Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 29 - Evidence - February 6, 2018
OTTAWA, Tuesday, February 6, 2018
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-49, An Act to amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts, met this day at 9:30 a.m. to give consideration to the bill.
Senator David Tkachuk (Chair) in the chair.
[English]
The Chair: Today we’re examining Bill C-49, An Act to amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts.
We have two panels of witnesses. For the first panel, I would like to welcome Gérald Gauthier, Acting President, Railway Association of Canada; Perry Pellerin, President, Western Canadian Short Line Railway Association; George Bell, Vice-President, Metrolinx; Sean Finn, Executive Vice President, Corporate Services and Chief Legal Officer and Janet Drysdale, Vice President, Corporate Development and Sustainability, both at the Canadian National Railway Company.
I thank all of you for being here. I invite Mr. Gauthier to start his presentation, followed by Mr. Pellerin, Mr. Bell and Ms. Drysdale.
I think you have had discussion with the clerk as to timing. I won’t be too strict, but at the same time we would like to have lots of time for questions.
Mr. Gauthier, the floor is yours.
Gérald Gauthier, Acting President, Railway Association of Canada: The Railway Association of Canada represents more than 50 railway operators composed of freight, class 1 carriers and local and regional railways, known as short lines, as well as many passenger rail providers such as VIA Rail and the Ottawa O-Train.
Today I will speak on two key parts of this legislation. First is the long-haul interswitching provisions. We challenge the idea that additional recourse mechanisms need to be made available to shippers if they have access to trucking or marine transport that provides competitive access options. It is important that we recognize the strength of our current system and ensure we do not move backward by introducing unnecessary legislation or regulations.
Let me turn to safety and the LVVR or locomotive video and voice recorder provisions of the bill. Safety is a top priority of the railway industry and LVVR is a proven piece of technology that has the potential to help prevent accidents by discouraging unsafe behaviours that may distract crew members from their duties and by providing information on the cause of accidents. It is expected that in most cases the recorded information will corroborate statements provided by crew members following accidents or incidents.
Locomotives are already equipped with black box-like event recorders that track measurements such as distance, speed and emergency brake application. While this has improved safety, it does not allow us to assess the human factors and the human errors that cause accidents.
Much has been said about the privacy implications of LVVR, but Bill C-49 is explicit regarding the specific circumstances in which railways can access recorded LVVR data and the use they can make of them. In addition, when the minister appeared before you he made clear hat the regulation would impose fines of $250,000 on any company that breaks the LVVR provisions of the act. That is a strong deterrent to illegal use of the data.
We find fault in the arguments made that railways will access data in circumstances not allowed by the bill. This presumption is totally unwarranted.
When the lives of the public are at stake, safety must take priority over privacy. When your workplace is woven through communities across Canada, as ours is, the implications of an unsafe workplace cannot be understated. In fact, in a decision last year on the Toronto Transit Commission’s random drug testing program last year, the Ontario Superior Court of Justice found that safety of employees and the public outweighed privacy concerns of those being tested and allowed the employer to enforce its zero tolerance policy.
We want to avoid accidents rather than regret that one happened. LVVR will help our industry to continuously learn and improve.
[Translation]
I would be pleased to answer your questions.
[English]
George Bell, Vice President, Safety and Security, Metrolinx: Thank you, Mr. Chair, and honourable senators. I will be focusing my remarks today on locomotive video and voice recorders. Metrolinx strongly believes that LVVR is a vital tool that, as part of a comprehensive safety program, improves safety for our customers, employees and the communities our trains travel through.
At Metrolinx, we have perhaps longer experience with LVVR than anyone else in the country so I would like to quickly provide some background into our operations and how we have implemented this technology.
Metrolinx is a Crown agency of the Province of Ontario. Our responsibilities include the GO Transit regional rail system that serves the Greater Toronto and Hamilton area and the Union Pearson Express, affectionately known as UP, which works between downtown Toronto and Pearson airport.
Together, these form the busiest passenger rail system operating over Canada’s mainline railways. Of the 84 million passengers who boarded a mainline train in Canada in 2016, over two-thirds were boarding one of ours.
Today, Metrolinx operate 3,000 GO and UP train trips over the course of a week. That number is already three times larger than it was a decade ago.
By 2025, it is planned to grow to over 7,000 trips per week as we complete our $20 billion expansion program. This will result in service resembling what you might see leading European and Asian cities with frequent electric trains running all day in all directions.
As we make these huge changes to the scale and scope of our operations, safety is our top priority. We are frequent early adopters of new technologies and techniques. LVVR is one example.
Starting in 2015, we began outfitting the interiors of all operator cabs in our GO and UP fleets with locomotive video and voice recorders. We believe we were the first rail operator in the country, passenger or freight, to take this step ahead of any legislated mandate.
In the passenger transportation business, human life is front and centre. At rush hour many of our GO trains routinely operate with over 2,500 passengers on board. That is the equivalent number of passengers one would find in five jumbo jets.
We proceeded with LVVR because we owe it to each and every one of these passengers, as well as our employees and our neighbours along our railway corridors, to be able to tell them we are using the best available tools and putting in place the best possible processes to keep them safe.
I’ve circulated a backgrounder that provides a bit more information on how exactly we have implemented LVVR and would be happy to discuss it in a bit more detail later this morning.
Metrolinx is sensitive to considerations related to crew privacy. We would like to commend the drafters of the bill who have struck an appropriate balance. Through our launch and ongoing operation of LVVR, we have maintained an effective partnership with our operating crews, who are unionized employees of our contracted service provider. We have made clear to them that we have no intention of using these recordings for discipline or performance management purposes.
Bill C-49, as written, formulates the principles were already following. It foresees three circumstances in which data may be used, subject to extensive safeguards:
First, by the Transportation Safety Board personnel during their investigation following an incident; second, by railway company personnel investigate a TSB-reportable incident that the TSB has declined to investigate; and, third, by railway company personnel for proactive analysis of randomly selected recordings as part of a safety management system.
We are pleased that there is a consensus among the stakeholders that Parliament has heard from that LVVR use in the first circumstance is appropriate. However, we are concerned by any suggestion that railways cannot be trusted to responsibly use LVVR data in the second and third circumstances I just mentioned.
TSB investigations are thankfully very rare. Metrolinx has not been subject to a TSB-led investigation in over 20 years, but we are not perfect and reportable incidents do occur that railways must fairly and responsibly self-investigate to the best of our abilities.
Were the bill to be amended to prohibit the second use, the vast majority of reportable incidents in Canada of over 98 per cent could no longer be investigated with the benefit of LVVR. While investigation is good, prevention is better.
As this committee heard last week from TSB, proactive analysis is crucial in building a true safety culture that prevents incidents before they can occur.
I respectfully encourage the committee to support these LVVR provisions and help ensure that we continue to have the safest possible transportation system.
Perry Pellerin, President, Western Canadian Short Line Railway Association: Thank you for inviting me to speak today and for giving the Western Canadian Short Line Railway Association the opportunity for input on Bill C-49.
The Western Canadian Short Line Railway Association, previously the Saskatchewan Short Line Railway Association, is a not-for-profit membership-based organization representing the interest of 14 short line railways across Canada.
Our member railways depend on competitive rates and rail transportation options. We believe the future of the transportation should be improved and allow for competitive choice for farmers, shippers and small business.
Today, we would like to focus on three of our concerns. First, the rate spreads set by the class 1 railways are anti-competitive and unfairly disadvantage producers and small and medium size businesses.
The newly introduced long-haul interswitching will decrease Canada’s ability to compete in the world agricultural stage against other countries.
Finally, short line railways should have access to shipper provisions such as service level agreements. It’s important to understand, at least in our railways in Saskatchewan, that not only are we representing our employees but we’re also representing a lot of our producers. Especially since the demise of the Wheat Board, we are quickly becoming the voice of our producers.
We will touch briefly on the idea of rates. Right now short lines have a variety of customers. Many are shippers that require short haul movements on an irregular basis, often needing fewer than 50 cars at a time.
We would like to assist all of our customers with their transportation needs for all movements. This is often not feasible because of excessively high short haul and single car class 1 rates. These goods are often forced to be shipped by truck, adding significantly to greenhouse gas emissions, destroying our provincial highways and roads, and decentralizing small business and economic growth.
It is important that we look at what we see as the focus of the government on the environment. What we’re doing here is really kind of anti that, in that we will definitely be putting more trucks on the road.
In Saskatchewan, at least, and probably in Manitoba, our roads are in tough, tough shape. If we add more vehicles, we will only make that worse.
Also this negatively impacts short lines when we’re attempting to meet the needs of our customers for short hauls and our concern for the proposed long-haul interswitching mechanism, which I will discuss shortly.
For some of the same reasons in the past we have heard the concern of CN and CP giving about extended interswitching. Giving another railway like BN extended reach into Canada is the same complaint we have with our class 1 partners. We are totally at their mercy when it comes to rates, and it makes it difficult for our shippers to compete.
The loss of the 160-kilometre interswitching option is very disappointing to our members. While not available to shippers on our entire network of short lines, it provided a strengthened bargaining position in most locations. The 30-kilometre existing legislation is problematic as it is only available to three of our 14 members.
Unfortunately, the proposed long-haul interswitching is not a good alternative to the 160-kilometre interswitching that has sunset.
The biggest problem we see is that this new mechanism is really based on an average of commercial rates. Really, at the end of the day, folks, we see a lot of short-haul rates that are very expensive for us and for our shippers.
If we are to take an average of an expensive rate, we end up with an expensive rate. The bottom line is that a bad rate will still be a bad rate under the new legislation.
Next, small shippers are very reluctant to apply to the agency for the long haul interswitching rates based on the current commercial rates and factors. As a result, competition and increased traffic on short lines by the way of small shippers or new builds on our lines will be reduced. This, paired with the sunsetting of the 160-kilometre interswitching distance, will result in less competition than existed before the introduction of the Transportation Modernization Act.
We appreciate that shippers on short lines have access to long-haul interswitching as per the proposed legislation, but we are disappointed that the rate for this new mechanism will be based on commercial rates, thus rendering it inaccessible for all intents and purposes.
It’s important that we not confuse inefficiency with the idea that doing less is better. We believe that efficiency can be gained by doing the job better, not necessarily doing less work. That is a short line belief, and we continue that today.
On service level agreements, the short line association currently advocates on behalf of our customers. While being unable to directly access the shipper remedies provided in the act, many of our customers are small shippers. As such, they are unable to invest the time and money necessary to truly benefit from those remedies.
To support small business and shippers on our line, the short line association would like to access shipper remedies directly, particularly with the service level agreements allowing us to negotiate directly with the class 1s and the CTA.
We will touch on another point briefly that was handled very well by the previous commentators. On the short lines safety is of utmost importance. We agree with the LVVR, with the exception that on some of our short lines we operate at 10 miles an hour and the need in our locomotives would be suspect. We want to support the class 1s and others in the idea that we see it as a very safe thing, especially on the mainline where we’re doing high speeds. We want to support our colleagues in that for sure.
In conclusion, it is of critical importance that competition is a focus in any consideration of the future of transportation in Canada. The industry is becoming less competitive over time for both grain handling and transportation.
While intending to increase competition, this legislation continues to move our transportation system toward efficiency that deters small business and small shippers and negatively impacts the flexibility and accessibility of our transportation system.
I appreciate the time to meet with you. I grew up and was told that the Senate was a place for sober second thought. I hope that is the case.
Janet Drysdale, Vice President, Corporate Development and Sustainability, Canadian National Railway Company: We appreciate the opportunity to discuss Bill C-49.
CN is Canada’s largest railway. We operate a network that stretches from Vancouver and Prince Rupert east to Halifax and south to the Gulf of Mexico. We operate in eight Canadian provinces and 16 states.
In Canada, CN owns and operates a 22,000-kilometre network, bringing the world’s imports to Canadian consumers and connecting inland resources with export gateways. CN is an integral partner in Canada’s supply chains and a true backbone of Canada’s trade oriented economy.
Canadians should be proud that our freight railroads are globally the most efficient, directly employ over 25,000 people, and annually invest billions of dollars in Canadian transportation infrastructure. In 2018 alone, CN will invest a record $3.2 billion.
Over the past couple of decades, deregulation in the rail sector and the capital investments that deregulation enabled led to significant service and efficiency improvements while at the same time providing Canadian shippers with the lowest freight rates of any country in the industrialized world.
In this context, the statutory review of the Canada Transportation Act recommended a strengthening of the reciprocal commercial environment while preserving the numerous shipper protections already contained in the act.
Unfortunately, the Canadian government has chosen to go in a very different direction. Bill C-49 seeks to increase the regulatory burden on the carrier-shipper relationship, compromising the efficiency gains of recent decades.
The bill fails to recognize how service levels and product offerings have evolved to meet the changing needs of shippers. The fact is that the vast majority of our customers prefer a commercial approach, including, increasingly, shippers of regulated Canadian grain. This is because shippers are best able to identify and negotiate what is most important for their respective supply chain.
In the case of Canadian grain, for example, the shippers’ priority is railcar supply. You have talked about your response. You have entered into commercial contracts for roughly 90 per cent of our railcar capacity.
Railcar capacity and container capacity are entirely different kettles of fish. In talking with farmers, container capacity is a problem that goes beyond railcar availability. It seems to me that you know where the railcars are but nobody knows where the containers are.
This committee has learned in the past, in the study of container shipping, that a farmer in Saskatchewan who wants to ship his pulse products to the Port of Vancouver calls them looking for containers and they have no idea where they are. Those agreements specify volume commitments from shippers in exchange for guaranteed car supply from CN and include reciprocal penalties.
We have been very clear that there are specific elements of this bill that we oppose and believe open the door for significant, unintended consequences. For instance, long-haul interswitching, or LHI, is a remedy which, until it appeared in the bill, had never been recommended, discussed or considered. No study was ever undertaken to show that it is needed or that it can be effective.
Of particular concern, LHI provides a non-reciprocal, competitive advantage to U.S.-based railroads that invest very little and employ very few people in Canada. We don’t understand why, particularly at a time when NAFTA is being renegotiated, Canada would give away this provision with nothing in return.
Providing such an advantage to U.S. railways at the direct expense of Canada’s railways creates a risk to the sustainability of Canada’s transportation network, which depends on the existing volume of traffic to generate the capital necessary to keep Canadian infrastructure safe and fluid and to increase capacity to support overall growth.
To prevent further compromising Canadian infrastructure investments we are proposing an amendment to subclause 20(2) of the bill to provide that a shipper is not entitled to LHI if the shipper is within 250 kilometres of the Canada-U.S. border. This change will ensure a level playing field between Canadian and U.S. railways.
Before concluding, it is essential that we speak to the proposed mandatory use of the locomotive voice and video recording devices. This is an essential step in our collective goal to improve rail safety. We are sensitive to employee privacy concerns, but we are confident that LVVR will be implemented with the appropriate safeguards to minimize intrusion while allowing railroads and government to gain important insights into accident prevention.
We appreciate the opportunity to speak with you today and look forward to your questions.
The Chair: Thank you. We have a long list. It’s going to be busy. Keep your questions and your answers short.
[Translation]
Senator Gagné: This question is for the Canadian National Railway, the CN, and the Railway Association of Canada, the RAC. Last week, the chair of the Transportation Safety Board of Canada, Ms. Kathy Fox, who supports your proposal to give you access to random audio and video recordings for prevention purposes, made the following statement to the committee.
[English]
Canadian railways have often demonstrated a very rules-based, punitive culture, and although progress is being made to improve that culture, the TSB nonetheless understands employee concerns about how this data might be used or misused.
[Translation]
How would you suggest keeping this punitive approach in check in the use of video and audio recordings? Would you agree to limit access only to those recordings that are related to incidents, even those that are not under investigation? What would be the added value of reviewing random recordings that are not related to incidents?
Mr. Gauthier: The act is very clear when it comes to companies’ use of audio and video recordings. Although Ms. Fox alluded to a culture that may have existed in the past, the act very clear provides that recordings may be used for specific purposes only. Concluding that railways will fail to comply with the act because there may have been a different culture in the past would be imputing motives unfairly, especially when the act is so clear.
Moreover, when the minister appeared before your committee, he said there would be very severe sanctions. In my opinion, one cannot assume that railways will not comply with the act. Secondly, you are asking whether we should be satisfied with access to information only when accidents occur, which seems to be what the act provides. Under the act, the TSB can conduct an investigation when there is an incident or an accident that has to be reported to it. Railways will be able to analyze accidents that were not investigated by the TSB. Under the 2015 Railway Safety Management System Regulations, railways are required to identify events that constantly recur and that may be a safety issue. This is what is required of railways. They are responsible for the safety of their operations.
So it is normal for them to access these recordings in order to detect situations that could pose safety risks, and that would be on a random basis. We should not worry about how the railway companies will use this data.
[English]
Ms. Drysdale: I don’t have too much to add. We are confident that the safeguards being built into the regulation will protect the privacy concerns of employees.
Senator Plett: I want to be on the record as certainly supporting the LVVR. However, my question is around interswitching and basically for CN and the gentlemen from Short Line
.
The current wording in subsection 129(1) may give a shipper access to the nearest competing railway, but this would be of little to no value if the nearest interswitch takes the traffic in the wrong direction of the shipment’s final destination, if the nearest interchange does not have the capacity to take on the size of the shipment, or if the nearest competing rail company does not have rail lines running the full distance of the shipment’s final destination.
The bill also stipulates in subsection 129(3)(a) that a shipper may not obtain a long-haul interswitching if a competing rail line is within a distance of 30 kilometres. Sending the shipment in the wrong direction is cost prohibitive, which makes the interswitch useless.
I am from Manitoba, as are two of my colleagues. I am concerned about the interswitch at the southern border of our province.
Over the past three years, 75 per cent of shipments leaving the CN-served elevator at Red River South were headed to export positions either east to the Port of Thunder Bay or west to the Port of Vancouver. These routes are serviced by CN and CP but not by BNSF.
The interchange at Emerson is less than 30 kilometres away from the elevator, but it is in the wrong direction and with the wrong rail line for these export moves. In order to have effective access, this elevator needs also access to the CN-CP interchange in Winnipeg.
These concerns have been raised with the government, with a possible proposed solution being to add the wording “in the reasonable direction of the traffic and its destination” to both of the sections that I quoted.
This language already exists in the legislation in subsection 136.1 for other purposes and could easily be applied here.
My question is to both presenters. Why not support something like this? Maybe you do and maybe you don’t. Mr. Finn is here. I made a suggestion to him the other day that I don’t believe, if the amount of grain heading in the wrong direction was changed, it would be a significant amount of revenue lost to CN.
If it is, I would like to know how much and, of course, I would like to know from the gentlemen from Short Line whether they would support such an amendment.
Ms. Drysdale: Let me start. The intended purpose of LHI is to provide shippers that have access to only one railway with a competitive option. Shippers within 30-kilometre interswitching already have that competitive option.
In the case of the facility that you’ve referenced, and certainly in the case of Vancouver, BN is perfectly capable of handling that traffic to Vancouver today. They don’t have just a CN option to go to Vancouver. They have a BN option.
Mind you, that BN option would be on a commercial rate basis because the U.S. does not have any of these regulatory options on the table today.
The 30-kilometre interswitching provides a competitive option to shippers in widely used, high density corridors at long established interchange locations and at rates reflecting variable costs. To suggest that moving in the wrong direction within a 30-kilometre zone is cost prohibitive is, respectfully, absurd.
Furthermore, grain will move the most efficient route to port, not necessarily the shortest miles. For example, grain coming out of the Peace River area of Alberta will go east to Edmonton first in order to go west to Vancouver, which is the most efficient way for that grain to get to port. It’s about efficiency, not about the mileage.
There is 30-kilometre interswitching within that zone. There are well established interchanges. There has never been a complaint about traffic moving in the wrong direction.
In terms of expanding the purpose of LHI to cover every commercial aspect of the grain industry, now we’re getting into an issue where we’re talking about the relative competitiveness of one grain elevator versus another. This, by the way, does not help farmers. By the time grain is in an elevator, we’re talking about grain companies.
What’s being proposed is in respect of whether one grain company feels it is at a relative competitive advantage or disadvantage versus another grain company. The grain company in the Red River Valley in question has access to competitive options today. LHI is meant to give that access to someone who doesn’t have a competitive option for rail.
Senator Plett: I want to go on the record as saying that when grain elevators and grain companies have increased costs, those costs are being handed down to the farmers.
To suggest that there will be an increased cost to farmers is respectfully absurd, I think what is respectfully absurd is to suggest that Western Canadian grain farmers have costs added to their shipment.
I would like to hear from Short Line Railway, please.
Ms. Drysdale: My only point being that let’s say there is a cost saving to a grain company. There is no regulation that obliges the grain company to pass that cost saving on to the farmer. In the context of a post-Canadian Wheat Board world, the farmers’ ability to have visibility into what is a transportation rate versus what is an elevation rate or a grain profit rate, they don’t have that visibility. That was my point.
Senator Plett: That is, respectfully, absurd to have western farmers.
The Chair: Mr. Pellerin, do you have a quick note to make here?
Mr. Pellerin: In this aspect, something that may need to return is a bit of common sense. There are occasions where sometimes going a step backward to go forward makes sense, especially moving grain.
It’s important for our shippers. I love the passion that class 1s have about moving grain and wanting to do great and everything else, but at the end of the day it’s the shippers’ grain that wants to go to a certain point. It should be their option to do that at the best available rate they can find. It is the country’s duty to help them at least access that rate structure.
Senator MacDonald: I will direct this question to Mr. Gauthier, but I think you’re all on the same wavelength on this question so anyone can feel free to respond to it.
None of us underestimate the importance of safety and travel. Most of us here are flying constantly. I always fly under the assumption that the pilots are not kamikaze pilots, that they want to land the passengers safely. We have to have trust in them. I take the train occasionally, and I have trust in the engineers in the cabs too.
I am curious. When safety is so important, and a provision for LVVR is not included or deemed to be necessary for pilots in cockpits, why would there be different criteria for an engineer in a cab of a locomotive than for the pilot in the cockpit of an airplane or the wheelhouse of a ship?
Mr. Gauthier: As you say, safety is important to us and to you. The railways are responsible for the safety of their operations. We have plenty of technology to check for equipment or track failure.
In fact, we have invested millions of dollars and we’ve seen a reduction in accidents caused by equipment or track failure, but on the human side of it we haven’t seen anything significant despite all the measures that we have taken.
Why? It’s because we don’t know what is going on in the cabin. We cannot train our employees for things we’re not aware of.
The advantage of the LVVR, as mentioned, is that you can determine what happened in the cabin. Based on this, the railways will look at the lesson learned from this and train their employees properly.
It’s difficult to improve safety if you don’t know what is going on, on board.
Senator MacDonald: With respect, you haven’t answered my question. Why would the criteria not be applicable to the cockpit of an airplane or the wheelhouse of a ship? Why would it be necessary in the cab of a locomotive and not in the other two means of transportation? Why are there two different standards?
Mr. Gauthier: To my knowledge there are audio recordings for the pilots. There is similarity with what is going on and what will happen with the rail sector.
As to why Transport has decided to start with the rail sector, Transport is the only one that can answer that question. I don’t see why it should not be used on board an airplane.
Mr. Bell: On the comment that Mr. Gauthier just made, it very well may be true that there will be equal benefit to having similar technologies installed in other modes of transportation.
I believe that railway is the first, but only the first.
Senator Mitchell: Thank you, Mr. Bell and others, for your presentations. You’re unanimous in your sincerity and passion for implementing LVVR for safety reasons. Each of you has made a very strong case for the protection of privacy in doing that.
To back that up further, Mr. Bell, you mentioned in your presentation that you have some background information you would be happy to discuss further.
Can you highlight the points that might further this case?
Mr. Bell: The background information I provided is a set of PowerPoint slides. I will take you through them.
The first page talks about our operations. The second page gives you a mockup of what you will see inside a locomotive, with these cameras installed. The cameras are installed to give about 95 per cent coverage of the cab area. That’s what the second slide shows you.
The third slide on page 4 will give you an idea of what those cameras actually physically display. We have cameras that face out of the front of the train, and we can see various things like signal aspects. If we refer to the tragic accident over the weekend, we can see switch positions post-incident on those types of cameras.
We can see the locomotive controls, where they’re positioned and how they’re being used. The picture on the top right shows a bank of diagnostic equipment that’s on the rear wall of the locomotive where we also record. We have a redundant system there to make sure we can tell what the conditions are of the locomotive, not just of the crew.
The final picture shows a view of the operator seats that we capture. This is important to us because we can see such things as cellphone use, if it arises. Otherwise, that would be opaque to us. We can see fatigue-exhibiting behaviours like nodding or sleeping in the locomotive.
I can tell you we have investigated a number of incidents in which trains have bypassed red signals. They call them SPADs, signals passed at danger, in Great Britain. When we speak to the crew in every one of those they tell us, unanimously, “I was not fatigued,” but we have no objective way to determine that.
Finally, the last two images are inside the cab. The last page tells you a bit about what we do with our data. It’s a 72-hour retention. It’s first in, first out, so it gets overwritten after 72 hours. It doesn’t disappear. It’s very strongly protected by password. It’s only available to us and our regulators. The software that we use is not available on the open market so the video cannot be pirated or downloaded by anyone but us.
Senator Bovey: I am going to follow up on what my colleague was asking. I am aware there are LVVRs in the cabs in British trains. Is that right?
Mr. Bell: That’s correct.
Senator Bovey: I was intrigued that you said you implemented this in 2015. You talked about the effective partnership with your operating crews who are unionized employees.
Can you tell us about those early negotiations and the concerns of the employees when you suggested bringing this in? Can you talk to how these LVVRs are used in the U.K.?
Mr. Bell: I will start with the crews. We introduced them because obviously we felt as a strong proponent that it was a strong action we could take in support of safety.
The reason we had relatively smooth sailing with our crews is that we guarantee we will not use these recordings for disciplinary purposes. We guarantee we’re not interested in their personal conversations. We guarantee we use them only for purposes of safety.
When we put these into place, we promote safety culture. Safety culture has three essential parts. We need it to be a reporting culture. We need to know what is going on in our railway. We need it to be a learning culture. We need to be able to learn from the information that we receive.
Finally, and perhaps most importantly, we need it to be a just culture. Based on all the information we receive, we have to treat our employees and our stakeholders justly. That’s the reason we’ve taken a strongly non-punitive approach.
That’s not where we want to end. We want to end up with a non-punitive approach, but we want to end up with the three cases that are contained in the regulation legislation. In Great Britain, they use it in a similar manner to what the regulation here says.
The Chair: Has it improved their safety record?
Mr. Bell: It has.
The Chair: Do you have numbers on that?
Mr. Bell: I do not, but I can get them.
Senator Bovey: I’ve heard the same and I think it would be important to get that.
The Chair: If you have evidence of that, that would be helpful.
Senator Bovey: I would be interested in Japan and Europe as well, because those are rail cultures. My facts aren’t so clear about Japan and Europe, but I do know the British instance. Thank you.
[Translation]
Senator Boisvenu: I would like to welcome our witnesses. Certain shippers who have appeared before the other House have said that the relationships between shippers and carriers date back almost to the 1950s in the sense that there was very little communication at that time. Today it is very much the same because shippers have very little access to the information you have, that is, your roadmaps. Subsection 77(2) of the bill provides for partial access to this information.
My question pertains to a transparent and honest partnership between you and shippers. Should this bill not be amended to give shippers full access to information about your roadmaps to make sure there is no discrimination among shippers, whether they carry oil, grain or automobiles? It is their perception that they might be subject to a form of discrimination. The question is whether the bill should be amended to ensure that all the information you have is available to all of your main clients.
Sean Finn, Executive Vice President, Corporate Services and Chief Legal Officer, Canadian National Railway Company: Firstly, it is important to understand that the relationship we have with our clients has changed a great deal since the 1950s. Now, with Bill C-49, many provisions have been added in the past few years to allow access to service agreements between railways and clients in order to give them a certain understanding of training and of service.
Secondly, under the provisions of the act, railways must provide the Canadian Transportation Agency with information in relation to the new proposed measures. Rest assured — and it was mentioned in today’s presentation — that when it comes to grain for example, 90 per cent of our grain shipments nowadays are made under a commercial contract negotiated between parties. These service contracts are essentially negotiated between the parties on a commercial basis. In case of a disagreement, there is a provision allowing shippers to turn to the agency to impose the agreement. Everything is spelled out: the agreement criteria, information categories and service levels.
Having worked for CN for 25 years, I can tell you that things have evolved considerably, and many shippers would now rather have a commercial agreement with CN, CP or a local carrier than an agreement with tariffs. Shippers are not perfect, but over the last 10 years or so, we have made fairly impressive efforts. Do we always succeed? Our network is more akin to a bus service rather than a taxi service. Often, a shipper will request service on Tuesday morning at 9 a.m. with 42 rail cars. We have to explain that we serve many customers on the same line. We do not discriminate. We operate a huge network, which is often subject to inclement weather and other incidents.
Senator Boisvenu: The mining industry, among others, is very concerned about this bill, because their access to information will be partial and the information provided will be incomplete. In subsection 77(2), should there not be an amendment so that the information related to your summaries is fully available rather than partially available at your discretion?
Mr. Finn: That provision allows railways to provide information to the regulatory agency, which knows how it is to be used. If individual clients have a service agreement under which they request information, and we agree to provide them with that information, all of it, naturally, is limited by competition, as we cannot provide information to two companies within the same industry. By allowing for greater sharing of information with our clients, we can better serve them. This would require not only an amendment, but also the parties must be willing to sign agreements negotiated in good faith with service conditions and information that allows them to make informed decisions.
Senator Dawson: First of all, please accept my apologies for being late; I was delayed by transportation issues. New technologies allow us to make recordings.
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I think that technology now gives us the opportunity to televise things, and I was listening to the debate as I was arriving. I agree with Senator Plett that if we have technology that could improve security, we should use it.
That being said, on the quantity of information that is being requested by the government, you talked about efficiency in your presentation. You are complaining that the government is asking for too much data, but don’t you think they use that data so they can be able to come back to the committee and ask for improvements in the bill?
Ms. Drysdale: That is a great question. The railways today provide a significant amount of data already. Post Bill C-49 we would be required to provide even more.
The challenge here is that the rail is only one portion of the end-to-end supply chain. No other members of the supply chain have the same requirement to provide the data.
Being able to drive efficiencies with a subset of the total information required is not the best outcome.
For example, right now in the context of grain moving to Vancouver, an arbitrator has ruled that the vessels cannot load in the rain. That is a good example of a significant disruption to the end-to-end supply chain that we as the rail portion of the supply chain don’t have visibility on. It rains a lot in Vancouver. This is causing a major disruption in terms of being able to have a fluid end-to-end grain supply chain.
The Chair: Why is that?
Ms. Drysdale: It’s an issue with labour. It’s an issue that has been going on for many, many years. Progress was made and up until, I want to say, a week or week and a half ago, loading was occurring under conditions that employees believed were reasonable.
An arbitrator has ruled that seems to no longer be the case, so for the foreseeable feature vessels arriving in Vancouver or Prince Rupert are equally limited to loading when it is not raining.
Mr. Pellerin: Maybe if I could, just a couple of quick comments on that.
I think Ms. Drysdale makes a very good point. It isn’t all about one piece of the puzzle. It’s everybody else. Sometimes there are factors that the railway doesn’t control and they end up getting blamed for it. Data can be very misleading sometimes.
The key thing for the Short Line Association or for our members when that happens is that because we’re not part of the 90 per cent we often face the brunt of the repercussion. Now the railways are faced with an empty shortage. Who pays the penalty for that? It’s usually the short line or the producer.
We sit waiting for cars and waiting for cars. We’ll talk to our partners and they say, “It’s not our fault. It’s the grain handlers in Vancouver because they’re not unloading in the rain.” I respect that, but we face the brunt of that change.
We’re trying to look at being part of the solution where we need to get into where we have some sort of agreement or a better understanding of what that means to our folks.
Actually, I would like to put a plug in for that 90 per cent. We’ve seen some great improvements in the last couple of years on how that works. My fear is the 10 per cent left are just dangling there. They have no protection whatsoever. We need to not forget the small and medium size businesses that are out there.
The Chair: I am intrigued by that rain question. Does it have to rain hard, or is it a slight drizzle and you can’t unload? Is it any rain at all and they can’t do it?
Mr. Pellerin: It’s up to the vessel captain’s discretion. One will load maybe in a light rain and the next vessel comes along and the captain refuses. It depends on the configuration of the vessel. They can cover the hatches and they have smaller chutes they can put pipes into, but nine times out of ten that’s okay if you’re starting. If you’re trying to finish the vessel, obviously you can’t use that small part of the vessel. It is going to be quite an effect for sure.
Senator Bovey: It outlines the importance.
Senator Mercer: It never rains in Vancouver. I’ve never heard that before.
It was mentioned in CN’s presentation that the priority of shippers today is railcar supply. In your response, you say that they’ve entered into commercial contracts for roughly 90 per cent of all railcar capacity. Railcar capacity and container capacity are an entirely different kettles of fish.
In talking to farmers, container capacity is a problem that goes beyond railcar availability. It seems to me that you know where the railcars are, but no one knows where the containers are.
As this committee has learned in the past in the study of container shipping, a farmer in Saskatchewan who wants to ship pulse products to the Port of Vancouver calls looking for containers and they have no idea where they are, but he’s looking out his window at a train heading west full of containers, which are probably empty.
It seems to me that this is an issue that needs to be addressed for efficiency of the system so that we can get the product, because in the case of pulse products out of Saskatchewan, the longer you wait, the poorer the quality. By the time of product arrives in China or India it becomes animal feed and not feed for humans. That’s one question.
The second question is on the LVVR. How do we change this bill to protect the concerns of employees about privacy? How do we change it but at the same time continue to address the safety issue?
My contention is with the data only being available to the Transportation Safety Board and only released by them in the case of educating the railways on issues that they have discovered in review.
Is there a way we can have both? Is there a way we can have the LVVR and have the data rest with the Transportation Safety Board? Their reports would be generic in the sense of not necessarily identifying crews to protect the safety of Canadians and of the railways?
Ms. Drysdale: I will take the grain question and leave my colleagues the LVVR question.
The single biggest issue facing Canadian supply chains today is capacity, our number one concern with some of the aspects of the bill and some of the proposed further amendments. We need to have a regulatory framework that will encourage the investment required to enable the capacity.
You raise an excellent point in the case of containers. Those containers, though, are controlled by the overseas shipping companies. The railways are working with our customers to try to direct those to where they make most sense, like southern Saskatchewan in terms of getting the pulse crop moved, but the discretion is really at the owners of the asset.
We would certainly like to ensure that focus is paid to the investment framework. Whether it’s railcar capacity, the usage of containers or just investments in core infrastructure, I can tell you that the biggest single issue today in going forward will be the capacity of our rail network in Canada and whether or not we can support the growth going forward.
Senator Mercer: It seems to me this is an issue that still is not being addressed, and perhaps the committee needs to reconsider our study on containers.
Our product is being damaged. The quality of our product is being hurt because of this and, of course, because of labour disruptions at certain ports in Western Canada.
Mr. Bell: I would like to speak to the LVVR question, if I may. It’s our view that having the data only available to the Transportation Safety Board is inconsistent with our safety goals and the creation of a safety culture.
There are a couple of reasons for that. The Transportation Safety Board investigates fewer than 2 per cent of the reportable incidents they hear about every year. We can’t learn and we can’t improve if we only hear about 2 per cent of the risky events that happen in the rail industry.
We need to support our learning culture, and we need to do that by having access to as much relevant information as possible. I think that a more effective way to control the inappropriate use of the information is, as Mr. Gauthier mentioned earlier, to have sufficient and strong sanctions against its misuse, either in regulations pursuant to the bill or in the act itself, so that we are disincented to use it for wrong purposes or purposes other than safety or protecting the lives of those thousands of people we have on our trains. I think that will be very effective.
It’s not our goal to release information inappropriately or to look at or listen to information that is not appropriate for us in achieving our safety goals. That’s not what we want to do at all. We simply want to make our railways safer.
Another problem with the Transportation Safety Board is that it is post-incident. We strongly believe that we need to look at pre-incident indicators that will allow us to help prevent an accident from occurring rather than investigating it post facto.
Senator Galvez: There are a lot of questions and a lot of answers. I think you realize by now that there are two main preoccupations: the cameras and the transparency. I want to insist on these two questions from another angle.
First, it is true that some shippers are feeling there is not enough transparency from both sides. It is true that there is an agency there to solve cases when there is a conflict, but shouldn’t it run smoothly if the transparency is from both sides equally?
Then we avoid all the administration and all these fights that cost money to everyone, including to us. I support what my colleague has mentioned.
My other point is with the cameras. Before I was thinking that you didn’t have any data on the trains and therefore anything can be a reason for an accident, but now I know that you have control. You know what is happening with the mechanics and the electronics of the locomotive.
Now you want to know about the human factor. You said before that you wanted to know if the engineer or the driver was nodding or was sleeping. There are many other ways of knowing if a driver is tired.
You can make surveys and ask how many hours they have driven. What happened in Lac-Mégantic was that the guy was driving for 36 hours. It’s normal that he’s tired. It’s normal that he’s nodding.
Have you done the previous exercise through human resources by asking questions through a survey? What do you think is the problem? Are you doing drugs? Are you having personal problems? Are you not sleeping enough? Are we providing you with food? I am nodding when I don’t have food. I have a sugar thing, so I need a sweet.
I don’t see how you will get useful information by having sporadic clicks, accident or not. How are you to digest the data that will translate into real things without penalizing? If you’re saying it has something to do with the driver, you will have to penalize the driver, or I don’t know what.
Mr. Bell: The answer is yes to the fatigue questions. There are fatigue regulations. There are hours of service regulation. Soon we’ll see the requirement to have what they have called a science-based fatigue management plan within our industry. We’re looking at all of those.
Fatigue is only one small aspect of behaviour in the cab. We are looking at that. We do talk to our operators frequently. What we would intend to use the information for is actually to look at trends, not to look at individual occurrences.
We see our operation very closely. We understand it very well, and we can detect anomalies within our operation. We would want to be able to investigate those anomalous incidents before they become accidents to determine whether there are trends. We at Metrolinx have zero appetite to punish our operators.
Senator Galvez: Can you just explain what anomalies are?
Mr. Bell: Certainly. It is when we see trains that are operated in unusual ways. There is a particular braking pattern that we expect an operator to use. We may see that it is not occurring, and they have been unable to stop at a platform, for example, or unable to stop for a red light. Those would be anomalous operations.
Senator Griffin: I have a couple of quick questions. The first one is for CN on interswitching. You’ve recommended an amendment. Of course, amendments would take time. What is more important to you? Is it getting that amendment or getting that legislation passed quickly?
Ms. Drysdale: I think the most important aspect is getting the legislation as it is, without further amendment, passed quickly.
Senator Griffin: My second question is for the Western Canadian Short Line Railway Association. Were you consulted prior to the introduction of this bill, and did you recommend changes at the House of Commons committee?
Mr. Pellerin: Some days I think we have to shorten our name. Anyway, yes, we were consulted, and our stance has been the same from day one.
To the point you mentioned on transparency, I understand when the class 1s talk about having done a nice job with commercial contracts and deals like that. I think the issue of transparency might go away, though, if the shipper had more options.
If I have an option to go to somebody else, I might be all right with the commercial arrangement but, when I’m captured by one railway or stuck in one spot, transparency is a concern to me.
That has been kind of our stand from the get-go. Before, with the extended switching, we were starting to see some real advantages for short lines and our shippers. With the 30 kilometres it has disappeared and now those questions about transparency have come back, which was brought up before.
The Chair: Why is it important to pass the legislation quickly, Ms. Drysdale?
Ms. Drysdale: It comes back again to the need for investment. Whether it’s NAFTA or other extenuating circumstances, we all know an uncertain regulatory environment is not supportive of making investments.
We’re a North American network, so we have to look at the investments that we make in that context. Not knowing what regulations will be or won’t be in Canada weighs heavily on how we think about long-term investment.
Senator Plett: If I could, I would like the gentleman from Short Line Railway to give us a little more of an explicit answer. I think he’s trying to get appointed to the Senate and is giving us political answers.
Did you recommend amendments, and are you happy with the interswitching?
Mr. Pellerin: Yes, sir, we did. We recommended that the interswitching zone stay the way it was at 160 kilometres. We also recommended that short lines should be allowed ability to make service agreements. We did do that.
Senator Plett: I appreciate that.
Mr. Pellerin: I was just trying to be nice.
The Chair: Thank you very much, witnesses. You were much appreciated. We will now get ready for a new panel set.
To continue our study on Bill C-49, we have with us, Isabelle Des Chênes, Executive Vice President of the Chemistry Industry Association of Canada; Francis Bognar, Advisor at the Canadian Association of Railway Suppliers; Robert Ballantyne, President of Freight Management Association of Canada, and David Montpetit, President and CEO of the Western Canadian Shippers’ Coalition.
I thank all of you for attending the meeting. I will invite Ms. Des Chênes to start, followed by Mr. Bognar, Mr. Ballantyne, and Mr. Montpetit.
The floor is yours, Ms. Des Chênes.
Isabelle Des Chênes, Executive Vice President, Chemistry Industry Association of Canada: We appreciate the opportunity to appear before you today on behalf of the members of the Chemistry Industry Association of Canada.
Canada’s chemistry industry is a vital component of the Canadian economy. It’s the third largest manufacturing sector, with just over $53 billion in annual shipments. We export 75 per cent of our production, making us the nation’s second largest manufacturer behind the auto sector. For many chemicals, rail has proven be our safest mode of transportation.
Few people give much thought to the role of the chemicals in Canadian society and in the Canadian economy, but it’s important to note that more than 95 per cent of all manufactured goods have a chemetric component in them. This includes key sectors of the economy such as energy, transportation, agri-food, forest products, mining and metals.
Equally important, chemistry is a growing sector, both globally and within North America. During the past five years alone, over 300 global-scale chemistry projects and investments with a book value of more than $250 billion Canadian have been announced in the United States alone.
While Canada has missed out on much of this initial wave of investment, there are some promising prospects for capturing a share of the next wave. These new investments are important because they would create sustainable jobs, environmental improvements and build a foundation for the development of made-in-Canada chemistry products and solutions necessary to meet Canada’s and the world’s climate change and low carbon challenge.
More than three-quarters of the industry’s annual shipments move by rail, accounting for nearly 14 per cent or one-seventh of all freight shipments in the country. This makes rail costs and service two of the most important factors when investors are deciding whether or not to locate a new facility or expand operations in Canada. Having a well functioning and competitive rail freight market is vital to the competitiveness of our industry and its investment prospects.
When Bill C-49 was introduced in May 2017, CIAC was pleased to see that government had correctly identified the key areas requiring attention to address issues of transparency, fair access, efficiency and long-term investment.
However, in our written submission to the Minister of Transport and in appearing before the House of Commons Standing Committee on Transport, Infrastructure and Communities, CIAC stressed that we believed amendments were necessary to ensure the provisions of the act met their intended objectives.
We want to see Bill C-49 advance promptly. While we do not wish to introduce new measures, we do believe there are areas that could benefit from some fine tuning.
Specifically with respect to the data transparency provisions in the bill, we strongly recommend that these provisions include commodity specific information and additional granularity that would support investment decisions and assessments of fair and adequate service.
In this regard, we also recommend that the availability of information to shippers be expedited by establishing a firm, early timeline for the implementation of the regulations.
On a closely related note, we recommend that the act include specific requirements for railways to provide the highest level of service they can reasonably provide. There is ambiguity in the current language that stops short of equating adequate and suitable with the highest reasonable level of rail service. We feel this should be clarified.
With respect to the powers and informal resolution processes of the Canadian Transportation Agency, we recommend that the agency’s powers be increased, providing it with the ability to investigate issues on its own initiative and ensure informal resolutions are implemented and are effective, and that policy-makers and stakeholders are then able to measure and analyze broader trends in rail freight system performance.
Finally, the intent of the long-haul interswitching provisions in the bill are most welcome. Previous competitive line rate measures were little used and provided no appreciable contribution to establishing a more balanced environment between shippers and carriers.
We are, however, concerned that the range of limitations and specific exclusions on LHI in the bill will similarly lead to its underuse and ineffectiveness. Many of our members are captive shippers. For some trucking is not an option, and for over 50 per cent of them, trucking becomes economically unviable at a distance of up to 500 kilometres.
As such, we recommend the elimination of those limitations related specifically to the toxic by inhalation or TIH products, to traffic originating within 30 kilometres of a different interchange and to exclusions pertaining to high-volume corridors.
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Mr. Chair, in order to limit my speaking time, I will stop now and answer committee members’ questions. I would like to thank you once again for the opportunity to speak today.
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The Chair: Thank you very much. Mr. Bognar, please.
Francis Bognar, Advisor, Government and Public Affairs, Canadian Association of Railway Suppliers: The Canadian Association of Railway Suppliers, or CARS, is a member-driven association that represents over 140 companies that supply goods and services to freight and passenger railways, transit authorities, railcar and locomotive owners. Our largest markets are new freight and tank cars, locomotive components, freight car components and track equipment.
Our members are located across Canada with significant clusters in Ontario, Quebec and Alberta. CARS members serve customers across North America and around the world.
The association helps its members to maximize their business opportunities by facilitating dialogue between the industry and government with the aim of ensuring the conveyance of information, which is critical in decision-making in Ottawa, to the provinces on issues that impact the rail industry.
CARS would like to emphasize that Bill C-49 not only has an impact on railways and shippers they serve. It will have a positive impact on the railway supply industry as well. Should the changes to the maximum revenue entitlement come into effect in their current form, major investments in new covered hopper cars are highly likely to manifest from it.
Once passed, Bill C-49 aims to increase rail efficiency and will encourage investment in the Canadian transportation system in support of the grain shippers. This investment will see new highly efficient railcars built in Canada, to the benefit of our supply industry as well as our members.
Canadian grain cars are some of the oldest hopper cars in use. Based on Canadian Transportation Agency sources, the Canadian grain car fleet is comprised of approximately 23,000 cars. Three-quarters of these cars were built in the 1970s and 1980s, thus they must be retired in the next 10 years to 15 years.
Industry experience indicates that these cars do not last the maximum statutory life of 50 years. The increased maintenance costs in line with the age of the cars make it uneconomical to keep them in service up to the designated 50 years.
New hopper cars will have a significant change in design and optimization of car capacity. As a consequence, fewer cars will be required to move the same volumes of grain. Replacing older fleet cars with newer, more efficient equipment will significantly increase the capacity of supply chain Canadian grain transport and improve reliability. Current stakeholders include producers, shippers, manufacturers, suppliers and railways.
There are several indirect benefits to renewing the current grain car fleet. Some of them include increased capacity, which will boost export trade and thus contribute to higher GDP. Farmers will be able to increase production with improved market access as elevator companies and port terminals will be able to increase their efficiency of operations as a result of the more efficient railcars.
These benefits will create the opportunities for increased investment in the grain producing and handling supply chains, manifesting in significant benefits to stakeholders.
Based on Transport Canada’s website, some of the environmental benefits include a significant reduction in grain spillage during rail transport, the use of more modern railcars to enhance safety and reduce noise in urban areas, and the use of more modern railcars to increase fuel efficiency, reduce emissions and road congestion.
In conclusion, CARS supports Bill C-49 in its current form. We believe the bill will promote increased efficiency on the rail transportation system and will encourage long-term investments in the replacement of aging grain car fleets with modern, more efficient grain cars.
Robert Ballantyne, President, Freight Management Association of Canada: The Freight Management Association, or FMA, has been representing the transportation concerns of Canadian industry since 1916, so we’re now coming up to our one hundred and second year.
This association is little different from most other industry associations in that the membership is very broad, covering people from retailing, manufacturing, grain, forest products, chemistry and so on, with a very tight focus only on freight transportation issues by rail, truck, marine and air cargo. We do this both in Canada and internationally.
FMA is the Canadian member of the Global Shippers Forum, and I have the honour of chairing that forum as well as being president of FMA.
In our written submission to the committee on Bill C-49 we have outlined in more detail what we are proposing and the changes we think would be useful to be considered by the Senate.
Let me say that the remarks I will make will focus primarily on the rail shipper sections of the Canada Transportation Act, but I will make brief comments on the Rail Safety Act, the LVVR issue and on the Coasting Trade Act, which has to do with the movement of empty containers between Canadian ports.
In looking at the railway issues, there are approximately 50 railways in Canada, but the rail freight industry is really dominated by the two class 1 carriers, CN and CP. These two companies account for approximately 90 per cent of the Canadian rail freight revenue. While there is limited competition between CN and CP in a few markets, primarily intermodal, for many shippers the rail market can best be characterized as being a dual monopoly. That’s different from a duopoly, that is to say each of CN and CP is the only railway available to shippers at many locations.
It should be noted that this is not just a Western Canadian problem but it exists in the East as well, including in the Quebec-Windsor corridor. Rail freight is not a normally functioning competitive market. This fact has been acknowledged in Canadian railway law for over 100 years.
Looking at the Bill C-49 amendments we would like to propose, when the minister introduced Bill C-49 he stated the objectives of the bill as follows:
The Government of Canada today introduced legislation to provide a better experience for travellers and a transparent, fair, efficient and safer freight rail system to facilitate trade and economic growth.
Bill C-49 contains a number of provisions that will go some distance to meet that objective. In renewing the bill, FMA has analyzed the changes proposed in Bill C-49, how well they will play out in practice, and when shippers will attempt to use them. The bill that passed third reading in the House of Commons addressed some of these issues.
In our written submission to this committee we are limiting our comments and suggestions for revision to only three elements related to the railway shipper provisions of the bill.
The first is improved rail service and costing data for shippers. This relates primarily to dealing with disputes between railways and shippers on rate related issues.
The second is to provide the Canadian Transportation Agency with the power to undertake investigations on its own initiative. Ms. Des Chênesmade some very astute comments related to that.
The third is that on long-haul interchange there needs to be provisions to make them workable. The FMA’s submission outlines four areas, which you have in that document, where improvements would enhance the likelihood that LHI will prove to be useful to captive shippers.
Going to the Railway Safety Act, Bill C-49 proposes amendments that will require major federally regulated railways to install locomotive voice and video recorders. Improved safety is in the interest of all stakeholders that may be impacted by railway safety, and that does include shippers.
FMA acknowledges the privacy concerns expressed by some stakeholders. The proposed amendments provide appropriate safeguards and balance the privacy concerns with the potential to improve safety for employees and the public.
FMA recommends that the regulations supporting these changes should differentiate between a major class 1 railway, that is CN or CP, and VIA, and the smaller short line carriers that operate at low speeds and with a limited number of trains on the line at any one time. Also exempting short line locomotives that may enter class 1 yards to interchange traffic also need to be addressed in the supporting regulations. FMA supports the Bill C-49 amendments related to the Railway Safety Act.
Finally, on the proposed amendments to the Coasting Trade Act, Bill C-49 proposes that the Coasting Trade Act allows ships of any foreign flag to reposition empty containers between Canadian ports as long as there is no charge for such a move. This provision meets one of the terms of the Canada-Europe Comprehensive Economic and Trade Agreement, or CETA.
While a relatively minor element, this will improve global supply chain efficiency for Canadian importers and exporters using containers. Supporting regulations should ensure that this provision can be used between container lines and each of the three major global container shipping alliances that exist. FMA supports this amendment to the Coasting Trade Act.
Those are my comments, and I would be pleased to answer any questions.
David Montpetit, President and CEO, Western Canadian Shippers’ Coalition: The Western Canadian Shippers’ Coalition, or WCSC, represents companies based in Western Canada that move mainly resource products through the supply chain to both domestic and international customers. A list of our members and additional information about WCSC’s objectives and activities are included at the beginning of our written submission.
WCSC members represent a range of commodity sectors. Because they ship large volumes, typically from remote locations, they are completely dependent on rail, and in most cases on a single rail carrier that serves their facility. They cannot take their business elsewhere if they are not satisfied with the railway’s rates or service. That creates a significant imbalance in the commercial relationship. Our members prefer to resolve issues commercially but to do so they require effective and accessible shipper remedies to counteract the current imbalance.
I will focus on a couple of areas that we have been emphasizing here over the last three or four months.
WCSC has concerns with a number of the measures contained in Bill C-49. However, at this stage, there are two key areas that we would like to probably dive into a bit more.
The first concerns the inability of the agency to exercise the authority it has over certain aspects of rail transportation unless it receives a specific complaint.
This is especially problematic when it comes to rail service issues affecting broader areas of a rail network. A case in point was the service crisis of 2013-14 that affected not only grain but also the sector in which our members operate. The agency did receive a handful of complaints that year, but it was forced to deal with each one of them in isolation rather than being able to consider them as part of a systemic issue.
We are now seeing another rail service crisis in Western Canada. Service levels on CN have deteriorated badly, starting last summer, and have continued in a downward spiral into late fall and winter affecting multiple sectors. A number of our members have been forced to operate at curtailed production rates. Some have even come within hours of shutdown because they could not get rail service. There is every indication that this systemic issue on CN’s western network is still ongoing.
A complaint by one shipper might bring that shipper some relief, but it may not prevent the railway from robbing Peter to pay Paul. We saw that in 2014. This is why we need this agency to be able to trigger an investigation to seek input from all those involved and affected as it was able to do in connection with the Air Transat tarmac delays last summer.
Our written submission explains why we do not believe this would result in shifting policy-making from the department to the agency, but if that remains a concern, we would be pleased to provide a narrowly focused wording to target the specific areas of the agency’s mandate where this is most needed.
Our second area of focus is around final offer arbitration, or FOA. It is the only remedy that allows a shipper to challenge directly the rates imposed unilaterally by the railway. It is essential that it remain effective and accessible.
Our written submission provides additional background on the FOA and on the amendment that WCSC is recommending. In essence, we want the arbitrator, tasked with selecting the rates and conditions that will govern the traffic at issue, to have access to all relevant information and the shipper to have an equal opportunity to properly present its case and challenge the railway’s case. Access to rail costing information is essential for this.
Railway costing is a highly technical subject. The agency maintains a regulatory rail costing model and has provided this type of assistance to arbitrators in the past. We are recommending that this be made available for every FOA.
I want to be clear about one thing. What we are advocating is not a return to cost-plus rate making. Our recommendation would make an agency costing simply one of many factors the parties can rely on and the arbitrator can consider.
The amendment proposed by WCSC, as well as other stakeholders, is necessary to help level the evidentiary playing field in FOA and streamline the process.
Thank you very much and I look forward to questions.
The Chair: What is the main issue with the problem with CN providing its regular service? What is the issue there?
Mr. Montpetit: It appears to be both crewing and power issues that they’re having right now.
The Chair: Is that a result of the layoffs that took place and now they can’t recruit back?
Mr. Montpetit: That’s correct. From my understanding, yes. I will be frank with you.
The Chair: Please do.
Mr. Montpetit: Yes, I will be. We invited both CN and CP to our WCSC fall session in Calgary in which they presented their winter plans to us. At that point, because of the crewing and power issues that CN was facing, the plan itself was already obsolete.
I am not only going to pick on CN. It could have been CP for that matter. The bottom line is that my members have been suffering through various degrees of service issues. At times they are getting 60 per cent of the service they require.
During the holiday season, I was basically on the phone with Transport Canada almost daily explaining and pleading our case. It was at the point of shutdown, and I am not kidding. The facilities were teetering on shutdown. In fact, some of my members were storing product in local hangars at the local airports, et cetera. It was that bad. It was a serious issue, and it still continues to be.
The Chair: What happens at the end of the line? There are customers at the end of the line expecting this stuff. What happens there?
Ms. Des Chênes: We have been experiencing the same things. We’ve had 13 companies that have been affected since November by the network capacity issues. Of them, seven experienced shutdowns or near shutdowns and eight of their customers also had shutdown or nearly shutdown. It’s quite significant, and the result is millions of dollars in lost revenue.
Mr. Montpetit: To shut a facility down costs a million dollars. I can’t get into details because of confidentiality issues, but it costs a million dollars a day to shut the facility down.
Senator Griffin: I have two quick questions, and these are going to sound familiar.
For the Western Canadian Shippers’ Coalition, what is the most important to you? Is it getting the amendments you’ve requested, or changes, or getting the legislation enacted quickly?
Mr. Montpetit: The amendments.
Senator Griffin: For the Chemistry Industry Association, were you consulted prior to the introduction of the bill, and did you recommend changes at the House of Commons committee?
Ms. Des Chênes: Yes, we did. We were consulted prior to the intro, and we appeared before the committee and made a number of recommendations.
Senator Griffin: How did you do in terms of getting those recommendations accepted?
Ms. Des Chênes: With respect to data, we did find that some of the recommendations around more speedy time to enactment of regulation were accepted. That’s very important to us, but in terms of the granularity of the data, that is still something we would appreciate some fine-tuning around, whether that’s through regulation or through the implementation.
Senator Bovey: I have a q quick question for Mr. Bognar. Thank you all for being here and for your presentations.
I am intrigued with the design of the new hopper cars and what the purchase of those cars will do for the economy and all. Are these already on order? Are these already being built, or are you waiting for the legislation to come through? I appreciate it’s going to revolutionize shipments.
Mr. Bognar: Thank you very much for your question. First of all, they are in the design stages and obviously some are in production. I can probably send you more updated information with respect to the exact status of those railcars in greater detail than what I have currently right now.
Senator Bovey: I would appreciate that material. I have heard from some that they can’t be ordered until the bill goes through. It seems to me that those of us in all sorts of businesses order what we need to do our business as we need to do it. I am looking for the chicken and egg in this.
[Translation]
Senator Gagné: I have a question for Mr. Bognar of the Canadian Association of Railways Suppliers. You said that Canadian grain cars are among the oldest hopper cars that remain in service. Three quarters of the 23,000 cars in this country were built in the 1970s and 1980s. You also mentioned the environmental advantages of a modernized fleet. Why are you still using such an outdated fleet? In your opinion, is there a public safety risk associated with this aging fleet? Are our government’s energy efficiency requirements less rigorous than elsewhere?
[English]
Mr. Bognar: Thank you very much for your question, senator. First of all, the replacement of these fleets will take a substantial investment, as I referred to in my presentation initially.
Before some of these investments are being made, as the CN representative on the previous panel indicated to you, in an atmosphere where things are uncertain, meaning that the legislation hasn’t been approved and hasn’t been passed, the investment portion is difficult to come by. Therefore, once the bill passes the investor confidence is established and this is what it takes.
I don’t think the public at large, if I understood your question correctly, is in any danger because of the cars. The issue is the economics of having these old cars maintained in an operational condition. Therefore, it is not necessarily the safety of the people, but it is the amount of money that is required to maintain it.
After a while, it is not economical to maintain these wagons anymore. Therefore, new investment is needed to introduce the new fleet as soon as possible.
Senator Gagné: This question is for the Western Canadian Shippers’ Coalition, Mr. Monpetit.
[Translation]
In your submission, you mentioned that you would like the Canadian Transportation Agency to be able to investigate incidents of its own accord without having to wait for complaint, as it did last summer with regard to the Air Transat delays on the tarmac.
[English]
This is a quote from your presentation.
[Translation]
Upon verification, it appears that the Air Transat delays were investigated in response a number of complaints filed by passengers.
Can you explain your position on the powers that should be given to the agency? Are we talking about specific events that the agency could investigate without receiving complaints or would you rather see more general investigations about potential systemic shortcomings?
[English]
Mr. Montpetit: It’s a good question. Right now what we’re looking at is that an individual complaint can come forward. For example, it’s a service level complaint. At that point it’s an individual company challenging the railway with a service level complaint. That one can be individually investigated. It does take time to do, but it is very similar to what Air Transat went through. If you had only one customer being able to complain about it at a time, they’d have to investigate one at a time. You had the whole planeload complaining at the same time. There is obviously an issue with something with Air Transat. I don’t know the details of it, so I really don’t want to get into it.
It’s very similar with the railway. If you have one complaint, perhaps it’s a one-off for that one geographic area. Let’s pick northern Alberta, just for an example.
However, if you have 20 or 30 complaints or concerns coming forward, this would give the agency the investigative ability to research and interview different shippers in those specific lines or areas, thus being a bit more proactive versus reactive with the situation. I hope that answers the question.
Senator Gagné: Yes, that’s okay. Thank you.
Senator Mitchell: I have a quick follow-up to that. It strikes me there is nothing now to stop them from doing that. If they get a single complaint, one would think they could talk to whomever they want to find out what background they need to solve or settle that complaint.
Mr. Montpetit: They do one complaint as they arise. That’s why we’re asking for the investigative ability to do that in systemic issues such as that. Right now, they have to go one complaint at a time.
Senator Mitchell: Subsequent to that, I see the imbalance in the fight that you have, but there are elements in this bill that address the imbalance in your favour, for example reciprocal penalties. That has never existed before for the shippers. That’s not nothing.
The fact is that the CTA can be much more proactive now in arbitration and mediation. The railways will be required to provide greater data on costing and service, and there will be a much more specific, rigorous focus on the definition of adequate and suitable levels of service.
It’s not as though your concerns aren’t being addressed at all. They are being addressed quite significantly. It’s not to say that this piece of legislation, when passed, precludes the addition of other amendments and improvements such as you’re talking about.
Mr. Montpetit: There are some definite wins for shippers in this that allow a little more accessibility to some of the information and data we didn’t have before, but the question is: Does it go far enough in specific areas?
Having more data and information available helps all of us, but when you’re looking at things such as systemic issues within the rail system, this is quite significant as far as penalties and that sort of thing.
That may apply to certain sectors but it doesn’t really apply, for example, to my shippers. That can apply to certain sectors, but again we seem to tend to lose focus. There’s a lot of focus put on grain.
I am pleased they have a lot of focus. Good for them, but there are also issues in our contractual situation with my members that are much different. It’s probably a lot more complex because we are dealing with a lot of non-information right now.
Senator Mitchell: It was interesting that the train representatives here today were saying that they feel the requirement of them to reveal data isn’t reciprocated or extended to both ends: the shippers and ports and so on. What would you say to that? Should your shippers be providing more data?
Having said that, in that context would you also comment on the fact that one of the problems with getting more granularity is that we have two major railroads? If one gives granularity, the other knows exactly whose information it is and they run into a competitiveness problem.
Would you say that’s an issue, and what would you say about shippers having to give more public information to match the kind of data being provided by the trains?
Mr. Montpetit: That’s a fair question. As far as data and information are concerned, and as far as the railway goes in providing more data, it’s already being done in the U.S. Quite a bit of data and information are available in the U.S. Yes, there are six or seven major railways down there and just a couple here; but geographically there are only a few railways proportionate to the companies in the U.S., so I find that a non-issue.
In terms of shippers providing more data and information,a lot of the shippers in different sectors have and do provide some of that information when dealing the railway. There is a lot of ongoing communication back and forth when they’re dealing with railway operations people on a daily basis.
It’s not like information is not going back and forth. They have no choice. They rely so much on the railway that they’re very transparent with the information they provide the railway because otherwise they’re not going to get their products shipped.
It’s a bit misleading to say no one else is providing anything and only the railways are. The issue is that there are only two railways and thousands of shippers. It would be very difficult to provide data for thousands of shippers. They are already communicating with the railways on an ongoing basis daily. If they don’t get things moving, they’re basically hog-tied.
The Chair: They have to explicitly explain what they want moved, or else they can’t get it moved, right?
Mr. Montpetit: Absolutely, correct. If you have been on the shippers’ side, they absolutely do and they have to. There are daily conversations on this. The whole black hole is what’s going on.
[Translation]
Senator Boisvenu: Mr. Montpetit, Ms. Des Chênes, thank you very much for your informative presentations. Railways are essential to the Canadian economy. Mr. Montpetit, you have shown that the mismanagement of railways could jeopardize the very existence of certain companies. I do not believe that the bill referred to us will be able to modernize the relationships between shippers and service providers.
I asked the question earlier on to a service provider. In his opinion, things are getting better, but service providers are strongly resisting greater transparency in managing what we call the “logbook,” among other things.
As Senator Mitchell stated, this bill will provide for some openness, but not full openness. It will be fairly discriminatory, since it will be not only be up to the minister’s office or a senior manager’s office to decide who is eligible to receive information or not.
Should this bill not make all carrier information available as long as it does not hurt competition or business relations between companies and carriers? With regard to shippers, should this information not be as transparent as possible? The same is true for the Canadian economy. I don’t understand this resistance.
Ms. Des Chênes: For our part, yes, we would like there to be more transparency. We understand that competition must not be hurt, but CN and CP operate in the United States where there are regulations on transparency.
This information would be very important for capacity planning and to know where our cars are. These cars belong to our companies and we often do not have access to them because they are elsewhere. These are specific cars, as they contain chemicals. We need them for transportation.
Greater transparency would not only help us plan, but would also help with arbitration, as Mr. Montpetit as mentioned. We need that information then. When it is only the companies that have that information, it does not help us negotiate commercialization programs.
[English]
Mr. Montpetit: I agree totally. In the U.S., and I hope I get the number right, they report on 23 different commodity groups. That would be a great start for us here.
To your point on understanding service and going into arbitration cases, the more information we can have, the better. Of course, there are always limits to what you can provide. Let’s be realistic here. Of course, I want all the information.
Let’s be honest. Realistically speaking, we need to do more than what we’re doing now. The U.S. is at least a good starting benchmark for where we can begin and then an evaluater from there. We need that. It would be very helpful to get better transparency on what the overall network looks like.
[Translation]
Senator Boisvenu: Are you both saying that the same companies that operate in Canada and the United States are less transparent here than they are across the border?
Ms. Des Chênes: Yes.
[English]
Mr. Montpetit: Correct.
Senator Mitchell: That is because there are more rail lines in the U.S. You can’t tell who is giving what information.
My question is to follow on your presentation, Ms. Des Chênes. I think you said that new LHI provisions are useful to your industry, in particular, because you have so many captive shippers.
Ms. Des Chênes: We have a lot of captive shippers, yes, but it depends on the region of the country. We have clusters of members across the country in B.C., Alberta, Ontario and Quebec. Certainly not in all cases would LHI work, but it would be an improvement for us.
Senator Mitchell: Mr. Ballantyne, I think you were referring to the problem of containers in the context of having capacity to transport. This bill will make it possible for non-CETA defined shipping companies and non-Canadian shipping companies to reallocate their shipping containers within Canada using things other than their own ships, which is very restrictive. Is that right?
Mr. Ballantyne: Well, no. The Coasting Trade Act has a provision in it that essentially requires Canadian flagged ships to move goods between Canadian ports. It’s similar to the famous U.S. Jones Act.
Bill C-49 is proposing that the shipping lines that own containers can move the empty containers, for example, let’s say between the Port of Halifax and the Port of Montreal. As long as it’s a non-revenue move of the empty container, they can do it in foreign flagged ships.
While the CETA agreement is limited to essentially European flagged ships, Bill C-49 opens it up to the whole world. We think that’s a good idea. We think that is certainly an appropriate thing to do.
The Chair: Thank you, colleagues, and thank you, witnesses, for appearing today. It’s much appreciated.
Senators, tomorrow we will have the Forest Products Association of Canada, the Mining Association of Canada, Teck Resources Limited, Fertilizer Canada, Canadian Pacific, Canpotex Limited and Engineers Canada.
Also make time tomorrow for a short in camera meeting after the witnesses are done for 10 or 15 minutes maximum, and then we should be out of here. It will be an important meeting. We’re going to discuss our way forward. That would be good.
(The committee adjourned.)