Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 12 - Evidence - Morning Meeting of May 15, 2014
OTTAWA, Thursday, May 15, 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 8:03 a.m.
to give consideration to the bill.
Senator Percy Mockler (Chair) in the chair.
The Chair: Witnesses, thank you for accepting our invitation to be
here today and to share your opinions or comments. I welcome you to this meeting
of the Standing Senate Committee on Agriculture and Forestry. My name is Percy
Mockler, senator from New Brunswick and chair of the committee. I would like to
ask each senator to introduce themselves, starting with the deputy chair.
Senator Mercer: I'm Senator Terry Mercer from Nova Scotia.
Senator Robichaud: Fernand Robichaud, Saint-Louis-de-Kent, New
Brunswick, and a Habs fan.
Senator Tardif: Claudette Tardif from Alberta.
Senator Oh: Senator Oh, Ontario.
Senator Dagenais: Good morning. I am Jean-Guy Dagenais from Quebec, a
Senator Eaton: Nicky Eaton, Ontario. Go Habs go.
Senator Plett: Don Plett from Manitoba, and I'm the sponsor of the
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
The Chair: Thank you, honourable senators.
Today we are continuing our study of Bill C-30, An Act to amend the Canada
Grain Act and the Canada Transportation Act and to provide for other measures.
We have this morning, as our first panel, Mr. Robert Ballantyne, Professional
Engineer, President, Freight Management Association of Canada. From the Canadian
Trucking Alliance, we have with us Mr. Stephen Laskowski, Vice President,
Economic Affairs, and Mr. Jonathan Blackham, Policy and Government Relations
Thank you for accepting our invitation. I have been instructed by the clerk
that the first presenter will be Mr. Ballantyne, to be followed by Mr.
Laskowski. At this time, I will ask Mr. Ballantyne to give his presentation,
and, after the presentations are made, senators will ask questions.
Robert H. Ballantyne, P. Eng., President, Freight Management Association
of Canada: Thank you very much, Mr. Chair. Even though I was born and
brought up in Toronto, I think I'm a Montreal Canadians fan today as well.
I appreciate the opportunity to speak on Bill C-30. Our association, the
Freight Management Association of Canada, was originally the Canadian Industrial
Transportation Association and has been representing the freight transportation
concerns of Canadian industry to various levels of government and international
agencies since 1916. Despite appearances, I was not at the first meeting.
I will only comment on the sections of Bill C-30 that would amend the Canada
Transporation Act. In these brief comments, I will attempt to provide some
context on how we arrived at this point and look at future needs.
During the run-up to Bill C-8, which was the last amendment to the Canada
Transportation Act from a statutory review, there were widespread complaints
about rail service from across the country. With the passage of Bill C-8 in June
2008, the government agreed to undertake an independent review of rail service.
The rail service panel recognized the fundamental railway shipper problem and
stated in its 2011 final report:
This railway market power results in an imbalance in the commercial
relationships between railways and other stakeholders.
Canadian railway law has acknowledged for over a century that rail freight is
not a normally functioning competitive market. The government's response to the
service review was to introduce Bill C-52, the Fair Rail Freight Service Act,
which became law in June 2013. Bill C-52 breaks new ground by providing all rail
shippers with the right to a service level agreement through arbitration if one
can't be directly negotiated with the rail carrier.
However, some of the most significant recommendations of the rail service
review did not find their way into Bill C-52. The government declined to accept
any of the six recommendations proposed by the Coalition of Rail Shippers — a
coalition of 19 industry associations, which I chair — to strengthen Bill C-52.
Consequently, there have been no shipper attempts to use the provisions of Bill
C-52 to obtain a service level agreement.
Bill C-30 provides another opportunity to revisit the shortcomings of Bill
C-52. Clause 5.1 of Bill C-30, which amendments subsection 116(4) of the Canada
Transportation Act, addresses one of the short comings; namely, the need to
compensate shippers for expenses incurred because a railway is in violation of
its service obligations either under a service level agreement or a confidence
contract. The definition of ''expenses'' in the agency regulations will be an
issue in determining how effective this provision will be.
Clause 7 of Bill C-30 provides authority for the agency to extend
interswitching limits ''for the regions or goods that it specifies.'' This
amendment to the interswitching regulations will allow the agency to give effect
to the government's policy announcement to extend a maximum interswitching limit
on the Prairie provinces from 30 to 160 kilometres for all shippers, not just
grain shippers. The interswitching regulations have been used for the shippers
over many decades and are a surrogate for real competition.
The other significant provision of Bill C-30 that is relevant to all shippers
is clause 8, which authorizes ''The agency to make regulations specifying what
constitutes operational terms . . . .'' to be included in a service level
agreement. While it is unclear how the agency and the government will use this
provision, it could be a vehicle for achieving some of the shipper amendments
rejected by the government during the Bill C-52 debates.
The current backlog of grain is an unusual situation and government did feel
compelled to intervene. However, there is concern within the shipper community
that singling out one industry group in such a manner could cause service
problems for other shippers.
Our association includes among its member both grain companies and shippers
from many other industries. We have informed our membership that targets set in
Bill C-30 originated with CN and CP, and we have to start with the premise that
the railways would have only offered another targets if they felt they could
maintain the level of service for other shippers.
Anecdotal evidence to date is unclear as to what has been the effect on other
industries. Interventions such as those in Bill C-30 need to be applied
carefully and only under the most extraordinary circumstances.
Two basic issues that the forthcoming statutory review of the act should
address are: one, the need to provide appropriate rail capacity for the needs of
Canadian industry over the coming decades; and, two, the need to improve the
relationship and trust between the railways and significantly large segments of
their customer base.
That ends my remarks, and I would be pleased to answer any questions members
The Chair: Thank you.
Mr. Laskowski, please make your presentation.
Stephen Laskowski, Vice President, Economic Affairs, Canadian Trucking
Alliance: Thank you for having us here today. We have members involved in
the grain hauling industry — I have members who haul all aspects of the economy.
I will explain a little bit of the background of what CTA is in a kind of
Background 101— a 60,000-foot version — of rail and truck shipments, why product
moves by rail and why it moves by truck. Then I'll get into the specifics of the
grain-hauling industry, this past boon crop, how the trucking industry reacted
and how it sees things going forward.
The Canadian Trucking Alliance is an association and a lobby group of the
seven provincial trucking associations from across Canada. Our board consists of
members of the for-hire trucking industry throughout Canada, but its policy is
driven through local provincial mandates. So although we are a national
organization, we take great pride in the fact that all our policy is from the
grassroots and provincial level. In a case like this, for example, we worked
with our Western colleagues to come up with the information we will provide you
In total, we represent about 4,500 member trucking companies, both big and
small. The vast majority of the trucking companies that belong to the Canadian
Trucking Alliance would have less than 20 trucks. We also represent the trucking
industry, and like every industry that is going through amalgamation, we have
some trucking companies that have 5,000 to 7,000 trucks. It's a balancing act
when bringing forward policy. It's one vote, one company, so it's no different
than Parliament: The big guys have a vote, but the little guys have the same
amount of votes, so it is a balancing act as we move forward.
With regard to the grain movements, CTA has reached out to our membership and
gotten a sense of what happened over this boon crop, as Bob has mentioned; how
they saw it happen; and how they see things going forward.
Before I get into that, we need to understand what the trucking industry does
for the manufacturing community and the farming community, and what rail does
for those communities. Trucking and rail are both transportation modes, and we
do compete. If you had to draw a line, there is an overlap, but it's not as big
an overlap as you may think. It's getting bigger and bigger as the railways are
increasing on-time performance, but there is still a large market that is
specific to the trucking industry and a large market that's specific to the
If I had to generalize grain, that is a rail market, for the most part; it's
a railway sector. Our members service the grain industry, but from a 60,000-foot
view looking at what the grain market is from a transportation standpoint, it's
a rail-dominated sector. That is most likely for the foreseeable future.
Why is that? Trucking is paid probably more for on-time performance. If it's
a higher-value product and more time sensitive, it's going to move by truck. If
it's less value and moving longer distance, it's going to move by rail. It's
sort of a generalization because the market is evolving, but if I had to
generalize it, that's how I would do it. That gives you a sense of why the grain
market is the way it is.
In terms of the current situation regarding grain routes with trucking routes
— where trucking takes place in the grain market — it's no different than what
happened in the 1940s during World War II. There was a big labour strike in the
rail industry. What happened? Trucking emerged. There was no rail strike in this
case with the grain industry, but when the railway industry started
rationalizing lines in Western Canada and certain spur lines shut down, the
product still had to get to market from those spur lines. That's where trucking
comes in. The average length of haul for a grain shipment in trucking is about
212 kilometres. That's a real short haul in trucking.
In terms of what's happening today, as our members look forward, they see a
normalized market with regard to grain shipments. It's business as usual for
them. Other than perhaps what's going to happen this summer, the folks figure
they'll be a little bit busier this summer still taking care of the backlog.
Historically, during the summer months in terms of the trucking industry moving
grain, the trucks wouldn't be moving as much. This year, they expect the trucks
to move to take care of the backlog; however, once we get into a fall harvest,
unless there is another massive bumper crop — because that's what drove this —
they expect it will be business as usual.
The question we asked is ''Are there more entrants in the market?'' It is
like any other business in that if there is more product, more money on the
table. Did we see more people in the trucking industry get into this market and
serve the grain market? The answer was ''no.'' The reason was twofold. First,
it's expensive. To run a tractor-trailer combination that would serve the grain
industry, it's anywhere between $225,000 and $250,000 per unit. That's a lot of
money. It's one thing to have a one-off bumper crop, but if you could say it
will be like that for 10 years, then somebody might jump into the market. But
you're going to be more cautious when that kind of capital is required to get
The other aspect for us is that, like other sectors you read about — and no
doubt you senators have discussed this — the issue here is driver shortage. We
have a significant labour shortage in the trucking industry. We have the largest
percentage of employees nearing retirement than any other sector in Canada.
That's another challenge in that even if there were an opportunity to bring in
more trucks because of a bigger market opportunity, obviously you need human
capital, and not just any human capital: You need professionally trained
drivers. They share the road with the public and they're handling big pieces of
equipment. They're not an easy thing to replace. So that is another one of the
challenges we have.
From a go-forward position with regard to the grain industry, we see
stabilization from a transportation perspective. We see this traditionally and
holistically as a railway market and we're here to serve our customers in our
specific spur lanes.
Thank you very much for your time, senators.
The Chair: Senators, we will try to stick to the time frame we have.
To do that we will need senators to stay on question, and also to help the chair
permit all senators to ask their questions because almost all senators have
asked to have at least one question.
Senator Mercer: Gentlemen, thank you for being here.
Mr. Laskowski, I'm surprised you didn't zero in on a problem that I've been
told exists by a number of farmers I've spoken to in Western Canada. The reason
that trucks aren't part of the solution here is that it's difficult to have a
return trip if you're hauling grain south to the U.S. Truckers aren't interested
in hauling grain to the U.S. and turning around and coming back empty. Is this
one of the issues?
Mr. Laskowski: That's natural. Grain trucks move by B-trains, and
there is a specifically designed B-train for grain. There are two types of
trucks; I'm sure you've all seen them. A normal truck would go north-south in a
flatbed or a dry van trailer, just a square box. You can put any commodity in
there, so you can be much more flexible to your point.
To your point, yes, if you can get the grain down to the south that's great,
but then you have to convince your customer because it's going to be difficult
as it's such a specialized piece of equipment. What are you going to put in it?
Most likely the chances are it's going to be very difficult. Now you have to
convince your customer. The customer wants to pay to move from point A to point
B. The customer is not interested in helping you go back from B to A, so that is
Again, that's a very structural component of it. That's why I say, in
generalizations, this is a railway versus trucking market, and that is why it
is. Specialized pieces of equipment are difficult to fill when you move outside
Senator Mercer: Mr. Ballantyne, I appreciate your presentation and I
recall the coalition amendments proposed to Bill C-52. I was disappointed then
and am disappointed now that they haven't seized the opportunity when making
amendments so that they could include some of the commitments that have been
You say interventions such as Bill C-30 need to be applied very carefully and
only under the most extraordinary circumstances. Are these extraordinary
Mr. Ballantyne: Senator, I think they are. As has been mentioned about
this grain shipment, and repeating what everyone else has said, this was a
record grain crop. It was a very difficult winter. We did see the end of the
Wheat Board in terms of the way grain has been marketed. With so much grain and
the value of that grain on world markets being left on the farms, it was an
extraordinary situation in this particular case.
It really is something to be very careful about. Railway is a network kind of
business. The railways do have a problem of attempting to provide the right
amount of equipment at the right place at the right time, and crews to handle it
not only for grain but for all shipments. The issues that Steve raised, in terms
of the return of the equipment with trucks, are true of rail as well.
Transportation always is a more complex business than it looks like on the
surface. When you see a train going by, it's pretty obvious what's going on;
it's going from A to B. But having the right amount of equipment at the right
place, at the right time, with the right number of crew and getting the empties
back, and all the rest of it, is very complex.
Senator Mercer: What happens though, Mr. Ballantyne, if this is not a
one-off? I'm hoping that this crop is now the new baseline from which we can
grow and get even more grain. The object of the game is to expand and create
more jobs and have farmers doing better. What happens in the future? If my wish
were to come true that this is the baseline and will move forward, how will we
respond? Will we have to do this extraordinary effort every year?
Mr. Ballantyne: We would hope not. As has always happened in the past,
if this does become the new norm — and I think everybody would agree that they
hope it does — the whole transportation network would evolve and grow to handle
In my remarks I talked about the upcoming statutory review of the Canada
Transportation Act, and one of the issues that the government needs to consider
is the whole issue of rail capacity for the country. In terms of track capacity
per se, while the railways have extended sidings and put in double track and
done other relatively minor capacity projects over time, we've almost been
living on over 100 years of capacity that could handle the traffic with those
We may be getting to the point now with low-cost issues — like mid-train
power, running longer trains and higher axle loadings that will allow for more
commodities to be handled in each railway car — where we may be coming to the
limits of that. It's going to be something that will need to be considered by
the government, railways and by industry, in general in terms of the whole
Canadian economy, as to the ability of the railways to handle the traffic that
will be offered in the future.
Senator Plett: Thank you, gentlemen, for being here. I will also start
with Mr. Laskowski.
This is really a fairly basic question. I grew up in a farming area in
southern Manitoba. Farms are getting bigger, larger; they're amalgamating. Would
you agree that most of the grain hauled by trucks would be hauled from a farm to
an elevator as opposed to any rails, and in many cases the farmers would have
their own trucks hauling it?
Mr. Laskowski: Yes, that's what I meant by a spur line. It's replacing
The one thing I left out in my opening comments is that we did see a growing
trend out West. Some in the farming sector were buying the $235,000 piece of
equipment, training someone and having their own truck and trailer to bring
those goods to those short hauls, yes.
Senator Plett: Of course for someone who owns and seeds 5,000, 6,000
or 7,000 acres and has half a million dollar combine and all the other things
that go with it, it's a significant investment to buy a truck and a B-train. But
nevertheless, it's not an unaffordable thing for many farms. So if they have
bumper crops and trucking companies can't keep up, a farmer may just decide to
buy another truck because he will need it next year as well.
Mr. Laskowski: Absolutely. It's a viable option. The trucking industry
only has one concern when that happens, and it's not the competition. It's that
those who get into buying big pieces of equipment and B-trains then need to have
the responsibility to learn how to operate it properly on public roads.
Senator Plett: Absolutely.
Mr. Laskowski: That's the extent of our issue.
Senator Plett: I fully support that.
Mr. Ballantyne, following up on what Senator Mercer already asked, you
indicated that the government needs to be very careful when they get involved
with one industry. Here we are getting involved mostly with rail, not other
industries, and we don't want too much government intervention and involvement.
I certainly support that, and I believe our government does. As has been said,
we hope this will be the new norm as far as the crops are concerned, but we
certainly hope it won't be the new norm insofar as the winters are concerned. We
hope maybe this will be a once-in-a-hundred-years winter and we won't have
another one like it for that long.
Clearly the guidelines have been put forward based on what we had last
winter. If we have the bumper crops but we don't have the same type of winter,
it shouldn't be as onerous for the railways to keep up, given the way the
proposed legislation is worded.
Mr. Ballantyne: That's true. With the experience that everybody in the
grain supply chain had this past winter and with what we have been going through
now that the government is trying to address it, everybody will learn from it.
Even if the next crop is as big and if there's growth in other industries where
the products are normally handled by rail, the railways will start to adjust to
be able to handle it better. I would expect to see a better performance this
coming winter. Unless we get a worse winter than we had this past winter, I
would expect to see some progress.
One interesting thing about Bill C-30 is that it self-destructs on August 1,
2016. Presumably, the assumption of the legislators with that provision is that
they expect normal arrangements to continue after that time. Bill C-30 is a
temporary measure. It was cautious and reasonable to have it extend over three
years. I would expect to see everybody in the grain supply chain start to
respond to what we hope is the new normal.
Senator Plett: You would also agree that when an entire industry gets
hurt, such as was happening here and not a one-off with a few farmers being hurt
but the entire farming industry in Canada, Canada's reputation overseas was
being hurt because we weren't able to get the grain exported. There are times
when government intervention certainly is necessary.
Mr. Ballantyne: Yes, I think so. The government always does have an
oversight role in managing the economy. Government intervention in various ways,
shapes and forms is not unusual. We have not seen that as much in
transportation, but with the problems in the automobile manufacturing industry
in recent years, the government felt it necessary to intervene there as well.
Obviously, there is a role for the government going forward.
Senator Tardif: Mr. Ballantyne, you indicated in your presentation
that there's concern within the shipping community that singling out one
industry group in such a manner could cause service problems to other shippers.
What type of problems would those be?
Mr. Ballantyne: In order to meet the commitment, the order-in-council
and Bill C-30 require that the railways — CN and CP — each have to deliver 5,500
cars per week of grain. That means if the railways don't meet that requirement,
they're subject to fairly considerable fines. They have a serious incentive to
meet that commitment.
Like any industry, they have limits on their resources. If that demand can't
be accommodated with the demand from a lot of other industries in terms of the
number of locomotives and train crews available, because they have had to focus
so much of their resources on grain, then in theory it could cause some problems
for other shippers. There may not be enough locomotives, for example. I wouldn't
see freight cars being too much of a problem because the cars used for grain are
specialized. They're covered hoppers specific to the grain industry. That's only
a potential problem.
What the government asks the railways to do in the order-in-council and Bill
C-30 is what the railways said they could do. I said to our other non-grain
member companies that we have to go on the assumption that the railways would
have offered that only if they felt they could accommodate their other customers
To date, the information I have, which is anecdotal, is not clear as to
what's happening. Some of our member companies have said, no, they haven't seen
any change in the service; while others have said, yes, they think they may be
suffering a little bit. At this stage, it is a little early. It is not clear.
Senator Tardif: What are those other industries that indicate they may
Mr. Ballantyne: They could be mining or forest products — those kinds
of industries primarily. Like the truckers, the railways handle a lot of
high-value goods in containers going very long distances, for example from the
Port of Vancouver to Toronto and Chicago. It is not likely that those
commodities would be affected by this issue.
Senator Eaton: Mr. Ballantyne, my first question will lead to
something you talked about in your presentation. Will this bill force the
railways to better their game and ramp up their infrastructure if this is going
to be the new normal? The minister made it clear that it will be with the world
demand for our food.
Mr. Ballantyne: I think it will. Like any business, if the railways
see a growing demand — and of course it has got to make commercial sense to them
— they will invest both for track and freight cars to meet what they perceive
the demand to be. For them to know what the demand will be is a fairly subtle
thing. They have to get forecasts from various industries to see what will
Senator Eaton: I'm thinking of potash and oil — it just goes on and
Mr. Ballantyne: Yes. They play such a significant role in the kind of
economy we have in Canada, which is largely based on relatively low-value,
high-volume natural resource commodities. That can be impacted by the world
price for the commodity. The question is whether the producers can pay what the
railways feel they need to ask in order to cover their costs, investment and so
The simple answer to your question is that it will help because the railways
will respond to growing demand.
Senator Eaton: This gets me to something you said in your presentation
about the future. Two basic issues that the forthcoming statutory review should
address are: first, the need to provide appropriate rail capacity for the needs
of Canadian industry; and, second, the need to improve the relationship and
trust between the railways and significantly large segments of their customer
Mr. Ballantyne: I'm sorry, your question on that?
Senator Eaton: You answered it when you said it will force them to.
This is perhaps a negative question: Do you think the railways up to now have
been improving their industry the way they should have over the last 20 years,
or because prices are depressed and there's not that much demand, they just let
themselves go a bit?
Mr. Ballantyne: No. I think they have generally invested. I don't have
the numbers at hand, but my recollection is that CN and CP are probably both
investing over $1 billion a year in capital year in and year out. Some of that
is for replacement of track and that sort of thing, and some of it is to
purchase new freight cars to meet different demands and new locomotives. They
have introduced a lot of new technology of various kinds to improve their
By and large they have. There is some criticism. The investment community
that looks at rail stocks usually looks at something called operating ratio. So
there is pressure on the railways to reduce their operating ratio, and this is
coming from the investor community.
One can argue sometimes that they may go a little skinny on some things that
they should probably do a little better at, but by and large they have done
fairly well in terms of investment.
Senator Robichaud: Mr. Ballantyne, you talk about the compensation,
not formula — whatever is in the bill there — and you said it depends on the
definition of ''expenses'' that is going to be taken into account. Would you
elaborate on that, please?
Mr. Ballantyne: Sure. In the way railways have always been able to
operate, under the Canada Transportation Act, railways have the right to issue
tariffs. The way the Canada Transportation Act words it is something along the
lines of once the railway issues a tariff, that is the legal price for the
It is one thing to say that's the freight rate to move stuff from A to B, but
then they can also issue tariffs for other things like demurrage, which is
essentially rental on freight cars that are taking too long to load, fuel
surcharges and various other things like that.
Even the shipper community doesn't particularly object to that, but when the
railways don't meet their obligations, going back to demurrage when the shipper
keeps a freight car too long to load, the shipper is in effect in violation of
their obligations. Therefore, the railway gets a penalty from the shipper for
There's no reverse provision in the law. If a shipper hires a crew of people
to come and load cars and the railway doesn't load the cars or doesn't deliver
the cars when they said they would, then the shipper has the cost of these
people that they have brought in, and there's no claim that the shipper has
against the railway for compensation for that kind of situation.
It looks now like this new clause 5 of Bill C-30 is going to possibly open
that up. It is not clear whether the term ''expenses,'' as in Bill C-30, is just
for those sorts of immediate out-of-pocket costs that the shipper had, or it
will actually allow for damages which may mean, for example, lost revenue that
the shipper may have.
It will be interesting to see how — I think the way it is worded is that the
Canadian Transportation Agency will define ''expenses'' in that context in the
regulations that are set up to administer that new provision that will allow the
agency to say to the railways, ''You have caused a problem; you will have to pay
the shippers something.'' It is a case of saying, ''How broad will that
Senator Robichaud: Everybody will have to stand by the definition they
come up with.
Mr. Ballantyne: Yes.
Senator Robichaud: There's no appeal mechanism.
Mr. Ballantyne: I think that's right. You would have to look at the
general regulatory provisions governing the agency, but my recollection is there
probably would be no appeal in a case like that. Once the agency makes the
decision, that's it.
It might not be a bad idea to ask that question to the agency. I don't have
that information handy.
Senator Robichaud: Mr. Laskowski, when the railroads transport grain,
there's a limit as to what they can charge to transport the grain. In the
trucking industry, how does that work?
Mr. Laskowski: It is market driven. It is a negotiation. It is a
published rate, and then the discussions begin. One would expect that when the
demand is high and the supply is lower, the rates will go up and vice versa. The
trucking industry is deregulated and its prices are deregulated.
Senator Robichaud: How does that compare with the railways in the cost
of transporting grain?
Mr. Laskowski: It is a shorter haul. I wouldn't know what a farmer
would pay to the railway industry for a long-haul shipment. Other than the fact
it is transportation from a smaller point, it is a very different type of
service, so the market is priced accordingly.
For example, on a truck haul, what was happening during the bumper crop over
the winter and through the fall, there were extraordinary movements, for
example, from the West to Thunder Bay that would traditionally move by rail. By
its nature, because it is a smaller shipment, on a price per unit, it is going
to be more expensive to move by truck.
Senator Robichaud: There was not a lot but some movement in that
Mr. Laskowski: Correct.
Going back to my original opening comments, we don't expect those types of
movements to occur unless this bumper crop is a new reality. As other senators
have mentioned, that opens up a new reality, including for the railways, the
trucking industry and the farmers, of how transportation systems evolve. That's
no different than, quite frankly, any other sector. It evolves, it changes, and
people step up and step in.
Senator Robichaud: For the transportation industry, rail or trucking,
to adjust, how many years would it take to establish a trend? Because we say CN
should have more crews and all of that, they just can't do that because of this
year, can they?
Mr. Laskowski: Absolutely not. From a business perspective, it would
be — I don't know of a bank that would give you a business model that would
allow you to step into a market and say, ''I need to buy 10 units at $225,000,
$2.25 million.'' They will say, ''To move what, sir?''
As Bob mentioned, in terms of track rationalization and growth, it's no
different than trucking. The trucking industry would rely on long-range
forecasts. Is this bumper crop a bumper crop, or is this the new norm? If it's
the new norm, business opportunities will present themselves both on the rail
side and on the trucking side.
Senator Dagenais: Mr. Ballantyne, do you think we should make service
level agreements between railways and grain shippers mandatory?
Mr. Ballantyne: I don't think we should necessarily make them
mandatory. I do think a shipper in any industry, including grain, should have
the right to a service level agreement. Bill C-52, which is now in the Canada
Transportation Act, does allow all shippers to have the right to an SLA.
The way Bill C-52 was structured, ideally it would be negotiated between the
railway and the shipper. In the event that the two parties can't come to a
negotiated service level agreement, the shipper does have the right to go to the
agency to have one obtained by arbitration.
All shippers should have the right. As I say, I don't think it should
necessarily be mandatory, but it should certainly be the right of all shippers
to have that, and hopefully between Bill C-52 and Bill C-30, we will see
shippers go after service level agreements.
Senator Mercer: I was going to ask this question, but it is apropos to
what Senator Dagenais asked. How many people have taken advantage of the SLAs,
the service level agreements, since Bill C-52 came into effect? Are you aware of
what we have been told is a heavy financial cost to get these agreements in
place? Are you aware — because you represent such a large number of people — if
this is actually working, even though it looks good on paper?
Mr. Ballantyne: As far as I know, nobody has yet taken the opportunity
to try to get a service level agreement by arbitration. Yes, the consensus seems
to be that the way Bill C-52 was set up, it will be quite expensive to get it.
The way Bill C-52 is structured, there are a number of legal hurdles that a
shipper will have to jump over in order to get it, and the opportunity for the
railways to use the legal system to make it difficult to come to an agreement is
such that it would cause most shippers to spend a lot of money.
One of the things we did in our association earlier this year is we ran
briefing sessions for the shipper community, one in Regina and one in Toronto,
in order to try to give shippers as much information as we could as to how they
could go about using it. We also had speakers. One was from the Canadian
Transportation Agency; the other was a transportation lawyer who specializes in
We are running a third such session in Montreal later this month. As far as I
know, nobody has taken advantage of it yet.
Senator Dagenais: My second question is for Mr. Laskowski.
Some stakeholders in the grain industry claim that Bill C-30 is a good bill;
others say that it should go even further. However, some long-term solutions are
Are there other long-term solutions that you would like to suggest to improve
Mr. Laskowski: I can only speak to that from a trucking perspective. I
mean, this bill is part of a much bigger picture in terms of how grain is moved,
how it is sold to market, and the evolutionary process of that market.
For the trucking sector, as a part of that supply chain, but not typically
the biggest part of that supply chain, we are standing back, looking to see
exactly how this is all going to work out. I keep coming back to the investment
required to get into this market and to be a participant. How far this bill goes
in terms of protection of market rights and access to transportation for grain
farmers will determine the reaction of our industry.
Quite frankly, picture yourself as a business person in the trucking
industry. Even if there were bumper crops going forward, are you prepared to
make an investment if there are more interventions with regard to requirements
that determine the shape of the market in the future? So although CTA doesn't
have a comment on the bill of how far it should or shouldn't go per se, it does
have an impact on our industry in terms of how it will react to its evolution in
the grain transportation business going forward.
Senator Maltais: Welcome, gentlemen. Thank you for being here.
I will turn to you, Mr. Laskowski, because you represent an industry that is
unique. You have laid everything out for us and explained the problems facing
I would like to draw a parallel, because you haul grain by trucks,
particularly in the West. Of course, we have the same problem in Eastern Canada,
but not with grain. You know, paper mills receive wood chips, but sawmills are
not always available. Truckers drive special trailers that cannot be used to
bring back stock, and that is somewhat similar to the problem that you have in
the West. Clearly, a truck that does not haul anything still uses gas, and the
driver needs to eat and sleep. Those costs are unavoidable.
Would there be a possibility to partner with other companies with the help of
dispatchers? We know those trailers are special and they cannot carry everything
under the sun. But the trailers are attached to tractors, so they can be
Could there be a way to reach an agreement with dispatchers in order to
reduce the magnitude of the problem? The situation will probably not be perfect,
but if goods were hauled in one out of two trips, the plight of truck drivers
would be improved a great deal.
Mr. Laskowski: Thank you, senator, for the question.
With regard to Eastern Canada and the issue of access to trucks, costs and
all the rest of it, it is a bit of a different situation in particular if we're
talking about paper mill product. That is more of an issue, quite frankly, sir,
of supply and demand.
If the paper mills wanted better access to trucking services, and there are a
number of excellent fleets who service the paper mills with the specialized
equipment, and have less of an issue with regard to the grain issue that we
talked about, the B-trains, north-south on return delivery, that, from a
logistical standpoint, is far less of a challenge.
The challenge in eastern Canada, and it is not necessarily exclusively the
paper mills' issue, is that manufacturing in the East has had tremendous
challenges over the last four years. What those challenges have produced not
only to their customers, but also to our industry and the customers, comes down
to payment for services. When those payment-for-service issues are addressed in
terms of making the trucking industry a little bit more whole, those logistic
issues will be dealt with, meaning if the demand for paper gets higher, they get
higher rates. Then they will be able to share that with the trucking companies
and have better access to transportation services north, south, east and west.
That's more of a supply chain issue.
Senator Maltais: The other important point has to do with the next
generation of truck drivers. We know the population is aging. You are not the
only ones faced with this problem, and it is a serious problem.
Do you have agreements with training centres to ensure that you will have new
drivers in a timely manner? We know that the industry will not stop just because
drivers are retiring.
Mr. Laskowski: Absolutely. We're working with the Government of Canada
to develop newer training standards to raise the profession.
Quite frankly, the problem in our industry is that truck driving isn't deemed
a profession, so currently we're working with the federal government and the
provincial associations with their provincial governments to raise the bar with
regard to training standards for trucking. We believe that if you raise the
training standards and raise the level of professionalism through its entry
level system, that will attract more drivers and give us a good quality of
driver and make it a sector that young people or transitional workers want to
come to. So absolutely, yes.
Senator Maltais: The prospect of free trade and the agreements signed
with some Asian countries will certainly increase the volume of grain
production. Do you have a solution for the future to solve those problems? The
question is also for Mr. Ballantyne. Are you a better forecaster than CN and CP?
Mr. Ballantyne: Yes. The shippers and the railways always talk about
forecasting. There seems to have been some breakdown in communication, I guess,
in terms of the grain forecast for the current crop year, last year. It may be
that nobody was particularly at fault there. It was just that the crop turned
out to be bigger than anticipated and that may not have been known until the end
of the crop year and, therefore, maybe too late for people to move very quickly
to put the resources in place to handle it.
It is something that does go on all the time. There are certainly discussions
between the shippers and the railways in terms of what their forecasts are
because the railways need to have that in order to be able to respond, as do the
The Chair: To conclude, Senator Oh.
Senator Oh: Thank you, gentlemen.
We understand that Bill C-30 is a very important piece of legislation and
needs to get through as soon as possible. This will not only protect our grain
market share in the world, but also all of the buyers need us to deliver the
goods on time, which is critical. We are competing in the grain market with
countries like Australia and the U.S. Canada needs a reputation for delivering
the goods on time. This not only helps farmers with their cash flow, but also
Canada's reputation is at stake. Can you comment on that? We need to have this
problem solved because if you have a bumper harvest and can't deliver, you're
Mr. Ballantyne: It's certainly important for the Canadian economy and
all of the companies that export, whether it's grain or forest products or
whatever, that the supply chain really works well because if it doesn't, then
our overseas customers lose confidence in our ability to be a reliable source of
supply. I think your point is very well taken. The whole Canadian economy does
require that all of the players in the supply chain work well together and in as
best harmony as they possibly can.
I think the government's initiatives with the corridor and initiatives like
the Pacific Gateway where it tried to bring federal, provincial and private
sector people and carriers together has been a good model for ensuring that the
supply chain works well.
The Chair: Mr. Ballantyne, thank you very much.
Witnesses, again, thank you for accepting our invitation and sharing with us
your comments, your vision and your recommendations.
Senators, our second panel will be by video conference. For the purposes of
clarity, as you look at the screen, on your right is Mr. Andrew Mayer, Vice
President, Commercial and Regulatory Affairs, Prince Rupert Port Authority, from
Prince Rupert. To your left on the screen is Mr. Tim Heney, Chief Executive
Officer, Thunder Bay Port Authority, from Antwerp, Belgium.
To the witnesses, thank you very much for accepting our invitation to be part
of the study on the proposed fair rail for grain farmers act, Bill C-30.
I will ask that we start in alphabetical order with the presentation of Mr.
Heney, to be followed by Mr. Mayer.
Tim Heney, Chief Executive Officer, Thunder Bay Port Authority: Thank
you, Mr. Chair, and on behalf of the Thunder Bay Port Authority, I would like to
thank you for the opportunity to appear before you today.
Thunder Bay is the Western Canadian entry point to the St. Lawrence Seaway
system. Ninety five per cent of the cargo handled at the port originates in
Western Canada, over 70 per cent of which is Western Canadian grain.
Thunder Bay currently ranks ninth largest of the 19 Canadian port
authorities, shipping an average of 7.5 million metric tonnes annually. It is
the second-largest Canadian port on the Great Lakes. We have the largest export
port on the seaway system, with over 85 per cent of our shipments transiting the
entire system to markets in Europe, North Africa and Latin America. The port
also serves domestic markets in Eastern Canada and the U.S. around the Great
Lakes. The St. Lawrence Seaway is the world's largest inland waterway and was
built to provide direct access to European markets for Western Canadian grain.
Currently, over $2 billion is being invested in the system, including $1
billion in new vessels following the removal of the 25 per cent import duty on
foreign-built ships. The use of ocean vessels at the port increased last season
and continues to increase this season, and the time has come for a regulatory
review of costs imposed on these vessels, including tolls, pilotage, marine
services and icebreaking fees. These costs have grown to over $135,000 per
voyage for an ocean vessel travelling to Thunder Bay and are eroding the
competitiveness of the seaway at a time when grain shipments through Churchill
are being subsidized.
Thunder Bay has eight operating grain elevators, with a combined storage
capacity of 1.2 million metric tonnes, the largest in Canada. The port has the
fastest ship turnaround time of any Canadian port, and the railcar cycle time
has improved 36 per cent over the last 10 years. Richardson International,
Patera, Cargill, Canada Malting Company, the Canadian Wheat Board, Western Grain
& Processing Division, and Mobil Grain operate the grain facilities in Thunder
Bay. In January this year, the Wheat Board purchased facilities in Thunder Bay
and Trois-Rivières, a major vote of confidence in the seaway export corridor.
This year, following a delayed opening with the most severe ice conditions in
memory, the port is now operating at capacity, with projected grain shipments in
the month of May of 1.2 million metric tonnes.
I would welcome any questions.
The Chair: Thank you.
We will ask Mr. Mayer to make his presentation, and then we will go to
Andrew Mayer, Vice President, Commercial and Regulatory Affairs, Prince
Rupert Port Authority: Thank you, Mr. Chair and committee, for allowing me
to present on behalf of the Prince Rupert Port Authority.
Prince Rupert Port Authority is one of Canada's 18 port authorities. We
administer federal Crown lands and the Prince Rupert Harbour pursuant to the
Canada Marine Act. The Port of Prince Rupert is the second-largest port on the
West Coast, after Vancouver, and is one of the largest ports in Canada, handling
approximately 30 million metric tonnes in 2013.
I would just like to pause and say that the overwhelming majority of cargo
that moves to and from the Port of Prince Rupert arrives at our port by rail, so
efficient rail service is critical to this gateway, which is a Western Canadian
gateway for a variety of products. It is our expectation that with rapidly
increasing volumes of Asia-Pacific trade, the demand for rail capacity to handle
a variety of products, including containerized cargoes and other resource
products exported from Canada, will grow.
By way of example, Prince Rupert handles a variety of rail-delivered export
products and import products through our gateway. Coal, which is a significant
export — the second-largest export for the Province of British Columbia and an
important export for the Province of Alberta — is a principal bulk cargo export
handled by rail, as is grain, an important cargo for the Port of Prince Rupert
as well, containerized intermodal cargo, wood pellets, which are a biofuel
product, et cetera.
We also have a number of projects that are currently either completing
environmental assessment or awaiting final investment decision. Not including
LNG products, rail-related projects are valued at over $2.5 million in capital
costs. Many of those projects will be serviced by rail.
There are some concerns we have in Prince Rupert with respect to the
implications of the bill on supply chain efficiency for all commodity types, not
One issue I would like to raise is the issue of interswitching. Canadian
ports compete heavily with U.S. ports. In particular on the West Coast of
Canada, Canadian ports compete heavily with ports in Seattle; Tacoma; Portland,
Oregon; and, in some cases, other smaller ports.
We're concerned that the extended interswitching rights may have the
unintended effect of drawing cargo that would otherwise be exported through
Canadians ports after being delivered by Canadian rail carriers to U.S. ports
south of the border. That's something we trust the committee will hopefully take
into consideration when determining whether the interswitching extension is
appropriate in this case.
Second, our concern is that mandatory arbitration may have a chilling effect
on what would otherwise have been generally good commercial discussions between
shippers and rail carriers. We support the concept of encouraging railways and
those who rely on rail service, including grain producers and exporters, to
enter into level of service agreements and to ensure that those agreements are
enforced and are enforceable. We have had some success ourselves in that
respect, entering into level of service agreements, and we think those
level-of-service agreements have had a positive effect on gateway efficiency.
The last issue we are concerned about is the proposal with respect to the
imposition of minimum annual grain movements in a particular year. Under the
proposed bill, it's our understanding that the Canadian Transportation Agency is
required to consult with railways and the owners and operators of grain-handling
undertakings. There is no corresponding requirement that the CTA consult with
other users. Those other users would include other commodity shippers, terminal
operators who rely upon efficient rail service, marine carriers who rely on
efficient rail service, and port authorities who are responsible for ensuring
that Canada's trade gateways operate efficiently. I would say that each of those
additional stakeholders will be dramatically affected if there is an overall
reduction in rail system efficiency.
The concern is that without adequate consultation by the CTA with those other
stakeholders, an unfair preference will be provided to one commodity sector at
the expense of other equally and, in some cases in terms of volume, more
significant commodity sectors.
Those are my comments, Mr. Chair.
The Chair: Thank you, Mr. Mayer. Now we will commence our questions.
Senator Mercer: Gentlemen, I would like to thank both of you for
making yourselves available to this committee.
Prior to my questions to them, I would like to put on the record how
disappointed I am that the Port of Vancouver did not accept our invitation to
appear. We have heard from witness after witness that part of the problem
getting the grain moving is the backup at the Port of Vancouver. I think it is a
travesty for the Vancouver Port Authority to not accept our invitation. I think
it needs to be noted on the record that they have turned down our invitation
while the good people in Churchill — at least those representing the railway up
there — Thunder Bay and Prince Rupert took the time to meet with the committee
via teleconference. So thank you again, gentlemen.
Mr. Heney, you said the Churchill subsidies are hurting the Port of Thunder
Bay. How has that manifested itself? How have you noticed this problem?
Mr. Heney: You have to be clear that the size of Churchill is very
small; however, last year it shipped over 500,000 tonnes, which is a fairly high
number for them. Yet the markets are the same as served through Thunder Bay, so
we are subsidizing one corridor over another, which seems rather strange when
the seaway is subject to the maximum of user fees and user pay type of
legislation. There seems to be a lack of fairness.
Senator Mercer: Mr. Mayer, Mr. Heney talked about Thunder Bay having
the fastest turnaround time. I'm curious; we heard from witnesses over the last
few days about turnaround time both in Vancouver and Prince Rupert and the fact
that there are a number of vessels waiting for grain. Of course, if a ship is
standing still, it's not making money and the product isn't moving. What is the
situation currently in Prince Rupert?
Mr. Mayer: Senator Mercer, that is a very good question. As a result
of the traffic congestion, both on the grain export side and also on the coal
export side, we had a higher than usual number of vessels at anchor for extended
periods of time at the Port of Prince Rupert. The reasons principally related to
weather delays during the winter months, earlier in the year, and that created
problems along the CN network in particular. It's our understanding that they
had the longest extended periods of temperatures below minus 30 degrees Celsius,
which made it impossible in some cases for them to use their railcars because
hydraulic braking mechanisms didn't work. There was definitely an issue with
respect to vessels being delayed and the gateway export being similarly reduced
in capacity during that time.
I would say, though, in terms of railcar turnaround that the terminal
operators in the Port of Prince Rupert and I would say through Vancouver as well
are efficient terminals. The grain terminal in Prince Rupert, operated by Prince
Rupert Grain, is a very efficient terminal, and once they had the cars, they
were able to turn them around very expeditiously.
Senator Mercer: You also talked about interswitching and the problems
that you have with it, forcing some of our shippers to go through American
ports. Let's say we could all get our wish and the interswitching stopped at the
border, stayed north of the border. Would the Ports of Vancouver and Prince
Rupert — and I know you can't speak for the Port of Vancouver, which is why they
should be here — be able to handle that extra volume?
Mr. Mayer: Senator Mercer, the issue and concern is that the
interswitching extension or the kilometre extension for interswitching rights
could result in U.S. carriers essentially being able to poach what would
otherwise be cargo carried on the Canadian rail network west to Canadian ports
or east to the Ports of Thunder Bay, Churchill and Montreal. That is a concern.
The additional concern is that there is no corresponding right on the part of
Canadian rail carriers to pick up U.S. cargoes [technical difficulty with
video conference]. I mention this because we are competing very heavily with
many U.S. ports. There are steps being taken, for example in the [technical
difficulty with video conference] on Canadian cargo routed through U.S.
ports. We are concerned about that.
With respect to the ability to handle volumes, if all cargo stayed north of
the border we'd consider that there is additional capacity for grain, additional
capacity for coal and additional capacity for other commodity types, both in
Vancouver and in Prince Rupert.
Senator Plett: Thank you, gentlemen.
Mr. Heney, I would like to further touch on your comments about the Port of
Churchill. I'm from Manitoba, and when we sometimes subsidize certain players we
are doing that not just to help one or two individuals, but rather to help a
huge sector of a province, as we're doing here. The Port of Churchill was quite
a big player in carrying wheat during the days of the single-desk marketing. Of
course the government chose rightfully to go to dual marketing and that, in the
short term, needed to be addressed in the Port of Churchill. There are many
First Nations people there who depend on the Port of Churchill for their
Would you feel the same way if an industry was not necessarily shut down but
if something like this happened in and around Thunder Bay? Would you have the
same feelings about somebody not being helped for a few years to make sure they
could get back on track?
Mr. Heney: Thank you for the question, senator. I'm a life-long
resident of Thunder Bay and I've seen much industrial decline over my career,
coming from the forest products industry originally. I've worked at the port in
the grain industry for the last 23 years, and we compete heavily with the U.S.
ports. They are also subsidized and we successfully compete with them on many
footings for project cargo. I'm used to competing. We have never seen any type
of subsidy to save the forest products industry, so I can't really look from
that perspective; I just look at it as a competitor. It seems I'm competing with
my own government in some ways. We have some fairly excessive fees on the
seaway, some of which haven't been reviewed in many years.
Churchill, because of its very short season and size of the shipments there,
is largely irrelevant to the future of Thunder Bay. I like to draw attention to
other corridors, the seaway corridor. A review of regulations on that corridor
would be in order as well. We are not asking for a subsidy, just a review of
Senator Plett: Fair enough. If they are largely irrelevant, I don't
think we should concern ourselves too much if they get a leg up and a hand up.
But nevertheless, Mr. Mayer, you correctly state that this bill specifically
states that shippers and rail companies must be consulted. However, the bill
also gives the authority for the government to consult all players, including
ports. Both Minister Ritz and Minister Raitt have said that all players will be
consulted. Were you aware of that, or would you like to comment on that?
Mr. Mayer: Thank you for your comments. If the act, in its final form,
does include a requirement that those key stakeholders also be consulted,
certainly I would withdraw our concerns. My reading of the act suggested to me —
and I apologize if I misunderstood — that there was a mandatory requirement to
consult with the rail carriers and grain handlers and operators, and it was an
optional requirement, a permissive ability to consult with others. That was the
concern. Of course, when that is the case there is the risk that those groups,
other than grain producers and grain handlers, may not be consulted. And
therefore their voices may not be heard before a decision is made that may
affect that gateway efficiency in general.
Senator Plett: I would like both of you to give a brief comment on the
normal amount of ships that would be in your port at one time waiting to be
loaded, as compared to what it was this winter because of the problems we had. I
certainly wish that we had, as Senator Mercer said, the Port of Vancouver here
as well to give us that, because they are large players. You are both
significant players as well. What would the normal be for your ships in port as
compared to what it was this year?
Mr. Heney: Our ship turnaround time is about two days on average.
There was a surge this spring, and to be clear we're not open in the winter
months. Following a delayed opening this year, we're seeing two to three ships
at anchor waiting for grain, which is a manageable number. We can load six ships
at one time in Thunder Bay.
Senator Plett: That's what it is now or is that the norm?
Mr. Heney: That's what it is now, which is high for us. Normally, we
wouldn't see any ships at anchor. They come right to the dock and go out again.
Given the number of ocean ships that have been queued up due to the late
opening, that's a pretty low number, I would think.
Mr. Mayer: Senator, thank you very much. As I mentioned during my
earlier submissions, we had extended vessel turnaround times — vessels waiting
at anchor for cargo. In particular, we had extended vessel turnaround times for
both the grain carriers and [technical difficulty with video conference].
I would say that our normal turnaround time for vessels, when vessels come into
anchor, is approximately between one and three days depending on the time of
year and the commodity type. After the difficult winter we had this year, in
some cases vessels were at anchor for 7 to 10 days or potentially even longer.
Again, I want to emphasize that those delays were not only experienced by
vessels here to load grain but also by vessels here to load coal.
Senator Tardif: You mentioned this before but I want to go over it. In
your opinion, how will the volume requirement that has been imposed by this bill
on the two major railways affect the transport of other products moving on the
same track through the same logistical system?
Mr. Heney: In Thunder Bay's situation, for other commodities there's
quite an excess capacity in the port. We never moved anywhere near our capacity,
which is about 3,700 cars a week for grain. Our number got up to not even 2,000
following the opening. It would not impact right now at all the coal or potash
that goes through the port. There's a lot of capacity to move both commodities.
Senator Tardif: And in Prince Rupert?
Mr. Mayer: I would just like to mention that Prince Rupert is in a
period of dramatic growth in terms of our cargo exports and imports through the
gateway. We also have had some additional projects for which we expect to make
final investment decisions imminently that will further increase in rail traffic
to and from the Port of Prince Rupert, in particular, a new potash terminal
development exporting potash from Saskatchewan and Manitoba. The environmental
assessment has been completed. The point is that we see our current traffic
volumes growing and rail traffic volumes therefore increasing as a result of
requirements to export those commodities.
We are concerned about making it a requirement for the railways to allocate a
certain number of resources on a mandatory basis to the grain sector because to
do so, especially given that there will be penalties if they fail to do so and
other potential sanctions, may result in capacity being taken away from other
sectors that also rely on that transport.
By way of comparison, and we don't think that any particular commodity type
should be preferred, the volume of coal moving through the Port of Prince Rupert
right now versus grain is approximately 2.5 to 1 in terms of annual tonnage; 13
million tonnes of coal in [technical difficulty with video conference].
Senator Tardif: I'm sorry; I did not hear that. You seem to be fading
in and out.
Mr. Mayer: I'm sorry, senator. I will try again. The grain volumes are
forecasted to be approximately 6 million [technical difficulty with video
conference], a little less than half our coal volumes. The concern is that
if CN were our only carrier into Prince Rupert, and we're a single track, not a
dual track, and were required to commit available resources in rail cars and
locomotives exclusively to grain at certain times of the year or in greater
percentages, it would affect, in our view, the shipment of other commodities as
well as containerized cargo because of the reduction in locomotive capacity to
the Port of Prince Rupert.
Senator Tardif: I'm going to restate that just to make sure that I
have heard correctly. You indicated that you have half the grain exports in
comparison to coal exports; is that correct?
Mr. Mayer: That's correct, senator.
Senator Tardif: You ship more coal. What is the situation for potash?
Mr. Mayer: For potash, the terminal has completed its market
assessment, but the terminal has not been completed. We expect it to be started
imminently. The potash terminal will be designed to be a 13.5 million to 20
million tonne per annum facility. It will be approximately twice the size of our
grain terminal in Prince Rupert.
Senator Tardif: Thank you for clarifying your concerns.
Do you have other tracks that service Prince Rupert besides CN?
Mr. Mayer: No. CN is the only rail service provider into Prince Rupert
[technical difficulty with video conference].
Senator Tardif: If those cars are taken exclusively for grain
shipment, you are concerned you may be short of cars for the shipment of other
products; is that correct?
Mr. Mayer: That's correct, senator.
Senator Tardif: Are they the same type of cars? I understand that the
same cars wouldn't necessarily be used.
Mr. Mayer: You are right, senator. More appropriately, we should refer
to the locomotives or the power used to pull the grain cars. Coal carriers are a
different type of car, obviously. They're open top as opposed to the grain
carriers. As well, containers are carried on chassis.
Senator Tardif: Do you have the staff and the capacity to handle this
extra volume, whether grain or new export products that you are building
Mr. Mayer: I will break it down, senator, if you don't mind.
We think that the rail capacity on the Prince Rupert corridor in terms of
ability to handle trains pulling cars leaves a lot of room for additional
movement, between 30 per cent and 40 per cent capacity at this time. That said,
there are not an unlimited number grain cars, coal cars or cars available to
carry containers and also locomotives.
In that sense, as volumes increase, there will be a requirement for rail
carriers and CN [technical difficulty with video conference] the shippers
[technical difficulty with video conference] cars to handle their
Within the Port of Prince Rupert, we are planning for growth. Our
organization has tripled in size in the last five years. Our terminals are also
in a period of expansion, which we see as a great benefit to the communities in
Senator Tardif: Congratulations on your success.
Senator Dagenais: My thanks to the two witnesses. We are talking about
the need to speed up the movement of goods in order to foster trade. The
Minister of Agriculture actually said that a ship remained empty at berth in the
port of Vancouver for a number of days. Mr. Mayer also said that it is important
to think about the costs of icebreakers that have to open the St. Lawrence River
seaway, which means that a lot of costs come with the shipment of goods. How
will the bill support your port activities?
Mr. Heney: Yes, senator, our port, of course, relies heavily on rail,
as do all ports shipping bulk commodities. Ours is devoted to grain almost
exclusively, other than coal and potash, which are much smaller in volume than
grain. So the effective movement of grain by rail is extremely important to us,
and the extent to which the bill facilitates that and focuses on that will be of
benefit to our program in Thunder Bay.
We have seen situations in other commodities like forest products, for
instance, where mills currently today are taking shutdowns because they do not
have access to rail cars. So I'm not sure this situation is hampering or
hindering that, but that is a critical thing to our community as well.
Mr. Mayer: Thank you, senator, for your question. I think that,
certainly, railways can be encouraged to improve efficiency in their systems,
can be encouraged to make investments in equipment to increase their capacity
and can be encouraged to make investments in their rail systems by creating
sidings and other infrastructure to improve efficiencies in the system.
I think the bill in some respects would certainly create an inducement to
rail carriers to do so, and in that sense we take it as a positive. We certainly
support an efficient movement of grain to all Canadian ports. It is very
important for all Canadians. It is important for us in Prince Rupert.
The concern, though, is that there may be an unintended preference [technical
difficulty with video conference].
Senator Robichaud: Mr. Mayer mentioned that he was concerned about
interswitching. What about Thunder Bay? Is there any concern there?
Mr. Heney: In Thunder Bay, we're basically into the first full year
past the removal of the Wheat Board monopoly. So the majority of the shipments
through Thunder Bay are Canadian wheat for export. We watch very closely what
happens after the Wheat Board. One of our main competitors would be the
Mississippi corridor for Canadian grain exports. We would not like to see
anything that encouraged that route or gave it incentive, as was discussed
earlier, to poach Canadian grain and take it through that corridor. We feel that
it should be kept north of the border and using the seaway system, which has the
ultimate capacity to do that. There are issues of competitiveness with the
seaway as well.
Senator Eaton: Thank you both. This is very interesting.
I'm sorry, Mr. Mayer; we have such difficulty hearing you because you go in
Mr. Heney, I would like to start with you. You are talking about regulations
and the costs of the St. Lawrence Seaway placing Thunder Bay at a disadvantage
to other ports. Is it only the federal government that you have to deal with in
changing the regulations, or is it Ontario and Quebec?
Mr. Heney: Regulations are generally federal. So when we saw the
change to the 25 per cent import duty for building Canadian ships offshore, that
immediately spurred a $1 billion investment in the Canadian lake fleet. So these
regulations can have dramatic impacts on the use of the seaway. The pilotage to
get an ocean ship to Thunder Bay is $60,000. You have to have a pilot come all
the way from Montreal across the Great Lakes, 2,300 miles inland to Thunder Bay.
That's an unheard of situation anywhere in the world.
Pilotage on the open lakes, on the main Great Lakes in Canada, is not really
required, and it is something that is making us non-competitive. We need to
review these. These regulations took place before the days of GPS and modern
navigation techniques and, to us, are just punitive to our competitiveness.
I think a review of these types of regulations, with a view to modernizing
them, would certainly help the seaway to move a lot more grain and be more
competitive. We do compete with American routes.
Senator Eaton: Have you lobbied the Minister of Transport about those
Mr. Heney: We have. We bring it up at every opportunity. They're a
very strong lobby group supporting the pilotage and those types of groups. It is
not an easy thing to change, but it is something that should be studied
carefully with a view to modernizing those regulations.
Senator Eaton: I would like a comment from both of you on this. Bill
C-30 seems to be pushing the railways to be less monopolistic with the new
switching program and pushing them to build greater infrastructure, whether it
is improving the track, building more cars, efficiencies, more engines. We had
one witness yesterday who told us they had enough cars. What they were short of
was engineers or personnel, crews and engines. How do you both feel about that?
Mr. Heney: There are two railways in Canada. Canadian Pacific has been
recently undergoing major restructuring, which has reduced staffing and
locomotive power dramatically. I'm sure that is a part of the cause of the
situation we are in. The business of rationing power to higher paying
commodities is something that is always going to be detrimental to grain
What we have seen in Thunder Bay is that once the order-in-council was
placed, a large amount of grain was immediately moved to Thunder Bay, from
short-haul places like Manitoba, to maximize deliveries. To us, that's in some
ways a benefit because Thunder Bay has such a quick cycle time from the
Prairies. Also, it impacted the fact that the railroads did not move much grain
east of Thunder Bay over the winter. It actually left Thunder Bay in a better
position in some ways.
The rationing of cars and locomotives is dangerous near a growth of
Mr. Mayer: First of all, we would support any efforts by the rail
carriers to improve the levels of their fleet, the number of locomotives and
their track. We think there has been significant progress in that respect on the
Prince Rupert corridor, so we're supportive of CN continuing to do that.
With respect, though, to whether or not that was the cause of delays over the
first part of 2014, senator, I would say that the delays in our view were not so
much in terms of equipment capacity. They were principally weather-related and
not labour-related either. So that was really an anomalous situation, in our
view. That said, we certainly support encouraging the railways to continue to
increase their efficiency.
Senator Eaton: As you both know, there's a sunset clause to this bill,
so it will be very interesting to see what it has done at the end of two years
Mr. Heney, don't you have an advantage over Churchill as the track to
Churchill is a difficult track, I understand? A lot of it goes over tundra, so
the trains have to go very slowly. Don't you have a built-in advantage there?
Mr. Heney: Without dwelling on Churchill, we have many advantages, but
they're not reflected in the freight bill at the end of the day. Thunder Bay has
excellent service in rail by both railways, a very large grain handling capacity
and a very efficient port, but not all of that is reflected in the cost of the
Senator Mercer: I have one question for each of our witnesses.
Mr. Heney, you claim to have the fastest turnaround time, and that's
terrific. The ships leave the Port of Thunder Bay, head down the seaway and
travel across numerous lakes in the seaway system. I put my other hat on as a
member of the Transport Committee. I'm very much aware that the water level in
the Great Lakes has dropped significantly over the last number of years to the
extent that some ships have not been able to go through the process fully
loaded. Has that affected grain shipments?
Mr. Heney: It did in 2007, senator. Last year, we saw the biggest
rebound in lake levels in 60 years. After the winter we just had, we're going to
see another rebound. We're actually, for the first time in many years, well over
normal lake levels in Lake Superior. As we know, those lake levels travel
downhill from Lake Superior, so you will see a correction of those lake levels.
I can't predict how long that will last. Whether global warming or climate
change has a long-term impact is up for debate, but I have seen rapid rebounds
when others said that this was a permanent situation. Trust me, it is not. Lake
levels in the Port of Thunder Bay have never been an issue, but along the seaway
there are challenging areas. Those today are resolving themselves as part of a
positive impact of the climate we have witnessed in the last winter.
Senator Mercer: The tough winter was good for something.
Mr. Mayer, I have to indulge my colleagues, but this is slightly off topic.
You told us that you ship mainly coal, grain, containers and wood pellets. The
other responsibility of this committee is forestry. We did a study on forestry
and we know that there was a large stand of dead wood in British Columbia due to
the pine beetle. Is that where the wood chips are coming from? Do you know?
Mr. Mayer: I know a little bit, so I will tell you what I do know.
Certainly, on the pellet side, wood pellets are a biofuel product
manufactured from wood waste [technical difficulty with video conference].
It is now compressed and formed to a biofuel that is exported to Europe and Asia
and considered to be a green fuel. So the wood pellet sector is a small sector
that is growing, we think.
Another important aspect in terms of forestry exports and access to rail for
forestry exports should be noted as well. Right now, the fastest growing export
product through the Port of Prince Rupert is wood products. Those logs and
finished lumber are loaded into containers and exported to Asian markets. So
access for the forestry sector to an efficient rail network is very important to
the Western Canadian economy, absolutely.
Senator Plett: Mr. Heney, you said that you are not open in
wintertime. What is your storage capacity in Thunder Bay? Don't tell me in the
amount of tonnes because I have a hard time figuring out how many boats that
will load. How many ships would you be able to load in spring before you would
need to get grain coming in?
Mr. Heney: The storage capacity, senator, is 1.2 million metric
tonnes. I know that doesn't mean a lot. To use a round number, there are 10,000
metric tonnes in a unit train of grain. That would be 300 trains, somewhere in
that range. To break that down by 25,000 tonnes, I would have to do the math. I
can't do it in my head. I'm sorry.
It is 10,000 tonnes in a train, 1.2 million tonnes storage. When things
opened up, we were loading six ships at a time, a unit train every hour, which
is 10,000 tonnes an hour in the port, so huge capacity there. It is the biggest
storage in North America, I believe. Here in Ghent, in Belgium, it is 1.1
million. They call that the biggest storage in Europe, so the storage capacity
in Thunder Bay is world-class size.
The Chair: Thank you, honourable senators.
To the witnesses, thank you for sharing your thoughts, recommendations and
opinions with us.
Honourable senators, we will resume at 2 p.m. today, same room.
(The committee adjourned.)