is significant?
Mr. Le Fèvre: We're basing ourselves on the use of hydroelectricity in Quebec.
Senator Massicotte: You said that the Quebec City-Windsor corridor portion is very profitable and that operating costs hover around $200 million. What is the net return for investors? You think it's $4 billion to $5 billion. Is that marginal or good based on the fact the return can be predicted with certainty?
Mr. Le Fèvre: We're talking about over 10 per cent.
Senator Massicotte: That's fine. Thank you.
[English]
The Chair: Thank you, gentlemen, from VIA Rail. We're going to go straight to the Railway Association with their presentation and some questions there. Thank you very much, gentlemen. We appreciate it.
Mr. Bourque: Thank you, Mr. Chairman. I'll just carry on.
The Chair: Okay, go ahead.
Mr. Bourque: Thank you for inviting me. I'm going to ask you to follow along in this deck that is in front of you.
It's a pleasure being here to speak about an important topic for us. Canada's engagement in COP21 reaffirms the country's commitment to combating climate change and the federal government's intention to play a more instrumental role in driving down emissions in Canada and abroad.
I'm here to tell you more about how the railway sector can be part of Canada's climate change solution and support the government's commitment to reducing greenhouse gas emissions by 30 per cent below 2005 levels by 2030. The development of a Pan-Canadian Framework for Clean Growth and Climate Change provides an exceptional opportunity to embrace the emission reduction potential associated with moving more goods and people by rail.
You'll see a chart on page 2. It presents data from Canada's 2013 submission to the United Nations Framework Convention on Climate Change. The data indicates 725,000 kilotons of CO2 equivalent were generated in Canada, of which approximately 28 per cent was produced by the transportation sector.
However, railways represent only 1 per cent of Canada's overall emissions and just 3.6 per cent of what is produced in the transportation sector alone, despite moving over $280 billion worth of goods each year, which reflects 70 per cent of the country's intercity traffic and 50 per cent of the goods destined for export by volume. The reason we emit so little is that we are very efficient. We move one tonne of freight more than 200 kilometres on a single litre of fuel.
I think what is noticeable about this particular graph is that railways are 1 per cent in emissions, which is the same as domestic aviation, yet we are moving all of these goods. As you just heard from Yves, rail also moves over 75 million people who elect to leave their cars at home and travel by train. Obviously, with a dedicated rail service we would increase that number.
The third slide tells you that Canadian railways have a long history of working with the government to reduce emissions produced by railways. As we mentioned, in 2006 we signed an MOU with the Minister of Transport that established voluntary GHG emission reduction targets for all freight and passenger railways operating in Canada. The MOU includes direct engagement with representatives from Transport Canada and Environment Canada as well as Pollution Probe. Each year we report on our results, which are peer-reviewed, and each MOU is subject to an audit completed by an independent and accredited auditor. So that means that the data we have is sound, peer-reviewed and audited.
Under this agreement, class 1 railways and intercity passengers have volunteered to reduce their emissions on an intensity basis by 6 per cent and short lines by 3 per cent. The simple difference between short lines and class 1s is their ability to afford new locomotives.
As you can see in the slide, technology plays a critical role in driving down railway emissions. New locomotives with emerging technologies like stop-start devices, anti-idling devices and throttle control are key tools for driving down emissions.
In the next slide, you see that infrastructure and track maintenance also play an important role to the efficient movement of trains. With fuel being the second largest railway expense after labour, the efficient movement of trains on yards and the main line is very important. Heat switchers, rail lubrication and welded rail are just a few examples that make sure trains run smoothly and with less friction.
Smart railroading is another important element to reducing emissions. For example, ensuring that our locomotives are focused on operating techniques that reduce fuel consumption — and Yves mentioned the program they have at VIA for doing so — is one of the most important methods for driving down emissions. Equally important is the introduction of distributed power, which reduces fuel consumption. For those of you who have seen long trains, you often notice that there is a locomotive in the middle, beginning and end — that kind of distributed power has tremendous energy-reduction properties.
The next slide tells you that with the introduction and use of modern technology, coupled with investments in infrastructure and using smarter railroading techniques, railroads have managed to reduce their emissions, despite an increase in traffic. Since the 1990s, RTK, which is "revenue per ten kilometres," which is the best freight railway's workload, have increased by 80 per cent, while GHG intensities have decreased by more than 40 per cent. You heard from Yves that they have a similar strong story on the passenger side.
The next slide tells you that, looking forward, the future does look very bright for reducing GHG emissions. Major technological changes are on the horizon. As I mentioned, CN is currently piloting the use of LNG-powered locomotives. Just this year, General Electric introduced its new tier 4 locomotives to the marketplace. In the passenger railway sector, full-scale electrification is occurring across certain segments. The map that is here shows you the AMT's line. GO is also electrifying in Toronto. If VIA's dedicated train program is approved by the government, then it will be another electrical system.
The next slide is really just to highlight that we believe the time is now to recognize the advantage of moving goods and people by rail. Rail reduces pollution, greenhouse gases and congestion. Certainly on the passenger side, it improves productivity.
The question I think most of you would have, if not now then when you get down to writing the report, is: What can we do? We believe that the potential for reducing greenhouse gases from the increased use of rail has not been realized.
At the RAC, we recently completed an internal review of truck traffic from 2013, using Transport Canada data sources. We estimate that if just 15 per cent of truck traffic was transferred to rail, Canada would reduce its emissions by 5.6 mega tonnes of CO2 equivalent. Additional benefits such as congestion and wear and tear on the country's roads and highway systems obviously result in savings. By comparison, B.C.'s taxation system is estimated to deliver a 3 mega tonne reduction by 2020. That means 5.6 mega tonnes for 15 per cent of the trucks is pretty significant.
Government can play a crucial role in realizing that shift by ensuring that carbon pricing revenues are recycled back into rail infrastructure. The Province of Quebec is already leading by example, where revenues from its cap-and-trade program are reinvesting into programs that allow rail customers to offset the costs associated with building rail access. In another example, the government provides resources to railways to help modernize their fleet and drive down emissions even further.
We're asking for an investment of $165 million over five years to support new rail and intermodal infrastructure projects across Canada. We propose that this program be based on the Quebec program and be made available in as many provinces as possible.
We're also suggesting that a federal program be implemented to award shippers for their efforts to transport their products by rail.
Anecdotally, one of the projects introduced in Quebec under their program was for Bombardier recreational products — so we're talking about Ski-Doos, Sea-Doos, boats and all the things they produce out of their plant — they were all previously moved by truck. The Quebec government helped pay for rail siding that connected that plant to the rail infrastructure, and they were able to see significant reduction in greenhouse gases. In fact, in the Quebec program, which was introduced after Kyoto, they saw more reductions in greenhouse gases by incentivizing a transfer from truck to rail than all of their other programs that they introduced to reduce greenhouse gases. It was seen to be the most efficient.
In addition to this program, governments should consider providing support to railways, specifically shortline railways, with the resources to ensure that their locomotives are equipped with the best available fuel-efficient and low-emitting technologies.
I would emphasize here what Yves mentioned; namely, the fact that railways are a capital-intensive business. It's shocking that a rail operator would not spend any money on capital infrastructure in a year. The class 1 railways in North America, including CN and CP, even through the big recession of 2007-08, invested 20 per cent of their revenues back into their infrastructure, which is probably more than any other industry that will come to this table. All of those investments lead to better safety outcomes and lower emissions outcomes because of de-bottlenecking and other things.
Unfortunately, short lines don't have that ability. They don't have the revenue base to be able to invest that much. They typically invest 12 per cent of their revenues back into their infrastructure. The simple reason is that they don't have as much revenue; they don't have that ability. They compete with trucks, and trucks are riding on publicly funded roads whereas short lines are operating on private railway tracks. That's where it's unfair, which is why we believe it would be levelling the playing field for governments to invest in short line infrastructure. Again, we recommend that the program model in Quebec provide the basis for the design of such a program.
With that, I thank you for staying so long overtime to listen to me. I would be happy to take some questions.
The Chair: Thank you for staying so long to actually answer our questions.
Senator Massicotte: Two quick questions. You say that the rail is three times more efficient than the car and four times more efficient than the truck, or vice versa. What does that mean? I would have thought that rail to, say, carry one tonne of materials would have been much more efficient — like hundreds of times more efficient — than a car. Maybe I don't understand your comparison.
Mr. Bourque: The metric that I provided is for freight rail. So we're comparing freight against truck, and we're using a sort of apples-to-apples comparison. The engineering and physics of railway, steel on steel, is what gives us efficiency.
I can understand why you would think it's higher, but that's a conservative estimate.
Senator Massicotte: The other question I have is that you used an example. You're saying the government should spend some money on some things and you use the example of Bombardier using rail spurs. But with the impending pricing in carbon — and Quebec has been there for a while with cap and trade, though it hasn't worked very well, although presumably they will get it right eventually — why would the government invest? Shouldn't the companies be motivated enough? If they will have a reduction of CO2, they would get attributed to that saving, wouldn't that be adequate, as opposed to asking taxpayers to subsidize their objectives to reduce CO2?
Mr. Bourque: There are two parts to that. Under a cap-and-trade system, companies don't necessarily get the benefit from the reduction in their transportation emissions.
So what has happened is that the funds have been set aside from the cap and trade program and spent on those kinds of projects. So that's the design that Quebec chose, and Ontario is in the same program.
A carbon tax, which is obviously a simpler design, in theory would allow for customers to switch from truck to rail because rail is more efficient. But if you want to accelerate that switch, then the answer would be to have a different carbon tax for rail than for trucks, knowing that trucks emit more emissions as well as being a higher cost for other reasons.
Senator Massicotte: The one recommendation we get all the time is to make sure you use the same metric. So why would you price carbon differently for truck than for rail? Why would you discriminate one industry to the other one? It's not a level playing field.
Mr. Bourque: To be clear, that's not what we're advocating. What we're saying is with a carbon tax, in theory there should be a switch from truck to rail because we are more efficient. If the government wanted to accelerate a switch from truck to rail, one of the ways that they could do that would be with a different carbon tax, which would be discriminatory toward the trucking sector.
Senator Massicotte: Or a higher level of taxation.
Mr. Bourque: Or a higher level, yes.
Senator Massicotte: Thank you.
Senator Lang: I want to pursue that for a second. No matter what program you have, cap and trade or carbon tax, at the end of the day the consumer will pay more. Because if it's going to cost more to run one, whether it would be by rail or truck, at the end of the day I will pay more for the milk I buy when it gets delivered.
Senator Massicotte: That's where the money goes.
Senator Lang: Where the money goes, I'll pay.
Mr. Bourque: Depends if you have supply management in your milk.
Senator Lang: You can switch to strawberries and blueberries. You're obviously very knowledgeable in respect to what is happening in the railway business. In respect to what you are proposing here, are these types of changes happening on the American side of the border in respect to their companies?
Mr. Bourque: They don't have carbon taxes.
Senator Lang: I understand that.
Mr. Bourque: We do have to be careful on a competitiveness basis. We're operating in the North American environment. The question of LNG locomotives is relevant as well because whatever infrastructure, whatever technology you use has to be able to operate within the North American context. All of our equipment is moved throughout North America on a daily basis.
Senator Lang: That's why I was asking in respect to the American side of the border and the changes that you're promoting to be done in Canada. Are the Americans going about and doing the same type of changes, or are we going to have a situation where we have a more efficient system on our side? How do you interconnect on the other side if they stay where they are?
Mr. Bourque: What we're suggesting wouldn't change anything as far as the operations are concerned.
One difference that the U.S. system does have, which relates to one of our suggestions, is short line infrastructure funding. They have had significant amounts of short line infrastructure funding in place for many, many years that we have not had. That is because they recognize the importance of the short line sector as an alternative to having more trucks on the road, and the fact that trucks are subsidized by virtue of the fact that they run on public roads, whereas railways run on private property and must pay for the security, snowplowing, maintenance, construction, new bridges and culverts and all of the things that go with having that infrastructure.
So that's one area where we really need to catch up to the U.S. Their short line industry is in far better shape as a result of that.
Senator Lang: Following on that, you're asking for a $165 million investment over five years. Is that going to address the short line investment?
Mr. Bourque: They would be able to apply.
Senator Lang: Second, how much money are you prepared to put in? You're asking for $165 million.
Mr. Bourque: As I mentioned, railways invest considerably as it is. So I think any investment by the government would leverage private sector investment.
Senator Lang: Would the $165 million go into the short line?
Mr. Bourque: They would be eligible, as would railway customers. First, you have to assume that we want to lower greenhouse gas emissions, that Canada is going ahead with lowering greenhouse gas emissions and that they are looking for solutions that will actually lower emissions. So there are a lot of different people talking about it, but this is an actual solution that will lower emissions based on programs that already exist in the country that have been proven to work.
One of the things that I like about it is that it benefits any railway, and it benefits any railway customer. So there is a competitiveness lift, if you will, from this kind of approach that maybe doesn't exist with other programs.
Senator MacDonald: Good to see you again, Mike.
The Government of Canada, Transport Canada, had an MOU with the Railway Association of Canada for the reduction of greenhouse gas and air contaminants. What has been accomplished under that MOU? Will a new one be signed when it runs out at the end of this year?
Mr. Bourque: I mentioned the numbers in my presentation. So under the agreement, Class 1 railways and intercity passenger rail volunteered to reduce their emissions on an intensity basis by 6 per cent and short lines by 3 per cent. We would like to negotiate a new agreement. It would be just for greenhouse gases because the other contaminants are dealt with by regulation now. Part of the limitation that we have is that we're the railway industry, not the locomotive manufacturing industry. We can only work with the technology that exists.
But I can tell you that Canadian railways are leaders in North America in terms of reducing greenhouse gases for two reasons: First, because we have an MOU where the American companies don't; and second, because Canadian railways have been leaders in both distributed power operations and in precision railroading.
Many of you have heard about precision railroading. It's the lean production process pioneered by E. Hunter Harrison and which is now firmly in place at CN and CP. If you look at the operating ratios of those two companies as a measure of how efficient they are, they are both below 60, which make them the most efficient railways in North America.
Interestingly, because I know this is a criticism, CP has had the best safety record for the last 10 years. So these things go hand in hand. Those kinds of debottlenecking and constant, continuous improvement of this sort of lean approach leads to better fuel economy. So we have got tremendous railways in Canada, at least at the class 1 level. Where we could use extra help now is on Yves' passenger side and on the short line side.
Senator MacDonald: Does the impetus come from the government for the MOU? Does it have to come from the railway association?
Mr. Bourque: We have raised it with them. We are talking to them, and we expect something will get done.
Senator Patterson: Just some brief questions. This new government is doing a lot of consultation, and one of them is that the first ministers issued a Vancouver declaration on clean growth and climate change in March of this year, and there is an objective set of framework, pan-Canadian, including the transportation sector. I am wondering, first, if your association has been contacted to provide input for the pan-Canadian emission reduction framework?
Second, the Minister of Transport has a consultative process launched with Canadians, stakeholders, provinces and territories to develop a long-term transportation agenda for Canada. And that's looking 20 to 30 years ahead. Again, I'm curious whether your association is participating in this process and expressing your views on what the industry should aspire to be in the next 20 to 30 years.
Mr. Gullo: I can speak to the pan-Canadian framework. Some of you may or may not be aware, but Minister McKenna started a consultation process over the course of the spring and into the summer there was an online portal and all Canadians were invited to feed into that, which was the opportunity to feed into the discussions about the pan-Canadian framework. The submission that was filed to all of you in advance of this meeting is what was given to the minister in advance of the discussions on the pan-Canadian framework.
Senator Patterson: Okay, very good; that answers that question.
Mr. Bourque: As I mentioned, we have the MOU. The MOU is really an audited set of numbers and so when we went about doing the calculation our submission is based on this notion of switching from truck to rail and reducing emissions accordingly. The assumptions that we've made are based on our experience and the data that we have. We think it's a credible proposal and the design of the programs that we're suggesting from a government standpoint are programs that already exist in other jurisdictions and which have proven to work.
My feeling is that ultimately we're going to come to a time when governments are looking around and asking "where have we reduced emissions" and "what programs are in place that will actually reduce emissions?" Our record as a country is one of consistently missing those targets. What we're offering as a suggestion, which we believe is realistic and not very costly, is one that has proven to work and based on a model that has credibility.
Senator Patterson: Thank you.
Senator Mockler: I have a question following meetings we had in Saint John, New Brunswick, last Wednesday. And the subject matter was moving oil by rail car or by pipeline. Have you done the analysis of which one would be a lesser emission? I'm led to believe that it is the pipeline, and if so would that mean to Canadians that we could reduce tankers on our rails?
Mr. Bourque: That's a very complicated question. It really would depend, first of all, on what kind of oil you are moving. Are you moving heavy oil or light oil? That is not because there is necessarily a difference in weight but because with heavy bitumen you can move that by rail without diluting it. You add diluent to heavy oil for it to move in a pipeline and that diluent has to move back to the original source so it can be recycled and used to thin out that heavy oil. The calculation of a heavy oil is different from a light oil.
Don't forget, one of the reasons we saw an uptick in the rail movement of crude oil some years ago was that there was a lot of oil being produced in areas where there is no pipeline or where it is not economical to build a pipeline because the extraction of that resource is not permanent the way, say, an oil sands operation is.
That's an extremely complex question, and at the bottom of it is railways are not trying to replace pipelines. We are a complement to pipelines, and even at the peak of what we moved in terms of crude oil we moved less than 5 per cent of all of the energy being moved. My view is that when it comes to moving energy products, it's a little bit like the debate of what energy sources we require. We need everything. We need ships and we need trucks. You still need trucks. You will never drive a train up to a Walmart store so you still need trucks and pipelines. We need all of it and everyone has a role.
Senator Mockler: I'm assuming from what I just heard that you did not do any analysis on carbon emissions, which is the question I posed. That's why you said it was that complicated.
Mr. Bourque: We've done it in very certain scenarios and, again, there are a lot of assumptions that you have to make and our general belief is that we're about equal. The proposed Keystone pipeline, for example, would have relied on very large motors — operating pumps — and depending on where these were located they may be using electricity that was generated from coal, which would have a very different emissions profile than if it was from a generating station that was hydroelectric. So it depends what assumptions you put in and you can move it either way but the fact is we believe we are highly efficient and more or less equal to pipelines.
Senator Mockler: I want to talk about Fred and Martha, who are Canadians. If a pipeline comes to Saint John, New Brunswick, the biggest refinery in Canada, where it's located, my Fred and Martha who are at Tim Hortons and McDonald's, say, "Okay, Percy, if that pipeline passes through here will we still have hundreds and hundreds of cars going down to Saint John?" Will we still have that or will it disappear?
Mr. Bourque: If you have a pipeline you are going to have fewer rail cars, but I don't think it's going to go down to zero. Don't forget, the reason they had rail into that facility is because they were moving a variety of products. There are dangers when we get into discussing rail versus pipe. I've always believed that there is really no benefit in talking about one being better than the other. We need all of them. The fact is that railways move more than 200 different kinds of dangerous goods on their network and they are much safer. Where would you rather see that propane tank, on a railway or on the truck driving next to your minivan on the highway?
We need to preserve the very good safety record that we have as railways and we need to preserve public confidence that we can move hazardous materials on rail safely and provide them to the destination. In fact, our record of doing so is identical to pipelines, which is 99.99 per cent of the time we get the product safely to its destination, exactly the same as pipelines.
Senator Massicotte: Relative to the answer you gave to Senator Mockler in relation to the economics, I agree, we need all methods of transportation because the circumstances dictate that sometimes one is not available.
Previous testimony we had here is that if you had a choice between rail and pipeline, and they're both available for long distances, pipelines were quite a bit cheaper to transport in than rail by as much as maybe $7 to $10 a barrel. Do you agree with that?
Mr. Bourque: Yes, that's my understanding as well.
Senator Massicotte: Thank you.
The Chair: In going forward, the government has committed Canada to reducing all emissions by 30 per cent from 2005 levels by 2030, and then 50 per cent from 2005 levels from there on, from 2030.
Is there a plan in place by the railroads to meet that first 30 per cent reduction and will they meet that plan moving forward?
Mr. Bourque: Because we've been at this so long and because of the important process innovations that I mentioned earlier resulting from precision railroading, I think last year the railroad spent $4 billion on their plant.
There is a lot of investment that has gone in, but that also means that because our record is very good, a lot of the low-hanging fruit has been picked, and now where you're going to see massive differences is going to be because of a new technology like LNG being introduced, which isn't going to happen by tomorrow, or by shifting from truck to rail. So that's why we're promoting that approach.
The other important point is, and the reason I wanted to have this deck, actually, is to give you this chart on the second page, because I think it really tells the story.
This particular chart points out that 12 per cent of the transportation emissions come from gasoline and diesel vehicles and another 6.6 per cent from gasoline and diesel trucks, whereas railways, which move significant amount of goods, very heavy goods, across great distances is only 1 per cent. That tells you the story, that we are extremely efficient, and where the opportunity is for rail is moving people out of their cars and moving as much truck traffic off the road as you can.
It's a little bit like the questions on pipelines for long haul. We're not going to pull a train up to a Walmart store, but if there is a truck that is going from Ottawa to Vancouver, maybe that should be on a rail.
The Chair: The question was: Have you got a plan to meet 30 per cent reduction by 2030 from 2005 levels?
I get it. You need it all. You don't service everyone by rail. You don't service Whitehorse by rail; they need trucks.
There are a lot of places that rails don't service. I'm not saying that they're not efficient or don't work well.
Is there a plan on a piece of paper from the Class 1 railroads that says, "Yes, we can meet 30 per cent reduction by 2030 from 2005 levels"?
You guys have been doing a lot of stuff. I appreciate that, but it's 30 per cent from 2005.
Mr. Bourque: You might have to invite them in and ask them directly, but I can tell you that we continue to work on it.
There is opportunity by investing in new locomotives, because these new locomotives are not 100 per cent of the fleet. That would go a long way towards those reductions. There are new investments that can be made for stopping bottlenecking. Longer trains reduce. That has been the trend.
I can't speak for them to say that they have a plan to reduce at that level, but certainly part of what we are proposing here will help us get us there. Technology and process changes will continue to get us there.
The other thing that will probably help is some of the work that we've been doing in terms of data analytics. Railways are fantastic collectors of data. We have technology on the cars and tracks that allow us to collect data, and we have the ability to analyze and act on that data in a way that has helped, for example, with significant safety improvements. No doubt, we'll be using that same kind of big data and data analytics to help with reducing emissions and reducing fuel consumption.
The Chair: The second question is about what the cost would be to reach that 30 per cent reduction, you wouldn't have any idea of that because you're not sure whether the railroads even have a plan that they can meet the 30 per cent reduction by 2030.
I would think that as a railway association, you would have something that would say, "Here's a plan. This is what we have to do, and this is how much it will cost."
Mr. Bourque: We presented a plan today which is realistic based on numbers that are credible and on program design that already exists, which would reduce emissions. That is in addition to all of the other technology and process innovations that railways will continue to implement and based on significant investments that they have been demonstrably willing to make at high levels over the years.
The other point I would make is that railways are already very efficient and very low emitting.
The Chair: But you still have to reduce it. So are a lot of other things. If we're going to meet our targets, everyone has to pull up and do what they can.
Mr. Bourque: The proposal that we put forward today, we're one of the few industries that can say we will continue to reduce our emissions, and we can help our customers reduce their emissions while still growing.
A lot of the people that you would speak to and who would come in from different industries would come in say, "We can reduce, but we can't grow," or, "We can't grow as much if we have to reduce that much."
The Chair: That's not always the case.
Mr. Bourque: No, I appreciate that, but we're saying we can grow and help our customers grow and, at the same time, reduce emissions.
The Chair: I think that ends our questions. I can tell you, coming from British Columbia and being involved with the Government of British Columbia for 18 years and now with the Senate, part of the problem of why there are trucks on the road and a lot of them hauling lumber from Prince George to Vancouver is because the railways can't compete with the on-time deliveries that customers want from their mills. If there was anything that I ever got, it was: "We can't get the cars. We can't get the right cars." And the same with the grain farmers: "We can't get the cars when we need them." There is a lot of stuff there that tends to lead to trucks staying on the road.
I don't disagree with you. They pay their share in fuel taxes. I know how that process works. Rail can't always meet the targets that a customer may want for their lumber, from Prince George to maybe down into Washington someplace. That's part of the problem.
I appreciate the time you've spent with us. I appreciate you staying later, and we apologize again for being late. Thank you, and have a good evening.
(The committee adjourned.)