Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 16 - Evidence, June 9, 2015
OTTAWA, Tuesday, June 9, 2015
The Standing Senate Committee on Transport and Communications met this day at 9 a.m. to study Bill C-52, An Act to amend the Canada Transportation Act and the Railway Safety Act.
Senator Dennis Dawson (Chair) in the chair.
[Translation]
The Chair: Welcome to the Standing Senate Committee on Transport and Communications.
This morning, we are beginning our study of Bill C-52, the safe and accountable rail act. This bill is the latest in a series of legislative measures intended to address concerns about safety and liability in the federal railway industry, following the derailment and explosion of a runaway train carrying crude oil in Lac-Mégantic, Quebec, in July 2013.
[English]
We have three panels before us today. The first group of witnesses is from the rail industry. I would like to introduce, from the Railway Association, Michael Bourque, President and Chief Executive Officer; and Terry Berthiaume, President and Chief Operating Officer of the Essex Terminal Railway Company. From Canadian Pacific Railway, we have Robert Taylor, Assistant Vice President, North American Advocacy. From the Canadian National Railway Company, we have Éric Harvey, Senior Counsel, Regulatory Affairs. And, from Marsh & McLennan, via videoconference, we have Mr. James Beardsley. From the Canadian Transportation Agency, we have Nina Frid, Director General, Dispute Resolution Branch; and Liz Barker, General Counsel, Legal, Secretariat and Registrar Services Branch. Welcome to the Transport Committee.
Our time this morning is limited. I hope you can keep your statements short, and I will ask the questioners to do the same thing.
Michael Bourque, President and Chief Executive Officer, Railway Association of Canada: Thank you for inviting us today. I should say that while the Railway Association of Canada has members from across the rail industry, today I will focus on the impact of this bill on the 40-plus short line railways in Canada, and I will be brief so that Terry Berthiaume, from Essex Terminal Railway, can speak directly about the impact of this bill on his business and on his customers.
My first point is that not all short lines are created equal. Some short lines are in fact large companies operating over hundreds of kilometres of track, with revenues very close to Class I railways. However, most operate over very short distances and are small to medium-sized businesses.
Regardless of their size, all short lines have expressed concerns about their ability to secure the amount of insurance mandated by this bill.
Our first concern is the cost and availability of insurance. The minimum insurance requirements for short line railways may be lower when compared to Class Is. However, it could still be challenging for short lines to acquire the necessary insurance at an affordable premium.
Already one of our member companies has made the business decision to shut down two of its crude oil transloading facilities and to no longer ship crude on its rail line. That means that approximately 900 truckloads of crude oil per month will be moved over much longer distances, on highways, to reach either pipelines or rail-serviced facilities. Many factors were weighed in this decision, including extremely high insurance requirements. If this bill is about safety, then I think we can say that it has already failed a key first test.
We are also concerned about the impacts of this bill on railway operations. Say a short line takes out $25 million in insurance because it doesn't typically haul crude oil or TIH, toxic inhalants. But, one day, the railway is asked to move a single tank car of crude oil. Under its common carrier obligation, it must move that tank car. What does the company do? Does it have to call its insurance company and seek an additional $75 million in insurance to move one car, or does it refuse to move the freight, violating its common carrier obligation? This is a true Hobson's choice, except, in this case, there would be no railcar for the customer. I'm pleased that Nina Frid is here from the CTA because I think this is a critical question to ask the agency.
What about the case where there's an accident, say at a crossing? About 20 per cent of accidents are at crossings. Insurance companies will pay for the damages resulting from an accident, but the day after, they could inform that railway that their coverage will be reduced by a similar amount for the rest of the year. So, in the same way that you have insurance and if you have an accident, your insurance company puts you on notice, in this case, they may decide to reduce the amount of insurance coverage. So will that railway still be able to meet its insurance requirements under the law and continue to operate? Remember that under the Canada Transportation Act, a freight railway must maintain required insurance, including self-insurance, at all times.
Canada's short line railways believe that liability coverage for smaller railways moving dangerous goods should be based on risk. What speed do they go? Over what terrain? Over what distance? This bill does not allow for these common-sense filters.
I will now turn to Terry Berthiaume, who can give you a real example of the impact and shortcomings of this bill.
Terry Berthiaume, President and Chief Operating Officer, Essex Terminal Railway Company, Railway Association of Canada: Thank you. I'm very grateful to have this opportunity to speak about some unintended consequences of Bill C-52, which will affect my company and the community that we operate in. As Mr. Bourque stated, all railways are not created equal. That's especially true of the Essex Terminal Railway. ETR was created in 1902 to provide switching services to industry in the Windsor area, and through our connections with three mainline carriers, freight is carried throughout North America.
One hundred per cent of ETR revenue is from interswitching. I believe we are unique in that aspect. In fact, CTA recognized that when they exempted Essex Terminal Railway from interswitching regulations. They realized that Essex Terminal Railway would not otherwise be viable and that our community would suffer if we were not there to operate, to service them. ETR operates totally within yard limits. We have no mainline track, and our main track is only 19 kilometres. Ninety per cent of our traffic moves less than 20 kilometres. Although we do not handle crude oil, we do handle dangerous goods in excess of 40,000 tonnes. Seventy per cent of this dangerous good traffic travels only 4.4 kilometres, at speeds of less than 10 miles per hour, during daylight hours, on very flat geography. We have no hills in Windsor. We have an incredible safety record and a very strong safety culture. We maintain very high standards of maintenance and inspection of our infrastructure.
I have been with Essex Terminal Railway for 34 years. During that time, our insurance has paid one claim, amounting to less than 1 per cent of our current liability insurance limit of $25 million. One time, less than 1 per cent. Because of Bill C-52, we will be forced to increase our insurance coverage four times, from $25 million to $100 million, with significant increased premiums, which are currently estimated to be $75,000 to $100,000 in additional premiums annually and could be higher. These are only estimates at this time.
These costs cannot be passed on to our customers. We are operating in a very competitive environment. We operate in an extremely depressed local economy. Windsor has the highest unemployment rate in Canada. We, Essex Terminal Railway, have lost 50 per cent of our business in the last 10 years. We lost this business because plants have closed and moved their operations to other areas where it is more economical to operate. Anything that we do that increases the cost of our customers doing business will undoubtedly result in lost business to them, lost traffic for Essex Terminal Railway and a loss of jobs for the 850 or so people who work for the industries that our railway serves.
The minister has stated that railway liability limits should be equal to the risk associated with the railway. The risk associated with our operation is obviously not the same as the MM&A Railway, the Montreal, Maine & Atlantic Railway.
We operate at slow speed, a maximum of 10 miles per hour, with an impeccable safety record and strong safety culture and high standards of track maintenance and inspection. Because of our unique situation and very low risk, we feel that our current liability insurance limit of $25 million is indeed adequate. We don't operate on main lines. Our cars move over very short distances, at speeds of 10 miles an hour or less, during daylight hours. We have a very low claims history, and, again, the current estimated cost of increasing our insurance from $25 million to $100 million will cost in the area of $75,000 to $100,000 per year. There's no guarantee that those premiums will not increase significantly under new Bill C-52 requirements, or, in fact, that this amount of insurance will be available at a price that we will be able to afford in the future.
How do we cover this unwarranted cost increase? Our railway volumes are at historic lows. How do we adjust? Do we cut jobs, install fewer railway ties every year? Where do we find the money to pay for this? Is the money not better spent by continuing to maintain a very safe railway and preventing the accident than putting it into insurance premiums that are unwarranted?
Why should we be forced to incur this additional cost when our record proves that we have adequate insurance in place?
The RAC drafted some recommendations for modifications to Bill C-52 that address the issues I've discussed, and if possible, I'd like to present those to the committee.
The Chair: We'll have them translated and circulated to all the members of the committee as quickly as possible. Thank you very much for your presentation.
Robert Taylor, Assistant Vice President, North American Advocacy, Canadian Pacific Railway: Thank you, Mr. Chairman and committee members. I appreciate the invitation to appear before you today to discuss Bill C-52 and answer any questions you may have.
CP operates a 22,000-kilometre network throughout Canada and the United States. In 2014, we moved 2.7 million carloads of traffic, with each car moving an average length of haul of 1,400 kilometres. 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 CP is the safest railway in North America and has achieved the lowest frequency of train accidents in the industry in each of the last eight years. In 2014, we had 1.2 train accidents for every million train miles. Our 2014 performance was a 30 per cent improvement and a new industry record.
It's important to recognize that North America's rail network moves 99.998 per cent of hazardous materials — including crude oil — without incident. But because every accident is one too many, we are continuously working to eliminate the last .002 per cent of risk from our operations. We can safely and securely move dangerous goods, including crude oil. We have moved dangerous goods and vital energy products for many years. We are a safer alternative than these products moving over highways, for example.
Now I will speak briefly to this bill.
We support the intent of Bill C-52, which is to better define and make accountable all those involved in the production, manufacture, transportation and distribution of dangerous goods and ultimately enhance prevention response capability, liability and compensation.
We need to strengthen the safety and security of the rail supply chain so that we maintain a world-class supply chain that is accountable and responsive, and both works to prevent incidents from occurring as well as provides for compensation and liability in the event of an incident.
We need a responsive regulatory regime to support the trade-based nature of Canada's economy. The public should not have to bear these costs, and the public should be compensated if accidents do occur.
Some elements of this bill are items that CP has been calling for over the last number of years, and we welcome action. We do think, however, that in a few important areas the bill lacks policy clarity, and we urge the committee to consider this as you perform your review of the bill.
Areas where clarifications are required have been identified and will be reinforced by other presenters to this committee. The ones I want to reference relate to proposed section 152.7, especially in instances where traffic is interchanged or passed from one railway to another; proposed section 152.9, which references other acts that could negate the railways' strict liability cap; and finally, how the shipper fund is to be recapitalized if it is depleted. We also question why the shipper fund is only initially capitalized to $250 million while the railway has strict liability of $1 billion.
I look forward to any questions you may have.
Éric Harvey, Senior Counsel, Regulatory Affairs, Canadian National Railway Company: Honourable members of this committee, thank you for having us today and giving us an opportunity to speak about Bill C-52.
Even if CN was not involved in the Lac-Mégantic accident, we understand the government's policy intent of developing a framework for damages of third parties in the context of accidents involving dangerous goods or crude oil. Lac-Mégantic was a tragedy, and we all want to build on the lessons learned from that tragedy.
At CN, we welcome the creation of a compensation fund for the purpose of providing readily available resources to address the circumstances of such accidents. That being said, we do want to make a few points for the committee's consideration.
As it stands, the bill is proposing that railway companies be liable for accidents without any consideration for the cause of the accidents. The liability imposed on railway companies fails to take into account that they have a statutory obligation to accept all traffic. Railways' obligations respecting level of service were established in recognition of the contribution that railway companies make to all sectors of the economy.
However, when those obligations become the basis to make railway companies solely liable for accidents, even in circumstances when accidents are caused by third parties, we beg to disagree with that approach for several reasons.
First, railway companies move traffic for a rate that is charged to shippers. That rate is the basis for the defined and limited benefit railway companies receive from that movement. On the other hand, the owner of the product and/or the shipper clearly derives a benefit by having products moved to markets by the railway companies. In the context of the traffic dealt with by the bill under consideration, the value of having products moved to market goes beyond the value of the railway benefit. In recognition of the relative economic benefit that railway companies and shippers derive from rail movements, it would have been more consistent with the policy intent of the bill that both railway companies and shippers be made liable under the liability regime introduced by the bill.
In addition to this economic reality, there is an underlying point that goes to the root of the matter dealt with by this bill. It is the accountability that each party should have for their actions, including errors and omissions, especially if those actions cause major accidents. If the intent is, as we presume it to be, to help avoid further accidents, we submit that those causing them should be made liable. For example, in the transportation world, the loading and unloading of traffic is the responsibility of shippers, and this is acknowledged by the structure of the Transportation of Dangerous Goods Act. The bill ignores this important reality and does not assign any liability to shippers, even in the case of accidents resulting from inadequate securement of traffic.
While railway companies will retain recourses against third parties causing the loss, imposing all liability to only one party in the logistics chain is broadly inconsistent with the objective of changing the behaviour of all those involved in the logistics of rail movements.
When we met the House of Commons Standing Committee on Transport, Infrastructure and Communities on April 23, we expressed our concern respecting what we considered the lack of clarity in making liable railway companies "involved'' in an accident without defining the degree of involvement required for the liability to apply.
During his testimony before the same committee on April 30, legal counsel for Transport Canada confirmed that the ". . . policy intent was to cover every railway company that is physically involved in the operation and physically involved in an accident.'' The language, in the opinion of legal counsel for TC, "clearly conveys the intention'' that it is the operation of a railway that involves the company. We have taken good note of this important clarification and as a result we're prepared to accept this wording.
Likewise, we take note of the statement made by the minister before the house committee on April 23 that ". . . the fund will cover all costs above the railway's insurance and will not be capped.''
The minister further stated that:
In the unlikely event that damages from an accident surpass both the railway's insurance level and the amount of the supplementary fund, the government's consolidated revenue fund will back up the fund but then be repaid through the levy.
Those important considerations are critical for the rail industry, and we accept them. We'll be glad to answer your questions.
The Chair: Next to present will be James Beardsley, President of Global Rail Practice, via video conference.
James Beardsley, President, Global Rail Practice, Marsh & McLennan Companies: Thank you, Mr. Chairman. Yes, I am the leader of Marsh's Global Rail Practice. Marsh is the largest rail insurance broker in Canada, and, as such, we build insurance programs for railways and rail-related clients in the insurance market.
I appreciate the opportunity to offer our view on some of the potential ramifications on the railway insurance market. If Bill C-52 is passed into law in its current form, we believe that these potential ramifications could possibly hinder the railways in their effort to comply with the bill and create unintended and negative repercussions in the delivery of the essential services that the railways provide for the Canadian economy and the wider economic benefits for all organizations in the supply chain.
The general insurance market today is one where the insurance buyers are enjoying an abundant supply of insurance. However, it's important to note that railroad liability is not general insurance but a specialty market. Specialty markets are more limited than the general market when it comes to the number of insurers available and the amount of insurance or capacity that is offered.
In addition, due to varying appetites for risk among specialty insurers, capacity is not simply interchangeable throughout a program tower. As is illustrated on the sample tower exhibit, the insurers that write risk at the top of the tower are usually different than those at the bottom or in the middle. The point is that if market disruption causes capacity to be lost from one part of the placement, there is no guarantee that it can be replaced by other existing insurers.
In 2008, for the first time in Canada, the railways were able to construct a liability tower to over $1 billion. A disruption in the rail insurance market could jeopardize the ability for the most active railways, through insurance, to meet the proposed $1 billion minimum limit level that the bill requires for large rail carriers. For short lines, while this level of limit is theoretically available, it would not be financially viable to buy or self-insure.
Uncertainty in insurance underwriting historically has manifested in reduced limits, coverage constraints and increased pricing. My wish today is to encourage the committee to reduce some of that uncertainty with clarifying amendments that will assist in stabilizing available capacity over the long term.
For example, the application of strict liability in lieu of at-fault or negligence-based liability as outlined in proposed section 152.8 is a major change and could be problematic for underwriters. While we understand that strict liability is a feature of the new legislation, and we might be able to assist the underwriters in accepting it, it is nevertheless unclear in the bill which involved railways could be subject to strict liability, as the term "involved'' is neither described nor defined in the bill. Reference proposed section 152.7.
Underwriters in this limited market are likely to write multiple companies that could somehow be involved, while physically not being part of the goods movement causing the loss. Under the proposed strict liability wording, insurers logically think they could be paying out far more limit than they might have under a fault-based regime. This encourages insurers to pull back on capacity to protect them from the unquantifiable.
Stacking limits under strict liability unclearly might even discourage cooperation among the railways, especially if the federally regulated railways suspect that a direct cause of loss could be the responsibility of a railway not covered by the act. As you know, the company depends on this inter-rail cooperation. We can diffuse this by clearly defining "involved'' as having charge, management or control of the shipment, for example.
We strongly encourage fortifying the language to describe that the minimum liability limits also act definitively as a per-accident cap, as alluded to in proposed section 152.7, thus helping to sustain the available limits to comply with the bill, as would clarifying the role of approved self-insurance, as noted in proposed subsection 92.1(b), as an acceptable substitute for third-party insurance.
Section 94.2 of the bill states: "The Agency shall suspend or cancel a certificate of fitness'' of a non-compliant railway. We recommend substituting more flexible wording so that the agency is able to make a decision that benefits all stakeholders — substituting the word "may'' versus "shall,'' for example.
In closing, I urge the committee to more clearly define the language in the areas noted and minimize the wording that creates underwriter uncertainty before a final vote on the bill's passage. Most importantly, we see the need for the clear definition for the term "involved,'' as suggested. In early discussions with regulators, it was discussed that there was intent in the bill to limit the involved railways by their role in the shipment, but the bill doesn't state that. As we all know, when catastrophe strikes, the written word will trump intent almost every time.
Thank you for your time, and I welcome your questions.
The Chair: Thank you very much, Mr. Beardsley. We have two more witnesses, from the Canadian Transportation Agency.
Nina Frid, Director General, Dispute Resolution Branch, Canadian Transportation Agency: Thank you very much, Mr. Chairman and honourable members of the committee. We appreciate your invitation to speak to you today about Bill C-52, the safe and accountable rail act.
As you stated, I'm from the Canadian Transportation Agency, where I'm responsible for the Dispute Resolution Branch. My colleague, Liz Barker, is the agency's general counsel.
As you know, the agency is a federal administrative tribunal and economic regulator with jurisdiction over a range of issues pertaining to air, rail and marine matters. As well, the agency is responsible for removing undue obstacles to the mobility of persons with disabilities within the federal transportation network.
The Canada Transportation Act is the agency's enabling statute. It outlines the extent of the agency's authority and jurisdiction, as well as our role in administering the act. As the tribunal, the agency resolves a range of disputes through facilitation, mediation, arbitration and adjudication. As an economic regulator, the agency issues certificates of fitness to railways under federal jurisdiction, among other things.
Current provisions of the Canada Transportation Act state that no person shall construct or operate a railway without a certificate of fitness. The agency issues a certificate of fitness if it is satisfied that there will be adequate liability insurance coverage for the proposed construction or operation.
In the summer of 2013, after the terrible accident in Lac-Mégantic, the agency launched consultations on the approach to the insurance, certificates of fitness and the issue of adequacy of railway liability insurance. The agency's consultation served as a starting point for the policy review that was conducted by Transport Canada.
Through these consultations, we heard from many stakeholders, and we understood that there is support for the introduction of specific minimum levels of insurance; there was support for different levels of insurance for different types of commodities, specifically dangerous goods; and there was also support for administrative monetary penalties as an effective compliance mechanism.
I would like to say here that the administrative monetary penalties provide a middle-type measure before the agency would move to suspend or cancel a certificate of fitness — so, to bring the railway into compliance, yet still allow it to operate.
These and other provisions are before you as part of Bill C-52.
The agency's role under the proposed regime outlined in this legislation is as follows: The agency will be required to assign legislated minimum levels of insurance to railways based on the type and volume of dangerous goods they transport. To help railways acquire the legislated levels of insurance, these will be phased in over time.
In Schedule IV to the bill, the levels are specified. For operation of a railway that does not carry any dangerous goods, the prescribed level is $25 million per occurrence. For a railway that carries less than 4,000 tonnes of toxic inhalation hazardous materials or less than 100,000 tonnes of crude oil or at least 40,000 tonnes of other dangerous goods, the initial limit is $50 million. That will increase up to $100 million after 12 months. The third level is $125 million, which will move to $150 million, and the fourth level is $1 billion per occurrence.
The bill also proposes a change to section 137 of the Canada Transportation Act to clarify that railways cannot impose the sharing of liability on shippers through a tariff. This has to be negotiated between the shipper and a railway and could be subject to a confidential contract. While Bill C-52 proposes changes to liability insurance for freight railways, the current regime will continue to apply to passenger railways.
I would like to now say a couple of words about the measures proposed under the Railway Safety Act that introduce a new mandate for the agency.
The proposed provisions allow a province or a municipality that believes that a fire was the result of railway operations to apply to the agency for reimbursement of costs incurred in responding to the fire. This amendment to the Railway Safety Act would give the agency new authority to determine, first, if indeed the fire was the result of railway operations and, then, if that is the finding, to order the railway to reimburse the province or municipality for the eligible expenses. These applications that are currently referred to the courts would come to the agency if or when the bill receives Royal Assent and would be adjudicated as a two-step process.
At the first stage, the agency will need to determine if the fire was a result of railway operations, and only after that can it move to the second stage to look at the expenses and order the railway to reimburse.
The agency will do its best to meet the challenges presented in this new mandate if we're tasked by Parliament. We will endeavour to discharge our responsibilities in a way that is fair and transparent in order to facilitate access to justice for all of our stakeholders, including provinces and municipalities and the railways. It will take a bit of time for us to put the proper process together. We'll consult with the stakeholders, develop and adopt a methodology and realign our internal resources to meet this mandate.
[Translation]
In closing, I would like to thank the committee members for listening. My colleague and I would be happy to answer any questions you have. Thank you.
The Chair: Now, I would like to take this opportunity to thank all of the witnesses for being with us today.
[English]
First of all, thank you for accepting to come in earlier than had been planned and to have a panel that's a little bit bigger. We're in June, and, since we want to study the legislation and have as many witnesses possible, we've asked for a few sacrifices and efforts. I want to thank you for the length of your statements, and I hope my colleagues will have the same discipline in their questions.
Senator Plett: I want to echo the chair's words with my appreciation for your coming in and being concise with your statements. I have a number of questions, but I will be very brief. Maybe the answers can be equally brief, and the chair will cut me off when he feels I've exhausted my time.
My first question is to Mr. Beardsley. You sell insurance. I'm assuming that your premiums, when you sell insurance, are based on safety records and risk. Am I correct on that? Low risk has low premiums?
Mr. Beardsley: Just as a point of clarification, I don't sell insurance. I'm actually a broker representing the railways in negotiations with the underwriters, who are the ultimate risk holders and sell the insurance.
However, in answer to your question, the safety and the loss performance record of a given client is always central to the negotiations on the level of the premiums as a factor. Correct.
Senator Plett: Thank you, and I apologize. So Essex Terminal Railway, with an impeccable record, would not pay the same amount of insurance as some company who had had a couple of $200 million claims?
Mr. Beardsley: If it was based only on losses, you are absolutely correct; they should not.
Senator Plett: Thank you. To the two major railways, Mr. Taylor, I want to congratulate you on your impeccable safety record. Nevertheless, you had — I don't know what it was — 1.2 train accidents per a million something.
Mr. Taylor: Per million train miles.
Senator Plett: Thank you. To both of you, how many of the accidents that your railways have had in the last, let's say, year or two years would have been the fault of your railway company versus a third party?
Mr. Taylor: The number one cause of incidents on CP relates to third parties. They are incidents at crossings. So, if you look at the preponderance of incidents that occur, they're at crossings. In many cases they involve — in most cases I would submit — third parties. So it's a vehicle, a truck, occupying a crossing and an unfortunate incident where the train collides. That's the majority of incidents.
We can talk about crossing policy in Canada for a long time here. I don't want to go on that tangent, but crossing policies are something on which I think additional work needs to be done in Canada.
Mr. Harvey: I share my colleague's answer respecting the cause. Accidents at crossings are basically the most significant occurrences, and they happen with third parties being involved — cars, trucks, et cetera.
Senator Plett: There is a private member's bill before us, Bill C-627, that we are going to be dealing with shortly. I'm not sure whether you're aware of it, but I believe it deals, in part at least, with some of your concerns.
Mr. Taylor: It does, although there are some jurisdictional issues with crossings. For example, people from the CTA can talk to it, but the CTA has jurisdiction on open crossings, purely on economic drivers. It relates to landowners wanting access. The minister is responsible for rail safety. There's only kind of a dotted line connection between the agency's consideration of safety, so we would like to see all matters to do with crossings dealt with by the minister and the safety related to a crossing be the paramount consideration of a new crossing. I use the analogy that you can't go and get a new crossing across the 401. You can still get a new crossing across a main line for a railway. It just doesn't make sense.
Senator Plett: In most cases, if there's an accident, the first thing insurance companies do is deny responsibility. Would you agree? They probably would point fingers at somebody else before they would accept responsibility. To Ms. Frid's comments about the agency being able to appoint liability, I guess, and then you being able to take recourse in the courts, at least that allows, then, the victims of that accident, whether it's the province or Lac-Mégantic, whoever, to be compensated and to get on with their lives while this is being handled in the courts.
Would you agree that the insurance companies, if they weren't immediately liable, if they didn't have to cut the cheque, would fight in court for a long time before anybody would pay, in the case of crossings, let's say, or in the case of fires?
Mr. Harvey: Our experience with our insurance companies is that based on the circumstances of the accidents, an analysis is made. I cannot say that there's a systematic approach on the part of our insurance companies to deny coverage. I think it's more, if you want, a rationalized discussion based on the circumstances of the accidents and the extent of the coverage in our insurance policies. To me, that's how this happens. There's one aspect.
I'd like to come back to your initial question about third parties. You've heard our comments that through the bill, railway companies are to become solely liable and accountable for all incidents. In our view, it is certainly a significant issue. In those rail movements where you have loaders of products, carriers, unloaders and a series of parties involved in that movement, and you want to assign only one player in that chain the sole responsibility of the incident, in our view that's questionable and should seriously be considered by this committee.
We're thinking here in particular about shippers of the products covered by this bill that are clearly deriving an economic benefit that goes beyond the benefit of the railway companies for their product being moved to market. At the same time, you have responsibilities for securing the shipments at origin.
So in our view, it's clear that there should be consideration respecting an allocation of liability for the purpose of the bill that would take into account shippers and their roles in this process.
Senator Plett: I commend your insurance company for their attitude, if that's what they have. I was in construction in a previous life for a lot of years, and my insurance company's first reaction was, "Let's try to blame somebody else for it.'' Maybe that isn't the case in rail operations.
I have one last question in the first round to the gentleman from Essex Terminal Railway. You say this affects you, and you do mostly interchanging. Your mileage is very low. Is it possible or feasible for you to reduce the size of your loads?
First of all, we heard from the insurance broker and with your record, my feeling is that your rates should be among the lowest, not the highest. Given that, if you would reduce the size of your loads to get under the 40 tonnes or whatever it is, would that not help your situation, and is it feasible?
Mr. Berthiaume: First of all, it's not my decision to reduce the number of the loads that come on our railway.
Senator Plett: Not the number of loads, the size of the loads. Does that not play into it?
Mr. Berthiaume: Again, that's not our decision; it's the shipper's decision. We are obligated to carry the goods they order as long as they are within the industry standards. I heard something differently when Mr. Beardsley was speaking. I heard him say that if our record was the only criteria for developing insurance rates, our rates would be cheaper. I don't think that's always the case.
I think all of us have seen situations where our house insurance, car insurance or our company's insurance premiums have gone up when we've had a very good record. They've gone up because the insurance companies have had to pay a lot of claims for catastrophes that happen in other parts of North America. Our insurance rates go up at times when, in fact, we have had a very good record.
The other part of what should be noted as far as insurance premiums go is that there's a rate per thousand and then a volume. Even if I'm getting a better rate per thousand or million dollars of coverage that I buy, if I have to buy four times as much, it's going to cost me a lot more money. That's the point I'm making today.
If we have a track record that proves the only incident we've had in 34 years was below 1 per cent of the current liability that we carry per $25 million, I think that speaks volumes. For us to have to increase our insurance now four times given that record means simply that we're subsidizing somebody else's bad record, and I don't think that's fair. It's also dangerous to our company. We're struggling through some very hard times.
Senator Eggleton: I appreciate the point you're making, Mr. Berthiaume. But if you look at Lac-Mégantic, we had a Class II railway company. If they had the application of this bill in terms of their insurance at that time, it would have been $250 million, but that's nowhere near what the cost of Lac-Mégantic was. It's more than double that, and the costs are still rising. Why should the public bear that?
This comes to the point you're making that Class II shouldn't have this level of insurance, but I'm not even sure that level of insurance can be adequate given Lac-Mégantic.
Mr. Berthiaume: You're making a comparison between my company, Essex Terminal Railway, and MM&A. There is no comparison. We have only 19 kilometres of track. We don't have a main line track, and we only operate at speeds of 10 miles an hour or less. There is no comparison in the amount of risk associated, and we maintain very high levels of track maintenance. We don't have dangerous conditions along our railway. It's a very small railway, the management is very hands-on and we're able to maintain the quality and integrity of our maintenance programs.
I don't think the public should be responsible, but I don't think that our company presents that kind of a risk. It's very easy to see the differences between our operation and a company that was not providing adequate track maintenance, was not operating safely and was breaking all the rules. We don't do that, so we don't expose our community to the risks that they did.
Senator Eggleton: Are there many rail companies with the characteristics of your company, or do you consider yourself unique?
Mr. Berthiaume: I think we're unique, and that was recognized when the Interswitching Regulations came out and our company applied for exemptions. The regulations limit the amount of money that railways can charge to interswitch to other railways. The fact that our company only interswitches — we have no road haul revenues — means that our income per car is very low. And if we had been limited to the amount regulated under the Interswitching Regulations, our company would not have been viable. We certainly would have ceased operations. The industries that depend on us to get their products to and from market would have had to deal with that, and many of those would probably have closed.
Senator Eggleton: I may have this wrong, but I thought one of the amendments in the House of Commons committee was on interswitching. Did that not in any way help your situation?
Mr. Berthiaume: I'm sorry, I don't know what you're referring to.
Senator Eggleton: I don't have it in front of me. There was an amendment in the house committee.
Mr. Harvey: If I may, the purpose of the amendment in the house was simply to clarify that when a movement originates on a carrier that moves traffic under interswitching rules, that carrier is not the party required to collect the levy. It's an administrative amendment.
Senator Eggleton: Let me turn to this question on the responsibilities of the shipper versus the rail hauler. That's to be done by an agreement. It's to be negotiated, but you've still expressed some concern about that or at least the main railways have, as I heard it.
I don't know what happens if there's no agreement. Perhaps the agency gets involved in that kind of thing to determine the liability. Can you explain a little bit more about why you don't think that's going to work too well?
Mr. Harvey: Under the act, the railway companies are basically assigned the sole liability for an accident involving the commodities covered by the bill. This means, essentially, that railways or their insurance companies will have to pay the damages. That's the purpose of the bill.
Our first point is that when you assign the sole responsibility of an accident, irrespective of its cause — in other words, even if for the purpose of the bill, the railway company has zero responsibility because it's caused totally by a third party — the railway company is nevertheless requested to pay integral the amount of the loss. Then they must turn to those who have caused the loss and seek compensation from those parties.
So our point was simply to say that when you assign sole liability to one party, it's a choice made that is not based on something that is related to cause. What we're saying is that perhaps, to be more consistent with the reality of the rail industry, where you have railway companies essentially required by law to accept all traffic, there should be a recognition of that and some assignment of that liability to some other parties that benefit from the rail movement, and here we're thinking about shippers.
Senator Eggleton: Do you think that should be in the legislation?
Mr. Harvey: We're saying that we understand the purpose and the policy intent behind the notion that you have assigned liability. But we're saying that, here, others are at play, and those people should also be covered by the act.
Senator Eggleton: Okay. Does the agency have any comment on that? No? Okay.
Let me change subjects here away from the insurance for a moment. This question of eliminating the definition of "fatigue science'' in the fatigue management portion — how do you think that's going to work out in terms of how you ensure the safety of the operations vis-à-vis fatigue of the people who are operating the lines?
Mr. Taylor: Well, I think it's really an administrative item. There's a whole set of rules and provisions around fatigue, so this is the department cleaning up the framework, as I understand it. Fatigue is something that we're very focused on, and there's a prescriptive set of rules around that.
Senator Eggleton: So you this is a minor wording change? Is that what you're saying?
Mr. Taylor: It's something best asked of the department when the departmental officials appear.
The Chair: We'll have the minister here tomorrow night as a witness.
We have about nine minutes left.
Senator Neufeld: My question is short. You answered part of the question as posed by Senator Eggleton.
Mr. Harvey, when you say that shippers should have some liability, maybe I just want to understand a bit more from you why that should be. When it comes to pipeline safety, the pipeline company is held exactly the same as the rail company is held, which is to say solely responsible.
If there's a third party involved, in the end, they can actually go after the third party. So if there were a pipeline rupture that wasn't caused by, let's say, Enbridge, Trans Canada or Spectra, they're still responsible; they're solely responsible to actually clean up the mess and do all that. Then they can actually do whatever they want to find third parties.
Why should the railways be different than the pipeline companies carrying the same product?
Mr. Harvey: Thank you for your question. In the case of incidents or accidents involving railways, the exposure to third parties is significantly greater for railways than for pipelines. Generally speaking, pipelines are underground for the most part. When something happens, as I understand it, for the most part, it's failure of the equipment owned by the pipeline company.
In our case, it's different. As Robert and I just explained, third parties are involved in the majority of our accidents. As a starting point, that establishes a difference.
Then, in our view, there are two other significant points. The first is the fact that shippers do benefit with an added value from moving their traffic to market that goes beyond our benefit. Second, shippers are directly involved in the securing of the shipment they send with us.
Those two things basically get them, for lack of a better word, involved in that transportation process to a greater degree than what happens in the pipeline industry.
Mr. Bourque: To expand on that last point briefly, in the case of crude oil, for example, the shipper leases or owns the tank car. They've chosen which kind of container they will move their product in. They are responsible for the loading of that product, and they are responsible for choosing which product to ship.
For example, they may choose to ship dilbit, which is bitumen with up to 30 per cent diluent added. That's a product that was designed to move by pipeline, but they might choose to move it by tank car. A safer option might be for them to choose to move railbit, which is 15 per cent diluent.
So there are a number of decisions that a shipper makes in relation to the safety of the transportation. For that reason, they are intimately involved in the outcome and safety if there is an accident.
Senator Neufeld: I appreciate that, and I understand what you're saying about the shipper usually owning or leasing the tank cars, but I imagine that if that tank car isn't to standard, you don't have to hook onto it and take it.
When talking about this, there's also shipper's benefit for pipeline companies to get their product to market. But as I understand it from the pipeline people, most of their accidents are also third party, and it's usually someone digging with a backhoe and striking a pipe.
I will double-check that just to make sure that I'm correct on the record, but I believe I'm correct that most of their accidents are also third party. So it's similar to railways. Thank you very much.
The Chair: Senator Unger, you had a short supplementary?
Senator Unger: Yes. Could you give me some idea of what it would cost you to go after a third party in the case of an accident?
Mr. Harvey: In terms of assigning a number in order to specifically answer your question, I'm not sure I can do that. I can tell you that of all the third parties that can cause a rail accident, you have sophisticated corporations with access to funds, and you also have private parties who have limited access to this. In other words, at the end of the exercise, depending on who we're dealing with, we may embark into legal proceedings to recover the money, or our insurance companies may embark on legal proceedings to recover the money, without any degree of certainty that they will actually recover it. It really depends on which parties are involved, and this will be determined after hearings and court cases.
That contrasts with, if you want, the readily available remedy that the bill provides for, relative to all efforts and engagement that everybody will have to do to recover the money paid eventually.
Senator MacDonald: If it's the final question, I will give it to Mr. Beardsley.
Mr. Beardsley, Bill C-52 imposes strict liability on the railways, up to the minimum liability for rail accidents involving crude oil, and it proposes a new levy on crude oil shipments. Do you think this is a fair way to increase liability across the supply chain? If not, why not? What would your alternatives be?
Mr. Beardsley: I'm not sure I could respond to whether it's fair, but from an insurer's perspective, it does carry that much more risk. Some of the testimony that we've just heard this morning includes the process that an insurer would have to go through to recover those funds if their client were not fully liable for the incident, which would quite directly affect the cost of the insurance itself.
I'm not an attorney, but I don't understand strict liability to be a brand new concept. It is a little bit of a hurdle for the insurers to shift how they protect themselves through reinsurance and internal funding from a negligence or fault- based regime, but it's not that it's a brand new concept.
There should be some constriction in the marketplace and some increased pricing. Is it impossible to comply with the bill because of strict liability? I don't believe that to be true. But it will be difficult and a bit more expensive, certainly, and we could see a reduction in available limits. My fear is that it will be enough so that some companies who cannot use self-insurance to reach their required limit will be facing very tough decisions, including the loss of their certificate of fitness, perhaps.
The Chair: I want to reiterate our thanks for your participation and cooperation and the brevity of your statements and the clarity of your comments.
I'm glad to welcome our next panel to the Transport and Communications Committee studying Bill C-52. Mr. Benson, you will be opening.
Phil Benson, Lobbyist, Teamsters Canada: Thank you. Phil Benson, lobbyist, Teamsters Canada.
Teamsters Canada Rail Conference represents almost all of the locomotive conductors, the running trades in the industry, with a few exceptions, which include the MM&A. Teamsters Canada Maintenance of Way represents workers on the track at CP Rail and most of the short lines. Together they represent about 65 per cent of rail labour.
Today I'll be dealing with this bill. Our focus is on the increased powers to Transport Canada, especially the minister, which we support. We think they were lacking and needed improvement. Good for the minister for bringing them forward from the house and dealing with them so quickly.
We have one concern with the bill. That was section 17, the deletion of the definition of "fatigue science.'' Notwithstanding that, I will be dealing with that and SMSs in general. Given the parliamentary calendar and the increasing powers to the minister and Transport Canada, we would urge you to pass the bill without amendment. We don't have time for that. We think the bill should go forward.
On the deletion of the definition of "fatigue science,'' we were not consulted at all. It came between Gazette I and Gazette II of the regulations. We have to go back to 2011, the Railway Safety Act. One of the major issues on that act was fatigue. It was a huge issue. Our viewpoint was dealt with correctly and adequately at the time. To remind the members who weren't there, it was passed unanimously by voice vote in the house and unanimously by voice vote in the Senate.
Why was it deleted? First of all, we were told it was a creature of the Standing Committee on Transport, Infrastructure and Communities, the SCOTIC Committee. That's not true. The SCOTIC Committee included that amendment because justice demanded it as a function of statutory writing. In talking with various bureaucracies, we were also informed that with that definition they would have to look at peer-reviewed studies in dealing with fatigue management. As I said, you mean like they do for pilots and for air and for truckers?
The third point is that we have to look at Gazette I and Gazette II. They've taken the definition of "fatigue science'' and put it into the regulatory body in Gazette I for the SMS, safety management systems. Yes, they've included words and some of the basic concepts of fatigue science, but fatigue science is far more than just those inclusions.
Our concern, first of all, is that, from the comments we've received, we will end up with weakened fatigue management for rail workers. Fatigue management is dealing with workers. There are three things. The first is contractual limitations. Then we have regulatory hours of service limitations, and, finally, the icing on the cake is fatigue management.
On the contractual side, CN was violating the rest rules under the contract during the polar vortex, because it was cold, 3,700 times a month. The polar vortex continued through August because it was only 2,400 times a month. They did a tally at CP Rail and, for the West Coast, the initial tally is over 2,000 and waiting for the rest to come in. We can see that the contractual rules aren't being respected, even when we win Canada Industrial Relations Board decisions.
The second are the regulatory rules, and credit to Minister Raitt and the department. After a lot of stonewalling, they've decided to move ahead and to change rules that were set after the Hinton disaster, in a previous lifetime. Totally inadequate, a total failure of all concepts of fatigue management.
We welcome them, and we hope to see them before October 19.
Last is the fatigue management parcel. As we say, because of this, we're concerned. We did ask for that section to be repealed at committee. It was rejected. Because of the limit of time we have, we'll hold off for another day on that. We'll see what happens.
I do want to talk about the SMSs. One thing we did ask for at the House of Commons committee was something rather simple. If we had the act open and they are talking safety management systems, perhaps we should be expanding the role. Right now, fatigue management is buried in an SMS document. The SMS document is quasi-regulatory. However, it is secret. Not only can the House not review it, the public can't see it. The press can't get their hands on it. We'd like to see that transparency continue. But, until that happens, we suggested that the fatigue management system be brought into section 18 of the Railway Safety Act to make it a rule, just as the hours of service rules are there.
The second one, which was a big thing in front of the Senate, was the need to have a 1-800 number. As you know, there just isn't. There are 117 inspectors; there aren't enough inspectors. The idea was that it would give our members, other union members on the job and non-union members an opportunity to call directly to Transport Canada with safety violations. This was 2011. In 2015, we're waiting for fatigue management. It might come next year, if we're lucky, when the regulations are finally applied. They're in place, but when they apply. The reason we don't have it is that it's buried in the safety management systems. It shouldn't be there. It should be in section 18 of the act.
As we go forward, we are going to be calling for the new Parliament, whoever is leading it, to review the Railway Safety Act. There are so many anachronisms in that act. We raised two. In sections 19 and 20, it allows the Railway Association of Canada to seek rule changes on their own accord. They're not always granted, but they do frame what is looked at. This doesn't happen in air. It doesn't happen in road. It doesn't happen for food processors. It's an anachronism. It made sense 50 or 75 years ago. It doesn't make any sense at all for a lobby group to be able to send over rule changes to a government. A lack of transparency in the Lobbying Act, which clearly applies to me. There are a lot of anachronisms in that act. We joke; we call this act the "We Don't Trust Company Act,'' if you look at the powers they are getting. We don't either, most of the time. We just think more changes are required. All of that being said, to be brief, we would urge you to pass the bill before time runs.
The Chair: Thank you, Mr. Benson.
I'd like to welcome Mr. Ballantyne from the Freight Management Association of Canada. Mr. Ballantyne, for the sake of expediency, we'll have Ms. Lai make her statement, and then we will have you. Then the members will have sufficient time to ask you questions after your presentation.
Patricia Lai, Co-Founder, Safe Rail Communities: Good morning, everyone. Thank you for this opportunity. Safe Rail Communities was created in March 2014, after the Lac-Mégantic tragedy. We are ordinary citizens deeply concerned about the transportation by rail of dangerous goods, especially volatile crude oil. We work to raise awareness on this issue and to urge government and industry to take meaningful action.
Bill C-52 is a good start in strengthening rail safety and accountability, but it could go further. Today, I'd like to share with you six concerns that we have identified within this legislation.
First, this bill sets a minimum insurance requirement of $1 billion for Class I railways, but CN and CP already carry more than this. Moreover, the draft regulatory impact analysis of the Pipeline and Hazardous Materials Safety Administration estimates a cost of US$6 billion for a high-consequence event in a densely populated area.
Class I railways should cover unlimited liability insurance to cover the full cost of a rail accident. This also fits with the polluter-pays principle, the supposed basis of Bill C-52.
Second, in this bill, the amount of insurance needed is dictated by the total tonnage that a railway carries in a year. However, the risk of accident is always in relation to a single event. This means that a railway carrying only a few large loads in a year could have coverage that is drastically insufficient.
Our third issue concerns the fact that railways can avoid liability if they can establish that any other defence set out in the regulations applies. It is the federal cabinet that decides upon these regulations, and cabinet's future decisions about what defences will be available to railways adds uncertainty to this legislation.
Our fourth concern with the bill is that the ability to sue for environmental damages is restricted to the government. This means that members of the public, whether an individual or a group, will not be able to sue for environmental damages. For more than a decade, both the federal and provincial governments have had the ability to sue for environmental damages but have not done so.
Our fifth point concerns levies collected from shippers to be used to create a $250 million compensation fund. Again, this is a relatively small amount compared to the estimated cost of US$6 billion.
Our sixth and last point concerns railway safety inspectors who will be authorized to identify immediate risks and request any measure that would mitigate risk. We would like to see included in Bill C-52 an inspection schedule, with specific criteria to determine risk and specific corrective action.
Prevention and mitigation should be the focus of any legislation covering railway safety and the transportation of dangerous goods. Now, I'd like to share with you six items that we believe should be included in Bill C-52.
First is the stabilization of volatile crude oil at the point of departure. Stabilization is mandated in the state of Texas. Why is it not mandated in Canada?
Second, we ask for increased government regulation and enforcement. The issuance of a certificate of fitness to railways lacks significance after the Lac-Mégantic rail disaster. It's time for a serious review of the safety management system.
Third, we believe there should be increased transparency and accountability. First responders need real-time data when a derailment of dangerous goods occurs. Historical data is insufficient. Again, we are asking for unlimited liability insurance to cover the full cost of a derailment.
Four, we ask for the reversal of recent cuts to the rail safety budget. The rail safety budget has been cut by over 20 per cent over the last five years. Why are we not investing in existing rail safety technology, like positive train control? The U.S. Congress mandated positive train control in the fall of 2008.
Our fifth request is the introduction of effective tank car standards. The current tank car standard will not be fully implemented until 2025, and we do not know if it is truly safe enough.
Finally, our last recommendation is a call for an independent risk analysis. Because so many factors influence rail safety, we should examine each factor individually and also together, through an independent body.
We trust the government to protect us, and what we find here is a broken business model in which industry profit puts the lives and pocketbooks of Canadians at risk. Safe Rail Communities respectfully asks that Bill C-52 not be passed without serious review of our reasonable recommendations and revision to make this legislation truly safe and accountable.
The Chair: Mr. Ballantyne, your statement, please.
Bob Ballantyne, President, Freight Management Association of Canada: Thank you very much, Mr. Chairman. I'm not going into what FMA is. It's in the testimony I've provided for you. It is an association of shippers that has been around for 99 years.
I'm going to focus most of my remarks only on Bill C-52 and not on the broader issues of railway safety, but I have a couple of preliminary comments.
By any reasonable standard, modern transportation in all modes in the Western world is very safe. As long as there is movement controlled by human beings, there will be accidents. Safety can never be taken for granted, and vigilance can never be let down. And there's always room for improvement.
The Canadian transportation safety regime — that is, the policy, laws, regulation, enforcement, accident investigation and practice — focuses on prevention of accidents, and this is as it should be. The Transportation Safety Board has made its recommendations, and the governments on both sides of the border have taken action, including Bill C-52.
It should be pointed out that such accidents are extremely rare, and this does need to be taken into consideration. The last accident that came even close to Lac-Mégantic was the derailment of propane tank cars and other DG cars, including chlorine, on the CPR in Mississauga on November 10, 1979. That was 36 years ago. In that accident, no one was killed or injured, there was limited direct property damage, and about 250,000 people had to be evacuated for several days. Transport Canada, the railways and the government all learned significant lessons from that accident. The Transportation Safety Board is the scorekeeper with regard to accidents in aviation, marine, rail and pipeline, and the statistical long-term trend in all modes is in the correct direction.
Looking at Bill C-52, I'm going to talk about two policy considerations, although in my expanded paper there are four.
First, as pointed out, a cornerstone of the government's approach to liability and compensation regimes in other modes and sectors is the polluter-pays principle. FMA agrees with the government that this is a fundamental cornerstone of the third-party liability and compensation regime and is in line with long-standing legal principles that have been confirmed by the courts over time. Bill C-52 appears to follow that principle.
Second, shippers, especially those that produce and ship dangerous goods, carry appropriate amounts of insurance and are prepared to live by the polluter-pays principle. That is, if a shipper is negligent, the courts will assess the degree of negligence and assess damages accordingly.
Looking specifically at Bill C-52, the minimum liability insurance coverage is essentially the first line of defence for ensuring that valid claims resulting from a railway accident are paid. When dangerous goods are in the care of the railways, the first claim should be, of course, on the railways. The bill confirms this.
It also appears to have been sensitive to the balance that is required with regard to short line and regional railways. That is, the insurance coverage has to be high enough to address the risk but not so high as to put the short lines out of business. The four levels of coverage in proposed Schedule IV attempt to meet this balance. Amended section 92(4) provides authorization to the Governor-in-Council to revise Schedule IV, and as more experience is gained with the proposed levels, the minister will be able to do that.
First, item 4 of Schedule IV is of some concern. It requires the big railways to have minimum coverage of $1 billion. In their discussion paper, Transport Canada reported that third-party liability insurance by the big carriers has been up at around $1.5 billion each, and it is understood that CN and CP have coverage in this range. It's our view that in this connection, proposed section 152.7 limits the railway liability to the minimum insurance coverage. This would appear to potentially reduce the liability of CN and CP to $1 billion from their current level of approximately $1.5 billion.
Second is the crude oil shipper-financed supplementary fund. This establishes a fund for railway accidents involving dangerous goods. Shippers of crude oil will be required to pay a level of $1.65 per tonne until the $250 million limit is reached.
The government has signalled that, in line with the polluter-pays principle, such a fund should be established. Every such levy to support the fund will have an impact on the competitive position of the industry so targeted. It is in the interest of the Canadian economy in general that this fund not be expanded to other products without compelling evidence that the products so targeted represent a significant public risk. FMA recommends that the agency be required to set out criteria in regulations that would be used when evaluating the expansion of the levy to any other commodities.
The third is the administrative monetary penalties. Section 177 is amended to provide for penalties up to $100,000 per violation, and FMA supports this provision.
Lastly are the proposed amendments to the Railway Safety Act. It is preferable to leave safety management systems and the detailed management of safety to the railway managers and employees. However, replacing subsection 32(4) with new subsections (3.2) and (4), and adding new section 32.01 give the minister authority to order the railways to take "the necessary corrective measures.'' This is reasonable, especially with regard to short line railways. FMA supports this recommendation with the caution that it be used only in exceptional circumstances.
I'd be pleased to answer any questions.
The Chair: Thank you very much, Mr. Ballantyne.
Senator Plett: Thank you to all three of you for being here.
Mr. Benson, I certainly appreciate the comments you made that although this may not be perfect in light of time, the parliamentary calendar, so on and so forth, clearly an election coming up, this bill should be passed the way it is, even if it does have some shortcomings.
I apologize if I didn't understand your entire presentation about the fatigue management. I would like you to give me a Reader's Digest version of it again, because I'm reading this paper from Transport Canada that deals with fatigue management. Human fatigue is governed by physiology. The human alertness is affected. Human performance degrades in relation to hours of wakefulness, accumulated sleep debt. Humans have a baseline minimum of physiological sleep needs, and so on and so forth.
It sounds like good stuff to me. Was your concern mainly that this wasn't going to be implemented right away? Could you share your concerns on that issue with me?
Mr. Benson: Teamsters Canada Rail Conference supported the Canada Gazette, Part I. It clearly outlined the people to whom it would deal with, among others, based upon the definition, and it included conductors, locomotive engineers and others. If you look at the Canada Gazette, Part II, that disappears. They're no longer listed. In fact, one of the concerns we have is that with the way the wording is, it may not even apply to them. So the very people who need it may in fact not be covered by it. That is issue one.
Issue two: When I talk to bureaucrats and people, and they say we wouldn't want to have studies and look at things like peer-reviewed documents, I've done it for Teamsters Canada in road and in air. Road took many years, and air just finished two years, four years waiting for the results. We bring scientists in, look at peer-reviewed documents.
Are we going to have a half-assed look at fatigue science or a full one? We knew, with the definition, coupled with the Canada Gazette, Part I, we were going to get proper review, proper fatigue management that we need.
With the removal of the definition, coupled with the change in language, we're not confident that that will occur. I guess from a legislative viewpoint, we have one that we're fully confident of and we have changes — again not consulted — and a viewpoint that none of them stand up to any kind of justification. It's the decision to do it, and even the wording they're choosing — fatigue management. I'll give you a briefing. It is everything from the room you sleep in, how noisy it is, when you get up, when you have something to eat and when you move. Fatigue science is a huge bailiwick; it's not just those eight points.
We deal with companies that do de minimis. This house — totally 100 per cent voice vote — fatigue management was the major issue. We've waited four years for it. We might get it next year or the year after. Please, the TSB in the United States, 20 to 50 per cent of people accidents are caused by fatigue. It's a major issue. It may also have been a factor in the Lac-Mégantic accident, as we know.
Also, the health concerns are documented: shorter life spans, damage to people's lives, cognitive damage and health care costs to the public. These should all be factored in.
So our concern, and the bottom line, is that we're not at all confident we're going to get what we should be getting, what the public wanted and what you wanted when you voted unanimously by voice vote for this.
Senator Plett: Listen, I appreciate the explanation. I just have a very brief question. Is this something that could be corrected by regulation, or would it have to be corrected by legislation?
Mr. Benson: When this bill is reviewed, we will be arguing that this goes back — as Justice demanded on day one — this is their concern: By statutory drafting, it was required to be in the act. They said between Canada Gazette, Part I and Canada Gazette, Part II, they had drafting problems. We understand there was a lot of consultations by other people beside us to what we feel is a watered-down version.
For us, we will see what happens next year when we deal with it. Our feeling is it will be inadequate. We'll deal with it next year.
Senator Plett: Fair enough. Thank you.
Ms. Lai, you are the co-founder of Safe Rail Communities. One of the concerns in your presentation was, among other things, environmental concerns. I got the impression that your feelings were that Bill C-52 didn't go far enough. Maybe I didn't understand it properly, but I'm going to just read a couple of quick bullets, if the chair will indulge me here. I want you to tell me whether these would be some of the things that deal with your concerns: providing the minister with express authority to disregard objections received to proposed railway work if the work is in the public interest; expanding railway safety inspectors' authority to restrict a railway's operations when their operations pose a threat to safety to include when the threat impacts the safety of persons or property; creating a new ministerial order that will allow the minister to require a company to take necessary corrective measures if railway operations pose a significant threat to persons, property or the environment; and, last, a ministerial order issued in response to significant safety threat would remain in effective while under review of the Transportation Appeal Tribunal of Canada.
Would some of those address your concerns?
Ms. Lai: Primarily, the concern is that all of the authority and power related to the ability to sue for environmental damages are restricted to the government — in the cases you were reading, to the Minister of Transport.
But we really feel that members of the public, whether individuals or groups, should also be able to have a say and have some recourse for action in this matter.
Senator Plett: Okay, but clearly it does deal with the environmental problems, and it gives the minister new authorities to propose regulations, which would at least deal in part with your concerns.
Ms. Lai: Right. We did say the bill has some positive aspects, but we do feel it could go further.
Senator Plett: Just for your information, the bullets I read are out of a private member's bill that will be coming to the Senate and be dealt with before we rise, hopefully. They are in addition to Bill C-52. Thank you, chair.
Senator Eggleton: Mr. Benson, just to finish off this discussion about fatigue science, this government has an aversion to the word "science.''
Senator Plett: Playing nice until now.
Senator Eggleton: One little one. I couldn't resist.
Anyway, there is still fatigue management involved. Everybody considers this to be a serious issue, but I take it your concern here is getting the latest information — peer-reviewed kind of stuff — so that, in effect, the best possible fatigue management can be administered.
So you're concerned that by watering it down, there wouldn't be as much attention paid to that. Is that correct?
Mr. Benson: First, in relation to Bill C-627, we support that. Please pass it. It's a good bill.
Here's the problem: When you walk in, there's science, and we must follow the science because that's what will get the best results. Companies, and it doesn't matter what sector, say we have experience, it would be inconvenient and it would cost money. Here's the point. There is a fine line; there is a point where that can be taken into consideration, but I'll give you an example. I'm hearing reports from people working 20-hour shifts with three hours of sleep and getting called out to go back out to work, interrupting what's called their WOCL, wake on circadian low, between four o'clock and six o'clock in the morning, which has to be protected.
That's how a lot of people are working today. You cannot work more than 14 hours, and 14 plus 10 is 24. Thirteen or twelve is better. Twelve hours to get eight hours rest is the standard. Fourteen hours of service is maximum. You can't go more.
They're working today 20, 19 and 18 hours. This is an accident looking to happen. It's killing them, so we're looking at potential damage to the public, the environment and their health, which the taxpayers pay for.
Without that science in there, we're going to be arguing about, "Oh, well, we've always done this. It costs too much money. It's inconvenient.'' When it comes to the science, you just can't do that.
Senator Eggleton: You've made an excellent point there.
Let me ask Mr. Ballantyne and then Ms. Lai a common question here.
Mr. Ballantyne, you talked about the Mississauga derailment in 1979. I remember it well. There were propane and chlorine cars involved in that incident, and it involved the evacuation of 250,000 people. It must have cost an awful lot of money.
This particular bill provides for the compensation fund to cover only oil shipments as opposed to other hazardous materials. More could be added later, but from the get-go, it's oil shipments. I wonder whether either or both of you have thoughts on the adequacy of that in terms of public safety in view of what happened in Mississauga.
Mr. Ballantyne: I'll go first, if you like. The first line of defence, or the polluter-pay principle, is that the railways would be responsible, as CP was in the case of the Mississauga accident. So the argument is this: Are the resources, including their insurance, enough to cover a case like that?
I worked at Canadian Pacific for decades, and my recollection is that, on that particular one, CP set up kind of a storefront office. They paid all the claims. I'm not aware that the public purse ever tried to be accessed on that particular accident. CP paid it all out of their insurance and other resources.
So, while an accident like Lac-Mégantic in a big city would be more than $1 billion or $1.5 billion or whatever, that hasn't happened, and the chances of it happening are very rare. There is some chance; it's not that there is no chance at all of it happening.
My feeling is that for a case like Mississauga, the railway's liability would certainly cover something like that, as it did in that case.
In this case, it's just looking at expanding the second level of defence — the $250 million — if and when the railway's liability is exceeded, and that seems to be reasonable.
Senator Eggleton: Transferring this question over to Ms. Lai, I want to point out that 250,000 people were evacuated. You said the public purse wasn't out as a result, but there certainly had to be an awful lot of private costs involved in evacuating 250,000 people for several days.
The compensation fund in Bill C-52 only covers oil shipments at this point in time, and Mississauga being an example of where propane and chlorine were involved, shouldn't those substances have been involved from the beginning?
Ms. Lai: I think absolutely. We are not focused on those issues. It's a different tank car standard and different classification. What I can say about how it applies to the transportation of crude oil is that we have seen a lot of fiery derailments recently — even this year, two derailments near the small town of Gogama in northern Ontario within three weeks in February and March.
We don't feel as confident as Mr. Ballantyne that the risks are that low. We have no information about how safe we are, and we feel that given this product is coming from North Dakota and then even the crude oil coming from our oil sands in Alberta is now being seen to be quite as explosive as that coming from North Dakota, we don't feel as confident that these risks are that low.
Senator Eggleton: Mr. Ballantyne pointed out that the insurance from CN and CP is probably up around $1.5 billion. You were suggesting that by putting in the $1 billion figure we're lowering it. Should we up it to $1.5 billion?
Ms. Lai: Yes. We have a letter from CN Rail that confirms that their current liability insurance coverage is $1.24 billion. We know for a fact it's higher. We have not received confirmation from CP, but we've seen reports that they are around $1.5 billion.
Really we don't feel that's enough. We have looked at the reports from the United States Department of Transportation, the Pipeline and Hazardous Materials Safety Administration, and they've looked at these events and have estimated the cost at US$6 billion. We are asking for unlimited liability insurance to ensure that we can cover these derailments and accidents without having to put the pocketbooks of Canadians at risk.
Senator Eggleton: Mr. Ballantyne, you may not have heard, but the CN and CP folks thought that the balance of responsibility between the shipper and the rail hauler should be adjusted. They're saying that all the liability starts with the rail company, and then they have to go after the shipper. What are your thoughts on that?
Mr. Ballantyne: It goes back to the polluter-pays principle. I think when these goods are under the care and custody of whoever they're under, say in the railway, that's where the primary responsibility should lie. As I say, the shippers I'm aware of carry their own liability insurance, and where they're at fault, they are quite prepared to live by the polluter-pays principle.
It is not reasonable for the railways to try to download responsibility on the shipper, or any other party, for that matter, when they have the care and custody of the goods.
Senator Unger: Mr. Ballantyne, clause 10 of this bill would create a supplementary shipper finance compensation fund to cover the cost of accidents that exceed the insurance cap. To what extent are you concerned, if at all, that a levy on any additional designated goods would affect your members' competitiveness and future production investment or investment decisions?
Mr. Ballantyne: Clearly nobody wants these accidents to happen, and if they do happen, the people that are affected need to be compensated. That's quite true. There is this balance that the businesses that are producing whatever the materials are, presumably there is a demand for that, either domestically or on a worldwide basis, and therefore these products do need to be produced and moved. We do need to be competitive in world markets, so that does have to be a factor.
As I said in my remarks, I'm not saying no other commodity should ever be targeted for this supplementary fund, but it has to be done very carefully and should be absolutely limited, if at all possible.
Certainly there's some concern about competitive position. The business of investment could probably have an impact on investment.
Senator Unger: I'm from Edmonton and, of course, northern Alberta, and we are very dependent on the railways now carrying our products. I've already read that some shippers have said if this causes costs to go up too high, they will consider pulling out, and already billions of dollars of future investment capital has been cancelled. This is an issue, as far as I'm concerned. On which dangerous goods will producers be most financially vulnerable to a levy on shipments?
Mr. Ballantyne: I'm just not close enough to the pricing of the various commodities and the global competitive position. I really couldn't give a reasonable answer to that.
Senator Unger: Crude is lumped into one product. Do you think it's possible to separate it?
Mr. Benson: There are different designations. We've been working with the transportation of dangerous goods committee and with the minister, and they do have different designations, and designations will be coming forward. You can ask the minister about more detail. There are different groupings that are in effect and coming.
The Chair: The Energy Committee studied that last year and published a report on the subject.
Senator MacDonald: Mr. Benson, I think workplace fatigue, particularly around heavy equipment, is an important issue. I know my own grandfather lost half his foot when he was in his sixties, trimming coal, and a train went over his foot, exhausted, working back-to-back 12-hour shifts. So we're glad those days are over.
Listening to the railway people, and if you look at the numbers, their safety records are fairly impressive. We were told that when accidents do occur on the railroad, they're usually at crossings. What we didn't discuss and I want to discuss with you, I would think when most accidents occur, human error is involved. How often is human error involved? How often have you determined that fatigue is part of that human error?
Mr. Benson: First of all, we don't have studies. If you just saw that CN's numbers exploded for reportable derailments, for some background going back seven or eight years ago, the TSB knew that, because I was at a meeting where we were talking about it. It's because the companies weren't reporting in the manner that the TSB thought they were. Last year the TSB changed the regulations so that they have to report the derailments that they weren't reporting because they basically chose to interpret the regulatory requirements differently than the TSB thought they would.
Second, most accidents are caused by the rail itself.
Third, you're absolutely correct, a great deal of the accidents are at crossings. In my head, it is 25 to 30 or 40 per cent of suicides. At the crossings themselves, some are preventable; some aren't. A lot of action is not caused by the rail conductor and the driver.
With fatigue, you can't expect people to be on their game when they're working the hours that they're working. If you look at road and pilots, they're exceeding all standards that are acceptable by modern fatigue science — far beyond. The question becomes: How many are caused by fatigue? How many small accidents are caused by fatigue? In Gogama, it was rail — maybe some speed; I'm not sure. Those are the two major things.
Even if we are looking at their record, let's go forward. I agree with Ms. Lai. Are we carrying the crude in the right containers? Do we have the correct shipments? Are we following all the rules and regulations — not just how you like to interpret them, but more than that — in spirit? Do we have adequate inspection? The answer has been no. Do we have proper auditing? No. Minister Raitt has been addressing that. We have an industry that for years has been self- governing and self-regulating.
I was working with air when they brought in SMS. They said this was done in rail but it was a disaster and we'll fix it. We're still fixing it. Congratulations to the house for passing bills and working together. The minister is moving things forward, but from our viewpoint some of them are half measures. This bill could have been a lot better if we included small things. Take the fatigue management out of safety management systems, which are secret, and put it into the regulatory rule power of the minister in section 18. I agree that the safety management systems — not in their entirety, perhaps — shouldn't be secretive documents. They are quasi regulatory in name. Transparency is needed. There are many things we can do, but they can't be done in this bill. Move forward. If you don't know — this is science — people die young. They die from various diseases. They have permanent cognitive damage because of the hours they're working. Nobody in Canada should have to work that way — nobody, ever — so a company can make a buck because it's inconvenient for them. CP laid off 4,000 or 5,000 people. Oh, well, we'll just work people longer. That's just wrong.
For the public safety issue, even with the Lac-Mégantic incident, the person had to go to bed so they could move the rail the next day. They had one engineer, not two. That has been fixed, but how was that ever allowed in the first place? How can you allow somebody to work 20 hours total excluding bedtime, let them have three hours sleep, supposedly, and then call them to go back out at three o'clock in the morning? How can you have a company violating collective agreement rest rules 3,400 times a month just because it's bloody inconvenient for them and it's going to cost them money because stuff has to move? The customer has to get their stuff. We don't care if it kills you. You should care. The public should care. We should move forward with this stuff quickly.
We've been waiting for a voice vote — when is that ever orchestrated? — on this issue in the house, in Parliament. We waited for four years and it only happened because Lac-Mégantic happened. Thank you, Minister Raitt, for bringing it forward, finally. It's an important issue that's just been ignored. Let's pull the cobwebs aside, open the curtains and get it done with this bill, Bill C-627, and we will come back to you next year and talk about the other stuff.
Senator MacDonald: Can I have one more question for Ms. Lai?
The Chair: Yes.
Senator MacDonald: You mentioned the stabilization of volatile crude oil and that there were regulations in place in Texas. Could you expand on that a bit?
Ms. Lai: Yes, the matter around crude oil volatility is not governed across the country. It has been left to each state to decide. In Texas, they've been stabilizing this for many years. It's not allowed to go on a train or in a pipe unless it's stabilized. We know the technology to stabilize volatile crude oil that has been fracked exists. We don't understand how we let it in our country when we know the technology is there.
The Chair: I want to thank Ms. Lai, Mr. Benson and Mr. Ballantyne for your presentations.
Colleagues, tomorrow we will meet at 6:45 p.m. and hear from the minister. If you agree, we will conclude with the clause-by-clause examination of the bill.
(The committee adjourned.)