Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 31 - Evidence - Meeting of June 18, 2015
OTTAWA, Thursday, June 18, 2015
The Standing Senate Committee on Agriculture and Forestry met this day at
8:30 a.m. to study international market access priorities for the Canadian
agricultural and agri-food sector.
Senator Percy Mockler (Chair) in the chair.
The Chair: I welcome senators to this meeting of the Standing
Senate Committee on Agriculture and Forestry. I'm Percy Mockler, senator
from New Brunswick and chair of this committee.
I would like to start by asking all senators to introduce themselves.
Senator Beyak: Senator Lynn Beyak from Ontario. Welcome.
Senator Merchant: Pana Merchant, Saskatchewan.
Senator Tardif: Good morning, I am Senator Claudette Tardif from
Senator Maltais: Good morning, I am Senator Ghislain Maltais from
the Beauport region of Quebec.
Senator Oh: Good morning. Senator Oh, Ontario.
Senator Dagenais: Good morning, I am Senator Jean-Guy Dagenais,
from the Montreal region of Quebec.
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
The Chair: Thank you.
Today, the committee is continuing its study on international market
access priorities for the Canadian agricultural and agri-food sector.
Canada' agriculture and agri-food sector is an important participant the
In 2013, the sector accounted for one in eight jobs in Canada — employing
over 2.2 million people — and close to 6.7 per cent of Canada's gross
Internationally, the Canadian agriculture and agri-food sector was
responsible for 3.5 per cent of global exports of agri-food products in
2013. In 2013, Canada was the fifth largest exporter of agri-food products
Canada is engaged in several free trade agreements. In 2006, 5 countries
had free-trade agreements with Canada. Today, in 2015, there are 43
Today, honourable senators, we are hearing from Wendy Zatylny, President
of the Association of Canadian Port Authorities, and Captain Yoss B.
Leclerc, Vice-President and Chief of Marine Operations, Port Authority of
Quebec, Association of Canadian Port Authorities.
From Canadian Pacific, we have Robert Taylor, Assistant Vice President,
North American Advocacy.
To the witnesses, thank you for accepting our invitation to come and
share with the Standing Senate Committee on Agriculture and Forestry your
opinions, recommendations and views regarding going forward in the
agricultural sector and making Canada the best country in the world to live
Following this presentation, the senators will be asking questions of
I am informed by the clerk that Ms. Zatylny will present first to be
followed by Mr. Taylor. Ms. Zatylny, the floor is yours.
Wendy Zatylny, President, Association of Canadian Port Authorities:
Good morning, Mr. Chair and honourable senators. Thank you for the
opportunity to speak with you today. We know that you've had a long-ranging
study and have looked at many aspects of Canada's agriculture and agri-food
exports. Transportation is not necessarily directly related to the
production of agricultural products, but it sure means that our products get
out to intended markets, so we appreciate being able to speak to you today.
Today I will talk about the valuable role that ports play in facilitating
the movement of Canada's world-class agriculture and agri-food products to
every region of Canada and within every region of Canada. I will also talk
about some of the challenges we face as global trade grows through the
expanded trade agreements that the honourable chair has referred to and what
kinds of strain this puts on our existing port facilities. Finally, I will
highlight some of the solutions that we're proposing as we continue to work
to improve our competitive position so that we can deliver on the promise
and the opportunities being created in the marine shipping sector. But
first, let me set some context.
With over 90 per cent of everything that we buy travelling by ship,
maritime trade really does underpin the global economy. Canada's ports play
a key role in transferring goods and commodities to and from vessels and
landside carriers. In fact, Canada's port authorities handle over $400
billion worth of goods each year with their trading partners in more than
160 countries. This contributes to Canada's economic growth, creating
250,000 direct and indirect jobs that pay higher-than-average wages.
As you'll hear from me today, our role as a key driver of job creation
and economic growth across Canada will only increase in the years ahead.
World sea-borne trade, including agricultural and agri-food exports, is
expected to almost double from 10 billion tonnes in 2014 to between 19 and
24 billion tonnes by 2030, while global population is expected to increase
by over 1 billion in that same period. The combination of growing trade and
a rising global population go hand in hand and will force Canada's port
authorities, including those who serve U.S. markets, to dramatically expand
their cargo handling capabilities and infrastructure, and improve their
For example, Chinese and other Asian container ports are already
handling, on average, an additional 14 million TEUs — 20-foot equivalent
container units — each year. Based on current trade patterns, this generates
a demand for an added 5 million TEU capacity per year in North American
Canada's portion of this growing Asian trade points to a potential
increase to about 11 million TEUs by 2030. The new trade agreements Canada
has signed recently and is currently negotiating will add to the demands
faced by Canada's port authorities.
The key question I wanted to bring before the committee is quite simple:
How can we as a country fully leverage the benefits of growing trade, a
rising global population and the corresponding increased demand on ports?
From our perspective, the status quo is not an option.
Agricultural products, especially grain, represent a significant
commodity flow through Canada's port authorities. In 2014, grain throughput
amounted to 22 per cent of the total cargo handled by our major ports. This
amounts to some 55 million metric tonnes.
On top of that, all ports reported a significant increase in grain
throughput in 2014. Many of these grains, including barley, canola, grain
pellets, wheat and oats, are exported all over the world from ports in every
region of our country. For example, the western movement of grains involves
rail carriage from prairie elevators to the ports of Prince Rupert and Port
Metro Vancouver. There, the commodities are loaded on international bulkers
for shipment overseas.
Looking toward the east, the Port of Thunder Bay ships grain to markets
in Europe, Africa and the Middle East directly via ocean-going vessels or
via the lakers that transship grain at deeper ports farther up the St.
Lawrence River, including Trois-Rivières and Quebec City. The Port of
Hamilton, meanwhile, has recalibrated its facilities to become an important
agricultural intermodal hub, exporting grain grown by southern Ontario
farmers to markets abroad and importing critical inputs such as fertilizer.
So all of Canada's grain-handling ports have seen significant growth in
cargo over the past two years, with ports such as Thunder Bay showing the
best results in 16 years.
This is both a blessing and a challenge for ports, because addressing the
requirements of future growth means that ports need additional port lands,
which is a huge challenge in urban areas; reserved transportation corridors
for road and rail service; and, most importantly, additional port
infrastructure, both in equipment and waterside berths.
In a joint study that ACPA did with Transport Canada a couple of years
ago, we found a $5 billion funding gap in port infrastructure needed to
serve our growing international and domestic trade. These infrastructure
requirements include both the rehabilitation of existing assets and the
development of new facilities. The breakdown is that about one third of the
funding is required to rehabilitate exists assets and two thirds is for
developmental projects to expand to meet additional demand.
Given the magnitude of port infrastructure investment requirements, it is
obvious that no single player, such as a CPA, can bear this cost alone.
There is therefore a need for innovative public-private partnerships to
support sound port infrastructure and investments. Our ports are already
engaging in these types of arrangements to address their infrastructure
shortfalls, but much more needs to be done.
At the same time, efficiencies can be gained through improved
information-sharing and data transparency regarding production of grain and
other commodities, rail capacity and asset utilization, potential
operational or weather delays, and other factors that affect the fluidity of
the supply chain.
We believe that port authorities have a role to play as honest brokers
among partners within the supply chain to collaborate toward smoothing out
the speed bumps and managing demand surges within the supply chain. In
support of this role, we've also recommended that departments such as
Foreign Affairs, Trade and Development play a role in developing a
consistent supply-chain strategy.
Lastly, a comprehensive review of the St. Lawrence Seaway is needed to
identify solutions to challenges faced by the ports and shippers, including
the cumulative impact of pilotage and lockage fees, as well as the desperate
need for additional icebreaking capacity to help extend the shipping season.
To help address these challenges, ACPA recently finalized its submission
to the CTA review panel based on a comprehensive survey of our CPAs. Our
proposals will help position Canada as a world leader in transportation
logistics and supply chain efficiency. Indeed, we believe our goal as a
nation should be to propel Canada into the top 10 of the World Bank's index
of logistically efficient countries. The time is now to pair Canada's 21st
century trade agenda with 21st century transportation efficiency.
We have submitted a copy of our submission to your committee clerk, and
we welcome any further discussion and questions you might have. Thank you
for the opportunity to speak with you today, honourable senators.
The Chair: Thank you very much.
Now we have Mr. Taylor from Canadian Pacific.
Robert Taylor, Assistant Vice President, North American Advocacy,
Canadian Pacific: Good morning, Mr. Chair and committee members. I
appreciate the invitation to appear before you today to discuss the
competitiveness of Canada's agricultural sector.
Canadian Pacific operates a 22,000-kilometre network throughout Canada
and the United States. In 2014, we moved over 2.7 million carloads of
traffic. Approximately two thirds of that traffic moves to or from a port or
border gateway as part of Canada's global trade.
I am proud to say that Canada has the lowest rail rates in the world. On
average, Canadian Pacific moves a tonne of grain for $38, which is quite
remarkable. We move a tonne of grain from the interior of this large country
to a port position for $38, on average.
Agricultural products are a major line of business for Canadian Pacific.
In 2014, we moved 464,000 carloads of agricultural products.
If you turn your attention to chart 1, it shows that grain and oilseed
farm incomes since 2000 in Canada have increased 152 per cent, or 8 per cent
per annum. This growth has been because of higher commodity prices as well
as increased export volumes, which Wendy alluded to. It's remarkable growth,
8 per cent per annum. We're doing okay.
Chart 2 shows Canada's production of grain. Overall production has been
growing at about 2 per cent per year over the last 15 years. The long-term
trend has been quite stable. Annual production, however, is highly variable,
and that is a function of yield. If you look at the chart, the blue line is
The science has definitely improved, but the main driver of the output of
the ag sector continues to be mother nature. Over the last 15 years we have
witnessed year-to-year variability as much as 50 per cent. This is unique to
grains and a challenge for a capital intensive, low-cost supply chain.
This leads me into a brief recap of the 2013-14 crop year, which we heard
a lot about. That year's crop was 37 per cent above the 5-year average of 56
million tonnes and an all-time high. To put it in perspective, that increase
significantly exceeded the volume of potash that Canada typically exports in
a year. In 2013-14, CP moved 16 per cent more grain and grain products than
the previous record. This crop year, 2014-15, we are also on a record pace.
Currently, even though volumes of grain are still robust, we are trending to
more normal volumes with the carry-out in 2015-16 coming into alignment with
the five-year average.
Another important element of the grain supply chain is seasonality. Chart
3 outlines CP's grain and grain products movements over the last two crop
years. It is important to note that every year, with the exception of
2013-14, there is excess supply chain capacity usually from May to
September. There is a ramp-up and a peak each fall as the harvest comes in.
In winter, capacity is reduced and shipments are lower. This is because the
Port of Thunder Bay — a very important port — shuts down because the seaway
shuts down. Winter can also impact the supply chain. In severe winters, all
elements of the supply chain can be more challenging. There is generally a
spring rebound when Thunder Bay comes back on line and by May/June, as noted
in a normal year, demand drops, we store rail cars and there is excess
capacity. This seasonal peaking is also a challenge for an intensive
low-cost supply chain.
Going forward, how do we ensure that the competitiveness of the ag sector
continues? One is more commercialization. The movement of export grain is
under a maximum revenue entitlement regime, often referred to as the revenue
cap. Exported grain is the only commodity in Canada where there is direct
revenue regulation. This is a disincentive to capacity enhancing investment
and complicates the implementation of commercial mechanisms, which can align
supply chain capacity and the grain marketplace. This is especially
important given annual variability and seasonal peaks. Commercialization
drives innovation and provides for a more nimble marketplace.
We also need to think about the longer item. From a railway perspective,
we have considerable runway to grow within our footprint with the right
market conditions and regulatory environment. This year, for example, we
will invest at CP alone about $1.5 billion in private sector capital —
nearly 20 per cent of our revenue.
We are also pleased that our supply chain partners have expanded port
terminal capacity and are considering additional port infrastructure. This
is positive because our supply chain is competing with other highly
innovative supply chains in the world, including the United States.
We also need to look at the covered hopper car fleet in Canada. We
currently operate about 6,000 covered hoppers that are owned by the
Government of Canada. These cars need to be replaced with new cars that are
much more productive, but making that investment is a considerable challenge
given the risk related to our regulatory regime.
Competitiveness can also be improved with operational innovation. Some
progress has been made on loading vessels in inclement weather, but more can
be done. Additional capacity can be brought online if rail cars are unloaded
when available for unloading seven days a week and 24 hours per day.
Currently, some terminals operate three shifts per day, five days a week,
while others operate two shifts per day, seven days a week. We need the
entire supply chain to work cooperatively to increase velocity in order to
create additional available capacity. Instead of cars sitting waiting to be
loaded or unloaded, these rail cars should be cycling back to prairie
elevators and ports.
Thank you, and I look forward to your questions.
The Chair: The first question will come from Senator Maltais.
Senator Maltais: Welcome, everyone. I have two questions. The
first is for Mr. Taylor. We know that the Port of Thunder Bay is closed
during the winter, as the seaway is not open. If ports in eastern Quebec had
the capacity to store the grain frozen in Thunder Bay, would you ship it? To
my knowledge, CP has a railway system in Quebec.
Mr. Taylor: You refer to movements that we call winter rail
movements. Generally, when Thunder Bay shuts down, grains are moved over the
Great Lakes into Quebec for shipment, and those movements are very dependent
upon the demand of our customers. Our customers determine where the grain
moves. They decide the origin. They decide the destination.
There is variability in terms of what customers want to do, but in a
typical year, once Thunder Bay shuts down, we do move grain by rail into
ports on the East Coast that are open all year round.
Senator Maltais: My second question is for Mr. Leclerc.
The Port of Quebec is constantly evolving. We know that the Beauport 2020
project is about to be completed. The goal of the project, valued at
$189.928 million, is to expand the port and ensure a larger intake capacity
Will that expansion be sufficient over the next 25 years? Will it enable
you to take in more grain for storage? Will it also enable you to store more
grain in Baie-Comeau and Port-Cartier? Everyone agrees with storing grain on
the North Shore. Will this project lead to a positive long-term future for
you? We know that the Port of Quebec is the second largest in terms of
tonnage, at the mouth of the St. Lawrence, after the Port of Sept-Îles. The
Port of Quebec is mostly known for grain. Will this fairly significant
expansion help you meet the trade demand over the next 25 years?
Captain Yoss B. Leclerc, Vice-President and Chief of Marine
Operations, Port Authority of Quebec, Association of Canadian Port
Authorities: As you know, a maritime strategy for Quebec was announced a
few months ago. To my knowledge, the entire maritime industry is happy about
that long overdue strategy.
As Ms. Zatylny said — and I can confirm it, having spent a number of
years at sea, travelling the world — ports are really among the most
important junctions of the entire logistical chain. They are the interface
between sea and land. Everything that happens in the logistical chain,
either upstream or downstream, will depend on the effectiveness, security,
safety and productivity the port authorities and the ports in general will
be able to provide.
To come back to the Port of Quebec, as you know, it is one of the oldest
ports in Canada, if not the oldest. It is over 400 years old and a
reflection of the wonderful history of the St. Lawrence and its shipyards.
We could spend hours talking about it. Today, port authorities, such as the
Port Authority of Quebec, as Ms. Zatylny said, need space to grow. I went
through that experience in Vancouver, as I spent eight years there. Land is
very hard to come by. There is a lot of pressure on investors to transform
old industrial land into residential land. Afterwards, there are some
challenges in terms of social acceptability — and I could discuss that
further if you like. The expansion project is not only vital for the Port of
Quebec's future, but also for upgrading aging infrastructure.
Mario Girard, our President and Chief Executive Officer, announced it,
actually. It will cost about $200 million just to upgrade our current
infrastructure. So the project is vital for the future. Ms. Zatylny gave you
some figures regarding future projects around the world. This expansion
project will help us, but we must also be able to upgrade our
infrastructure. All Canadian ports must turn to the future and prepare for
the coming demand.
Senator Maltais: Could you pass on a message to your port
authorities and ask them to please fill out the documents as quickly as
possible and send them to the Treasury Board? The Government of Canada is
contributing one third of that $189-million envelope, and we are still
missing many documents. This little message is for Mr. Girard.
I am actually originally from the North Shore. As Mr. Taylor was saying,
our storage capacity will become a matter of clientele. Quebec City,
Baie-Comeau and Port-Cartier have huge storage capacity. Given the free
trade agreement that will be implemented, we will definitely have grain to
ship in the winter, as well. We know that, during the winter, the St.
Lawrence is impassable upstream from Quebec City. However, there is no
problem downstream from Quebec City.
Could clients like Bunge or Cargill consider storing more grain in Quebec
City, Baie-Comeau or Port-Cartier, to meet a growing European demand?
Mr. Leclerc: When it comes to grain terminals on the St. Lawrence,
at the Port of Quebec, we have Bunge. That is one of the largest terminals.
Its storage capacity is about 300,000 tonnes. We have other warehouses at
the Port of Bécancour and a bit further down the St. Lawrence.
About two years ago, the Canadian Grain Commission disappeared. It took
some time to readjust the business and transportation model for grain
movement. As Mr. Taylor was saying, today, the Canadian Grain Commission is
no longer deciding where the grain will go. The discussion is between the
supplier and the client. They are the ones who decide where the grain will
be loaded, based on economic considerations, and in terms of productivity
As you say, the St. Lawrence has a lot of capacity to meet future demand.
Senator Maltais: Thank you and good luck with your expansion
projects. Do not forget: figuratively speaking, I can see you from my
Senator Tardif: My first question will be to Mr. Taylor. In
January, the AG Transport Coalition released a report saying that the
railways have failed to supply more than 11,000 cars that were ordered in
the first five months of the crop year, and that the demand for rail cars
was exceeding the supply. We know that in 2014 the federal government took
steps to mandate minimum wheat delivery for moving grain to protect Canadian
farmers and its international reputation.
You explained that things are going better but that there are still
challenges. Could you explain to us what those challenges are? If, as you
have indicated in your graph, we will be seeing increases in grain yields,
how do you plan to meet the growing transportation demands?
Mr. Taylor: Thank you for the question.
I can't speak to the AG Transport Coalition's data. Unfortunately, we
have multiple data sources being produced, and we cannot reconcile the data
from the associations that are part of the AG Transport Coalition with the
real data, so I'll leave it at that.
Actually, 11,000 rail cars is a fairly small number when you look at the
fact that we move half a million rail cars each year.
I will just bring your attention, senator, to chart 3. I don't want to
spend a lot of time here today talking about 2013- 14, but I think it's
important and it's still topical. If you go to chart 3, you'll see crop year
2013-14. You'll see that in August 2013, before people really saw this huge
crop coming, there was very little demand in the supply chain. We didn't
have grain to move. We had as many as 4,000 rail cars parked in August going
into September, which is unfortunate.
Then, all of a sudden, because of exceptional weather, this huge crop
materialized. We moved record amounts of grain in October and November into
December. The red line is the five-year average. Our units moved were
literally off the charts. This is real data and it shows that. We were below
the five-year average in only seven weeks in 2013-14, and not much.
After the severe winter lifted — and it was a severe winter such that if
you lived in Winnipeg, you probably had your water pipes frozen — we moved
record amounts of grain. We didn't move the record amounts of grain because
of the government order; we moved the record amounts of grain because in the
free marketplace, we make money by moving grain. I want to put that into
perspective. We have moved record amounts of grain.
If you look at the supply chain, we have a lot of runway at the railway
in terms of moving grain. What we need to see is additional port and
Vancouver is a very difficult place to operate. Vancouver is the number
one outlet for Canadian grain, and we are pleased to be in discussions with
some of our customers about additional capacity in Vancouver.
Senator Tardif: Thank you for that explanation.
Are you indicating, sir, that the data provided by the AG Transport
Coalition is not real data?
Mr. Taylor: We can't reconcile the data.
Senator Tardif: They have indicated that though things are better
this year, there are still real concerns. You were fined a $50,000 penalty
last year, if I understand correctly. You indicated that you are
transporting 12 per cent more grain this year compared to the same time
period last year but that there are still not enough railway cars. Would you
agree with that statement?
Mr. Taylor: No, I would not.
Senator Tardif: Do you have sufficient railway cars?
Mr. Taylor: Yes, absolutely. We are transitioning into a period,
senator, where we will soon be parking rail cars. As I alluded to in my
notes, and if you look at the data and the facts, from May until September
every year — except for 2013-14 because of the exceptional crop, the one in
100-year crop that Canada produced — we park rail cars. It is
counterintuitive to think that more rail cars will move more grain. It is a
supply chain and it is a multicomponent supply chain. If you put more cars
into that supply chain, you actually increase congestion. It is like adding
more cars to the 401 at rush hour. Putting on more cars when the supply
chain is congested is absolutely the wrong thing to do.
So I don't agree with that statement.
Senator Tardif: Are cars being diverted for transportation of
Mr. Taylor: It is a different car.
Senator Tardif: I would think so. I would agree.
Mr. Taylor: It is a tank car owned by an oil company. Grain moves
in covered hoppers; bulk grains move in covered hoppers. There are some
grain products that move in a tank car, but it is not a tank car that is
used for moving crude, plus the crude moves in a totally different lane.
Crude is a small part of our business. Crude represents about 4 per cent
of carloads for CP; grain represents about 20 per cent of carloads. So it is
not a factor.
Senator Tardif: In your opinion, because you and CN represent 85
per cent of rail transport industry revenues in Canada — that was the data
in 2011 — could this level of concentration in Canada's railway sector
impact transportation costs for Canada's exporters?
Mr. Taylor: If you look at the data, Canada has the lowest rail
rates in the world. We move a tonne of grain for 2,000 miles for $38. If I
translate that into cents per tonne mile, we move a tonne of grain for
between 3 and 4 cents a tonne mile. Imagine: You move a tonne of product a
mile for a few cents. That is canola. That is worth $500 or $600 FOB
We move a tonne of grain 2,000 miles for $30 to $40, and our customers,
who we value, move that tonne of grain 200 feet — they elevate it 100 feet
and drop it 100 feet — for $30 or $40.
The rail supply chain in Canada is incredibly efficient. We are the envy
of the world in terms of the efficiency to move these products.
If you look at it, it is just common sense. We are a small population,
with huge distances, and we are the number two trading nation in the world.
How do we do that? We have an incredibly efficient supply chain.
Yes, we are concentrated because we are like a natural monopoly. We are
very capital intensive. We spend 20 per cent of our revenue in capital. To
fragment it, having hundreds of railways moving these little trains will
completely undercut that efficiency. And we are highly regulated. Customers
have a multitude of options.
I think we have a good model in Canada. The only other supply chain from
a rail perspective that we could maybe learn from is the U.S. If you look at
the U.S. from a grain perspective, they are incredibly efficient as well.
They have these high-throughput port terminals, which can handle unit trains
that are not affected by inclement weather and operate 24/7.
I would submit to the committee respectfully to have a look at a terminal
like Kalama, Washington. On a good day at Kalama, they unload three or four
times as many rail cars as the largest terminal in Vancouver, Cascadia. I
would have a look at that.
I will push back with passion, very respectfully, about the efficiency of
our rail supply chain in Canada.
Senator Dagenais: I want to thank our guests for joining us. My
question is for Mr. Taylor.
Mr. Taylor, you know that, in 2014, the federal government took steps to
require railway companies to transport a certain minimum volume of grain.
The government passed an order in council to protect Canadian farmers and
maintain our global reputation as an exporter of grain. However, the
government did not renew that requirement when the order in council expired,
on March 28, 2015.
First, what impact did that requirement have on Canadian grain exports?
Second, do you believe it could be necessary to renew the Order-in-Council?
Mr. Taylor: Thank you for your question. It would have been almost
nonsensical to force, by law, CN and CP to move 500,000 tonnes of grain per
week when the marketplace did not demand the moving of that grain.
When Bill C-30 was introduced, the initial weekly mandated minimum was
500,000 tonnes per week. That equates to about 5,500 unloads per week for CN
and CP. That is the capacity of the supply chain currently.
If you look at all of the outlets in non-winter, it is lower in winter
because you lose Thunder Bay. The government made a decision and it was the
prerogative of the government; I cannot speak to that. I cannot speak to the
reasons for them making that decision. I can speak, however, to the number
that they came up with. I think there was reason behind that number, because
if they came up with a number of 7,000 unloads, or 600,000 or 700,000 tonnes
per week, the supply chain — not the railway — would be unable to move that
much product. You can't just look at it from the railway's perspective. The
grain originates in a truck; all of it originates in a truck. It is goes to
an elevator. It is elevated, goes into a railcar and then it goes to a port.
It's a multi-component supply chain.
I think where some reason prevailed is coming up with the right number.
What the government did after the initial implementation is reduce that
number, because this exceptional crop has essentially been moved. So to
mandate by law the supply chain to move a certain amount of grain, when the
marketplace is not demanding that grain to be moved, would be completely
nonsensical. This is what the government recognized.
In my notes, if you look at chart 3, we just don't have the demand. In a
normal year — and we have a more normal crop in 2014-15 — May to September
there is excess capacity.
Part of what I would submit to the committee is that if we looked at more
commercial mechanisms, you can lower that peak and increase the demand
throughout the entire year. Commercial mechanisms, like car auctions and
other things, can certainly do that.
I do not think there will be a requirement to have a mandated minimum
going forward. We are moving record amounts of grain. We can move record
amounts of grain.
The other thing that deserves some analysis and consideration is the
impact of winter on the supply chain. In 2013- 14 we had an exceptionally
severe winter. Our basic technology in the railway is steel on steel. We
have steel wheels and steel rail. Rail contracts when it is very cold. When
it is colder than minus 25, we slow down because we have rail breaks. The
rail actually contracts. It is continuously welded rail. So if it is colder
than minus 25, we slow down because we don't want to derail. Derailments are
catastrophic events. We want to get to zero in terms of derailments, so we
slow down. Velocity and cycles are a key component of our low-cost supply
We can all appreciate that when you get out and it is minus 40, those are
tough operating conditions. We are an outdoor sport, so winter will have an
impact every year. It is driven by the severity of the winter. Luckily, this
past winter was less severe.
I want to make sure that you understand that we do more work in the
winter now than we did in the summer three or four years ago. Railways are
growing and we are investing. It is not like we are standing still and not
trying to innovate. We do more work now in February. We move more gross ton
miles, GTMs, in February than we did in July a few years ago, but we are
impacted by our basic technology when we have severe winter conditions in
The other challenge we have related to winter is that all of these
railcars and locomotives are in North American service. The Canadian
railways, CN and CP, cannot go ahead and change our technology to deal with
the Canadian winter. We have to have BNSF, the largest railway in North
America, which is based in Texas, change their technology, too. There are
over 1 million railcars in service in North America. It is a complex
Senator Dagenais: You answered my question well. However, there is
something I would like to confirm with Mr. Leclerc. I do not know whether
this was before or after the order in council, but I remember some witnesses
saying that, at the Port of Vancouver, where ships arrive — and you can
confirm whether it is true or not — ships would sometimes wait empty for
one, two or three days, as rail carriers were unable to bring in the grain.
It must result in costs when ships arrive and remain empty for a day or two
at the port waiting for the grain. Have you looked into the possibility of
coordinating the two carriers? The issue with the Canadian winter has been
explained to me, and we are stuck with it, unless the environmentalists
decide that global warming might help the railways, but we are not there
Have you seen ships sometimes docked at the port empty, waiting a day or
two for grain, because there were no rail cars?
Mr. Leclerc: When we look a bit into the logistics of grain — and
I will try to look down on this from 10,000 metres in the air — we see that
the logistical chain is extremely complex. As Mr. Taylor was saying, there
are so many people involved along the logistical chain that it is difficult
to target a single individual — the entire logistical chain really has to be
considered. Let me explain what I mean. First, the buyer of the product
charters a ship — you charter a ship like you rent a car. Depending on the
time of the year or the year itself, the freight costs can be extremely low
and, often, the buyer provides a ship and sends it at not much cost. At
times, the ships are used for storage, as it is cheap.
I would say that the "just-in-time'' approach underlies the whole
process. For instance, a ship can be used as a storage area, and it is
cheap. There is also the problem Mr. Taylor talked about earlier with regard
to terminals. Some terminals operate 24 hours a day, 7 days a week, and
others are open only 5 days a week. So, terminals must also be considered.
In the past, the Canadian Grain Commission took care of grain
transportation logistics across Canada. I would say are a number of
stakeholders, with the efficiencies and inefficiencies that brings with it.
In my experience, Canadian winters are certainly very harsh, and there
are also technological limitations. I know that carriers, including CN and
CP, have been working hard in the winter to plan for equipment moving on
both sides of the Rockies, so as to meet the winter demand, in the case of a
snow storm, for example.
So there is no doubt some improvements need to be made to the entire
logistical chain. I know that a lot of work is currently being done on the
West Coast and at other ports to establish cooperation among everyone
As for the port authority — and I will bang my own drum a bit here — one
of the issues we face is access to databases. We are talking about
performance tools, PKI tools, but for us, the port authorities, having
access to that information is very difficult. I was at the Port of
Vancouver, where some extraordinary work has been done to make the entire
logistical chain more visible. We are doing that here, at the Port of
Quebec, at the Port of Montreal, at all the ports, using our own resources,
both human and financial, to be able to make that logistical chain more
visible and transparent. However, it is very difficult to obtain information
for various reasons.
Senator Merchant: Mr. Taylor, I come from Saskatchewan, so I will
continue along the same vein. I understand that you have many challenges.
I don't know if you answered the previous question regarding this extra
demand that is bound to happen because of all the trade deals that we are
signing and because, as Ms. Zatylny said, the population of the world is
Will that mean that exporters and exporting companies will have to pay
more — I don't know if you answered that question — to facilitate the
movement of their products? You said that you are exporting things cheaply,
but what do you envision? You will have to make some investments — and I
will ask you later what that will be — to handle all of this.
Could you answer this question: Does that mean higher prices for the
exporters or the exporting companies?
Mr. Taylor: That is a big question. Thank you for asking it. I
won't give you too long an answer because I know your time is important.
We are investing more than ever. CP this year invested $1.5 billion of
private-sector money, which is important.
I find Saskatchewan quite interesting because it is kind of a microcosm
for Canada, a good case study. Saskatchewan has a very small population, and
it is a trade-dependent and rail-dependent province. I have crunched the
numbers: For every person in Saskatchewan, we move about 20 tonnes of
product; so 20 tonnes of product in Saskatchewan per capita moves by rail.
That same number in Ontario is two tonnes.
If you compare Ontario to Saskatchewan, Ontario would be very envious
because Saskatchewan has had 4, 5 or 6 per cent GDP growth for the last five
or six years, enabled by a very efficient supply chain.
So I find it interesting that we're put forward as being a problem when
we have enabled very significant GDP growth in Saskatchewan. Without an
efficient supply chain, without our great port partners and without CN and
CP, I cannot see how Saskatchewan would be growing 5 or 6 per cent per year.
I also want to come back with the nature of our business. In rail we have
few take-or-pay contracts. I come from the utility sector. Before you build
anything in a utility, you sign take-or-pay contracts. So before you build a
highly intensive capital — again, billions of dollars in a transmission line
— you ensure you have customers, which will guarantee the usage of that
In very few cases do we have take-or-pay customers in rail. We take all
the variability. This is where we are transitioning in the grain space to
say, "Okay, grain customer, you come to us and say this is the amount of
capacity you need — be it trains per day. If you guarantee to use that
capacity, we will guarantee to supply that capacity.''
I don't think it makes commercial sense to expect the railway, overnight,
without any kind of commercial backstop, to move 22 extra million tonnes of
grain. That is what happened in the fall of 2013: All of a sudden, everyone
wanted to move an extra 22 million tonnes of grain. Now, we are right back
to a situation where if we ramped up to move that, we would have excess
In terms of rates, rail shouldn't be some different entity. If you want a
premium service, you should pay for it. It is just basic common sense. If
you want to pay $14 for an envelope, we will be like FedEx: We will have the
guy sitting in his van around the corner. If people want a premium service,
they should pay for it.
Going forward, though, we are growing GDP and GPD plus. Our rates have
grown at inflation. I think that trend will continue — maybe at inflation
and a little plus, if we need to grow and deploy more capacity.
This is a conversation we need to have in the grain space. We have the
maximum revenue entitlement, which depresses rates. Grain rates are lower
than all the rest of our rates. If we want a nimble grain marketplace, we
should talk about more commercialization; we can deploy more capacity and
then producers can take advantage of more market opportunities.
I will not go on because I could talk at length, and I know your time is
Senator Merchant: Maybe you have answered my second question,
because you do give premium service where you can get higher rates. A few
years ago it was common knowledge that many cars were being shipped empty
from Vancouver straight down to where Walmart, for instance, could just say,
"We need X number of cars'' — I'm not sure if it was CP or CN, but we have a
duopoly. This country is a natural monopoly as far as shipping grain is
concerned. But you were shipping empty cars to pick up orders from Walmart.
They must have been paying a premium price; is that what you are saying?
Mr. Taylor: There is a lot of discussion concerning Canadian grain
with regard to covered hopper cars. We don't send any of those to Walmart.
Walmart is an intermodal customer. Their product moves in containers. Some
grain moves in containers.
So I can't speak to that anecdote. To me, we are comparing apples and
Intermodal is a fully competitive business. If we are to have a
fact-based discussion, we need to talk about different lines of business,
because intermodal is incredibly competitive. Ports compete with ports.
Vancouver is competing with LA Long Beach or Seattle. It all can go on a
truck. It is a container. So there is no duopoly in intermodal, per se,
because it is an extremely competitive business.
But I can't speak to that anecdote, sorry.
Senator Merchant: It may not have been for shipments of grain,
though, just general shipments through the prairies. You were sending empty
cars. Was that the case?
Mr. Taylor: No. This is where I struggle. We make money. Adam
Smith's "the invisible hand'' is a wonderful thing. The politburo is not
such a great thing. Ordering to move one commodity over something else,
trying to plan this complicated logistic system, I don't think is good
We want to move traffic and we are moving traffic. We are moving more
traffic than ever. We are investing more than ever. We just can't move an
extra 22 million tonnes overnight. That is the bottom line here.
Senator Enverga: Thank you. We learned a lot from your
We heard about the federal government establishing a partnership with the
ACPA, and they are going to put a Canadian trade commissioner in the Halifax
office. The trade commissioner will provide services to Canadian exporters
looking for international expansion, because we will have CETA, South Korea
and a lot more trade coming in.
Can you tell me about this? Do you have the same facility or same
services on the West Coast?
Ms. Zatylny: Thank you for that question. We are excited about
this opportunity because it is brand new; it is a pilot project and it is
extremely innovative. It has not been done before. We are designing it as we
Essentially, it's to embed a trade commissioner within the national port
system. They will be located at the Port of Halifax because that was just a
priority location that the Department of Foreign Affairs and Trade had
identified, but this trade commissioner is meant to serve the entire port
system, from the East Coast to the West Coast and all the wet points in
The idea of the trade commissioner really is to work with the port
authorities and with the businesses in their local communities to help them
to facilitate and build their businesses. The reason for it was twofold. One
was that we thought, if you look at the supply chain — and we've spoken a
lot about supply chains this morning — we firmly believe that the efficiency
of the Canadian supply chain is as much a "value-add'' to Canada's trade
agenda abroad as are the products we sell. Customers from Europe or Asia who
purchase Canadian products rely on our ability to get them there in a
timely, efficient, and cost-effective manner as well. All of the elements in
the supply chain, especially port authorities, have been working very hard
to make that as efficient as possible and create that value-add. We want to
be able to sell that element abroad, and to do that we needed to ensure that
the trade commissioner service understood that as completely as possible.
The second element is that the port authorities themselves are morphing.
Their role within their communities really is evolving. One normally thinks
of ports as places where cargo is handled and transshipped, but port
authorities have started to take on a larger role around logistics,
efficiency and management, but also, frankly, around business development.
They are working with their local customers, their terminal operators, to
start expanding and accessing markets abroad.
A great example of that is the Port of Belledune in New Brunswick that
had worked with a local manufacturer to develop a market for wood pellets in
Northern Europe. Now, the port handles the ships, and the local manufacturer
provides the wood pellets. They heat the homes in Northern Europe. We wanted
to be able to capitalize on that, so being able to hook into the trade
commissioner service and to have that trade commissioner also identify
opportunities within Canadian businesses surrounding the ports and marine
environment would be an extremely powerful value-add.
Senator Enverga: Do you have that same facility in the Port of
Vancouver, let's say, or would you recommend that we have something like
that in the West?
Ms. Zatylny: I'm hoping that we will be able to have a trade
commissioner in the West and as well in Central Canada because a lot of
shipping is done down into the States or up through the Great Lakes and the
St. Lawrence Seaway. Again, this is a pilot project, so we wanted to start
with one and design the job description and get everybody comfortable. Then,
I'm hoping we can expand it.
Senator Enverga: To be specific, can you give me examples of how
it will impact Canadian agriculture and the agricultural sector? Would you
have something that will help them, and can you cite examples that maybe it
will be good for the agriculture industry?
Ms. Zatylny: That's a little bit prospective, and we're all still
trying to see what the full impacts of agreements such as CETA are going to
be. We know that there will be positives, an increase in trade, but a lot of
details still need to be sorted out.
Part of the value of a trade commissioner here is that they then hook
into counterparts in other markets around the world. Once a trade
commissioner has the knowledge of Canadian products, whether it's an
agricultural commodity or agricultural inputs that are required, anything
like that, they are able to work with their counterparts in other markets to
set up the business connections that will create the sales contracts to move
our products abroad. That's pretty well it. It's one person who then hooks
into a global network that will help build our businesses.
Senator Enverga: Will there be an impact on the railway industry
Mr. Taylor: We're very excited about continued growth in Canada's
trade. We're a willing partner. I think we have a lot of opportunity to
increase trade with the world. Like I said before, we're growing. We're
growing GDP plus. We're investing. We have an incredibly efficient supply
chain. We have great producers in the ag space. We have strong companies,
and we're optimistic about the future. We obviously support anything we can
do to promote that.
Senator Moore: Thank you, witnesses, for being here.
I'm from Halifax. I grew up just on the other side of the tracks, so I'm
familiar with the noise but also the value of railways. I'm a fan. If you
want a deep, open, year-round port, we've got one in Halifax and we're open
for more business. A little plug.
I want to touch, Mr. Taylor, on the matter of Bill C-30. Was the required
number of cars safe? Doesn't Transport Canada say that you can only have so
many cars in a train attachment?
Mr. Taylor: We've continually increased our train size in North
America through a lot of innovation. We use what we call distributed power.
We now have multiple locomotives throughout a train. You have one in the
front of the train, one in the middle of the train and sometimes one at the
back of the train. They all communicate. This allows you to move longer
We're also investing a lot of money in terms of siding length. In Canada,
CN and CP are essentially single-track railways with sidings. We have some
double track. If you look to the U.S., for example, there are places on the
BN or the UP where they have quadruple track. When I refer to the fact that
we have a lot of runway to grow, we have a lot of ability to deploy
additional track capacity within our existing framework.
There is no regulatory limit on train size. There are physical issues
with moving longer trains, and it's a real optimization in terms of your
siding length. We're now extending all of our sidings to 10,000 feet. Those
sidings before were like 7,000 feet. You have meets. We're also doing, with
CN, what we call "co-pro,'' so we run on CN in one direction and CP in the
When I talk about Bill C-30 and the volume, I think that when the
government initially implemented C-30 and came up with this 500,000 tonnes
per week, that number aligned with the supply chain's capacity, which was
very important. To move a certain amount of grain per week that was beyond
the capacity of the supply chain, we would have failed every week. So they
ordered us to move what was a reasonable amount, and CP did that almost
every week. We did miss one week, and that was Labour Day, because the Port
of Vancouver shut down for Labour Day. You can't unload a railcar when the
port is shut down.
I hope that answers your question, senator.
Senator Moore: Looking at chart 3, were any of the peaks in demand
attributable to farmers holding back their crop hoping for a better price?
Mr. Taylor: Absolutely. That's an excellent question. When you
look at the demand to move grain, it surges and flows. It's very dependent
For example, in the U.S. right now, we have very little demand, and there
is a lot of grain in storage in the U.S. because the market is just not
demanding service. If you look at August, September in 2013, the reason we
didn't have a lot of demand was an expectation in the marketplace that
prices may increase. Then when the huge crop came in — and there was not
only a huge crop in Canada; there were huge crops elsewhere in the world —
farmers said, "Oh my God. Prices are going to go down. I need to ship now.''
Then we had all of this demand. That's an excellent question.
Senator Moore: I have learned a lot here this morning. One thing I
didn't know is that the Government of Canada owns 6,000 hopper cars. I don't
know why that is. Maybe one of you could answer that. How does that work? Do
the railways lease them from the government? Who maintains them?
Mr. Taylor: Do you remember the Crow rate?
Senator Moore: Vaguely.
Mr. Taylor: Way back, a long time now, there was a regulated rate
which was incredibly low. It was less than a cent. I don't know the actual
number off the top of my head. We weren't making any money whatsoever off
moving grain. We could not invest to move grain, so what the Government of
Canada did is they subsidized the movement of grain by buying hopper cars,
and then we used those cars. Now those cars move under an operating
agreement that we have with the Government of Canada, essentially.
Those cars are old. You can't load them to the newest standard, plus they
are longer. A new car is a shorter car, so it's a much more productive car.
Senator Moore: That would work with the handling terminal at the
Mr. Taylor: Exactly. There is limited space in Vancouver at
terminals, for example, and there is limited space at customer sidings.
Because it's a shorter car that can carry more and doesn't cube out — some
grains cube out. They're not really dense. It's the physical size of the
car. You can only put so much in. It's kind of like the difference between
potato chips and iron ore.
With a smaller car, you can put more in a customer siding; you can have a
more productive train; and you can also have a more productive on-load at
limited space at a port terminal. So it's a much more productive car.
Senator Moore: You mentioned that the Port of Cascadia in
Mr. Taylor: Cascadia in Vancouver, the Viterra terminal.
Senator Moore: You mentioned the one in Washington.
Mr. Taylor: Kalama, Washington.
Senator Moore: You said it's three to four times more efficient.
Why is that?
Mr. Taylor: On a daily basis, they can unload three or four times
more railcars. They have a dual loop track.
Senator Moore: How do we get to compete with that in Canada?
Mr. Taylor: It's a dual loop track facility. They unload two unit
trains with power attached in a 24-hour period. If you look at Vancouver,
there is not space to have loop tracks. The most efficient rail terminals
now have a loop track. You keep the locomotive attached.
At Cascadia in Vancouver, for example, they break the train apart and
they have what they call "car pullers.'' They have a system on pulleys where
they pull individual cars and unload two or three cars at a time.
It's a unit train continually unloading versus individual cars unloading,
so it's a much more efficient way. We welcome that. There are some customers
— and this is public knowledge. Bunge and G3, which bought the Wheat Board,
are looking at a new grain terminal in Vancouver, which is great. It's in
the Inner Harbour, though, which is not a great place to operate. We think
the future for Vancouver grain would be a new terminal not in the Inner
Harbour, somewhere like a Deltaport, where you have a greenfield site and
you can put in the latest technology, dual loop track.
Some of the U.S. terminals have grooves which allow you to load ships in
inclement weather. The complete loading process is actually under a roof
because you need to be very careful in terms of moisture when loading bulk
grain. It can't get wet.
Senator Moore: Will that 6,000-car fleet be maintained or is that
being phased out?
Mr. Taylor: That's being phased out.
Senator Moore: The various railway companies are building their
own and supplementing that need; is that what you see happening? You will
need hopper cars, so where will they come from?
Mr. Taylor: We have a real challenge there right now because we
have this maximum revenue entitlement, and we are concerned about these
regulatory interventions. That 6,000 hopper cars is a billion-dollar
investment. You expect, on the one hand, to invest $1 billion, when we have
very little regulatory certainty about being able to pay for that 30- or
Senator Beyak: Thank you for your presentations. The numbers and
your knowledge are so impressive. I'm thrilled. As a committee, we're always
encouraged to hear comprehensive, actual solutions and to see this kind of
cooperation and shared vision. Thank you.
My question relates to your comments on foreign affairs, the need to grow
and the local collaboration that will be needed. How do you see yourselves
as the honest brokers with local port authorities?
I'm northwest of Thunder Bay. There is always the local town council, the
provincial and federal governments, and it's often hard to get everyone
growing in the same direction. Do you have a strategy for that?
Ms. Zatylny: I think that answer has many components. Certainly in
terms of the relationships with their communities, each of the port
authorities is deeply embedded in their communities, either physically or
extremely committed to being a good corporate citizen and working within
Each of the port authorities in their own way, as appropriate to their
size and to the nature of their communities, has extensive outreach
programs. They work closely with their municipal councils and with their
provincial representatives to ensure the port is growing to meet the needs
of the community and the community understands the needs of the port.
Outside of Thunder Bay, a great example of that is Saint John, New
Brunswick, where they had worked closely with the municipal council to make
sure that both understood, and now the city and the port operate in a
symbiotic relationship. Again, each of the port authorities has that kind of
approach in dealing with and working with their communities.
At the same time, they invest heavily in the communities, whether through
funding local programs that are important, such as breakfasts in the schools
or being active in the communities, to environmental activities, to also
ensuring that the port operations have a minimal impact on citizens around
them — so noise and pollution reduction measures. They strive to be very
good corporate citizens.
On a larger level, the notion of honest brokers also speaks to this
evolving role of port authorities that I mentioned earlier, which is that
port authorities themselves are starting to move out and also become
business developers or partners in business and market development.
We have been talking a lot about supply chain efficiency. We're arguing
for the port authorities to take on this role of bringing together all the
stakeholders within the supply chain — rail, truck, suppliers, markets,
terminal operators — to start having the exchange of data and the data
transparency that Captain Leclerc mentioned. There is a need for exchanging
data and building trusted relationships so that we can have the
conversations to help identify problems in the supply chain and smooth them
out, so that we can help make sure we're well positioned to manage surges in
commodities, or that we're just moving product as efficiently as possible.
There are numerous roles or facets to that honest broker concept.
Senator Beyak: Could you tell me the status of the St. Lawrence
Seaway review that you're proposing? I think that's an excellent idea. I,
too, am a fan of railroads and ports. My dad worked for Muirhead Steamship
Lines and took us everywhere by train, because we didn't have a car. I'm
interested in how that's going.
Ms. Zatylny: It's a recommendation, and it's one that we believe
is strongly needed. Certainly the other stakeholders along the St. Lawrence
Seaway echo that recommendation, whether it's the St. Lawrence Seaway
Development Corporation, the management corporation or the Canadian
Tim Heney, the CEO of the Port of Thunder Bay, was reminding me of this
the other day. The seaway was originally built to ship Canadian grain to
eastern markets. It has done that job very well. Again, demand changes.
Ships are getting bigger. We need to move product and we are facing harsher
Numerous factors are having an impact on how effectively we can use the
St. Lawrence Seaway, but the factors are interrelated and quite complex. We
would like to see a comprehensive review to see how to extract maximum
efficiencies. One area to look at, and we have been talking about managing
commodity surges, is that there is excess capacity within the St. Lawrence
Seaway to move product, to move grain.
This may be a slight nuancing, but when Mr. Taylor said the Port of
Thunder Bay shuts down for the winter; actually it's the seaway that shuts
down. The port would happily operate year-round, but they are physically
One way to address that is to increase the number of icebreakers
available to us. There is a desperate need for icebreakers within the Great
Lakes to keep the ports open. Being able to extend the shipping season by a
couple of weeks on either side would make a big difference in being able to
handle capacity surges and to ensure we're making full use of the seaway.
We're hoping the review would be able to address some of those issues.
The Chair: Before we move to round two, I have a few questions.
There is a subject we did not touch on and the committee would like to have
The economy has to flow. We need to get a common denominator. We do agree
that we must bring our products to destinations. There is a factor here, and
it is short lines. Do you have any comments on short lines? What role do
short lines play and how can we improve them in order to assist the main
Mr. Taylor: I do, and it's a good question. Short lines are very
important. A good analogy would be that the branches of a tree are the short
lines and the trunk of the tree is Class I. Short lines are very important.
Unlike the Class I, where we would submit that we will invest significant
amounts of our money if we do not get encumbered by undue regulation —
because we're still highly regulated — I think there is a role for
government in funding short-line infrastructure. They compete directly with
trucks and don't have the ability to fund infrastructure. The Government of
Canada has recognized that. Additional work could be done with provinces,
but from a public policy perspective a good case could be put together for
public support for short lines.
The Chair: Ms. Zatylny, do you have any comments?
Ms. Zatylny: That's probably an area we don't touch on as much.
The Chair: We know the Association of Canadian Port Authorities
has made an application to Infrastructure Canada for a comprehensive study
of the state of marine infrastructure within Canada. What is the status of
your application with Infrastructure Canada and which ports were singled
Ms. Zatylny: I confess I'm not aware of that.
We have completed a study with Transport Canada of the funding gap that
was required to fund infrastructure within ports. That study was completed
two or three years ago. It found that there is a $5.3 billion funding gap in
terms of what ports require to fund rehabilitative needs, fix existing
inherited infrastructure, as well as to fund developmental needs.
This study was dated before the CETA agreement was signed, so that $5.3
billion figure in fact is conceivably greater. We would like to repeat that
study but have not been able to do so yet.
Mr. Taylor: One thing the committee may want to consider is the
gateway model. The Asia-Pacific Gateway was an important policy, and having
public funding go into some of the public interfaces between ports was a
positive thing. The Asia-Pacific Gateway was a successful initiative of the
The Chair: Since you're touching on the gateway, Mr. Taylor, I
will ask another question. You explained this dual loop process with the
Port of Vancouver. Do you think other Canadian ports could have similar
types of efficiencies to move larger volumes? If so, which ones would you
recommend or have an opinion on?
Senator Moore: You can just say Halifax.
Mr. Taylor: Unfortunately, we don't go to Halifax.
There is a lot of growth in Vancouver. Thunder Bay remains to be an
important gateway, but if you look at the nature of trade, there is a lot of
growth in Vancouver. In the long term, I think there is definitely
opportunity in Vancouver to move out of the Inner Harbour and build a very
We do have loop tracks in some other facilities that we serve, but we
need to look at the long term in terms of getting out of some of these
congested urban areas.
Ms. Zatylny: To build on that, I think it's important to look at
the 18 Canada port authorities as a national port system. It's a system that
spans the country and serves both coasts and the interior of the continent.
In terms of looking at efficiencies and where we can grow, each port
authority has the opportunity to expand in ways that are most appropriate.
We've been talking about the expansion in Vancouver, and we can't forget
that Montreal is expanding and growing. There are new investments going in
there, as there are in Quebec and Belledune and Halifax.
A lot of the answer to our commodity needs, our export needs, lies in
looking at how to maximize the entire system across all 18 port authorities.
Mr. Leclerc: I just want to give you an idea of how much
infrastructure alone costs. I have often been visited by people at the ports
of Vancouver, Quebec and Montreal, and they do not really realize how much
infrastructure costs. I just want to give you an idea, just so you know.
At ports, the docks have what we call defences, which are pieces of
rubber between the ship and the dock. Each one of those, once in place,
costs $150,000. A ship needs about a dozen of them. We have $1.5 billion in
defences alone, and I am not talking about the edge of the dock itself. Each
linear metre costs $100,000. For a 300-metre ship, if you do the math, the
cost is in the tens of millions of dollars.
People often do not realize how much infrastructure costs and what the
burden is for port authorities, which, as you know, have to generate their
own revenues, which they reinvest every year.
The Chair: Could you send that information to the clerk? We would
like to have that data, given what has been said this morning.
Senator Maltais: Ms. Zatylny, you are the President of the
Association of Canadian Port Authorities, which I assume brings together
most of the major ports in Canada?
Ms. Zatylny: Yes.
Senator Maltais: When it comes to grain exports, we have the
farmer, we have CP and CN, which move the grain, and we have the ports,
where the ships that leave with the grain dock.
There is an association for the ports. Is there an association for the
Ms. Zatylny: That is a good question. There are a number of
associations that provide solid representation for producers, farmers and
terminals. However, I have not yet come across a grain buyers association.
Senator Maltais: Do you think it would be important for such an
association to exist?
Ms. Zatylny: What I think is important is the ability to have a
good discussion among stakeholders and partners in the supply line.
Regardless of whether it would be done individually or through an
association, what is important is the dialogue, the sharing of information.
Senator Maltais: I am asking you the question because, although
this aspect may seem insignificant, it is important.
We know that the Great Lakes are frozen during the winter. You are saying
that a lot of icebreakers would be needed to keep the channel open in the
winter. Would it be less expensive for grain buyers to invest in grain silos
in Canada's eastern ports, which are open 12 months a year?
Ms. Zatylny: There are also ports in Eastern Canada that are open
throughout the year.
Senator Maltais: That is what I am saying. I am talking about
Ms. Zatylny: It's smoothing out the bumps within the entire
system, as long as we have maximum flexibility and opportunity to have
grains shipped out of Thunder Bay, Quebec or wherever. We have to build a
system that accommodates maximum flexibility to be able to handle all kinds
of surges. In order to do that, we do have issues, such as ensuring the
seaway can stay open as long as possible, but we need equivalencies
throughout all the regions.
Senator Maltais: The quantity of grain is not likely to decrease.
We have optimum seasons and open markets. Having grain storage in Thunder
Bay for four months is not profitable for anyone. Bring the grain to the
east, store it in Quebec City, Baie-Comeau, Port-Cartier, and your clients
will be served 12 months a year, and in very large quantities. Those are
deep-water ports. Captain Leclerc is very familiar with them. That way, your
clients would have a supply 12 months a year.
The Chair: I understand that the last comment was not a question.
Senator Tardif: Ms. Zatylny, you made 14 recommendations in your
excellent brief. Which of those recommendations do you think the federal
government should focus on first?
Ms. Zatylny: All 14.
Senator Tardif: Which one?
Ms. Zatylny: We come back to a theme that Mr. Taylor raised, which
is the notion of increased commercialization. The port authorities, since
they were created in 1998, have this mandate to be commercially
self-sustaining while still remaining strategic assets. In order to do that
in an increasingly competitive world, we require help to be moved further
along the spectrum toward greater commercialization. That includes issues we
identified in our briefing regarding raising the limits available and
allowing port authorities to seek additional sources for funding.
Currently, for infrastructure needs, they developed a patchwork quilt of
funding sources and operate in a competitive capital market. So being able
to provide them with those types of commercial flexibilities would probably
be the most effective.
Mr. Leclerc: I want to add something about the ports in Canada. I
have been involved quite a bit around the world. For example, the north
coast off Morocco. I was there in the 1990s, and there were small ports and
not much happening there.
The new government, with the son of the king, has put their whole focus
on transportation. The first thing he did was the port — a full review. I
was involved in it. There was a full review of all Moroccan ports. They are
putting in over $1 billion to upgrade every port that they have. I was there
three years ago, and today they are competing with Barcelona, Italy, Spain
Mr. Taylor was talking about the gateway. They want to become the gateway
of all of North Africa. They understand the importance of ports.
The Chair: Thank you very much to our witnesses for sharing your
Senators, before you leave, we have to address one item.
I would like to draw your attention to the trip to Edmonton the committee
has planned and presented to Internal Economy.
This being the case, would you be open to withdraw the budget application
that we adopted for this trip? If so, I propose that we adopt the following
motion. I will advise the Standing Committee on Internal Economy, Budgets
and Administration accordingly.
Is it agreed, honourable senators:
That, notwithstanding the approval of the committee on March 12, 2015
of a special study budget application in the amount of $80,936 for the
fiscal year ending March 31, 2016, the committee withdraws this
It is a matter of administrative process. Do we have agreement?
Hon. Senators: Agreed.
The Chair: Thank you.
(The committee adjourned.)