Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 29 - Evidence - February 7, 2018
OTTAWA, Wednesday, February 7, 2018
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-49, An Act to amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts, met this day at 6:45 p.m. to give consideration to the bill; and in camera, for the consideration of a draft agenda (future business).
Senator David Tkachuk (Chair) in the chair.
The Chair: I call this meeting of the Standing Senate Committee on Transport and Communications to order. This evening, the committee is examining Bill C-49, the Transportation Modernization Act.
We have two panels of witnesses tonight. For this first panel, I would like to welcome, from the Forest Products Association of Canada, Joel Neuheimer, Vice President, International Trade, Transportation, and Corporate Secretary; from the Mining Association of Canada, Brendan Marshall, Vice President, Economic and Northern Affairs; from Teck Resources Limited, Brad Johnston, General Manager, Logistics; and from Fertilizer Canada, Clyde Graham, Senior Vice President and Ian MacKay, Legal Counsel. Thank you for being here.
Mr. Neuheimer, I invite you to make your presentation, to be followed by Mr. Marshall, Mr. Johnston and Mr. Graham.
You have already talked to the clerk about timing, so the floor is yours.
Joel Neuheimer, Vice President, International Trade, Transportation, and Corporate Secretary, Forest Products Association of Canada: In the interest of staying on time, I will move right to page three of my written remarks, with which I believe you have been provided ahead of time. I will start with the heading, “Amendments Needed that are consistent with the Spirit of the Bill.”
While FPAC has concerns with respect to a number of the other measures contained in Bill C-49, including the definitions of “adequate,” “suitable” and “long-haul interswitching,” my focus today will be on two key areas where minor adjustments would greatly advance the objective of promoting a more competitive, balanced and efficient transportation system.
Point number one is on railway data. Bill C-49 lays the foundation for a more transparent transportation system by enabling a more robust set of rail data to be collected and made available to stakeholders. With respect to financial data, the bill would provide the Canadian Transportation Agency with access to information directly relevant to long-haul interswitching contained in the bill. However, it stops short of improving the information available in the context of other remedies contained in the act.
Specifically, final offer arbitration, or the mechanism known as FOA, is a process intended to foster commercial resolution by its high risk either/or nature. The lack of available data and technical expertise relating to railway costing exacerbates the imbalance between the parties. While the rail carrier knows its own costs to move the traffic, the shipper and the arbitrator do not. Railways have used this imbalance to shift risk inherent in FOA on to the shipper.
The agency has for many decades possessed both the expertise and the resources to determine the cost to the railway of moving the traffic at issue in an FOA. Mandating an agency costing that can be made available to both parties to an FOA would make the FOA process more efficient and fair.
We are accordingly recommending the addition of recommendation number one as outlined in the annex to this submission.
Point number two is on agency investigative powers. Currently, the agency can only act in response to a formal complaint. This is problematic since the fear of retaliation discourages shippers from initiating a complaint process. When a shipper does file a complaint, the agency is limited to addressing that particular shipper’s issues.
We are accordingly recommending the addition of recommendation number two as outlined in the annex to this submission.
Perhaps I could quickly read part of recommendation number two at the bottom of page 5 of our submission. It is to modify the act as follows:
The Agency may of its own motion inquire into, hear and determine any matter or thing that under this Act it may inquire into, hear and determine.
This change is necessary to allow the Agency to respond in a more timely fashion in matters within its existing mandate.
Over 600 forest-dependent communities need a more reliable transportation system. FPAC members take great interest in transportation issues because they account for up to one-third of their input costs. The availability of an efficient, reliable and cost-competitive transportation system is essential for future investment in our sector and to support the families that rely on our industry for their livelihoods across Canada.
For the 230,000 Canadiansdirectly employed by the forest sector across Canada, a more competitive freight transportation system as outlined here will ensure increased access to the rail system, more reliable service throughout the supply chain, more competitive rates, and a more competitive supply chain.
I would be happy to answer any questions you might have on our position on this bill. Thank you very much for your time this evening.
Brendan Marshall, Vice President, Economic and Northern Affairs, Mining Association of Canada: Canadian mining is an exhibit stalwart, contributing $57 billion to national GDP. The mining sector is also a top employer, with more than 400,000 people working directly and a 196,000 working indirectly for our industry. Proportionally, we are the largest private sector employer of Indigenous Canadians and a major supporter of Indigenous businesses. Thus, we’re a powerful partner in Indigenous economic reconciliation.
If railways are the arteries of our trading nation, then the mining industry is the lifeblood upon which they depend. Accounting for 20 per cent or one-fifth of the value of Canadian exports and over half of the total rail freight revenue generated each year, the mining industry is the single largest customer group of Canada’s railways.
Despite this, we are continually facing an unlevel playing field in the rail freight market which manifests as significant and perennial service failures. The reason is that the Canada Transportation Act is an imperfect surrogate for competition in a monopoly marketplace. Many shippers are captive to one railway and beholden to railway market power as a result.
It’s crucial to get Bill C-49 right on this third legislative attempt in four years.
I would like to address two key issues in order of priority. The first is data transparency. Enhancing railway data transparency is not only consistent with the government’s commitment to data transparency and evidence-based policy but also critical to improving the functionality of the rail freight market. Robust disclosure would inform policy-making, improve railway-shipper relations, and avoid unnecessary and costly disputes. All parties having a clear picture of respective capacity and limitations would better compel them to achieve optimal and workable outcomes.
While Bill C-49 proposes positive measures to address the service level data deficiencies, MAC is concerned that, as written, certain transparency provisions will not lead to meaningful data on supply chain performance. Of specific concern is the requirement in subsection 77(2), a measure that would align the Canadian and U.S. systems.
Our concern is that the U.S. model is based on internal railway data that is only partially reported. It doesn’t represent shipments accurately or completely. Further, the U.S. model was created decades ago when large scale data storage and transmission were not technologically possible. With the data storage capabilities that exist today, there is no rationale for such a restriction in either the waybill system or LHI outlined in section 76 or for system performance outlined in section 77.
To ensure the appropriate level of data granularity and to ensure the proposed reflects Canada’s unique rail freight context, MAC recommends an amendment that would require all waybills to be provided by the railways rather than the limited reporting currently outlined.
On shipper right to an agency costing determination, while MAC is supportive of Bill C-49 improvements to costing data collection and processing by the agency, we raise one minor but important consideration related to final offer arbitration. Currently, arbitrators request an agency costing determination only when the two parties to the arbitration agree to make the request. However, railway companies habitually decline to cooperate with shippers for this request, thus limiting the ability of the parties involved to be equally informed.
We know of no legitimate rationale for a railway to decline an agency costing determination under FOA other than to deliberately frustrate the process. To ensure that the right level of transparency and accessibility is struck so that remedies under the act are meaningful and usable, MAC recommends that shippers be granted the right to an agency costing determination.
On level of service obligations, in subsection 116(1.2) Bill C-49 would require the agency to determine whether a railway company is fulfilling its service obligations by taking into account the railway company’s and the shipper’s operational requirements and restrictions. Identical language is also proposed to govern how an arbitrator oversees level of service arbitrations.
MAC members are concerned that the proposed language for determining whether a railway has fulfilled its service obligations does not reflect the reality of Canada’s monopolistic rail freight market. The quality of service that a railway company offers is influenced by how it allocates its resources.
These decisions include purchasing assets such as locomotives, staffing, crews and construction. As those restrictions are determined solely by the rail carrier, their consideration in fulfillment of service obligations leaves the shipper structurally disadvantaged. The goal of the agency should be facilitating the correct decision based on the facts, not a balanced decision between the parties.
To address this challenge, MAC recommends either striking out this requirement or making the restrictions themselves subject to a separate review.
To conclude, the amendments we are seeking are modest and highly consistent with the proposed legislative package. They continue to allow the railways to be profitable, to have operational flexibility and to be material enough to make a critical difference if not taken into account.
Thank you for your time. I would be pleased to answer any questions that you may have.
Brad Johnston, General Manager, Logistics, Teck Resources Limited: For those of you who are not aware, Teck is a diversified resource company that employs 8,000 people across the country. Teck is Canada’s single largest rail user, with nearly $9 billion in exports to Asia and other markets in 2017. That is why it is important to Teck that Bill C-49 enables a transparent, fair and safe rail freight regime that meets the needs of all users.
Throughout the consultation process for developing this bill, Teck has advanced balanced solutions to address the significant rail service issues that our sector continues to experience. To put this in perspective, Teck’s experience is that direct costs attributable to rail service failures have been as high as $200 million over various periods in the past decade. These are added failures and costs that our global competitors simply do not face.
To address these failures, Teck’s recommended solutions have included the following: the need for a meaningful, granular and accessible rail freight data regime; the definition of adequate and suitable service that acknowledges the unique monopoly context in which we operate; and allowing for real competition in Canada’s rail freight market by extending running rights to all persons including shippers.
While disappointed that the introduction of competition is not addressed in the bill, we are strongly encouraged by the vision that Bill C-49 represents. It is our view, however, that to fully realize the bill’s intent some minor adjustments are required.
Regarding the ability of the agency to collect and process railway costing data, Teck believes that the bill will significantly improve the agency’s ability to collect and process this data, enabling it to arrive at costing determinations to ensure that the rates shippers pay are fair and justifiable.
This improvement is critical in maintaining the integrity of final offer arbitration as a shipper remedy, which helps shippers to deal with the railway’s monopoly and market power. However, we are concerned that the shipper will not have access to that improved costing determination, which then defeats its purpose.
Under the current FOA model it is the practice of an arbitrator to request an agency costing determination only when the railway and shipper agree to that request. However, we have witnessed the railways routinely declining to cooperate with shippers in agreeing to make such request. This is a further exercise of the railways’ monopoly power within the arbitration itself, and the legislation ought to bar such behaviour.
For FOA, Teck recommends that shippers be given access to agency costing determinations that are improved by this legislation and asks that Bill C-49 be amended accordingly.
On transparency, in terms of our recommended solution Bill C-49 goes a long way in addressing the service level data deficiencies in our national rail transportation system. However, we are concerned that, as written, certain transparency provisions will not provide intended results.
The relied upon U.S. model is flawed and does not provide the level of reliability, granularity or transparency required for the Canadian context. Accordingly, Teck recommends simple and clear amendments to relevant sections of the act to ensure that all data is provided by the railways rather than just a sample set thereof and that the transparency of that data is apparent to all users.
On level of services, we are concerned that the language offered in Bill C-49 for determining whether a railway has fulfilled its service obligations does not reflect the reality of the railway-shipper imbalance. Bill C-49 would require the agency to determine whether a railway company is fulfilling its service obligations by taking into account the railway company and shipper’s operational requirements and restrictions.
In connection with the service that a railway may offer its customers, the railway decides the assets, labour or infrastructure that it will provide for service, and any of these elements could result in one or more restrictions. As rail carriers determine these restrictions unilaterally, it is not appropriate for them to become a goal post in an agency determination. Teck recommends either to strike out the provision or to make the restrictions themselves subject to review.
In conclusion, getting this bill’s design right with a few simple amendments is vital to enabling a world class rail freight regime in Canada. Teck believes this is the opportunity to set a new course for the benefit of all Canadians.
Thank you, and I look forward to your questions.
Clyde Graham, Senior Vice President, Fertilizer Canada: Fertilizer Canada represents manufacturers and wholesale and retail distributors of potash, nitrogen phosphate, sulphur fertilizer and related products. Put simply, fertilizer is food for plants.
Collectively, our members employ more than 12,000 Canadians and contribute over $12 billion annually to the Canadian economy through advanced manufacturing, mining and distribution facilities nationwide.
Our association includes companies such as Koch Fertilizer Canada, the Mosaic company, Yara Canada, K+S, CF Industries, Sherritt, Orca and a new company that is an amalgamation, Nutrien. Our association is committed to the continued growth of the fertilizer sector through innovative research, programming and advocacy.
Canada is one of the world’s leading producers of fertilizer. It is our products that help farmers to produce bountiful, sustainable food in Canada, the United States and in more than 70 countriesworldwide.
We therefore play a central role in Canada’s agri-food industry, an innovative industry identified by the Prime Minister’s Advisory Council on Economic Growth as a key potential growth area for the Canadian economy.
To meet the demand of the world’s farmers who rely heavily on the railway system to move our products along our trade and transportation corridors to U.S., international markets and markets within Canada, we are a proud partner of the Canadian rail system. A reliance on rail is so extensive that our membership comprises one of the largest customer groups by volume for CN and CP.
As key stakeholders, we are encouraged to be working with the government that has demonstrated commitment to modernizing Canada’s transport system and capacity. We commend the legislation’s objectives regarding freight rail. We are supportive of many of the proposed changes, including those clarifying third party liability, reinforcing rail safety, promoting competitiveness and increasing data transparency.
In an increasingly globalized world, we appreciate the government’s recognition that a nuanced approach to freight rail is necessary to meet the needs of the Canadian economy. However, we make the following recommendations, understanding that the freight rail system should evolve to ensure that management of Canadian railways does not impair Canadian jobs, trade or competition.
I would like to begin by discussing the exclusions for long-haul interswitching. Measures proposed in the legislation would exclude certain materials and certain regions from accessing the benefits of long-haul interswitching. This is a serious concern for our members.
Canada has longed adhered to the common carrier principle as a foundation of the rail system and the economy. This principle prevents shipping companies from discriminating against a particular type of good. It is what has kept the Canadian economy in motion despite our vast distances.
Amending the legislation to exclude certain materials and regions from long-haul interswitching will have the negative effect of eroding the common carrier principle, a concerning precedent. As most of our members operate in communities and regions captive to rail, denying access to long-haul interswitching solely based on their location also increases their cost of business.
From a safety perspective, I would also like to draw attention to the measures excluding toxic inhalation hazard material from long-haul interswitching. Our product in question is anhydrous ammonia. It is the key building block of nitrogen fertilizer and is directly applied by many farmers to their fields to grow wheat, canola and other key crops in the Canadian economy. To date, there is no evidence to suggest that this material is not safely and securely transported by rail. Our members take the transportation of anhydrous ammonia very seriously.
In support of that record, I would say that our members use purpose-built rail cars of extremely safe high standards for the handling of our products. Our members invest significantly in the insurance coverage and safety measures necessary to safeguard the transportation of our products.
I want to emphasize that our members already pay significantly higher freight rates to transport anhydrous ammonia, which is considered a dangerous good, in some cases up to 400 per cent higher than for other goods.
Our association proactively develops codes of practice and educational resources for our supply chain and for first responders in case of incident to support the safe handling of fertilizer.
Future tragedies such as Lac-Mégantic must never happen again. However, in so doing, it is critical that we approach the transportation of dangerous goods through responsible, evidence-based policy decisions. I reiterate that there are not and have not been any safety reasons to discriminate against the shipment of toxic inhalation material by long-haul interswitching.
Our members already pay the premium rates I have described, which compensate the railways for their liability and any additional handling costs. Any long-haul interswitching rates established by the agency will reflect this and adequately compensate the railways.
Fertilizer Canada’s members are disappointed in the government’s decision to sunset extended interswitching up to 160 kilometres. We have found 160-kilometre interswitching has strengthened competition over great distances as Transport Canada has admitted.
Since Western Canada’s freight rail landscape has not changed in any fundamental way since 160-kilometre interswitching regulations were introduced in 2014, we are disappointed by the government’s decision to sunset extended interswitching. The Canadian fertilizer sector is a proud partner of Canada’s rail system. Together, we support global competitiveness in the agri-food sector through trade and transportation.
Our $12 billion industry and the 12,000 jobsthat depend on it are parts of a healthy modernized competitive rail system to survive and thrive. Ensuring the products are delivered to farmers safely and securely is of paramount importance to us, and we have a long, proud record of success in that regard.
We are very supportive of much of this bill and what it proposes and commend its intentions. However, captive shippers need to benefit from our national railway infrastructure. It’s great to see the government act to support them.
We do believe, though, that more can be done, which is why we strongly encourage members of the committee to consider our recommendations. We believe they improve Bill C-49 through a considered, evidence-based policy approach.
Thank you very much, and we will be happy to take questions.
Senator Plett: I think the chair scared you into thinking you were all going to get cut off if you didn’t get through your presentations in 30 seconds. It was difficult keeping up with some of what you were reading, especially not having seen the notes beforehand which, of course, is my fault.
I clearly understand or I think I understand the interswitching problem. I am very supportive of the problems there. I will ask my question a little differently tonight.
I would like to hear from all four of you, and I think I know what the answer of Fertilizer Canada will be. In laymen’s terms, as opposed to what we have here, if there is one thing that you could change about the bill to improve the bill in 60 seconds or less, what would that be? At the expense of not even having this bill done by June or May, should we make every effort and take that risk by fighting hard for the improvements you want to make to the bill?
Again, I am certainly very supportive of the interswitching. I was very supportive of the sunset clause. We spoke to the minister about it and will again. Could you, in 60 seconds or less, give us your number one priority?
Mr. Neuheimer: Thanks so much for that great question. Mine would be my second recommendation: Give the agency the power to act on its own.
If it was hearing things about the supply chain not functioning the way that we ideally all want it to function as Canadians, they would have the power to look into that.
This is a recommendation that David Emerson made in his review. It was an important recommendation that he made to the government. I don’t understand why the government did not agree with his recommendation. We certainly support his recommendation.
The last thing I would add is that this type of power already exists in the U.S. The equivalent of our agency, The Surface Transportation Board of the United States of America already has this capacity to act. Why are we so hesitant to give our agency the same power to act to ensure the supply chain works?
I know there is a fear the agency will suddenly start reinventing policy, but I don’t think that will be the case. I think the agency has its role and Transport Canada clearly has its role. Transport Canada sets the policy and the agency makes sure the policy is working the way it’s supposed to.
Mr. Johnston: I don’t have to hesitate at all. The one thing we would like to change is the right to have a costing determination under FOA.
FOA, or final offer arbitration, for captive shippers such as Teck is the one remedy we have available to us on rate. Speaking plainly, the efforts of the railways to dilute the effectiveness of that remedy is where we’re asking for your support.
To answer the second part of your question, our preference would be for you to delay and get that right rather than to rush the bill through, very much so.
Mr. Marshall: MAC’s priority recommendation would be giving a shipper a right to a costing assessment during an FOA process.
Characteristic of the two previous pieces of legislation trying to address systemic issues in the rail freight market in Canada has been going 90 per cent of the way and not taking the final step. That final step would make all the difference. Not going that final step is why we’re here again for the third time in five years talking about the same issues and systemic problems.
You have a real opportunity at this time to fix some of the challenges that we face. FOA measures in the bill increases costing data collected by the agency. It gives it more levers. That last 10 per cent is allowing that information to inform the decision-making process of an FOA.
Please go the distance. Get it right this time. We would all, I think, prefer not to be back here for the fourth time in seven years dealing with the same issues.
Mr. Graham: The simple answer is interswitching. The bill should not encourage, allow or assist the railways in discriminating against certain classes of goods or people in certain regions of the country. I think that’s fundamental to the nature of Canada. That should not occur.
Regarding delay, if the government and parliament determine that something should occur, then there’s no reason for significant delay. However, if delay is necessary to get the bill right, I think parliament should get it right rather than quick.
Senator Plett: If there’s time for a second round I would like to go on it.
Senator Dawson: Getting it quick is already too late because it has been debated in house. We have four different amendments and we’ve had more requests for amendments from other groups. Somewhere down the road we will have to have a balanced bill.
You always have to understand that if we accept your amendments, somebody else might bring in an amendment that goes against your particular interest because they lobbied for it.
I recommend two things to you: Find yourself a sponsor and get some real wording down on what the amendment should be. Making the request does not make it an amendment to the bill.
Don’t get me wrong. I have amended bills in the past, and I feel very free as a senator to amend bills from the House of Commons. I also amend them knowing that when we send them back to the House of Commons, what you think will solve the problem may go back there and they will refuse it. They refused it in October. They’ll refuse it again and we’ll be delaying the bill without having made any progress.
Since none of you want it to pass quickly, be sure you get those amendments right because we don’t want to be in that situation. There is support for those amendments.
Trust me, I think the bill is balanced. I would rather have it pass as it is. Whether or not I like it, if the majority of members support an amendment we’ll live with it. I want you to be sure that you understand you have to go out there and lobby to ensure that change is passed if it goes back to the House of Commons.
It’s not quick. We’re not rushing anything. It has been debated and it will continue to be debated for weeks. Would you rather it die in June or would you rather it pass with flaws?
Mr. Marshall: I’ll answer that question in the affirmative or in the positive. We would like to see the bill pass in a way that addresses the issues we continually face.
From a longer term advocacy standpoint, as I reiterated to Senator Plett’s question, I firmly believe that if we do not address these systemic issues, for me that’s great. I’m an advocate on behalf of the industry. I’ll have a lot more work in transportation space coming down the line.
With respect to the opportunity we have at this point, there’s the immediate space of this bill but then there is the long-term systemic issues. If we don’t address those, we will be back at this again. I think that’s something we would like to put to bed.
Senator Dawson: Whether or not this bill is passed there will be other bills in the future anyway, so some of these issues can be addressed.
Senator Gagné: I would like to come back to the question of the agency’s investigative powers, Mr. Neuheimer.
You mentioned in your presentation that currently the agency can only act in response to formal complaint and that it’s problematic. You also mentioned that the fear of retaliation discourages shippers from initiating the complaint process. When a shipper does file a complaint, the agency is limited to addressing that particular shipper’s issues.
Can you elaborate on the question of retaliation? Have you seen these actual situations? If so, are they numerous and recurrent?
Mr. Neuheimer: First, the bottom of page 2 of our submission talks about the railway being one of our most important partners. I wanted to start with that positive note.
We’re collaborating with them as hard as we can to make things work in the real world. One of the big challenges right now is getting products into the Port of Vancouver and basically beyond. It’s something we’re directly in dialogue with them on. We’re hoping some of the government’s infrastructure money will end up being invested there to resolve that whole situation.
It’s really the economic future of Canada that is at stake when you look at whether or not these things can be made to work. The whole issue of retaliation is an extremely sensitive issue. It’s one of the reasons the association gets to speak on these issues as opposed to private companies.
This is a delicate question to answer, but there are different approaches to advocacy on this issue. If you look at the history of advocacy when it comes to challenges shippers face with railways, I think the successful shippers are very careful with the representations and the comments that they make because they want to be able to continue to work with the railways. They don’t want to end up in a combative situation with the railways.
To go back to the thought about the agency having the power to look at things in the supply chain that don’t seem to be functioning correctly eliminates that uncomfortable situation of a number of private companies having to put their hand up and saying, “I’m getting beat up pretty bad here. I can’t get all my stuff to the global marketplace. What can you about it?”
If the agency has the power to look at a situation like that, it would be a real benefit. It would certainly remove a lot of the potential opportunity for a combative type scenario, if I can say that.
This is why we’re asking for what we’re asking for when it comes to that. Hopefully, that answers your question.
Senator Gagné: Fair enough.
Senator Mitchell: I am sympathetic to what Senator Dawson said. To some extent it seems you’re not entirely unhappy with what is in the bill. You’re advocating for something more than what is in the bill.
How much of what is in the bill do you like? How much of what is in the bill would actually preclude adding on later things that haven’t yet been achieved in the particular bill? You have to understand that if it lasts too long and we have prorogation, the whole thing shuts down and we start the whole process again.
Senator Dawson’s point is well taken. One way or the other, we’re going to be doing transportation legislation for a long time. You’re not going to be out of work, Mr. Marshall.
Mr. Marshall: I guess that question was for me.
Senator Mitchell: More or less. It was really a statement.
Mr. Marshall: Fair enough. I can’t underscore enough the notion of a monopoly market context sort of being a zero sum game. If you’re a shipper and you don’t have any other opportunities to get your product to market, you only have so many recourses available to you.
Everybody shares a frustration sometimes with Rogers, Bell or Telus. It’s not like if you were ordering 100 channels and they only gave you 65 channels. You could say, “Okay,m that’s fine. I’ll switch.” You can’t switch in the rail freight market when you’re captive. There is nowhere else to go.
We need to address the issues that prevent companies from growing, companies that create wealth, support jobs, support families, support Canadians and grow the Canadian economy. The systemic barriers prevent those companies from thriving, and we need to address them.
I am less concerned about my own disposition with respect to advocacy and opportunities going forward. I would like to focus the attention of the committee and the group and underscore we’ve all come forward with amendments. MAC is part of a broader coalition of rail shippers. I am aware of many of the organizations that participate in the group, all wanting amendments to this bill of one form or another.
There’s only one sector I am aware of that’s scarce on amendments and fearing the bill will collapse. Collectively, when I look at the scan of broader stakeholders to this issue, the majority of those want to see the bill changed. They want some aspect of that bill to change before it passes. From where I sit, a loud cross-sector of input is coming to this group. I think that’s important to take into account.
Just to follow up your point, Senator Dawson, the three associations before you today have co-signed a letter, along with others, about two recommendations in particular. One is FOA costing assessment and the other is investigative powers. There is legal language in that bill. I believe the letter has been submitted to this committee, but I’ll make sure it’s submitted again.
We’re doing our best, recognizing that it’s not an easy job to assess a myriad of recommendations. We are doing our best to try and prioritize issues we think are consistent with the direction the government has decided to go in this area and present those as reasonable opportunities for improvement. That’s the attitude we’re taking.
We’re trying to take disparate issues and package them in an acceptable, comprehensive way before coming to you with 50 different proposals that go seven ways from Sunday.
The Chair: Were there amendments offered up in house, in committee?
Mr. Marshall: I believe so. The two amendments in particular that I am aware of were a modest extension or reduction of the geographical limitation of long-haul interswitching access, one around the city of Montreal, one a GPS point around Kamloops, and the other which was not a substantial amendment but more of a process amendment around data, whereby the terms or the periods of time for railway data to be released were shortened. Those were the two amendments I am aware of. There may be others.
Mr. Neuheimer: To add to Mr. Marshall’s list, the final offer arbitration mechanism can now be applicable for up to two years. That’s up from one year. That’s another positive change in addition to the ones that Mr. Marshall cited.
When you step back and look at these, these are incremental changes. This is a game of incrementalism when you start looking at those individual aspects.
To go back to the agency, the Minister of Justice makes the laws in Canada. There are other powers out there to investigate if those laws are not being met. Why not let the agency play that role as another additional incremental change being made to the system to make sure it works the way it works?
There were some positive changes made, but if you are to spend time reviewing the bill now, again at this point, one of the reasons we are here is to encourage you to make another one or two incremental changes to make it better while you are at it.
The Chair: Almost all the shippers are saying the same story: We moved forward but we never really got there. In other words, the problem isn’t solved. Why do you think that is?
It seems to me every one of you are saying, and other groups are saying it too, that we just never get there. Why would that be? When you have monopolies it’s a big problem. We understand that. The railroads are the railroads.
Mr. Neuheimer: You used the M word. I won’t because I am trying to be collaborative with my railway partners.
Just to put it in context for our sector, our members are typically operating in scenarios where they are hundreds of kilometres away from the next competing railroad. On the interswitching, which is not a priority for us at this point in our presentation tonight, the concept is fantastic. The reality of how it rolls out in a bill for us to address the scenario I have described for you is severely limited because there are significant exemptions to the way the tool will work.
These are important things for you to factor into your consideration at this point in terms of what, if anything, you may be able to do to change what’s already in this bill and ideally make it better for the interests of all Canadians.
Mr. Marshall: I would just build on that. It’s the same type of perspective with data. I come back to 90 per cent but then that final step.
With respect to data, why miss out on an opportunity to demonstrate real leadership with respect to transparency and accountability by bringing the Canadian rail data transparency system up to a level equitable with the U.S., which was created back when people were indexing libraries with cue cards?
Context is really important. I believe there is a tremendous opportunity for leadership. We can’t fear the change that is needed to improve the circumstances we face.
I have a very simple answer to your questions as to why we are continually facing these issues. I believe it’s for two reasons. One is that it’s a very difficult to understand a monopoly market. The default position of many decision-makers is that we need to have a balanced bill between shippers and railways.
The reality is that the marketplace isn’t balanced between shippers and railways, to begin with. If every piece of legislation that comes forward here is undertaken on the basis of we need to have a fair, equitably based, balanced piece of legislation, that will maintain the imbalance in the marketplace.
Do you understand that?
The Chair: I got it.
Senator Boisvenu: Gentlemen, thank you for being with us and for your support of the Canadian economy; you represent several industries.
Like Senator Tkachuk, I have a thousand questions for you in order to understand the problem. When the government intervenes in a matter like yours, it means that you don’t get along with each other. Have things changed over the last five years in terms of the business relationship between shippers and carriers, or has it been set in stone for a decade and things aren’t budging?
Mr. Johnston: I’ll speak to that. There’s no doubt there have been peripheral changes in the relationship you describe but, speaking as a shipper, the fundamentals of our relationship with each of the class 1 railways would remain the same.
We’re a captive shipper and we’re subject to a monopoly. That important point remains the same. Nothing is going to change that. There are such high barriers to new entrants, I think we can all agree that we will not have another transcontinental railway in Canada in the next 10 years.
When we are engaging in this effort we speak around it, but what are we trying to do? We are not willing to introduce real competition. We are trying to bring in proxies for competition, or alternatively we are trying to enhance the remedies that exist to try and support shippers in this imbalanced relationship between the shipper and the railway.
In the case of Teck, once again, we have used FOA or final offer arbitration. It is the one remedy available to us as a captive shipper on rate. It is very important to us. To maintain that as a robust remedy is very important for Teck, for the mining industry and for shippers in general. It’s why it’s the single most important thing I’m talking about this evening, and it’s why we’re asking for what we are asking for.
The remedy is being diluted because the railways are not cooperating in seeking an agency costing determination. It’s not surprising that they’re doing that. It’s not that their self-interest to do so. We’re asking you to help us maintain FOA as the sole shipper remedy for rates for captive shippers such as Teck.
Senator Boisvenu: Does this monopoly exist because of a lack of infrastructure? Is it because our rail infrastructure in Canada no longer meets the needs of the 30,000 or 40,000 shippers?
Mr. Johnston: No, I would say that is not the case. It’s not a question of infrastructure. It’s a question of captivity. Our five mines in the southeast corner of the province of British Columbia are served by one railway. There is no doubt the infrastructure that serves them is safe, secure and handles traffic. Quite certainly, there will never be competition like another rail carrier servicing those mines. It’s just not possible.
The infrastructure that’s there is satisfactory, but because we are captive we see ourselves in the predicament from time to time that we do.
Senator Bovey: The discussion has been pretty fulsome, but I will go in a slightly different direction. Mr. Marshall, you mentioned a third issue, the issue of level of service obligations. You said that MAC recommends either striking out this requirement or making the restrictions themselves subject to a separate review.
Can you elaborate on that? From your perspective, how does that fit in with the other two issues we have been discussing? If this requirement were to be struck, what would the impact be?
When you say making the restrictions themselves subject to a separate review, does that become a regulation rather than part of the legislation?
Mr. Marshall: Sure, I’ll begin. I may defer to Mr. Johnston on this as well because he’s very knowledgeable.
Senator Bovey: I was just quoting you.
Mr. Marshall: Fair enough. My understanding is that some of the language in the level of service provisions text requires that the business requirements of railways are taken into account in the process.
The concern MAC has is that a railway’s business determinations are 100 per cent in its own purview. A railway will determine how much capacity it will maintain. A railway will determine how many crews it will employ. A railway will determine how many cars it operates and how many locomotives it operates. It will determine all these parameters of its business.
The Canadian Transportation Agency has recognized how railways have operated historically, the sweating of assets and the Louis Dreyfus decision. As its modus operandi railways maintain just enough capacity to maximize profit. They will do so at the expense of the service their shippers are requesting, or the service their shippers need to get product to market.
We’re concerned that taking those unilateral railway decisions into account distorts what we think is an appropriate outcome from that process. I will pass it over to Mr. Johnston, to add anything he wants to add to that.
Mr. Johnston: I will read a bit of the language proposed under the arbitration on level of service at subsection 169.37(3). To a shipper like Teck, it poses a challenge.
The arbitrator shall establish a term with respect to an amount described in paragraph 169.31(1)(c.1). . .that is balanced between the shipper and the railway company.
It’s Teck’s view that such is an inappropriate piece of language to be in legislation or instruction to an arbitrator.
The arbitrator should be charged with arriving at the right outcome based on the evidence put forth by each party to the arbitration. That might not necessarily be a balanced decision. It could favour either the shipper or sometimes the railway.
Instructing an arbitrator to have a balanced decision in our view is not appropriate. It’s part of the level of service language that we would like to be amended or struck from the legislation.
Senator Mercer: Mr. Chair, I have been on this committee for 15 years, although not concurrently. That means I am currently the longest serving member of this committee currently, although you have been on it a couple of times, not concurrently.
For the past 15 years I have watched legislation, I have never seen a bill where more amendments have been proposed from as many different groups across the country. If this bill is to collapse, and the weight of amendments might just do that, then let’s be clear that the blame lies squarely on the Government of Canada for producing this complicated bill. If it were divided into five different pieces, I would suggest that three of those pieces would be law by now, and we would be sitting here debating the other two.
That being my political statement for tonight, I am concerned about a couple of things. We will continue to talk about delays. I don’t object to delays, but I also have in the back of my mind a bunch of unemployed workers in Hamilton, Ontario, who were told by at least one railroad that once this legislation is passed they will be ordering new hopper cars and new rail cars for their rail lines. There are jobs at stake for those people. I’m concerned about those people, but I’m also concerned about all the complications you have added to this.
I guess my frustration is that I don’t know where we go. Do we start piling on the amendments, and the government will suddenly scream or the House of Commons will scream if we send it to them? We’d have to tear it up and start all over again, and still those people in Hamilton who need those good jobs will not have them. That really bothers me.
What’s the solution so that we can speed this up collectively and get all of these amendments? Senator Dawson and I had a meeting earlier with some people who were to be witnesses here. They were proposing amendments that I hadn’t heard of yet. We’re months into this debate, and we’re still getting new amendments. You brought new amendments again tonight, so I’m not sure if the witnesses tomorrow or next week will have more amendments.
We’re going to die under the weight of these amendments. Does anyone have a suggestion as to how to get out of this mess?
Mr. Graham: If I could offer a suggestion, humbly I might say, part of the struggle parliament has had with this bill is the issue of balance. When there’s the debate between shippers and the railways, there is in the sense in the government that if the shippers get a perceived advantage in one part of the legislation, then the railways must get some balancing activity. That puts both houses of parliament in the position of trying to weigh this delicate balance. There’s a sense it must be preserved, or the transportation system will tilt one way or the other.
I would suggest to senators that what you should do is review the proposals that have come forward to you from the issue of fairness. When you look at the FOA, and things like that, is the system fair? We would submit in terms of interswitching, is it fair to discriminate against certain products and certain regions of the country for reasons that we can’t see as being fact based or evidence based?
Perhaps the job of the house, as you were talking about, is looking at different people coming and lobbying and balance, but I would suggest that the Senate’s role is to take that evaluation from a point of fairness.
Are some of the provisions in the bill unfair and are there proposals being brought forward by shippers that increase fairness for people who depend on the rail system?
Mr. Marshall: I would like to add a bit of context.
I would love those folks in Hamilton to get building those rail cars. I would love some of my members not to incur $200 million in rail service related freight losses. I would also love for some of my members not to have to downscale their plant operations because they have limited storage for certain materials. Unless they get cars coming in to get that material moving, they have to stop production, and that has implications for their workers.
In the longer view what would be best is if that rail system put those workers in Hamilton back to work because there is a greater volume of goods moving on the Canadian rail freight network. There is more production. There are more minerals. There is more grain. There is more fertilizer and there are more forest products. That’s how I would love to see those workers moving forward in Hamilton. I think the way to do that is to fix some of the systemic issues.
The final point that I would make is that I appreciate that this is not an easy thing to wade through. That’s one of the reasons we have taken the many interesting issues that we see in this bill and boiled them down as small as we possibly can, and sought to co-sign letters that identify issues of priority collectively for you to consider.
We are really trying to make this as concise a process as we can, even though we do appreciate it’s not an easy one.
Senator Mercer: This is my final comment because we’re running short of time. To really earn my keep here this evening, I have to go back. Everyone has talked about shipping things through the Port of Vancouver. I want to encourage you to consider shipping things through the Port of Halifax because I want you to remember that we have not had a labour stoppage in the Port of Halifax since 1972. Some people in the audience here weren’t born in 1972.
We are also closer by sea through Suez to a lot of the markets that you’re shipping to. I would like you to take away as my recommendation to you to consider shipping things through the Port of Halifax. Where the Port of Vancouver continues to have labour problems, the Port of Halifax does not. We are open to business.
Mr. Marshall: You help us get products to the port, we’ll move it there.
Senator Galvez: I want to move forward with the discussion in a positive and constructive way. It is true that we have heard a lot of witnesses. I wouldn’t say that there are a lot of amendments, but there are four things that keep coming. There are, of course, the ones on transparency, independence of the agency, interswitching and cameras for the train. These are the four main things we have been hearing, so it’s not a tonne of amendments.
I am thinking you know better your counterparts. For example, on the issue of transparency, as you say it’s a monopoly or a duopoly. Usually, the issue of transparency is important and it’s a friction when there is a lot of competition, but when there is only one or two I don’t see that transparency should be an issue.
According to you these will be the obstacles, and you know your counterparts. For example, on the independence of the agency I know that roles are very different. The role of Transport Canada is the policy and the agency is actually mediating, so that shouldn’t be a big problem.
You’re aware there are other issues that your counterparts in the rail industry can come up with. I am asking you to help me help you.
Mr. Johnston: I hope you can. I am going to speak to your point as well as that of the previous senator. What would really help us? What is it that we’re after?
If you look through this lens at everything we’re asking for, the principle is that competition works. We’re asking for these different things in this monopoly. You can call it a market, but I think that is a bit misleading because there is no market. We’re subject to a monopoly whether it’s data or transparency or service. These are all things that are part of a normally functioning market that people like ourselves at Teck or other shippers suffer from time to time.
When we ask for transparency, that is what you get in a normally functioning market. That’s why it’s important to us. When you have six or eight choices you can choose from, the market looks after service, price, costs and efficiency.
The changes on data are about transparency because that’s what you have in a normally functioning market. You don’t need that costing determination in a competitive market, but in a monopoly market our submission is that you do.
To help us, please look at it through the lens of what would bring real competition or be a proxy for competition. That is what we’re asking for. I hope that answers your question.
Mr. Marshall: I have one follow-up. I think you asked what prevented these things from happening. In another way of saying the absence of market dynamics, it’s our experience that unless the railways are compelled to do something against their own interests, they’re not very likely to do that.
That’s the reason why we don’t have an abundance of transparency. That’s the reason why we don’t have as constructive working relationships as we would like on terms that we would deem to be more market-like or more transparent. It’s because they’re not required to do that.
Mr. Neuheimer: Very quickly, Senator Galvez, you have really touched on a key point in terms of transparency. For me, both the things we’re asking for in our submission, whether it’s that the agency provides the costing information at the beginning of the FOA process or the agency has the power to investigate things on its own, I think both of these would actually enhance the transparency for us as shippers dealing with the rail carrier. I think both those recommendations would help.
To the question of Senator Mercer and the point Senator Dawson was making earlier, I can tell you we have spent many hours trying to come to a consensus on what the shippers want. Unfortunately, it’s a very imperfect world. In our world of shippers there are many different sectors with different priorities, but I think there are some recurring themes that you’ve seen some tonight. We will follow up and send you the letter that six of the associations, including Fertilizer, Mining, ourselves, Chemistry and a few others, signed on to so you can see the two points we are highlighting there in common.
On review of the bill hopefully you will agree there is at least one common theme out there in the submissions you’ve heard that makes sense to you and you will go back to the house with this bill. Hopefully the house agrees with you and sees fit to include whatever that is to try to make it better.
There will be no magic bullet solution. As I said earlier, the history of this legislation and work is incrementalism. We have to do as much as we can to go as far as we can in this bill, realizing that we will not solve everything this time around; but we can certainly do our best to go as far as we can.
The Chair: We circulated those documents. This has been a great session. You have been very informative and compelling. We enjoyed it very much. Thank you very much, witnesses.
We are continuing our study with the next panel. I would like to welcome Chris Roney, Past President, Engineers Canada; Vee Kachroo, Senior Vice President of Operations, Canpotex Limited; James Clements, Vice President for Strategic Planning and Transportation Services, Canadian Pacific; and Jeff Ellis, Chief Legal Officer and Corporate Secretary, Canadian Pacific.
Thank you for attending our meeting. I will invite Mr. Roney to start, and then we will go to Mr. Kachroo and Mr. Clements.
Chris Roney, Past President, Engineers Canada: Our testimony today pertains directly to section 11 of the Railway Safety Act, specifically in relation to the design, build and maintenance stages of engineering work in Canada.
There are two recommendations I will discuss. The first is that licensed professional engineers be involved in the entire life cycle of railway infrastructure. Licensed engineers are required to meet high standards of knowledge, skill and experience, and are bound by a stringent code of ethical conduct.
Most important, they are accountable to the public for their work. In fact, professional engineers, unlike most of the other learned professions, are required to place the public welfare above all else, even above their own employers. This paramount duty includes the safeguarding of life, health, property, economic interest and the environment. It’s one of the key things that sets a licensed engineer apart from others who may be charged with safeguarding Canada’s infrastructure.
Key decisions and directions must be made on the basis of unbiased, sound engineering advice and expertise that balance the costs with the long-term benefits, while never compromising on public welfare. This is why it’s so critical that professional engineers be at the table, guiding the process throughout the entire life cycle of rail projects.
Recent events have painfully demonstrated the importance of ensuring that we have the right people with the right knowledge and skills who are both unbiased and accountable for the public good whenever our country’s infrastructure is concerned. It’s also essential in ensuring that we have resilient rail infrastructure.
This brings me to my second recommendation that climate vulnerability assessments be carried out on Canada’s rail infrastructure and that it be adapted to the potential risks associated with the changing climate. Resiliency in civil infrastructure is the driving force behind productive societies, stable industries and increased public confidence.
However, Canada’s infrastructure report card noted that much of our current infrastructure is vulnerable to the effects of extreme weather. This presents an avoidable risk, not only to public safety but also to the country’s economy.
For example, floods and record high water flows severely damaged the Hudson Bay Railway line this past May. This event damaged five bridges, washed away 19 sections of track bed, and required a significant number bridges and culverts to be reassessed. This specific rail line transports food, supplies and people to the remote community of Churchill, which is a popular tourist destination. The rail service disruptions have caused goods, services and people to resort to air transportation at great expense.
With objective climate vulnerability assessments, infrastructure owners, managers and others can gain an early awareness of the potential impacts that extreme weather events could have on the infrastructure serving communities across the country, and they can plan and build accordingly.
Engineers Canada, in collaboration with Natural Resources Canada, has developed a climate risk assessment tool that can greatly enhance the resilience of infrastructure and decrease the severity of climate impacts on individual and business economic interests.
The public infrastructure engineering vulnerability committee protocol, known as PIEVC, gives engineers, as well as others, a tool to design and construct railway infrastructure that will withstand our rapidly changing climate.
The protocol has been applied to infrastructure systems more than 40 times already in Canada and three times internationally. We strongly encourage the federal government to adopt assessment and prevention tools such as PIEVC to be a condition for funding approvals, acceptance of environmental impact assessments, and approving projects that involve rehabilitation, maintenance and decommissioning of existing infrastructure. This will contribute to the safeguarding of the environment, the economy and public safety.
Mr. Chair, thank you for allowing Engineers Canada to present our recommendations to the committee today. I assure you that our profession is ready and willing to ensure that Canada’s railway system is resilient, safe and continues to be an enabler of Canada’s economy.
The Chair: Did translation get all that? You spoke very quickly.
Mr. Roney: I was told I had four minutes and so much to share. It’s all in writing for you.
The Chair: Mr. Kachroo, you are next.
Vee Kachroo, Senior Vice President, Operations, Canpotex Limited: Canpotex is the world’s premier potash exporter. Based out of Saskatoon, we market and deliver over 10 million metric tons of potash each year to 130 customers in 40 countries on behalf of our shareholders, Mosaic and Nutrien. This translates into over 110,000 rail car shipments.
Our shipments represent approximately $3 billion worth of exports, which contribute approximately $500 million in tax revenues to Canadian governments. We are one of the largest overseas exporters sending our products to key markets like Brazil, China and India. We are also one of the largest rail users in this country.
Part of our competitive advantage overseas is our reputation as a reliable shipper. To strengthen that reputation, we have invested heavily in our own highly integrated supply chain. It includes over 5,000 custom designed rail cars built in Hamilton and our own rail car facility in Lanigan, Saskatchewan. We charter over 235 voyages. We also own export terminals in Vancouver, British Columbia; Portland, Oregon; and Saint John, New Brunswick. We have a lot of skin in the game.
In essence, the only portion of the supply chain we do not control is rail transport. Inadequate rail service has the potential to harm our reputation as a reliable shipper, as well as diminish the competitiveness of Canadian potash overseas.
Today, I would like to specifically discuss rail transportation to Saint John, New Brunswick. Saint John is an important part of Canpotex’s supply chain. Potash exports through that port contribute to the economic activity of the region. In 2017, over 1 million tonnes of potash were shipped through Saint John. It is a high cost corridor but Canpotex is captive to CN, which provides the only rail services to our Saint John terminal via direct Canadian route.
Canpotex has no alternative if CN does not provide adequate conditions of service or if CN charges higher rates than those that would prevail under competitive conditions. It has been our experience that when CN experiences delay it is felt inordinately on Canpotex’s eastbound trains captive to CN. The delay comes at a cost to Canpotex and makes Saint John a less attractive shipping option, which puts that port and that terminal at risk.
Without access to competitive and reliable rail service options to Saint John, those shipments would instead be diverted to our Vancouver or Portland terminal. We recognize that government has tried to address competition for rail service for captive shippers through long-haul interswitching, or LHI, in Bill C-49.
However, as currently drafted, Canpotex could not use this remedy for shipments to Saint John because the nearest interchange at Montreal is located within the Quebec-Windsor exclusion zone. As a solution, we’re seeking a modest amendment to Bill C-49 to exempt shipments destined for the Maritimes from the Quebec-Windsor LHI exclusion zone. It’s a regional remedy that is practical, and we have provided a suggested wording in our brief.
Our suggestion is in line with the bill’s current exemptions for shipments originating in northern Quebec. Similarly, it provides a fair regional remedy for captive shippers destined for the Maritimes. This is a matter of fairness.
There are other alternative approaches that we could provide for exemption for shipments of potash to Saint John or the Maritimes. We respectfully ask that you consider our recommendations regarding LHI.
In our view, these modest changes provide fairness relative to other shipments. It would make Saskatchewan to the Port of Saint John a more competitive and reliable corridor for the overseas export of potash. Thank you.
Jeff Ellis, Chief Legal Officer and Corporate Secretary, Canadian Pacific: I am joined by my colleague, James Clements, Vice-President of Strategic Planning and Transportation Services. Our overall message is that the Senate should move to pass this bill expeditiously.
Bill C-49 is not a perfect bill. We have concerns with elements of it, as you’re aware, particularly with respect to the lack of reciprocity vis-à-vis American railways that will disadvantage Canadian railways under the proposed new long-haul interswitching regime.
That being said, at this juncture the passage of the legislation is necessary for two reasons.
First, without question, it enables a material improvement to safety by mandating the installation of locomotive voice and video recorders, or LVVRs, with some limited but appropriate scope for proactive use of the technology by railway companies.
Second, the adoption of Bill C-49 is needed to provide industry with certainty needed for investments in new equipment and expanded capacity, including potentially new grain hopper cars, which you heard about in the last session.
With respect to safety, CP is proud to have achieved the lowest train accident frequency of all class 1 railways in North America for the past 12 years. This is based on our increased capital investments in infrastructure, deploying new technologies, and driving down equipment and track failures.
The adoption of LVVR technology is one of the most important steps that can be taken to strengthen railway safety in Canada because human factors are now the leading cause of railway incidents.
Data published annually by the Transportation Safety Board indicates that on average more than half, or 53.9 per cent, of all railway incidents since 2009 have been caused by human factors. Action is needed to tackle this category of incidents to make sure meaningful improvements to railway safety are made in Canada. LVVRs are the tool that will allow us to do this in a substantive way.
The evidence from other jurisdictions is compelling. Since the implementation of DriveCam technology in transit buses, New Jersey Transit saw a 68 per cent reduction in bus collisions from 2007 to 2010. The number of passenger injuries fell 71 per cent in the same period. Rail commuter Metrolink in California similarly saw a significant reduction in red signal violations and station platform overruns with LVVR.
In order to maximize the safety benefits of LVVR technology, it is essential that railways be permitted limited proactive use of the data. Systemic safety issues need to be exposed before an accident occurs so as to enable proactive development of effective and appropriate corrective action.
Bill C-49 will allow railways to use LVVR data only in certain limited circumstances and within appropriate, carefully circumscribed limits to improve safety while maintaining the privacy of railway employees. There is no desire or intent to use LVVR data to examine minor rule infractions that are not systemic.
We know there are some who disagree with limited proactive LVVR data use by railways and that they are concerned about the privacy of employees. We understand those concerns and we recognize the need to ensure that technology is used respectfully.
CP is committed to collaborating with Transport Canada and our unions as regulations are developed to govern the access and use of LVVR data by railway companies. We owe it to our employees, the communities where we operate and all Canadians to do everything we can to ensure the highest level of safety on our railroad.
It would be a mistake to amend Bill C-49 to prevent proactive use of LVVR data by railway companies. This would negate the strong potential for improving railway safety in Canada. Those are my comments. Thank you.
The Chair: I want to ask Mr. Roney a question before we get started. You mentioned that professional engineers should be involved in the entire life cycle of railway infrastructure.
Aren’t they involved in the entire structure of infrastructure, or why are you saying that?
Mr. Roney: Not necessarily. Subsection 11(2) of the Railway Safety Act speaks to professional engineers approving all work that fall within the practice of professional engineering. That approval often comes very late in the game and isn’t as fulsome as being involved in the entire life cycle.
A great deal of work involving engineering is done by others who don’t have the accountability of professional engineers. The legislation speaks about engineering principles but it is very vague in its language.
The actual fact is that a great deal of engineering work within Canada’s rail infrastructure is carried out without accountable oversight by professional engineers. That’s the issue we’re concerned about.
The Chair: It would be like my hiring a handyman rather than a plumber.
Mr. Roney: Sure.
The Chair: That’s not good, or doing it myself.
Senator Plett: Mr. Chair, you already asked my first question, but don’t apologize. I’m going to follow up on it.
I will ask the professional engineer and then segue that into asking Mr. Ellis or Mr. Clements from CP.
You used Churchill and Hudson Bay Rail as an example. Three senators are here from Manitoba and some of us have been on that railway many times.
That railway was built many, many years ago. Do you think there weren’t professional engineers involved in building that dilapidated railway? It’s where it is because it is built on muskeg. That muskeg, no engineer in the world will change that.
You seem to intimate that maybe if professional engineers had been involved we would have a great railway up there. I am not of that opinion. We have bridges collapsing because of earthquakes now. We have highways collapsing because of weather conditions.
Where are you going with the fact that if professional engineers were involved from start to finish everything would be good and we would have safe railways?
To Mr. Clements or Mr. Ellis, if we accept the recommendation of professional engineers, will that impact CP or your competitors? Senator Mercer talked about the stack of amendments we are looking at. This is one I hadn’t even heard of before.
I would like you to explain that a littler further and then I would like a comment from CP to tell us what the cost would be of accepting the engineers’ proposals.
Mr. Roney: That’s an excellent question, and I appreciate the opportunity to address it as best I can.
Oftentimes the challenge we face is that engineering is often seen as investing in the right expertise. I talked about having the right people with the right knowledge and skills to be at the table when decisions are made.
Often engineering is seen as a cost rather than an investment. That’s one of the challenges many times in a corporate environment where shareholder value seems to reign above all else. Cost often reigns over the accountability on the public safety side that a professional engineer would bring to the table. It’s the missing piece of ensuring that public accountability is at the table when decisions are made.
Another thing is that many of the railways predate licensure of engineers, for instance, though engineers were certainly involved without the regulatory regime we have in place today. Much of the legislation predated the modern system of accountability that we have for licensed professional engineers. Furthermore, it’s a federal jurisdiction, typically, whereas licensure for all of the professions is something done on a provincial basis.
A tradition and a culture have evolved over the years in the railways. Though railways certainly recognize the value of having the engineering expertise at the table, it is something we believe is important to reinforce by ensuring that it is not an option. It is a mandatory requirement that licensed professional engineers be there throughout the life cycle.
It wouldn’t prevent, necessarily, some of the historical issues, but often engineers are not involved in the maintenance. Their looking at the whole life cycle is an important factor when it comes to ensuring the stability of our infrastructure.
Another portion of the answer is with regard to some of the things you’re talking about, such has track beds being washed away and that sort of thing. These are effects we have seen of the evolving, changing climate. That was the second piece about the vulnerability assessments with the protocol I mentioned, the PIEVC protocol. It’s part of the due diligence to ensure that such a protocol is followed to ensure we’re taking into account the risks associated with these changes.
The way that engineering was done so many times in the past was a reliance on past behaviour being a reliable predictor of future events.
Senator Plett: I want CP to be able to answer as well.
Mr. Roney: That is the opposite now. We can’t rely on past historical data to rely on future events. That’s why we need to do these climate vulnerability assessments.
Senator Plett: Muskeg in Manitoba, of course, was there long before climate change was talked about.
James Clements, Vice President, Strategic Planning and Transportation Services, Canadian Pacific: First, at CP we take safety very seriously. It’s the number one focus of our company. We take pride in our reputation of having the lowest train accident frequency of any train company in North America. A lot of that has come through the diligence of the professional engineers that work for us and all the other people that maintain the infrastructure of our network.
We invest 20-plus per centof our revenues back into the company. The vast majority of that is into the engineering space. I think about $900 million of $1.3 billion or $1.4 billion will go into the physical infrastructure of our network. We take it very seriously. We invest very heavily.
To the second point, we have a comprehensive risk assessment process. As part of that, we look at the vulnerability of our infrastructure. We’ve developed plans to mitigate the risks our infrastructure is exposed to.
The entire success of the company from the reputation of the communities we work in all the way through and subsequently to the revenue stream hangs on that infrastructure being well maintained, safely maintained and successfully operated 365 days a year.
Senator Bovey: I will follow up on that if I may because I have been following the Churchill issue very actively.
In fact, as Senator Plett said, many of us have been on that train a number of times. I tried to fly up a couple weeks ago to meet with some folks because air is the only way in there now. A cart was broken on the runway so in fact we landed in Rankin Inlet instead of Churchill. It was impossible to get to Churchill by any means on the day I was supposed to go, anyway.
I want to pick up on an analogy about the engineering and climate vulnerability assessment. Is what you’re proposing similar to what many well-run condo corporations do by having engineer assessments on their parkades on an annual basis? You’re really talking about it from a preventative measure.
If that’s the case, when we take a look at the accident in Hells Gate last November 2017 with the spill, would that accident have been prevented had the infrastructure been assessed on a regular basis?
To flip it the other way, we talked about the expenditure of doing these assessments. I would be interested in knowing what the savings are.
In taking a look at the accidents that have happened, how many of them would have been prevented with this kind of regular engineering assessment as you look at the different terrains around the country, and not just Manitoba muskeg but British Columbia mudslides?
Mr. Roney: I don’t think I can give you an answer as to whether or not particular incidents would have been absolutely prevented necessarily. Your analogy, though, is reasonably on with regard to that preventative study for things like a parkade.
This protocol provides a well documented, well thought out, due diligence exercise to ensure that these questions are being asked, the future is being looked at, and the implications are being studied. Introducing that rigour is what we’re really recommending in going with an established protocol.
Senator Bovey: Is that a legislative concern or a regulatory concern? I am trying to figure out how much of what we’ve been hearing would better fit in regulations that can have an easier, more frequent review and update, and how many of them should be enshrined in legislation. As you know, an amendment is a more complex, slower update.
Mr. Roney: You are the legislators. I don’t have to tell you about ensuring the act is the enabling body that then can allow such flexibility in the regulations.
Certainly having it in regulations would seem to be a logical place.
The Chair: Colleagues, we’re going to try to move this along a little quicker, so try to keep your questions short, your preludes short and your answers short.
Senator Mitchell: Thank you very much for mentioning the importance of climate change and its impact on future infrastructure investment issues. Maybe that’s why the muskeg is melting. That’s the engineering problem.
It turns out there is a lot of tension felt by shippers about railroads. I would like to give you a chance, Mr. Ellis and Mr. Clements, to answer the two specific points emphasized by the witnesses before, which were directed against you, really.
First, if they could, they would want more data from you. In fact, they say specifically that they think they should see every single one of your waybills so that they can see what the costs are across the system and how they would affect them.
Second, they would like to see the Canadian Transportation Agency be able to act on its own and not just on the basis of a complaint.
It seems to me that bears exactly on the tension, which is you need to make money so you can invest in very isolated lines and the capital that requires and they want to lower their costs, of course, so they can remain competitive.
How do those two features affect that specifically?
Mr. Ellis: If I could, I’ll begin and then Mr. Clements will take it from there.
As a starting point, we heard a lot about monopoly, duopoly and captivity. I think it’s important to acknowledge and it’s straight out of the Emerson report, and there was a World Bank report as well in 2014, which said that since at least 2006 average freight rates in Canada and the U.S. were among the lowest in the world.
Service is without peer in the world. There is a problem with ongoing exploitation. If you look at the broader context of industrialized countries, it doesn’t seem to be the case.
So when you begin from that, again, we think compromises have been made in the proposed bill. Essentially we will already provide, under the proposed legislation, additional data that will bring the provision of data to a situation comparable to that of the United States.
The supply chain is far greater than just the participation of railroad. As yet, we’re the only party being compelled to provide this sort of information. As the senator points out, there’s a significant cost associated with that.
If you balance that against what it is we’re trying to solve, the fact is that the data available will be comparable to that of the United States, which was held up as an example of a jurisdiction where it works well. I am not sure what more is being asked for or why further amendments should be entertained.
The additional piece to that is that business needs certainty and thrives on certainty. We have shareholders, investors and regular Canadians investing their pensions, et cetera. For us to move on and make significant investments like we would like to do with hopper cars, we need that certainty to proceed.
Senator Mitchell: Are you saying you’re the only party being required to provide information as opposed to the shippers who aren’t being required to provide that?
Mr. Ellis: For example, other modes such as trucking, et cetera, the emphasis appears to be largely on provision of rail data.
Senator Gagné: My question is for the Canadian Pacific witness. I wanted to mention that I asked the CN witnesses the same question yesterday. The chair of the Transportation Safety Board of Canada, Kathy Fox, who supports the proposal to give you access to random audio and video tapes for preventive purposes, explained the following to the committee during her testimony, and I quote:
Canadian railways . . . have often demonstrated a very rules-based punitive culture. While progress is being made to improve that culture, the TSB nonetheless understands employee concerns about how this data might be used or misused.
End of quote. We heard this comment several times.
All in all, I have two questions for you. What has earned you this reputation, and what do you think is the added value of studying random recordings for preventive purposes in relation to the study of recordings that are related to minor incidents that have not been investigated by the board? By studying minor incidents, would you have enough material to improve your practices?
Mr. Ellis: There are a number of pieces in there. If I miss anything, you’ll let me know.
Senator Gagné: Sure.
Mr. Ellis: First, in terms of our reputation for being punitive or rules based, it’s important to look at the context of a heavy industry. I came, still relatively recently, from the banking industry into the rail industry. One of the things when you move to a heavy industry like rail is the danger to individuals, communities and employees, et cetera. The emphasis on rules and compliance may seem at times severe from the outside, but the stakes are extremely high.
That said, culturally the rail industry in Canada has moved to perhaps more of a culture focused on safety management systems and not on individual punitive actions. We’re looking for things that are systemic.
If we move on to LVVR, LVVR specifically has strong protections, not just under this proposed legislation but under section 28 of the Canadian Transportation Accident Investigation and Safety Board Act with its privilege protections. You can’t use the information meant to be collected from the LVVR for disciplinary purposes outside of a very limited exception for very egregious action.
It will only be available to us either retroactively after an accident or incident has occurred or on a random sampling basis. This goes to the next part of your question as to what we would do with it. It would allow us to identify holes in our training and problems with our procedures, where it becomes evident to us from the voice and video recordings that the operators in the cab are overwhelmed with information or distracted by something going on in the cab or whatever.
If we see a pattern of that we can address it. We can change procedures and address those safety issues. Without that knowledge and ability to look into the cab and see, we miss all of that. That’s the importance of it.
As far as being able to use it for individual performance or punitive, no, that’s not the purpose. It’s meant to address systemic safety concerns. It’s a reasonable balance of safety and privacy. PIPEDA itself contemplates that balance, essentially, for exemptions in the event of safety.
Senator Griffin: I am from Prince Edward Island, and we don’t have a railway. We lost it in the mid-1980s or late 1980s. It was ripped up. Anyway, I am still very interested in how important the railway is to the Maritimes in general in terms of shipping.
This comment is for Mr. Kachroo. When the House of Commons committee was dealing with Bill C-49, I understand you were not a witness at that hearing.
Member of Parliament Ken Hardie proposed the amendment that was accepted to open up long-haul interswitching as an option for communities in Northern Quebec and British Columbia. He seems to have forgotten the Maritimes, so it was good to hear your point about the Maritimes this evening.
Do you have any idea how big a difference this would make in the Maritimes if it were opened up to long-haul interswitching?
Mr. Kachroo: I don’t have clarity on all the Maritimes. I will come back to the Port of Saint John. We’re talking about 100-150 jobs, or in that order of magnitude.
I would probably ask for comment from the port itself for the specifics, but I can tell you that when the mine in Sussex went down there was a dramatic drop in volume. We came in, bringing back long haul volume and jobs into that terminal.
The reality is that we’re a very commercially market-oriented organization. There is a massive difference between having one railroad or two railroads. When we have two railroads, a lot of people will say that is not enough, but I can tell you that just going from one to two is a world of difference. We have very pointed conversations with both railroads, and we will work with both railroads.
We’re a commercially savvy organization. We compete worldwide against a lot of competitors, so we recognize that. Even in this environment, we’re good with two. When you only have one, you don’t have a lot of places to go.
If you look at potash prices over the last 15 years, we’re at the bottom of that period. If you look at rail prices in that same period, they’ve gone up every year. If we are to continue, we have to be not only competitive but reliable.
I will give you a real living, breathing example right now. All the railroads will tell you that over the last three or four months they have had more business and less power and crews. There is a shortage of service.
Going westbound out of Saskatchewan, when you release a rail car you’d have to wait from 1.5 days to 3 days to get that rail car. It used to be the same number going eastbound. Now it is 7 to 11 days.
Where you have no competition you are not tempted to behave in a responsible way. That’s just a data-based observation. With some competition through LHI going to Saint John you can bring another railroad into the picture. Competition will enable better and more reliable service. It would enable us to look at the Port of Saint John as a more competitive option.
We need optionality. We talked about what is going on with the West Coast. We talked about infrastructure. We have talked about how long it will take to put money in to add capacity.
In the interim having Saint John is important to us, but if it comes to a point when the dollars do not make sense you have to make that hard decision. It puts one regional area at the mercy of another but dollars do come into play here.
Senator Galvez: First I will ask a question of Mr. Ellis and then relate it to Engineers Canada.
The worst accident in inland Canada happened in Lac-Mégantic, Quebec. Some 47 people die. The accident happened when a small company, MMA, was carrying dangerous goods. They were given a contract by your company.
Do you think that having LVVR cameras in the cab of the train would have stopped that accident?
The relation I want to make with Engineers Canada is that we are professional engineers. We are followed by this federal program. We have ethical and ontological obligations that force us to declare untenable situations. If the professional engineers were there and suffering a lot of deregulation and a lot of abuse, I truly believe they would have the backing of their profession, their order and their school to say, “We cannot sustain this way of working.” I think that could have made a difference in this situation.
I just want you to comment on this.
Mr. Ellis: With respect to Lac-Mégantic, it has been in the media quite recently given the criminal proceedings that are under way. Some of the facts that have come to light point to factors that were outside of the cab, things like a lack of compliance culture, insufficient investment and failure to apply brakes, et cetera. It’s not for me to —
Senator Galvez: TSB said 18 factors.
Mr. Ellis: There you go, yes. All of that is what it is. I can’t speculate as to whether some part of that would have been impacted specifically by an LVVR.
What I can say, from an equipment perspective, is that we have managed to bring incidents down significantly by investments in technology. We have managed to bring them down significantly on the front of track failures. We’ve brought them down 39 per cent since 2007. It’s 50 per cent on equipment failures.
On the hard factors of monitoring, et cetera, we have managed to reduce those sorts of incidents significantly. We’re now at the point where again the toughest nut to crack is human behaviour. That’s why we’re of the view that LVVR is so important. It gives us the ability to know what is the distraction that takes place when an engineer in a train carrying dangerous goods blows through a signal. That’s the hard part to get at. We can monitor wheels for hot spots, hot bearings, flat wheels, et cetera. What we can’t do is get inside the cab to ensure safety management systems, policies and procedures are working effectively.
From the studies I’ve mentioned to you from other sectors like busing, it has proven to be highly effective.
Mr. Roney: I really appreciate your comments. One of the messages I wanted to get across is the concept of why an engineer should be involved. As Senator Plett was mentioning, would it have prevented this or that?
Do you know what? It is about accountability. It is not about corporate accountability. It is about personal accountability.
It is drilled into professional engineers that their paramount duty is beyond just their employer. Their paramount duty is to the public welfare, even if it goes against their employer.
There are whistle-blowing provisions in the legislation. We talk about human behaviour, making humans accountable for their behaviour. That is the missing piece, and that is one of the messages I want to get to you.
As engineers we take career ending responsibility in what we do. I am a structural engineer. I had a case where we were doing a very tricky thing. The iron workers were a little worried about cutting off this column underneath this big building. I designed these transfer beams, and they wouldn’t do it. I had to go down there and stand under there, not just to tell them that I checked everything and it was all good. I had to stand right under the beam while they cut it.
It is not just taking career ending responsibility sometimes. It’s taking potentially life-ending responsibility. As an engineer, that’s the difference. A licensed engineer brings that to the table.
Senator Mercer: I have all kinds of questions, but I will limit it to one section. I want to talk to our friends at CP. I am a little surprised about your attitude with the use of LVVRs. You have talked about using them for some disciplinary reasons if they come up.
Suggestions have been made by others and by the unions that maybe the keeper of the data should be the Transportation Safety Board where they could review them. That would mean we would have to have an enhanced Transportation Safety Board. I recognize that they might not have the wherewithal to review on an ongoing basis. They’ll need to do that.
If they recognize safety issues, they can come back to the railroads and say, “Look, here are some things we noticed.” You haven’t acknowledged the fact that your unions and the other unions involved in railroads are pretty strong in their opposition to your having access to the data without having them filtered through some other organization such as the Transportation Safety Board.
What is wrong with the data being held by the Transportation Safety Board and the Transportation Safety Board raising their hand and saying, “CP, you have a safety problem; here is what we have noticed,” and then working with you to fix that safety problem, even you do have a very good safety record? I appreciate that, and I acknowledge it.
Mr. Ellis: Again, we respect the privacy of our employees and our union workers, the lifeblood of our company.
We’re looking at here the balance between privacy and safety in the act, as drafted. Some of it, it’s true, remains for the regulations later on; but there is only access ex post facto following an incident where you’re trying to determine the cause and then otherwise on a random basis, with protections not only under the bill, as drafted, but also under section 28 of the Canadian Transportation Accident Investigation and Safety Board Act, which very narrowly constrains and prevents you from using that information in a personal punitive way to go after a given employee. It’s meant to be there to look at it systemically.
As to the value of our being able as a railroad to look at that information ourselves, I think there is significant value. The concept in the rail space of the safety management system, as I think you’re familiar with from other testimonies, is something that we own and that we need to take accountability for. We invest heavily in our policies, our training and our procedures. We take it very seriously, and I think it’s the reason why we’ve had an excellent safety record to date.
Senator Mercer: They have to take responsibility too.
Mr. Ellis: Sure, but when it comes to putting in place the policies and procedures, et cetera, it is the company that is putting those in place. To do that right, to see what’s working and what isn’t, and to make sure that it’s effective, it seems to me that we will need access to that information but, again, within the constraints already contemplated under the bill.
Senator Dawson: I’m going to make a rookie mistake. I have an idea of the answer, but I’m going to take a chance and ask the question. There was an accident last week between Amtrak and CSX in the U.S.
First of all, does the National Transportation Safety Board in the U.S. encourage the use of LVVRs? Would the LVVR have been of any use in not only preventing that accident, obviously, but in being able to analyze what really happened? It was between two trains.
Mr. Clements: There is a lot of speculation on that one. I’ve seen press reports, and that’s all I can comment on, that there was some video in that locomotive. I would assume it will be used and will give some insight into that situation.
In the U.S. we are using some LVVR ourselves, and the other class 1s are using LVVR. In fact, it has fewer restrictions than are being proposed here. We are using it in a responsible way, as Mr. Ellis has said, and respecting the privacy of our employees even through that.
In that process, as one example, the data are encrypted and password protected. Our field level management staff is not actually the ones doing the analysis. It’s not the direct supervisor of the employee. We’re using it at a corporate level to evaluate the systematic issues.
Senator MacDonald: The question will be for Mr. Ellis, our engineer over there, perhaps, but anybody else can join in if they feel they have something to contribute.
I want to talk about black box technology. We had a witness the other night who talked about black box light technology in railway cabs. How sophisticated is the black box technology that is in engineering cabs? Is there a deficiency when it comes to that technology? Is it very basic?
I am certainly no technician, but I would assume the type data they can ascertain now from black box technology, whether ti it is when you brake, how you brake, how quickly you brake, if you don’t brake, and stuff going on in the cab. They must be able to determine a lot of things from black box technology. What sort of level of black box technology does CP have in its cabs? Is the stuff 20 years old? Is it six months old?
Mr. Clements: We continue to update our locomotives. As we refresh them, we keep the technology updated on that side. I think there is an important question that you didn’t have insight from the technology you’ve described. Yes, we know when they brake, what type of brake application they have made and how fast the locomotive is going. You get a number of different systems and their statuses.
The braking question is a good one, but why didn’t they brake? There was a red signal and they did not apply the brake. You need to have information that goes over and above the data about the status of all the systems to answer the question of what was influencing the decisions and the actions of the employee at the time that there was an incident.
In the random case, you may understand why they did something that didn’t comply with the rules. That is the step that LVVR takes that you don’t get even if you have an advanced monitoring system on the status of the locomotive.
Senator MacDonald: Is CP presently using audio in all of their cabs in combination with black box technology and, if not, why not?
Mr. Ellis: In Canada, we’re waiting for this legislation to permit us to do so.
Senator MacDonald: You are talking about video. I am talking about audio. What if you had audio in combination with black box technology? Certainly, that would tell you a lot more.
Mr. Ellis: More information is certainly better, and we don’t have that now. I was just looking through some of the prior testimony. I am afraid I can’t cite it precisely, but there was a black box voice recorder example from the airplane industry where someone in the cockpit had said, just before they lost sound entirely, “There’s smoke coming out.”
I believe it was the TSB trying to reconstruct what had occurred when the person who had given testimony said, “The problem we had afterward was trying to reconstruct what had occurred and where the smoke was coming from.” That’s the issue with not having the visual. Was it coming from the control panel? Was it coming from the ceiling vent?
To Mr. Clements’ point, one of the issues we have on the human factor side is someone blowing through a signal. They miss the light. They miss that point. Were they looking at the floor? Were they monitoring other controls? Was there an overload of information?
We can do a lot more from a safety perspective if we can have those inputs and modify our safety management system to address them.
Senator MacDonald: You mentioned the data published by the Transportation Safety Board indicated that, on average, more than half of the railway incidents since 2000 weren’t even caused by human factors. I am assuming that equipment failures and infrastructure problems are not human factors. I suspect it could be argued they are human factors in many ways.
Of that over 50 per cent of human factors, how many of those occur in the cab of a locomotive and how many are outside factors, such as people putting their car or bus on the train tracks? Of that over 50 per cent, how much is from the outside?
Mr. Ellis: I personally don’t have that specific answer, but to your other question as to whether we’re distinguishing those from mechanical failures, yes. I can provide more information. There’s information that we provided previously on that, in that we’ve seen a dramatic decrease in accidents associated with mechanical and equipment failures. It is in the human factors that we have not.
As to the breakdown of human factors, we would have to follow up on that.
The Chair: Thank you very much, witnesses. This was much appreciated. We will have a short in camera meeting after we adjourn this because we have a little bit of future business to discuss.
(The committee continued in camera.)