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Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 12 - Evidence - Meeting of May 13, 2014


OTTAWA, Tuesday, May 13, 2014

The Standing Senate Committee on Agriculture and Forestry, to which was referred Bill C-30, An Act to amend the Canada Grain Act and the Canada Transportation Act and to provide for other measures, met this day at 6:15 p.m. to give consideration to the bill.

Senator Percy Mockler (Chair) in the chair.

[English]

The Chair: Honourable senators, welcome to this meeting of the Standing Senate Committee on Agriculture and Forestry. Minister, thank you for being here this evening. I will introduce you formally a bit later.

My name is Percy Mockler, Senator from New Brunswick and Chair of the Committee. I would ask senators to introduce themselves beginning with the deputy chair.

Senator Mercer: Senator Terry Mercer from Nova Scotia.

[Translation]

Senator Robichaud: Fernand Robichaud, Saint-Louis-de-Kent, New Brunswick.

[English]

Senator Tardif: Claudette Tardif from the province of Alberta.

[Translation]

Senator Maltais: Ghislain Maltais, Quebec.

[English]

Senator Oh: Senator Oh, Ontario.

[Translation]

Senator Dagenais: Jean-Guy Dagenais, Quebec.

[English]

Senator Eaton: Nicky Eaton, Ontario.

Senator Plett: Don Plett from Manitoba.

Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.

The Chair: Thank you, senators. Today, we will begin the study of Bill C-30, An Act to amend the Canada Grain Act and the Canada Transportation Act and to provide for other measures. It is known as the proposed Fair Rail for Grain Farmers Act.

The first panel consists of the Honourable Gerry Ritz, P.C., M.P., Minister of Agriculture and Agri-Food Canada. For the record, thank you, minister, for being here this evening to share your comments and vision with us.

With the minister, we have Greg Meredith, Assistant Deputy Minister, Strategic Policy Branch, Agriculture and Agri-Food Canada; and Lenore Duff, Director General, Surface Transportation Policy, Surface Freight Policy, Transport Canada. I thank officials for accompanying the minister.

I will invite the minister to make his presentation, to be followed by a question and answer session. Each senator will be given five minutes to ask questions before the chair recognizes another senator. We will have as many rounds as questions made available.

[Translation]

On that note, Mr. Minister, you have the floor.

[English]

Hon. Gerry Ritz, P.C., M.P., Minister Agriculture and Agri-Food: Thank you, Mr. Chair. I'm pleased to be here this evening to speak to Bill C-30. I want to thank senators for their efforts thus far in moving this bill forward.

Bill C-30 is good news for farmers, all commodity shippers and our Canadian economy. Canada's hardworking agriculture and food producers and processors generate close to 7 per cent of Canada's GDP and nearly $100 billion in annual sales. The agriculture and food industry is the largest manufacturing employer in Canada generating one in eight jobs, with record exports topping some $50 billion for the first time in Canada's history. Close to half of those exports were generated by grain alone. On average, 50 per cent of our wheat, barley, canola, peas, lentils and other world-class grain and oilseed crops are shipped to our customers here and around the world.

Our government continues to work collaboratively to modernize Canada's grain industry so it can capture exciting new opportunities in the global market place. We delivered on our commitment to bring marketing freedom to western grain farmers. We are investing in research into new disease-resistant productive crop varieties that will keep farmers competitive while helping them to meet the growing global demand for high quality foods and while lightening their environmental footprint.

We're opening up new markets around the world through the most aggressive trade agenda in Canadian history, including signing free trade agreements with key agricultural markets like the European Union and South Korea. Our customers in both of these markets are eager to have greater access to our quality Canadian food products under these new FTAs.

Last month I was in Korea, along with representatives from across our Canadian agricultural industry, to promote that agreement. While there, I met with the SPC Group, a major Korean buyer of Canadian wheat, that plans to purchase roughly 50 per cent more Canadian wheat to grow their market share in Asia.

To meet this new demand, Mr. Chair, Canada's farmers require an efficient, reliable and predictable transportation system to get those crops to market, all the more so this year given that Western farmers brought in a record harvest that was close to 50 per cent above the average. This year's record crop, combined with poor rail service, has led to a severe backlog of grains in Western Canada, as well as many other bulk commodities.

While the grain has started to move, thanks to the order-in-council issued on March 7, we must ensure that it keeps moving. Under the order-in-council, Canadian National and Canadian Pacific are currently required to carry some 500,000 metric tonnes of grain each per week. This weekly tonnage target is set according to CN's and CP's ability to move this volume without negatively affecting other commodities. The OIC's volume and reporting requirements will effectively expire on June 1, due to the reporting of the crop week. This legislation intends to extend these same volume requirements until the beginning of the new crop year, August 1. With seeding season upon us, it's absolutely critical to keep the grain moving so farmers can free up storage space for this year's harvest.

Bill C-30 will require rail companies to move 1 million tonnes of grain every week through to August 3, extending the volume requirement from the order-in-council. The act will allow us to set ambitious, achievable volume requirements for railways moving forward. It will give shippers of all commodities in the three Prairie provinces more rail options by extending interswitching rights. It will give the government powers to strengthen farmers' contracts with the grain companies.

It will also strengthen the accountability between shippers and the railways, thanks to an amendment passed at the House of Commons Agricultural Committee. The amendment would allow shippers who enter service-level agreements to be directly compensated for expenses they incur as a result of the railway's failure to meet their service obligations.

This amendment is a market-based solution to meet stakeholder requests for more balanced accountabilities between railways and shippers. For example, if a grain shipper has a service-level agreement with a rail company, and if the rail company does not meet those obligations — triggering demurrage fees, for example — the grain shipper can ask the Canadian Transportation Agency to require the railway to provide compensation for those out-of-pocket expenses.

As well, our government will require the Canadian Transportation Agency to consult with the railways and other supply chain partners to discuss their plans regarding the movement of grain and other commodities during the upcoming year. The goal is to proactively bring together all the players in the chain to ensure the conversation happens up front at the beginning of the season.

We will also be able to ask for updated analyses, as needed, throughout the year. The Canadian Transportation Agency will then provide advice and information that will help the Minister of Transport and the Minister of Agriculture to determine further volume requirements going forward based upon this hard data. Furthermore, our government will also require the railways to provide more timely and detailed data regarding the movement of grain on a corridor-by-corridor basis.

Mr. Chair, together, these measures will ensure that Canadian shippers have access to a world-class logistic system that gets Canada's agricultural products and other commodities to market in a predictable and timely way. The grain industry and shippers across Canada support Bill C-30. With this legislation, our government is taking immediate concrete action to get the grain moving faster to port so Canada can meet its international sales commitments.

It's not the final step, however. Higher crop yields and better crop performance are the new normal, and we must be prepared for that. Our government will continue to engage the full value chain and the provinces to look at the challenges of transporting not only this year's record harvest but future harvests as well. We're encouraged to see the investments in new capacity across the prairies.

For the immediate term, there are a number of risk-management tools available to farmers as spring seeding gets under way. Producers are making good use of available risk-management tools, including the Advance Payments Program, which is specifically designed to assist with producers' cash flow pressures while commodities remain on farm.

Looking ahead, the future is bright for this core economic driver. With our highly skilled producers and our abundant land and water resources, Canadian agriculture is well positioned to meet growing demand in the global marketplace. Our government will continue to work with the Canadian agricultural and food industries to drive transformative change and lay down the conditions required to unlock this sector's full economic potential.

This committee continues to work hard for the Canadian agricultural sector, and I thank you for that. I urge you to give this bill your careful consideration while moving it forward as expeditiously as possible. Thank you. I look forward to your questions.

Senator Mercer: Mr. Minister, thank you for being here again. It is always good to see you. Since the hammer is coming down here and there are time limits, I'll try to be quick.

You mentioned the 500,000 metric tonnes per week, per railroad, directed under the order-in-council. Are they meeting those requirements?

Mr. Ritz: Yes. The short answer is yes, senator.

Senator Mercer: Has there been any week when they haven't met that target?

Mr. Ritz: There was a gradual build-up to the last two weeks, when they met the requirement full on.

Senator Mercer: So they've only met the requirement for the last two weeks?

Mr. Ritz: That was part of the program under the OIC. They gained capacity each week, moving up to the beginning of May, up to that 500,000 metric tonnes.

Senator Mercer: So no fines have been levied?

Mr. Ritz: Not that I'm aware of.

Senator Mercer: The drafting of the legislation and the amendments to the legislation in the House of Commons ran into a snag or two when the report came back from committee, and then an improper amendment was discovered or appealed to the Speaker, and he ruled that it had to go back to the committee.

It took 42 days to get that done, and now it comes here and we're under the gun to get it done. I'm not suggesting we're not going to get it done; I think we will. But I get frustrated when legislation gets bogged down because of drafting legislation or improper amendments being made. Would you care to comment on that?

Mr. Ritz: I was disappointed, too, senator. We undertook an amendment. We thought we were on the right track, moving it through as we did. There was unanimous consent moving forward.

There was some question as to whether or not the committee had the ability to do that in the way they did. The Speaker's ruling took some time with the Easter break, as you well point out. I'm not sure if 42 days is accurate or not. I didn't count them. I know each day mattered. At the end of the day, the railways were still under the OIC, and will be until June 2, I think, the date of that crop week. So the grain continued to move.

I was concerned, like you, that there was time lost, but at the end of the day we hope to make that up.

Senator Mercer: The service-level agreements that are referred to in the act and were referred to under the transportation amendments that took place recently do not specifically define ''adequate and suitable.'' Why wouldn't we do that? This is the second or third bill we've had, or at least the second bill, where we've talked about ''adequate and suitable.'' It doesn't appear in this bill either, but you're going to try to define it in regulations.

One of the complaints since we passed the last piece of legislation on this was the fact that it didn't have a strong enough definition and, indeed, that there were no teeth in the legislation — so that we don't find ourselves in this position next year, when maybe the crop will be even bigger.

Mr. Ritz: There's always that potential, senator.

We have a very strong legislative outline here with the amendment that was eventually passed by the committee and brought back to the house at the report and third reading stages. Then you underscore the backbone of that, as I said, in legislation with good regulations. The reason for regulations is that they are flexible. There are a number of commodities at risk here and we're not going to increase grain movement at the expense of coal, potash, timber and the other bulk commodities, containers and so on.

The definition of ''adequate and suitable,'' for one, may be different for the next. To keep it as flexible as possible, the regulatory package will address that in each service-level agreement that is struck between the shipper of record and the railway of record.

Senator Mercer: Yes, but there are multiple shippers of record and railways of record. Let me move on, because I know my time is short.

I've talked to a number of farmers in Western Canada and some of them have suggested that the dismantling of the single desk at the Wheat Board contributed to the problems we're seeing with the amount of grain being transported. In particular, without getting into the debate of the Wheat Board again, but talking about the fact that you proceeded with getting rid of the single desk, but there didn't seem to be a plan in place to replace some of the things that the Wheat Board did. They had a role to play in booking transportation of grain.

Mr. Ritz: I would question the fact that you spoke to a number of farmers. I could name two or three who would give you that argument, not a lot. At the end of the day, the single desk removal has worked extremely well. You also have to recognize that this is the second year of freedom for western farmers.

The first year worked exceptionally well. There was a large crop then and a good volume was moved well ahead of schedule. Even this year, with the problems we've had, we had 30 per cent off the combine. That's called cash flow in anybody's books. Literally what happened is the wheels fell off in early December and the railways never tucked them back up under the cars again as we came back after the Christmas break. That was the problem this year.

Anybody who says the old single desk would have fixed this — the only thing I would give them in that regard is that the single desk dribbled the sales out so slowly that there never was a strain on the rail system.

Senator Mercer: My final question is again about the movement of grain. When we had the Wheat Board debate there was great discussion here about the availability of trucks moving grain south into the United States. Specific farmers I've talked to have told me that this is an issue: getting trucks out to do this and having enough available rolling stock to get the product moving. Have you had reports of that?

Mr. Ritz: There was some concern that more product may be moved south because the railways weren't. That was one of the corridors they weren't addressing, and still aren't in a significant way. The order-in-council says get the volumes to the coast where the boats are sitting and causing demurrage charges. There is a shortage of product moving to the States in a timely way.

It's starting to move down there. There was some concern. I know Cargill undertook moving a lot by truck to keep the feed mills operating, the General Mills and others down there. It's far more expensive and not as environmentally reasonable to move by truck as by rail. That's one of the reasons we moved to interswitching at 160 kilometres, with the ability to expand that.

Senator Mercer: I think that is a good move.

Mr. Ritz: I agree. Rather than a handful of elevators that have the ability to do that, we now have close to 200, plus the ability for Burlington Northern, who also partners with CP stateside, to come up and take that product south. At the end of the day, that will address a lot of those concerns.

Senator Plett: Thank you, minister. I want to make a comment, since my friend brought up the single desk. I also see one of the problems that doing away with the single desk has created. Farmers seeded 2 million more acres of wheat than they did under the single desk because they were happy they could go out and sell it on the free market, which has created that much more crop out there. That, as I said in my speech, is what you call proof in the pudding.

I want to talk a bit about interswitching. It's important to me, as you know, minister, being from Manitoba and having the Port of Churchill there. You briefly touched on this, but I would like you, if you would, to explain more about interswitching and how it increases competition between railways.

Specifically, our government has taken action to ensure that the Port of Churchill continues to be an important northern shipping port, including an important option through which farmers ship their grain to market. Will the increased interswitching distances improve things for the Port of Churchill, for Omnitracs and possibly other short-line railways?

Mr. Ritz: The short answer on the Churchill sub is, yes, it will help them. They will have a larger catchment area throughout Manitoba in order to feed up through there.

We've actually exceeded the dollars that were allowed under the changes in the single desk. There was an allocation that would drive product with that same capacity through Churchill, and we surpassed that last year. This year it has already been fully subscribed, and it looks like we'll have another banner year up in Churchill. The interswitching will help Omnitracs in that catchment area.

There is a map we've done up, and I can leave a copy with you, that shows the circles and how they overlap. When interswitching first was put in in 1987, it was increased in 1987 to 30 kilometres, which reflected some 66 per cent of the grain elevators. This was before rationalization of a lot of the rail lines and elevators. Now, rather than some 2,000 elevators, we're down to a couple hundred major points. The old interswitching at 30 kilometres no longer addressed the ability to move grain from one area to another railway.

By moving to 160 kilometres, we're now back to a higher percentage of all of the elevators having that ability, the buyers and the shippers themselves.

One of the demands was ''Let's have joint running rights.'' Of course, it's easier said than done, with safety factors, who dispatches and how you keep track of it.

What the railways have done, to their credit, is that they each spent about $100 million last year on infrastructure through Western Canada. What they did is lengthened their sidings so they can get the longer trains off to let the other train come back through. There's been a lot of work done in that regard. What that pointed out is there's more work to be done on the infrastructure from the rail perspective. They're certainly not against doing that. This bill will help them along that way.

Senator Plett: I know there has been talk about it also extending because of the interswitching, and it extends now into the United States. Could you touch a bit on the impact of that, where that will help us the most?

Mr. Ritz: There are two major corridors across the northern tier of the U.S. One feeds into the Chicago and Thunder Bay market that's really under-tapped right now. The other one takes it out to Seattle and loads at that facility. There's been some push back saying that all those Canadian jobs are gone, but once it's on the railway there are not a lot of Canadian jobs involved. It's a bulk commodity.

To see CP take it south on one of those corridors, they have agreements with BNSF. As I say, they partner up with them in the U.S. now. They have the ability to do that. BNSF engines come up and hook on and take cars south and either go west, east or straight south. It gives us a lot more options.

It's funny, when I went out to Calgary to do the roundtable with bulk shippers there, we left the airport and were heading downtown to where the meeting was, and there was a CP train sitting and waiting for another one to go by. It had CP engines and BNSF engines on a CP train. They're already doing those partnerships, so it's not a big leap to see more grain have access out through the West Coast at Seattle, as opposed to Vancouver, if it is required, or the same thing going through to Thunder Bay and the Chicago market, which is virtually untapped at this point.

Senator Plett: Minister, I understand this legislation takes a staged approach and will be in place in a minimum of two years. As far as the Canada Transportation Act review, the next step is putting into force the regulations around this legislation.

After that, I understand you are proposing an expedited, more fulsome review of the Canada Transportation Act. Could you touch on that a bit?

Mr. Ritz: Sure. The CTA review happens every 10 years. It was due again in 2015, so what we've done is pulled the railway component forward into this year, and we'll be setting up the review of the railway actually a year ahead of schedule. It was supposed to start in June of 2015, if I remember correctly, and it's going to start this summer and work through. By the time it was actually to start, we will have the response we need just on the railway component of it.

The regulation package is actually under way right now, with concerted work between my shop and Transport as to the regulation package. We're hoping to have that coincide with the passage of the bill at Royal Assent so we have a better, more fulsome package to go out and do the final consultations ahead of the end of the crop year.

The CTA review and the regulation package are two separate things; and the overall CTA review for everything else in Transport will begin in June 2015, as was scheduled.

Senator Tardif: Thank you. Minister, this bill is certainly a step in the right direction, and I know that farmers in the Prairie provinces are extremely pleased to see their grain going to market after having it sitting around for so many months.

However, some farmers have indicated, as well as the Minister of Agriculture from Saskatchewan, that the bill does not go far enough, that it doesn't have enough teeth. What would your response be to that?

Mr. Ritz: At this point we have the dentures and the teeth will be inserted with the regulatory package. I think I would coach my friend and colleague, Minister Stewart, to just bide his time and be patient. We've had these discussions. I know they wanted almost 3,000 cars allocated, but that's beyond the scope of what the railways have said they could do without interfering with other bulk commodities. I know that's important for Saskatchewan, with the amount of potash that has to move to market.

Senator Tardif: How was the target of 1 million metric tonnes of wheat per week established?

Mr. Ritz: That was established in numbers that railways brought forward and said they could move, roughly 5,500 cars to move that, half of that amount each. So, 11,000 cars was the number they thought they could cycle without having any detrimental effect on other bulk shipments. That is a minimum.

Senator Tardif: That's a minimum.

Does this volume requirement affect other commodity groups that will transport their products?

Mr. Ritz: Not negatively, no.

Senator Tardif: The volume requirement is an aggregate number. How can we make sure that the railways do not simply concentrate on low-hanging fruits to meet their targets?

Mr. Ritz: Part of the problem right now, senator, is, under the order-in-council, it's a blunt instrument and they do concentrate on where they can get the volumes to maintain.

We will have corridor-by-corridor specificity once this bill is passed, both in data, so we can establish what routes are required. There are longer cycle times when you start running south. I know some of the concerns are we never railed enough straight on through to Montreal or Quebec or some of the other facilities farther out from Thunder Bay at other times of the year, and on that we will have better reporting and better data so we can start to do those assessments as well.

Senator Tardif: In this whole consideration of transportation, number of cars and the volume, do you feel it would have been important to have included something in the bill on the short lines and producer cars in order to make a change to how the transportation will go?

Mr. Ritz: The producer cars are, under the Canadian Grain Act, already administered by the Canadian Grain Commission. They never were a creature of the single desk. A lot of people would have you believe that, but it's not true. So the allocation of producer cars is there. There has been a demand for more producer cars than ever, and the demand has been filled to a higher level than ever before.

With this bill and service-level agreements, a short-line rail with catchment area, too, will have the ability to sign a service-level agreement with CN or CP.

Senator Tardif: Farmers I know, certainly from southern Alberta around the Cypress Hills area, are asking for more producer cars and short lines, from what I understand.

Mr. Ritz: And they will be able to do that. As I say, they'll be able to sign the service-level agreements. They will also, with the interswitching, have the ability to move products south and east and west for the designation, should they decide to.

Senator Tardif: Do you have a sense of the volume of grain from last year that will be carried over to this year's harvest?

Mr. Ritz: Every year, there is a carry-over. On average, it runs between 5 and 8 million tonnes; it has always been in that ballpark. With this one, with the extra tonnage that was produced, the carry-over will be somewhere in the 18 to 21 million tonne range, basically a creature of the oversized crop.

Senator Tardif: And will the capacity be there to handle that by transportation?

Mr. Ritz: That's the whole point of having the hard data that we will require on the corridor-by-corridor breakdown, so we can decide where that overage is sitting. We will sit down with the shippers and the railways to map out a program going forward.

The most egregious point I heard this year is there was one boat sitting in Vancouver for 60 days waiting for 15 more cars of a specific malt barley, and they couldn't get those cars spotted where that barley was and move to fill that ship. Sixty days of demurrage on that one boat. That's a creature of no one talking to the other person and the people that should be listening.

Senator Tardif: I'll leave it for now, chair.

Senator Eaton: I think this problem, minister, certainly shows how successful getting rid of the Wheat Board has been made, that you have the surplus.

You're talking about overages. Every year there is leftover. Does the grain deteriorate?

Mr. Ritz: Not if it's stored properly, and it depends on the product. If it's canola, you have to be much more careful storing it because it will take on moisture and spoil a lot faster. If it's in a good bin that has air that you can apply to it, you have to watch it. You have to manage your grain in store. But wheat is a very hardy product. It can last quite a while. There's always the stories about it being in the pyramids, take it out and it will still grow.

Barley can deteriorate from a malt quality down to a feed quality. There are some changes that can happen.

As for any grain that was stored on the ground, as I travelled through Western Canada — I do that a lot — there's not a lot still stored outside. There are the new grain bags and so on that are being used, and a lot of product that was moved; those have either been binned or sold.

Senator Eaton: Are you going to keep on with these volumes? Is it 1 million tonnes of wheat we're insisting the railways ship?

Mr. Ritz: It will take more than that to catch up at the end of the day.

Senator Eaton: I understand that, but will they keep on going until they have caught up? Will it just be a regular fact of life now?

Mr. Ritz: That's the point that needs to be underscored. The whole thing will change drastically, depending on how late this crop gets seeded, which means it will be harvested late, and that gives you the period between the start of the crop year, August 1. Until last year, really, there wasn't substantive amount of product off until mid-September. It was a late fall, and then moving forward from that, which really threw off everybody's numbers. So if we have that period this year, we'll catch up on a lot of that overage, and if we have an above average crop again, we will be still looking to be moving those types of tonnages.

Senator Eaton: You'll eventually catch up. In other words, you'll keep on going until you catch up?

Mr. Ritz: Yes.

Senator Eaton: How long do you think that will be?

Mr. Ritz: Straight at a million tonnes, you would not catch up, but it all depends on when harvest comes into full swing. They have a six-week period. Like last year, where those tonnages could be moved, there are buyers and there still is demand. So you would gain a lot of that in those six weeks.

Senator Eaton: Before the next harvest comes in.

Mr. Ritz: Yes, before the next harvest comes in. Then the size, the quantity and quality of next year's harvest will then tell you what kind of volumes you will have to move to move that to marketplace.

Senator Eaton: Say you have a window of a month, and I'm not asking you to give firm numbers because you can't because of the planting and the cropping, but if we have another bumper crop, will we just keep on going? Is this something that you hope will permanently be in place?

Mr. Ritz: As I said earlier on, there has always been an overage every year. You never sell everything you have.

Senator Eaton: Yes, but, there are overages and overages.

Mr. Ritz: There are always overages. We will try to get back down to normalcy. It's always a percentage of the overall crop. This year it's a bigger percentage because it was a bigger crop.

Senator Eaton: What is the percentage of a normal overage?

Mr. Ritz: Maybe 8 or 9 per cent, something like that.

Senator Eaton: What is it now?

Mr. Ritz: Right now, it's probably a little more than double that.

Senator Eaton: So this is why the hurry.

Mr. Ritz: And a potential to be almost triple that if we didn't get on top of this. Every million bushels we move is cash flow for farmers, and that's the whole point, to get as much as of that out as we possibly could, to get them paid for their hard work.

Senator Eaton: Do you feel the railways are looking at this long term and are going to build more track and cars?

Mr. Ritz: In what I've seen, senator, it's not a problem with track. It's a problem with engines and crews. The cars are there and the track is there to handle it. They've expanded their sidings, so they can get these longer trains that they run in the summertime.

The concern this winter was it was a cold winter. Yes, we've had them before. We didn't have the snow problems this year that we've had other years, but at the end of the day, I understand the need for safety to run a shorter, slower train. I get that, but then they ran half as many trains. All bulk commodities, even Canpotex, who own their own cars — they're a single-desk marketer for potash internationally — were several hundred thousand tonnes short of the capacity they needed.

Senator Eaton: Because of the winter?

Mr. Ritz: Because they couldn't get engines.

Senator Eaton: Did the railways see that?

Mr. Ritz: Yes. That's part of the reason I'm having the new data that we have never had access to. Mark Hemmes and his crew at Quorum will be doing that assessment. They'll be getting data on a week-by-week basis, corridor by corridor, which we have never been able to do before, and that will tell us where the shortfalls are. We — the Minister of Transport and the Minister of Agriculture — will sit down with the shippers and the railways in August of each year and work out the surge capacity that's required. If there's a 700,000-tonne sale of potash to India or China, when does it have to go out, so we can start to overlay it all in?

I'm buoyed by the fact that Hunter Harrison, the CEO of CP, is saying that we have to sit down and talk. He's absolutely right. That's what we need to do and that's what will happen in August, once this bill is passed.

Senator Eaton: Looks good. Thank you.

[Translation]

Senator Robichaud: Mr. Minister, you said in your presentation that this new legislation will allow us to meet our international sales commitments.

Prior to May, prior to everything being set in motion to get the grain moving, were we lagging behind in meeting our international sales commitments?

[English]

Mr. Ritz: No, we were not. We were as high as 50-some vessels sitting on the West Coast waiting to be finally filled or to be put in line to be filled. The average is 10 to 12.

Senator Robichaud: So we were not meeting our commitments?

Mr. Ritz: The boats were sitting there waiting to be loaded.

The elevators on the Prairies were 95 per cent full, which means that they are full, and the terminals were in the 30 per cent range. It should be the other way around.

Senator Robichaud: So we have some catching up to do on our international markets. How soon will that be met?

Mr. Ritz: We're getting very close. There are roughly 25 to 30 vessels sitting at the West Coast points right now. A lot of those are new vessels that have come in. The others have been loaded and gone; that's one of the purposes I made to our major buyers in Korea and Japan. I talked about Korea, but I didn't mention Japan. I talked to all the major grain buyers and millers in those two markets, which are very important for us as they're premium markets, assuring them we were on top of this, that we were cognizant of the fact that any kind of delay in their getting their grain also put pressure on them. They were at an average of some 40 days later than they thought they had, but they had enough volume on hand that nothing slowed down and no mills stopped. Nobody stopped producing flour. So we were able to keep that flow going.

Senator Robichaud: Did we lose any customers?

Mr. Ritz: Not that I'm aware of. There was one Japanese vessel that pulled into Vancouver and was going to buy on spec. When they saw the lineup they moved, but that's the only one I'm aware of.

There were some contracts bought out and some where the boat went out light because we couldn't get the final cars on board, so a few of those things happened that aren't good. That's an embarrassment.

Senator Robichaud: That's too bad.

Mr. Ritz: It has happened before, senator.

Senator Robichaud: I have another question. You mention the Port of Seattle. That's to move grain overseas, isn't it?

Mr. Ritz: Yes.

Senator Robichaud: Is that because the ports in British Columbia cannot deliver and load the vessels that come for the grain?

Mr. Ritz: No, we have the capacity and there are actually some major improvements going on with capacity to some of those terminals. As well, there are discussions under way to build one more large-capacity terminal; a consortium is looking at putting one together. That's all good, but there are times of the year where, if we have an avalanche in the mountains and the train can't get through, you'd have that as a safety valve.

Senator Robichaud: Will all the regions of the Prairies — because this is a large territory — receive equivalent services, and one region will not be advantaged over another?

Mr. Ritz: By having the data that we've never had access to on a week-by-week basis, corridor by corridor, we will be able to ascertain whether somebody is getting left behind. Certainly it's easy and business will flow where it's easiest to make money.

There will be times where we'll have to say no, there are cars needed up here. The shippers will also do that because the major terminals are scattered throughout that whole area. There are some independents that fill some of the gaps. They will be driving it and saying, ''We need cars and our service-level agreement says we have to get 100 cars a week. If we only got 80 last week, you owe me for 20.'' The service-level agreements will drive them out into some of those areas to make sure they're not lost in service.

Senator Robichaud: Who will have the authority?

Mr. Ritz: The Canadian Transportation Agency will have the tribunal quasi-judicial authority to say, ''You haven't measured up. We have a complaint here from X terminal in Grand Prairie. You didn't get their cars last week and they got a complaint. Here is what you owe them for not getting them there on time.''

Senator Robichaud: They will have —

Mr. Ritz: Teeth.

Senator Robichaud: Okay. That's where the teeth come in?

Mr. Ritz: Yes.

[Translation]

Senator Maltais: Thank you for being here, Mr. Minister. I imagine that most of the grain from the west is shipped to ports in Vancouver, Churchill or Prince Rupert. What percentage of grain is exported to British Columbia, if I can put it that way, for Asia? What is the percentage of all grain shipped from the west to the west?

[English]

Mr. Ritz: Our largest buyer is still the United States. The bulk of the product still flows south. The Pacific Rim is growing in demand every year. We're just starting to get into the Chinese market. The biggest commodity going into China is canola, both oil and canola seed to be crushed. The value of that for the last three years has been an average of $2 billion, just the canola. Japan is a primary wheat buyer and a lot of barley as well. Korea is a smaller buyer, but premium products. We want to make sure we have the ability to address that.

The bulk of our product is still going south. I would say — I'm going to out throw numbers; correct me if I am wrong, Greg — 60 per cent offshore.

[Translation]

Senator Maltais: In the case of connections to the east, Thunder Bay and the Great Lakes for Chicago, are we facing the same problems with cars, particularly for shipping to the Pacific?

[English]

Mr. Ritz: Yes, we were. The railways were saying the problem was in the cycle times. They couldn't get cars to Thunder Bay and bring them back into service. They were about half again as long as taking them to Vancouver and bringing them back into service. That was their decision not to tie up cars for that long as they strove just for volumes.

There's more capacity in Thunder Bay that they're addressing now. There are buyers in South America, Europe and up into Africa, Morocco, Turkey and so on, that buy a lot of our pulses. Those either go out through Churchill or Thunder Bay, and there's a growing demand for those products in that European theatre.

[Translation]

Senator Maltais: I am from northern Quebec, a region where there are a lot of grain stores belonging to Cargill, Bunge and various companies, because the shipping season on the St. Lawrence River unfortunately does not last 12 months of the year. Are the storage areas in Montreal, Quebec City, Baie-Comeau and Port Cartier sufficient?

Mr. Ritz: And Trois-Rivières.

Senator Maltais: Are they sufficient for storing enough grain for the sales capacity for your clients?

[English]

Mr. Ritz: There hasn't been a problem to this point, senator. They've had the capacity. They're more transfer sites than storage sites so there are ships. There are lakers that come down through from Thunder Bay, off-load at some of those terminals and then from there they're put on the panamaxes, the salties, the ocean-going ships. So they're transfer sites. They've had the capacity.

There have been changes in the ownership of some of those. The Canadian Wheat Board, as a private entity now, actually owns a major terminal in Thunder Bay and that also came with terminals in Trois-Rivières and one other spot in Quebec, I think. I'm not sure. They're transfer sites then.

[Translation]

Senator Maltais: When the St. Lawrence River is frozen, there are only three shipping ports: Quebec City, Baie-Comeau and Port Cartier. There are not any others. Is the storage capacity sufficient for your clients' demand?

[English]

Mr. Ritz: Yes, and the other major one on the East Coast is Halifax. The railway can go straight through to that, but again it's a longer cycle time.

Senator Oh: Thank you, minister, for coming. My question is about the Canada Grain Act. An important part of this bill is the changes to contractual obligation between farmers and grain companies. It is well known that some farmers have been not able to deliver their grains for contracts that are months old, some going back to November. At the same time, the grain elevators are unwilling to take the grain they have contracted for and are paying cash for grain at a lower price.

Can you please explain why it is important to make these changes to the Canada Grain Act, and how does this play into the overall theme of strengthening the supply chain as a whole?

Mr. Ritz: The one thing we noticed from last fall as the prices started to tail off — in the contracts that the major grain companies had put in place with farmers — is that they have a clause in the contract that says they'll take it at their time and place. So we wanted something back from the farmers' side that said, ''Okay, you choose when and where you're going to honour that contract. It says October shipment, you didn't take it and then after 30 days, by the end of November, if you haven't honoured your October contact, then you will start paying the farmer storage on that grain and the interest on the value of that contract going forward.'' So, the longer they delay in fulfilling that contract, they will actually pay the farmer for it. It stimulates the elevator company to honour the contract.

We saw the basis price — the price that was offered — stretch down to where it was ridiculous, simply because the system was plugged, but also because they didn't want to honour the contracts and bring them in at the same time.

This will actually level the playing field. It gives predictability to the producer and the contractor — the grain company that issued the contract. They will have to honour it within that time frame or start to pay storage and penalty. They're going to ask the railways, or the railways are going to ask of them — it puts the farmer into that loop, as well, to collect damages if there's less-than-good service.

Senator Oh: So, the faster they move, the better for everybody?

Mr. Ritz: Exactly. It's cash flow, just like in any business.

[Translation]

Senator Dagenais: We have spoken a lot about trains and railway companies. The railways have described this bill as an intrusion into rail transport. How would you respond to the railways?

[English]

Mr. Ritz: Politely?

[Translation]

Senator Dagenais: As you wish.

[English]

Mr. Ritz: Well, I mean, we're not a government that meddles in business. We don't do that. We actually set the playing field so that business can adapt and adjust to itself. We keep our taxes low; we look at our regulations to make sure they're not burdensome; and in agriculture we work with our partners in the provinces to identify regulations that are counterproductive. If there are overlap and gaps, we want to make sure we don't have too many overlaps.

I don't see it as an intrusion. I see it as strengthening the ability of the railways to provide the service they're paid to. Both railways, CP especially, have fine-tuned their operations to the point where they're based on velocity, not on volume. That's going to be a problem for them.

They let go of some 400-plus engines, a number of crews — 4,000 to 6,000 people, depending on who you talk to — and some 11,000 railcars for various commodities. At the end of the day, that gives them a tremendous bottom line that the shareholders like, but they're not able to provide the service that we rely on.

We are landlocked. Saskatchewan has 47 million arable acres and we're a long way from tidewater. We export between 50 and 85 per cent of what we produce, so we need railways that are on target, on time, predictable and manageable.

We're not controlling the cost to the railway. They have what's called an entitlement for hauling grain. It's not restrictive in any way, shape or form. But at end of the day, we expect them to provide service to counter that entitlement.

The Chair: Looking at the time, the minister had committed to one hour. Thank you for that, minister. We can start on a second round.

Senator Mercer: With respect to the time, minister, I'll give you two questions and a comment, and then you can respond.

You used the term ''oversized crop.'' Shouldn't we be hoping this is not an oversized crop, but a new baseline?

Mr. Ritz: Yes.

Senator Mercer: Second, how many farmers have availed themselves of the $100,000 interest-free bridge loans that are available?

While you're figuring out your answer to that one, my comment is that there may be a backlog in Thunder Bay, but not in Halifax. There is a lot of capacity in Halifax; we can handle 50,000 bushels of grain per hour. Our port is much closer to most of the markets that we're shipping to when we go east.

That's a comment. Can you answer the other question about the $100,000?

Mr. Ritz: Right. Yes, I agree with you that this was a large crop. In my estimation, we've been saying that, with the demand out there in the global marketplace, Canada will have to produce between 50 and 70 per cent more than we do now in order to meet that growing demand. The middle class in China are some 400 million people now. For the first time in history, bread has surpassed rice as a staple in Japan. We're seeing those kinds of changes. India is buying more.

We're going to have to start producing these types of quantities on a regular basis, and we can do that through biotechnology, innovative farming practices and so on. This is a wake-up call and a dress rehearsal to say this is what we'll have to be prepared to do over the next 5 to 10 years to get to that point.

Senator Mercer: Hopefully, we won't be back here every year for the next five years as we were doing it.

Mr. Ritz: Absolutely. That's why the regulatory package with the flexibility in it will address that.

There are roughly 2,700 farmers who have applied this year. It's up 10 per cent from a normal year. The number of farmers is up, but the actually loan per farmer is down slightly — whatever made that happen. That's still only about 30 to 35 per cent of farmers who are taking advantage of even the $100,000 interest-free.

Senator Mercer: And I assume we have 100 per cent payback?

Mr. Ritz: Yes, we do. It's extremely good. It's based on what they have in the bin or what they are going to produce.

Senator Plett: My first question is simply out of curiosity; it doesn't really have to do with the legislation. You talked about a ship going into Vancouver, I think you said, and the line-up was too long and it took off. Where did it come from and where did it go?

Mr. Ritz: It was a Japanese vessel, and they headed stateside.

Senator Plett: So they must have known they could go to Seattle or somewhere.

Mr. Ritz: You get those types of boats that show up; they're on a backhaul and they're hoping to take something back with them. Truckers do that all the time. There's no reason to think boats wouldn't also. They're close and in the area.

As I understood, it was a Japanese vessel. They would have picked something up on spec, and they would have waited too long to make that happen.

Senator Plett: I know that Senator Mercer rightfully plugs the Port of Halifax on a regular basis, as I try to do with the Port of Churchill, even though it's much smaller. But the problem isn't that there's backlog at the Port of Thunder Bay; the problem is getting it to the Port of Thunder Bay, as it is to Halifax.

Senator Dagenais asked about how the railways had accepted this. Obviously, you did some consultations around the country on this. Tell me, how did other stakeholders — Senator Tardif talked about the Minister of Agriculture in Saskatchewan not really being happy — but how about other ministers and stakeholders? What has been the reception you have seen on this legislation so far?

Mr. Ritz: Extremely good. We had a number of roundtables, as we recognized in early January that the railways were not picking up their game, regardless of the cold and the winter that was out there. They weren't picking up their game and moving the product. We started talking to a lot of the bulk shippers. We started with grain, because that was the first one flagged. Then, over the course of about six weeks, as we did I forget how many roundtables across Western Canada predominantly, we started hearing from other bulk commodity shippers, as well.

The name of the bill is ''fair rail for farmers,'' and they said, ''What about us?'' We say they're included, but the name of the bill is just the name of the bill. They were giving us stories of concern, too.

We had representatives of CN and CP at these roundtables. They were invited to each one. They stopped coming; as the complaint level went up in the public, they stopped coming to the meetings, which was unfortunate, because they needed to hear what was said.

That's why I said I'm buoyed by the fact that CP's Hunter Harrison is saying, ''We have to sit down and talk,'' and he's absolutely right. What will make this work is sharing that data and information as to what's required when, and how we tackle that and put our best foot forward.

Senator Plett: There has been talk about the sunset clause in 2016. Could you elaborate a bit?

I gave Senator Tardif a challenge today in the chamber that from now to 2016, we would all collaboratively work together to try to improve already-good legislation. Can you talk about that a bit?

Mr. Ritz: Sure. This is classed as emergency legislation, and it comes with a two-year window, so that it is renewable simply by a motion in Parliament — whether it takes a second one in the Senate, I'm not sure; if it does, great — to reenact it again or to make slight changes again and go forward.

Senator Plett: So, we would have the opportunity to improve on it if we saw fit, or you would have that opportunity?

Mr. Ritz: Yes. And the timing of the CTA review and that two-year window all come together, so if there are things that come up in the CTA review that are pertinent that need to be put into this bill or the next one forward, then it's an ideal time to do it.

Senator Tardif: Minister, why did you choose the Canada Transportation Agency rather than the Canadian Grain Commission as the agency that would adjudicate claims and arbitrate disputes?

Mr. Ritz: Well, the CTA are experts in transportation; the CGC not so much. They are about more varietal grain and they'll adjudicate the contracts if there's a problem with farmer to grain buyer. The CTA is well versed and has the capacity and the skill set required in order to do the adjudication.

Senator Tardif: I would have thought they might have been ill-equipped to interpret service agreements.

Mr. Ritz: No, this question came up at the Standing Committee on Agriculture and Agri-Food in the house and Minister Raitt was there that day. She's not able to be with us today, but she responded that they have the ability and the technical expertise to do exactly this.

Senator Eaton: Minister, have you talked to some of our biggest customers and reassured them that they will get their grain?

Mr. Ritz: Yes, I have. I did that personally on my trips. I will be in China coming up in June. There hasn't been a problem with China. I've also compared notes with my colleague Tom Vilsack in the U.S. I know the transportation agency in the U.S. had a letter condemning CP's handling of products in the U.S. at the same time we were complaining here. There were some concerns about what they were doing down there as well.

It's a small world when it comes to agriculture. Everybody knows everybody and we all compare notes.

Senator Robichaud: Minister, what is the state of the rail lines on the short-line operations? I'm asking that because you are aware in New Brunswick that there's a section that was to be closed. It was a section of the main line, and the minister had to announce that VIA was going to put some money into it.

Is that a situation that, in some places, is waiting to happen?

Mr. Ritz: Absolutely. CN and CP can qualify for the Building Canada Fund. Short-line rail can qualify for the provincial component of the Building Canada Fund. They're all listed in there to have the ability to borrow and look for grants and those types of things that they need.

There are a number of short-line rails in Saskatchewan; there are some in Alberta as well. They do an excellent job of filling in gaps. They're part of the catchment area that CN and CP need. A friend of mine, Sheldon Affleck, runs a large one that has the whole centre of Saskatchewan and he has an agreement with CN to take the cars into their grounds in Saskatoon to be hooked up onto trains. It does work well.

There's always a problem with capacity and maintenance on those lines. They tend to run slower because of the rail beds and so on that need maintenance. They're slowly getting that back in shape. Some of them don't run locomotives like you see on rail lines. They use a Kenworth truck that has been retooled to run on the rail line; it was done by a company in Regina called Brandt Enterprises.

Senator Robichaud: You're saying they're working on it?

Mr. Ritz: Absolutely. The maintenance is never done. You're always changing ties and working on certain things.

Senator Robichaud: Sometimes they have a tendency to wait until the very last minute, when it's too late.

Mr. Ritz: Well, that would be their business decision.

The Chair: With that said, I want to thank the minister for being here for the hour that you have committed. Before we conclude with the first panel, minister, do you have any closing remarks?

Mr. Ritz: I thank you for the timeliness you are putting into this bill. Certainly, we're looking at getting it through as quickly as we can. We made the point that the OIC is up June 5, but the actual crop week is June 2. That gives us three days to assess the last data that comes in. There is some timeliness to it. We're working hard on getting the regulation package to dovetail into that as well.

The Chair: Honourable senators being in a good mood, and in the spirit of cooperation, minister, thank you very much.

Honourable senators, the committee will now hear from our second panel of witnesses who are from Agriculture and Agri-Food Canada. Greg Meredith, Assistant Deputy Minister, Strategic Policy Branch.

[Translation]

From Transport Canada, Lenore Duff, director general of Surface Transportation Policy. From Justice Canada, Sara Guild, counsel with Agriculture and Food Inspection, Legal Services — AAFC.

[English]

Demeena Kaur Seyan, Counsel, Agriculture and Food Inspection, Legal Services, AAFC.

[Translation]

And Alain Langlois, Senior Legal Counsel for Transport, Legal Services, Justice Canada.

[English]

Honourable senators, I have been informed by the clerk that there will be no statements; so we will move to questions.

Senator Mercer: Thank you all for being here. One of my frustrations with this process has been that we're in a situation where the clock is ticking and we need the legislation by a certain date.

As I was doing my research for my speech today, I came upon the fact that in the House of Commons the bill had gone to committee, and I incorrectly said they had four sessions this afternoon; it was actually five sessions. They reported back with an amendment and then it arrived in the House of Commons, and a member from Edmonton rose on a point of order because one of the amendments wasn't proper.

This is a drafting issue, the advice given by lawyers to politicians. Most people sitting around the table, while they may be lawyers, they are not experts on the constitutionality and niceties of drafting legislation and of amendments going from committee back to either the House of Commons or to the Senate.

How did this happen and how can we prevent it from happening to other pieces of legislation in the future? It delays it; it frustrates it; and it means if it's in a piece of legislation started in the House of Commons and comes our way, it shortens our time frame. It means that we're now under pressure to get this bill done. We're going to do the job, but it would be a lot easier if we could have had at least another week to get the job done.

Greg Meredith, Assistant Deputy Minister, Strategic Policy Branch, Agriculture and Agri-Food Canada: Thank you, senator. I would point to what the minister said a little earlier. He was not pleased with the point of order. He was very happy that when the house reconvened there was unanimous agreement to send it back to committee.

The one thing I think is for certain is that you wouldn't want to remove the right of a parliamentary committee to amend legislation or to suggest amendments; that's part of the process. As you heard the minister, he's very anxious to get this legislation through and very appreciative of the committee putting the time in to do that and very anxious to show the cooperation that all parties are showing to get this legislation in place for farmers.

Senator Mercer: There are a number of references that I made earlier today in the chamber to the service level agreements with respect to people's comments on it, everything from Cam Dahl, the president of Cereals Canada, who in part said the regulatory package must provide for a better and more specific definition of ''adequate'' and ''suitable,'' whereby railway service obligations must be met.

Again, he is only one person who has said that. Another who has said similar things is Matt Sawyer of the Alberta Barley Commission, who said:

The definition of adequate and suitable accommodation and service obligations within the legislation needs to be made clear.

And the bill needs more teeth. The minister claims there are some teeth there, but I would debate whether there are enough.

It seems that we continue to get legislation that refers to a suitable accommodation and service obligations, and we talk about the service agreements that came out of Bill C-52, I believe. I'm not seeing any progress here. I continue to see people frustrated by it. I continue to see that as part of the problem that has led to the issue.

Obviously, we don't want to be back here next year, as I mentioned to the minister, addressing the same problem because — or at least two years, because this has a sunset clause, but we don't want to be here doing this again.

Alain Langlois, Senior Legal Counsel, Transport, Legal Services, Justice Canada: We can explain what the legislation does. The legislation doesn't talk about suitable and adequate. That's already in legislation. What the legislation does speak about is it allows the agency, when a shipper and a railway cannot agree on the level of service agreements, to establish a level of service agreement between the shippers and the railway. The legislation allowed the agency to make a regulation to define what terms and conditions that could be referred to arbitration under the existing legislation. It will provide for a means to clarify what the broader concept of ''suitable'' and ''adequate'' means.

Senator Mercer: How many arbitrations have there been since the bill came into effect?

Mr. Langlois: I can't answer that. You'll have to ask the agency.

Senator Mercer: I am told by shippers they are having a difficult time agreeing to service agreements with the railways, and that means that this is not working.

Mr. Langlois: The choice to refer the matter to arbitration is the shipper's choice. The current legislation entails a two-step process. The first step is the shipper makes a request to the railway to get a service agreement. There's a negotiation or a refusal by the railway, and there's the ability of the shipper to refer the matter to arbitration. The decision to file for a level of service arbitration is a shipper's decision. The shipper has that ability. If they choose not to, it's their decision.

Senator Mercer: Thank you. That doesn't answer my question, because I know there are some frustrated people out there and one or two around here. Many of the witnesses that have appeared in the other place saw that the current situation is not working as well as it had been designed to do.

Perhaps under the review that the minister referred to of the Transportation Act, perhaps we can readdress this issue as we go through that review. I'm not satisfied, and I know we could find hundreds of shippers who are not satisfied, that this process is working. It sounded really good on paper, but I was a critic of the bill in the Transport Committee when it came in, and I was very concerned about it then and I remain very concerned about it now.

Senator Plett: We know that Canadian companies have lost some contracts over this period of time. Japanese ships have moved to the Port of Seattle. The minister talked a bit about that. Shippers are facing cancelled contracts, contract penalties and demurrage charges, and these challenges are being reflected in the prices offered to producers and elevators for their grain. Of course, we are introducing, I think, some good solutions here to keep the grain flowing.

Could you provide some additional evidence that the economy has been negatively impacted by the current situation that we have?

Mr. Meredith: I think that would be difficult, senator. The minister did talk about instances where ships, vessels, had to go light or not loaded at all.

The grain companies will tell you that there is a significant gap between their marketing programs, in other words, the customers waiting for grain and the customers getting grain. There are all kinds of penalties associated with that. Demurrage charges can be half a million or a million dollars a vessel, and the minister did mention the 60-day delay for that one vessel. There are all kinds of impacts on producers who can't bring their grain into the system, and on grain shippers who can't get the grain to their customers.

What we're very hopeful of, though, is that in the post-winter period, and given the performance increase we've seen amongst railroads, that we're going to catch up. That grain is still in terminals, or in the inland elevators, or on farm in storage, so that's a very valuable asset. It's going to be significantly richer over time than a normal harvest. As the minister said, that harvest last year was 50 per cent higher than the 10-year average.

We're hopeful to make farmers and grain shippers whole.

Senator Plett: Senator Eaton asked the minister about whether the grain lost its value and, of course, he said if it was stored properly, it did not. I agree with that, but being from Western Canada and knowing many farmers, I know that they have storage issues. Many farmers are storing their grain by leaving it lying outside on the field.

Have a lot of producers lost value through contamination and other issues by having to leave it on the field, not having the proper storage that they need to tide them over?

Mr. Meredith: That was an issue that the government was very seized with. Because we didn't know the extent of the storage problem and we didn't, at the time, have any confidence that the railroads would move the kinds of volumes needed to solve that problem, we looked at this very carefully.

We work very closely, as you know, with provincial governments. Their crop inspection functions for their crop insurance were giving us feedback about the storage issue.

To be honest, farmers are very astute managers of their farms. They would only store on the ground under very unique circumstances, and it would probably be their lowest quality, probably a feed grain. When you do hear about farmers storing on ground, you recall the minister talked about these grain bags. They're very big grain bags. They were not for permanent storage but, for the time period, especially over winter, they're adequate.

In addition to those kinds of inquiries, we commissioned Statistics Canada to do an additional survey specifically on the issue of storage. We found that there was only about 13 or 14 per cent of grain stored that way. What farmers had been doing was taking that grain and shipping it first or storing it if it's good quality, and that there was significant storage capacity now that the system had become more fluid.

We're hopeful that farmers won't be out of pocket in that situation.

Senator Plett: One more question, and this might be for Ms. Duff, I'm not sure.

We need a way forward that will benefit all shippers selling every commodity, from grain to oil. I'm wondering, will the volume requirements that we now have — and, of course, either one of you can answer — impact other commodities such as coal, potash or oil?

We've all read the newspaper articles that one of the reasons that CN and CP weren't hauling enough grain is because they were hauling more oil. They, of course, said that wasn't the case.

Do you have some comments on whether us telling the railways, ''You have to haul this much grain,'' will that have an impact on these other commodities?

Lenore Duff, Director General, Surface Transportation Policy, Surface Freight Policy, Transport Canada: What I can tell you is — and I think minister Ritz spoke about it as well — that ministers met with the railways and established these targets for volume requirements that were ambitious but achievable. They exceed the best numbers that the railways have ever produced with respect to moving grain, but we're also conscious of other commodities, and they were calibrated so as to not affect other commodities. That was in the planning of these volume requirements, so the expectation is it will not affect the shipment of other commodities, but it will improve the delivery of grain in the short term.

Senator Tardif: The minister referred to the fact that now he would have access to data, that this was something new, and that this data would allow him to look at the corridors that were being used, the shortfalls.

Can you give us a bit more information about this? Will this data be made public? What type of agency is gathering this data? I know he mentioned it.

Ms. Duff: There are regulations currently in the Canada Transportation Act that provide for the collection of data from the railways, and there have been requests to the railways to provide additional data and to add to those regulations so that they will be able to obtain data on corridors, which Minister Ritz mentioned. The data that's collected under the Canada Transportation Act is confidential, but it can be released at an aggregated level so it doesn't identify commercial sensitivities.

The other additional data that will be obtained from all participants in the supply chain, from railways and from terminals, which Minister Ritz referred to earlier, will be for the fall planning process where all the participants will be asked to provide additional data that will be used for planning purposes. That data, I would expect, will be available to all the members in terms of the planning requirements to improve situations so the transportation crisis that has occurred with the grain isn't repeated in the next crop year. So there will be a better planning function going forward.

Senator Tardif: The bill that's proposed is to give the Canadian Transportation Agency new responsibilities for providing advice to the Minister of Transport regarding minimum tonnage to be transported, and the agency would also be responsible for investigating whether the railway companies are respecting these new provisions.

Will the agency receive new resources in order to take on these additional functions?

Ms. Duff: There are no new resources that have been attached to the bill that I'm aware of. I think it will be assumed that the agency will take this on using existing resources.

Senator Tardif: But there is extra work, of course.

Ms. Duff: There will be extra work.

Senator Tardif: And no extra staff will be added?

Ms. Duff: I can't speak for the agency's resourcing plans or what they —

Senator Tardif: But no additional resources are being considered?

Ms. Duff: At this point, there are no additional resources being considered that I am aware of.

Senator Eaton: Ms. Duff, to follow on Senator Tardif's question, would some commodities have priority access to corridor capacity? If so, can you prioritize for us?

Ms. Duff: Are you asking me if the legislation provides for prioritization?

Senator Eaton: Yes.

Ms. Duff: The legislation doesn't specifically provide for prioritization for specific commodities, other than extending the volume requirements for grain. It doesn't specify priorities with respect to specific commodities. Those arrangements would still be made between the railways and the shippers, as they would normally be in a commercial arrangement.

Senator Eaton: I'm sorry; I guess I'm slow. I understand what you mean by that, but you consulted. Mr. Meredith was talking about the agriculture ministers from the provinces consulting as to tonnages and what could be moved when and how much. How did you gauge what the rail capacity was? You've come up with these figures — a million tonnes a week — and no other commodity, like potash or oil, will be impacted. Did the Canadian Transportation Agency determine the corridor capacity, or was it the rail companies themselves?

Ms. Duff: Ministers consulted with the rail companies themselves.

Senator Eaton: And they came up with the capacity?

Ms. Duff: They identified the car amounts that Minister Ritz referred to that they could manage within their system to deliver that much grain.

Senator Eaton: We've heard that the Canadian railways are concerned. This extension of the interswitching distance from 30 to 160 kilometres would give shippers greater access, but would this undermine Canadian railways? Do they feel they're being undermined vis-à-vis American railways in doing this?

Ms. Duff: I think that the railways have expressed some concerns about the nature of the interswitching changes or said that they're not in favour of the interswitching changes. I believe the CN president spoke to that in a public address.

Senator Eaton: We're concerned with the shippers.

Ms. Duff: Those are commercial decisions with respect to their business, but the perspective here is that it provides more competition to move grain within this market from the three Prairie provinces and that there is some evidence that there is insufficient capacity currently and that that's why it's being extended — that there's grain left sitting, waiting to be delivered.

Senator Eaton: The change in interswitching applies to all commodities, right? That would apply to potash and oil or whatever?

Ms. Duff: The interswitching applies to all commodities within the three Prairie provinces; that's correct.

[Translation]

Senator Dagenais: My question is for Ms. Duff. Perhaps the other witnesses will be able to answer as well. The Western Canadian Wheat Growers Association claims that the requirements for the volume of grain to be transported will not sufficiently reduce the grain stocks that might even reach 20 million tonnes when the crop is done, which is more than double over the past two years. The association also feels that the penalties for railways are insufficient. I would like to hear what you have to say about that.

[English]

Ms. Duff: With respect to the carry-over and what level it will be, I think Minister Ritz spoke to that as well. There still will be a significant carry-over, higher than it has been in past years, but, without this legislation, it would be considerably higher. It is a record grain crop, so one would expect that the carry-over would be larger. But this legislation goes some distance in managing that, so I think that that's the answer to the first part of your question.

With respect to the question about the penalties, a policy decision was made in terms of the amount for the penalties that was reasonable. My comment would be that it's higher than any other penalty in the Canada Transportation Act. It's a significant measure in comparison with other provisions, and it's a daily penalty.

Senator Mercer: With respect to the review of the Canada Transportation Act that the minister and a number of us have referred to, it would seem to me that it would be incumbent upon the department and the minister to reach out to all stakeholders involved, which goes beyond agriculture, of course. It does go to all of the shippers that are there. I hope that the consultation is a little broader than we have seen in the past and that there will be some good public consultation.

We continue to hear the problems that I have outlined today and from others, but I would hope that decent recommendations get to Minister Raitt. I'm disappointed she's not here so that we could talk to her about that, but that will be another day, on my other committee. It's important that she realizes that there are a lot of stakeholders, not just in agriculture but also in other areas, that are interested in this. This problem is big now. I worry that it's not going to go away if we continue to have these record crops, and I hope we do have the record crops that we had last year.

Senator Robichaud: And that will depend on the bees.

The Chair: That was supposed to be a question. Before we close with Senator Plett, there will be a question from Senator Robichaud. We will finish with Senator Plett. Rather than a comment, it will be a question.

Senator Robichaud: You can go now, so I can pick up on what you're saying.

Senator Plett: I want the last word today.

[Translation]

Senator Robichaud: Bill C-30 amends two acts: the Canada Grain Act and the Canada Transportation Act. Clause 2 talks about the commission and the commission's powers to fix the remuneration to be paid, determining the costs and the allocation, making binding decisions, third-party arbitrators, making orders to comply, and further on, it talks about licence suspension, the licensee's opportunity to be heard, and you are familiar with all of that.

Is there an appeal process for these decisions made by the commission?

[English]

Mr. Meredith: There is not an appeal process built into this legislation, but there is always judicial review of decisions that are taken in arbitrations.

Senator Robichaud: Why isn't it in this bill?

Mr. Meredith: Because it's an existing facility.

Senator Robichaud: So they would have to go to court?

Mr. Meredith: Yes.

[Translation]

Senator Robichaud: Do you agree, Ms. Duff?

Mr. Langlois: Under federal legislation, with respect to provisions in a federal act, in terms of appeal or judicial review mechanisms, a statutory right of appeal will be set out in an act. However, judicial review is never set out in an act. That is a fundamental right. If an act does not set out a right of appeal, any decision by the administration is automatically subject to a judicial review. It is in the country's constitution. So it is never set out in an act. It is a fundamental right of Canada.

Senator Robichaud: I understand that part. Before the commission makes its decision, can the party in question appeal before appearing before the courts?

Mr. Langlois: Before the commission?

Senator Robichaud: Yes.

[English]

Sara Guild, Counsel, Agriculture and Food Inspection, Legal Services — AAFC, Justice Canada: The way that the current act is set out, things can become orders of the commission, and then those things can be enforced as orders of court. That may still result in other mechanisms that exist above. They don't need to be that express in the legislation, necessarily, to deal with it.

Senator Robichaud: When the entity in question is given a chance to either explain or contest the decision before having to go to court, it will be a long process and by the time you get a decision then it's too late to do anything.

Ms. Guild: Yes. The thing is too, though, that things can be made in orders by the commission, so with respect to licensees the commission does have certain powers that they can assist with in that sense. That does deal with that issue a little bit, but again, it's like Mr. Langlois says.

Senator Robichaud: You say ''a little bit.'' Okay. Thank you.

Senator Plett: I was going to almost go where Senator Robichaud went. I want to talk about the arbitration itself. He wanted to talk about if the arbitration didn't go the right way.

Clearly, this bill has been applauded by both shippers and farmers equally, except for the two farmers that Senator Mercer talked to. A farmer can't take this to arbitration. The bill really deals with the shippers and the grain companies.

Walk me through the arbitration process, if you would, and tell me how the arbitration process will benefit the farmer. If a shipper gets $100,000, that does not benefit the farmer.

Mr. Meredith: No, correct. The relationship you're outlining between the grain company or the shipper and the railway is governed under the section of this act that deals with the Canada Transportation Act. The facility for a farmer to have a provision put into his contract with his or her shipper is within the section of Bill C-30 that deals with the Canada Grain Act and that confers on the Canadian Grain Commission the authority to outline a provision for penalties, to adjudicate between the two parties and to set a penalty or a payment or compensation, if you will, to the farmer.

It's really, as the minister would call it, a balanced equation. There is a provision to protect shippers with the railways and there is a provision to protect the producer or the farmer with the grain shipper.

Senator Mercer: Is there an appeal process?

Mr. Meredith: The same appeal process.

Senator Plett: Thank you, chair.

The Chair: Honourable senators, to the officials from Agriculture and Agri-Food Canada, Transport Canada and Justice Canada, thank you very much for the information.

I declare the meeting adjourned.

(The committee adjourned.)