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THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE

EVIDENCE


OTTAWA, Tuesday, May 4, 2021

The Standing Senate Committee on National Finance met by videoconference this day at 9:30 a.m. [ET] to study the Main Estimates for the fiscal year ending March 31, 2022.

Senator Percy Mockler (Chair) in the chair.

[English]

The Chair: Honourable senators, before we begin, I would like to remind senators and witnesses to please keep your microphones muted at all times unless recognized by name by the chair. Should any technical challenges arise, particularly in relation to interpretation, please signal this to the chair or the clerk and we will work to resolve the issue. If you experience other technical challenges, please contact the ISD service desk at the technical assistance number provided.

[Translation]

The use of online platforms does not guarantee privacy of speech or freedom from eavesdropping. Thus, when conducting committee meetings, all participants should be aware of these limitations and limit the potential disclosure of sensitive, private, and privileged Senate information.

[English]

Participants should know to do so in a private area and to be mindful of their surroundings. Honourable senators, we will now begin with the official portion of our meeting.

My name is Percy Mockler, senator from New Brunswick and chair of the committee. I would like to introduce the members of the committee who are participating in this meeting: Senator Boehm, Senator Dagenais, Senator Deacon (Ontario), Senator Duncan, Senator Forest, Senator Galvez, Senator Klyne, Senator Loffreda, Senator Marshall, Senator Richards and Senator Smith. We welcome Senator Pate, who is also participating in our meeting.

I wish to welcome all of you and viewers across the country who may be watching on sencanada.ca.

[Translation]

Today we begin our consideration of the Main Estimates for the fiscal year ending March 31, 2022, which were referred to the committee by order of reference on March 15, 2021, by the Senate of Canada.

[English]

Honourable senators, today we welcome officials from Transport Canada. First, Kevin Brosseau, Assistant Deputy Minister, Safety and Security. He is accompanied by Craig Hutton, Assistant Deputy Minister, Policy; Anuradha Marisetti, Assistant Deputy Minister, Programs; Ryan Pilgrim, Assistant Deputy Minister, Corporate Services and Chief Financial Officer; and Melanie Tod, Director General, Crown Corporations and Portfolio Governance.

Welcome to all of you, and thank you for accepting our invitation.

Ryan Pilgrim, Assistant Deputy Minister, Corporate Services and Chief Financial Officer, Transport Canada: Good morning, honourable senators and committee participants. My name is Ryan Pilgrim, and I am the chief financial officer of Transport Canada. I’m pleased to be here to discuss our Main Estimates for 2021-22. These Main Estimates represent items within the Minister of Transport’s portfolio, including Transport Canada, the Canadian Air Transport Security Authority, VIA Rail Canada, Marine Atlantic Incorporated and the Federal Bridge Corporation Limited. My colleagues have already been introduced. I have Anuradha Marisetti, Kevin Brosseau, Craig Hutton and Melanie Tod, who will be here to assist me with questions.

Transport Canada is seeking a total of $2.05 billion in funding through these estimates, comprising $742 million for operating expenditures, $122 million for capital investments, $960 million for grants and contributions, and $227 million in statutory authorities. The funding requested by Transport Canada covers a variety of initiatives, including $407 million for the National Trade Corridors Fund, $61 million to protect Canada’s coastlines and waterways, $58 million for air service support to remote communities and over $21 million for the Rail Safety Improvement Program. These estimates also include items announced in the Fall Economic Update tabled in November last year, such as an additional $229 million for the incentive program for zero-emission vehicles, helping to reduce greenhouse gas emissions and contributing to a clean transportation system.

Tens of thousands of Canadians and Canadian businesses have continued to benefit from this purchase incentive since the program’s launch on May 1, 2019.

The COVID-19 pandemic continues to have an unprecedented impact on our nation. The government has committed to help mitigate the effects that the pandemic is having on the Canadian air sector. Through these estimates, Transport Canada will maintain the safety and security of Canada’s transportation system and will support the ongoing provision of air services to Canada’s remote communities, which rely upon these flights for the delivery of essential goods and services.

These estimates will also fund the Crown corporations and the transportation portfolio organization, whose operations represent an integral component of Canada’s transportation sector.

[Translation]

Canadians continue to rely on the services provided by VIA Rail Canada. With $770 million in the Main Estimates, VIA Rail will be able to stabilize its operations and support long-term capital planning. The company will also seek to modernize its operations through fleet renewal, enhance safety through rail infrastructure improvements, and maintain its asset base in good condition.

The Canadian Air Transport Security Authority’s mandate is to protect the public by ensuring effective, consistent, and high quality security screening for air travellers and air industry employees. The $568 million in funding will allow the authority to continue to carry out the activities that make this possible.

Marine Atlantic operates critical ferry services between the Atlantic provinces. The $150 million in funding will support year-round service delivery in a safe and efficient manner. The Federal Bridge Corporation Limited manages and operates international bridges in Ontario communities. The $18.5 million in funding will support the corporation by offsetting the effects of the pandemic on operations, allowing for the continued delivery of goods and services to the communities that rely on these bridges.

I would also like to note that Transport Canada stands ready to support the recent announcements in the 2021 budget that it will provide critical funding for Canada’s economic recovery, following the effects of the pandemic. The federal budget announced more than $190 million to improve screening infrastructure and develop new contactless digital identification technology at Canadian airports. The budget also provides $1.9 billion in additional support for the National Trade Corridors Fund, nearly $500 million to advance the high-frequency rail initiative led by VIA Rail, and $271 million to the Canadian Air Transport Security Authority to maintain operations and improve screening services.

These 2021 budget items are not included in these Main Estimates. However, they will be presented by Transport Canada for approval in the coming months and will be included in future estimates.

I thank the committee for the opportunity to share our Main Estimates with you. My colleagues and I will be happy to answer any questions you may have. Thank you.

The Chair: Thank you very much, Mr. Pilgrim.

[English]

We will now proceed to questions from senators. I would like to tell you, senators, that, for this panel, you will each have a maximum of five minutes for the first round. Therefore, please ask questions directly to the witnesses. Witnesses, please respond concisely. The clerk will make a hand signal to show that the time is up.

Senator Marshall: Thank you to the officials for being here today.

I wanted to start off with a request for information on some items that have been in the news lately. What is the department’s role with regard to the agreement with Air Canada and Air Transat? A new Crown corporation was created in the past fiscal year. But is it the Minister of Finance? What’s the role of the Minister of Transport with regard to that agreement?

Mr. Pilgrim: Thank you for the question. I will pass it off to Craig Hutton, the ADM of Policy.

Craig Hutton, Assistant Deputy Minister, Policy, Transport Canada: Thank you, senator.

In terms of negotiations that are ongoing with air carriers, we have reached a successful conclusion with a few, including Air Canada, which was announced on April 12. That is the lead of the Minister of Finance and her officials in terms of leading those negotiations with air carriers. Of course, Transport Canada is providing support to those negotiations where there are certain policy questions that may be entertained, but in terms of the overall lead for those negotiations, that is being done by the Minister of Finance and her officials.

Senator Marshall: What about other airlines? I’m thinking of airlines such as WestJet. Is there any assistance in the works for that or other airlines?

Mr. Hutton: Discussions are ongoing and assistance can be available to those airlines, but that also depends upon ensuring that customers are able to access refunds for any tickets they might have purchased and have not been able to use.

Senator Marshall: Mr. Pilgrim mentioned assistance to support remote communities. Would that include any communities in Newfoundland and Labrador?

Mr. Hutton: In terms of some of the routing that is coming out of those discussions with airlines — where, for example, Air Canada has served communities prior to the pandemic — part of the negotiations did arrange for a restart on a number of routes where they had previous serviced. This will be dependent upon further discussions with a range of airlines we are speaking with, but routing is certainly a factor in terms of those discussions.

Senator Marshall: What’s the relationship of NAV CANADA to Transport Canada? I have been getting a lot of emails from NAV CANADA employees regarding downsizing or layoffs. I went onto the NAV CANADA website, but I can’t really see what the relationship is there with Transport Canada. Can you clarify that?

Mr. Hutton: NAV CANADA is a private not-for-profit company. It was established in 1996 to provide air traffic control, along with airport advisory services and other aeronautical information services for Canadian domestic and international airspace. It was an entity created to provide these services that were previously provided within government.

Senator Marshall: But is there any relationship? Does the minister have an oversight function? Just “yes” or “no.”

Mr. Hutton: In terms of tabling reports in Parliament and so on, yes.

Senator Marshall: But no direct . . . ?

Mr. Hutton: No direct —

Senator Marshall: The last time officials appeared, we talked about the marine vessel Villa de Teror, and we were told that the purchase cost was $155 million, $25 million for refit and that she would be ready for the summer of 2021. Could you give us an update on that?

Mr. Hutton: Perhaps that’s better answered by one of my colleagues.

Anuradha Marisetti, Assistant Deputy Minister, Programs, Transport Canada: Thank you for the question, senator.

We took the vessel, and it’s with us right now in Canada. A bit of work is being done to put it into service in June 2021. We are on track to put the vessel in service in 2021.

Senator Marshall: And the costs haven’t changed? It’s still $25 million for the refit?

Ms. Marisetti: Correct. And $155 million for the purchase.

Senator Marshall: I have a little time for one last question, and I’ll be quick. I’m wondering why transfer payments have increased so significantly from $863 million to just over a billion dollars. If there isn’t time for an answer, we could get it in writing or they could answer later; I would like to go on a second round, please.

Mr. Pilgrim: The main adjustment is the increase in zero-emission vehicles, which have increased by over $200 million from the last Main Estimates — $170.8 million for zero-emission vehicles, and $57.7 million for support for remote communities that was not in the last Main Estimates. Those are the primary items, about $220 million.

Senator Marshall: So $229 million and $57 million, thank you very much.

[Translation]

Senator Forest: Thank you, Transport Canada officials, for being with us this morning. My first question concerns the port of Cap-aux-Meules, in the Magdalen Islands. We experienced a crisis this spring when Transport Canada announced in February that it was condemning 11 of the 24 mooring spaces, which represents almost 50% of the spaces in the port of Cap-aux-Meules, due to the neglect of upgrading and maintaining the infrastructure. Eventually, Transport Canada reversed its decision, allowing the start of fishing, which is a vital activity for the Magdalen Islands.

The fact remains that urgent work is needed. The mayor of the Magdalen Islands is calling for a master plan to ensure that the work will be done quickly, while respecting the constraints of the fishing season.

Is the department committed to doing all the work to make the wharf safe by the next fishing season? Is there any money left in the envelope dedicated to this type of work or is it already empty?

[English]

Mr. Pilgrim: Thank you for the question. I will start it off, and then I will pass to Ms. Marisetti.

Transport Canada understands the importance of the port to the social and economic well-being of the Magdalen Islands and is working with all stakeholders to explore solutions to minimize the impact of the coming fishing season as well as into the future. Perhaps I’ll pass it to Ms. Marisetti for more details.

Ms. Marisetti: Thank you for the question. With respect to the degradation of one of the wharves, we are aware of the work required. We have received a detailed inspection report which indicates the wharf may be at the end of its life. That report is being shared with some of the stakeholders concerned.

We are also currently assessing concerns for the future of this facility. Options include transferring the facility to the Department of Fisheries and Oceans, given their programming mandate. In the meanwhile, if there is any work to be done, we will be reviewing the work required and making the necessary repairs identified as being required. Thank you.

[Translation]

Senator Forest: My second question is about the Lac-Mégantic bypass. In an interview with the local media, the minister reassured the people of Lac-Mégantic, and promised that the bypass would be completed in 2023, which is very soon. The federal government had announced that it would cover 60% of the costs.

What is the total cost estimated by the federal government to complete the Lac-Mégantic rail bypass project? There was talk of a total cost of $133 million; is this still the case? Do these estimates include funds to cover the entire Lac-Mégantic bypass project?

Mr. Pilgrim: Thanks very much for the question. Yes, the projected cost is still $133 million. I will turn it over to Ms. Marisetti for the specific details of the current project. Thank you.

[English]

Ms. Marisetti: Thank you, senator, for the question. I would like to say that on the projected timeline we are working very hard with CP Rail to ensure the project starts construction as soon as possible, once we receive all regulatory approvals, so that we can start the project in the spring of 2022 and be able to meet the projected deadline of the end of 2023.

As you can imagine, it’s a very complex project so it requires a lot of design and development as well as construction. We are working closely with CP to ensure that we can meet the projected deadlines.

In terms of the cost, as my colleague Ryan Pilgrim has mentioned, the present budget says $133 million, but we are also aware that as we finalize the drawings and design, there might be an increase in the cost. We are not aware of what the extra costs might be.

[Translation]

Senator Forest: I have one last question. There is a lot of uncertainty in the region. The mayor is asking that Transport Canada update the population on the progress of the file this spring. The population needs to know where we are in order to be convinced that the project will be realized. Is it possible to relay this reasonable request from local authorities to Transport Canada for an update on the progress of the file?

[English]

Ms. Marisetti: We are working very closely with the mayors of the three towns, and we will be holding public consultation meetings to inform all the community about the progress of the project, and that is being planned right now.

Senator Klyne: Good morning everyone and welcome to our guests. The question I have is around VIA Rail.

In the Main Estimates, there is $769 million allocated to VIA Rail. As I look back in the third quarter report of 2020, VIA Rail reported total revenues decreased by 83.9% due to the decreased ridership and service adjustments as a result of the pandemic, while operating expenses decreased by only 27.5%. Given revenue is impacted substantially by the pandemic, it doesn’t appear the operating loss was as significant as one might expect compared to the 2019 period. I might have misinterpreted that and you can correct me.

Can you provide any information that would help this committee understand the 2020 operating performance of VIA Rail compared to the prior period and what operating performance is expected to look like through 2021, assuming you have ridership projections and the assumptions around those projections?

Can you also provide this committee with some insight into the variable or direct costs and overhead expenses to understand how the aforementioned revenue dropped approximately 84% yet operating expenses dropped only 28%?

Mr. Pilgrim: Thank you very much for the question. Last year, the revenues obviously fell dramatically for VIA Rail as they did for most entities in the transportation sector. They were provided with $187.5 million extra funding last year to cover the difference between their operating costs and revenue shortfall, so that helped them get through last year.

This year they are assessing their projections. They’re watching, like all of us, the ebb and flow of the pandemic and what that will do to ridership. We are working closely with VIA Rail and the Department of Finance to ensure that their variable, direct and revenue projections are well understood by us and them so that they have the right amount of money to deliver this essential service to Canada.

I’ll pass it over to my colleague Melanie Tod who may have more specific information on VIA’s operations.

Melanie Tod, Director General, Crown Corporations and Portfolio Governance, Transport Canada: Senator, thank you for the question. Let me start by saying VIA Rail has done an exceptional job in responding to the pandemic. While retaining rail service, they have also protected their staff, protected the passengers and always been compliant to the COVID protocols.

The initial expectations in the first year of the pandemic were a significant drop in revenues, which they saw. As you noted yourself, they also expected higher costs. They were able, through great effort, to restrain their costs and reduce their costs, and thus their demand on the public purse was less than expected. We are very happy they have done that.

The variables are operating under a demand-responsive service. As demand increases to a reasonable level, they will put trains on. Given the bubbles everywhere now, where everything is in varieties of lockdowns, they are at very slow service levels. They are providing enough cars so the people can socially distance, and they are remaining within all the protocols. I think I’ve gotten off topic.

Inside the variables and the costs moving forward, again, demand-responsive. They’ll put cars on as demand increases. They’re not seeing it yet for obvious reasons. Again, their costs are slightly higher than would normally be the case because, in order to keep people socially distanced and safe, they’re not packing them onto cars.

Senator Klyne: Thank you. Mr. Chair, do I have time for a second question?

The Chair: Yes.

Senator Klyne: This is a question around CATSA. The Main Estimates indicate that the Canadian Air Transport Security Authority, or CATSA, will receive $567 million. As we all know, COVID-19 has had a substantial negative impact on Canada’s airlines. According to the CATSA passenger screening data, the volume of passengers screened by CATSA from May 2 this year was 17,052 compared to 6209 in 2019 and 175,653 in 2018. We can see the significant impact there. I’m wondering what the considerations are with the amount of money going to CATSA. Is it significant and satisfactory enough to ensure that CATSA and security are held intact? What are some of the substantial changes or adjustments that will need to be made to transform to what we hope will be a recovery?

The Chair: Mr. Pilgrim, please, with a concise answer.

Mr. Pilgrim: Thank you very much for the question, Mr. Chair. I’ll start and then I’ll pass it to my colleague Kevin Brosseau.

They did receive $567,828 million in the Main Estimates, and the federal Budget 2021 announced another $271.1 million to CATSA as well in year. This money is to ensure the safety and security of air travel in Canada and continue operations, including additional screening and sanitation measures implemented to address COVID-19. They have been topped up to a level they feel will satisfy their cost requirements. We’re watching carefully, working closely with them. Even though the volume of passengers has fallen dramatically, we want to keep that service in check so when the return to travel does occur, it’s not rebuilding from scratch. Maintaining the core operations and a high level of safety and security for those travelling is paramount. I’ll pass it over to Kevin for further details.

The Chair: Mr. Pilgrim, I will ask you and Kevin to answer that question in writing, please, because of the time frame that we have for this meeting. Also, we will ask you to provide the written answer on or before May 12. Do we agree on that, Mr. Pilgrim?

Mr. Pilgrim: Of course. Not a problem.

The Chair: Thank you very much.

Senator Richards: Thank you to the witnesses today. I’m going to come back to the very question I asked last year and that is about the Campobello ferry. The citizens of Canada and New Brunswick have to travel to the States nine months out of the year to get to New Brunswick and to go to doctors and shopping and whatever else. They’re stopped at the border both ways. They don’t have a ferry. I’m glad to see that you’re concerned about the [Technical difficulties] islands. I’m glad to see that you’re concerned about remote areas. I think Campobello deserves a ferry. The 800 people who live there deserve it. If you can’t tell me why you can’t give me one, I would like an answer in writing, so I can deliver it to the people of Campobello. With all due respect, I would ask Mr. Pilgrim to answer this question, please.

Mr. Pilgrim: Thank you very much for the question, Mr. Chair. We did respond to this last time. This is a provincial jurisdiction matter, and falls under the domain of my colleague Anuradha. She may be able to provide you a more detailed response than I can on this specific service provision.

Ms. Marisetti: Thank you, senator, for the question. As we responded last time, this service does fall within the provincial jurisdiction. Canada’s responsibility to provide the services is between the provinces. All three ferry services that we are providing currently are between the three provinces of Nova Scotia, New Brunswick and P.E.I. and the province of Quebec.

We likely said the last time that the request for the ferry service between Campobello Island is noted and recorded for consideration. I’m afraid I cannot provide any other answer to that question at this moment.

Senator Richards: Thank you. That’s not very reassuring for the people of Campobello who have to travel through another country to get to their own. I don’t think that would be tolerated out west or anywhere else in the country. Do I have a chance for another question, Mr. Chair?

The Chair: Yes, Senator Richards.

Senator Richards: It’s about the regional airports that have been affected by COVID. I am wondering if the regional airports that have been cut back over the last couple of years will be back to full capacity once COVID is hopefully over, or will they be as constrained as they are now? Could Mr. Pilgrim answer that, please?

Mr. Pilgrim: Thank you very much for the question, senator.

Quite a bit of money has been put forth for the support of remote communities and smaller airlines to serve those remote communities. Those airlines work in smaller, regional airports. Therefore, they’re keeping activity in those areas. There is also additional funding that has been provided — in the Fall Economic Update as well — for airport capital assistance; another $186 million to maintain the airports; hundreds of millions of dollars of rent deferrals; $206 million to regional development agencies for air transportation initiatives to be provided to regional airports as well; and critical infrastructure for our larger airports.

There’s been well over $1 billion put forth to provide funding to airports that are definitely struggling during this period. We’re hoping, with the negotiations that have been transpiring with the airlines in recent weeks as my colleague mentioned before, to keep as many flights as possible travelling to the regions and the provinces.

We’re doing what we can to help the airlines and the airports survive this unprecedented period. It’s an ongoing collaborative process to ensure sustainability and that the system is able to survive and continue forward once the pandemic comes to a close.

Senator Richards: Thank you very much.

Senator Duncan: Thank you very much to our witnesses who are here this morning. In the past, the committee has heard from Air North, Yukon’s airline, which I remind members is 49% Indigenous owned by the Vuntut Gwitchin of Old Crow. Part of the presentation from Mr. Joe Sparling has spoken about interline agreements. The interline agreements, I would remind folks, protect regional air carriers and regional economies.

The Air Canada news release regarding the funding that has been provided to them and the financial arrangement spoke a great deal about refunding, but it also spoke of the resumption of service or access to Air Canada’s network for nearly all regional communities where service was suspended because of COVID-19 through direct services or new interline agreements. This spoke to communities that had lost their Air Canada service or lost access to an airline, but it does not speak of the requirement, the need, to have these interline agreements with the smaller, regional carriers. Part of Mr. Sparling’s presentation has also spoken to policy intervention and financial intervention going hand in hand.

I wonder if Mr. Hutton and Transport Canada officials could address how Transport Canada is monitoring the policy needs and the requirement for these interline agreements with smaller carriers as opposed to competition cooperation with the smaller carriers. How is Transport Canada monitoring that in the agreement with Air Canada, financial arrangements?

Mr. Pilgrim: We will let Mr. Hutton, the ADM of Policy, respond to this question. Thank you.

Mr. Hutton: Thank you, senator, for the question. In terms of those interline agreements, obviously they’re very important. Part of these negotiations on restarting routes that Air Canada had served previously will involve Air Canada enter into interline agreements with other carriers to provide service. We have committed to ensure that service is available for those communities.

It is something we’re going to be watching from the point of view of service to the stations that had been committed to be serviced as a result of the financing arrangements made through LEEFF, and these interline agreements remain part of that in terms of being able to serve those communities going forward. Should Air Canada not be able to serve those communities themselves, they can enter into partnerships with other carriers to do so.

Senator Duncan: Thank you, Mr. Hutton. I appreciate that’s for the communities that have lost their service. What about ensuring that Air Canada enters into interline agreements where communities already have the service, where regional carriers are in place? I note, for example, Air Canada speaks of their interline agreements with other airlines, and only a few of those agreements are with Canadian carriers, and similar to WestJet.

How are we ensuring, in terms of policy intervention with this financial intervention, that Air Canada is making interline agreements with the existing regional carriers where there is service?

Mr. Hutton: Senator, in terms of the way we are seeing the agreement play out — and I take your point on communities that may not have been serviced as a result of the pandemic through Air Canada and the agreement that stipulates Air Canada must provide service either directly or with partners — going to communities that have other partners and other airlines that have an equal chance to provide service, this is something we will be monitoring closely in terms of service to the North. It is something we have spent quite some time on in terms of thinking about supports that are available to regional carriers, and programming is in place with regional carriers as well.

This is certainly a complex landscape that we’re going to see continuing to evolve over the coming months. We’re going to want to make sure that communities are serviced and there is — to the degree we can — competition amongst carriers for the users, and that they have options available to them as they look to connect to points south and also between communities.

The Chair: Mr. Hutton, a couple of times we had blanks, probably due to your Wi-Fi, in your answer to the question. Can you agree with the committee that you will look into the questions that were asked by Senator Duncan and complete your answer in writing? Do we agree on that?

Mr. Pilgrim: Yes, we agree. Thank you.

The Chair: Again, the time frame is no later than May 12.

Senator Loffreda: Thank you all for being here. One of the key planning highlights from your 2021-22 departmental plan is to continue to work with VIA Rail and the Canada Infrastructure Bank to finalize the assessment of the proposal to create high-frequency rail in the Toronto-Ottawa-Montreal-Quebec City corridor and to look at options for the future of intercity passenger rail services outside the corridor.

I know the bank has already committed $55 million to this project. It has been almost two years since former Transport Minister Marc Garneau announced the government’s support to further exploring VIA Rail’s proposal. When can we expect to see the results of the government’s feasibility assessment? What possible impediments or challenges currently exist for this project to be approved, and has the pandemic delayed the government’s assessment of the project?

Mr. Pilgrim: Thank you very much for your question, Senator Loffreda. This project continues at great pace. Some good news was reported in the recent federal budget, with $491 million proposed over six years, starting in 2021-22, to VIA Rail Canada for infrastructure investments that would support the overall success of the High Frequency Rail project between Quebec City and Toronto. That is a great development recently on this project.

We are working closely with VIA, the Department of Finance and other agencies to ensure that the project can be delivered even with the pandemic restraints and complications. We are moving forward, and with the support of the government’s recent boost, to make sure this project does transpire.

Perhaps I could ask Mr. Hutton for any further details on the specific questions asked by the senator.

Mr. Hutton: Thank you, senator. Yes, in terms of the HFR project, which is continuing to move ahead, with strong commitment from the government in the recent budget, as Ryan indicated. Certainly the work there is supported by the budget in terms of providing some further funding to Transport Canada and VIA Rail to support their work through a joint project office that has been established to support [Technical difficulties] in terms of bringing results.

The Chair: Mr. Pilgrim, again, we have an agreement on the written answers. Could you look into it and make sure all your written answers are directed to the clerk of the Finance Committee?

Mr. Pilgrim: Yes, of course. Thank you.

Senator Loffreda: Thank you for your response.

I’d like to explore your department’s Known Traveller Digital Identity initiative, which aims to allow passengers to share their information with entities across the air travel continuum, in order to facilitate the traveller experience, all the while maintaining high security standards.

As noted in the departmental plan, the pilot project is to be implemented on select Air Canada and KLM flights between Amsterdam’s international airport and Toronto’s Pearson and Montreal’s Trudeau airports. Can you provide the committee with an update on this initiative? What is the cost associated with implementing this pilot project and what are the anticipated savings with the implementation of the digital identity, if any? I assume the pandemic has also had an impact on the rollout of this pilot.

Mr. Pilgrim: Thank you very much again for the question.

Good news to report, much like the High Frequency Rail project. This initiative received significant support in the recent federal budget: $105.3 million, starting in 2021-22, will be allocated to the Known Traveller Digital Identity pilot project, so this is great news. The pandemic definitely threw the travel industry a curve ball, but initiatives like this came to the forefront and their importance became even more well-known, so great support from the government for this initiative.

For the specific questions you had in terms of timing and financial results of this initiative, I’ll pass it to my colleague, Kevin Brosseau.

The Chair: Mr. Brosseau, because of the time frame, I would ask Mr. Pilgrim to again answer in writing, please, on the specific question.

Mr. Pilgrim: Yes; very good.

Senator Loffreda: Thank you, everyone.

Senator Smith: I’d like to follow up in terms of travel in the North. The pandemic has highlighted flaws in our institutions across the board, and I would like to get some sense of the gaps that have been identified in supporting air travel in the North, in remote communities, as a direct result of the pandemic. Are these operational problems, administrative issues, and has the department set aside money to correct them?

There have been a variety of answers and different answers to the questions, but give us two or three specific examples and how they’ve been corrected and what type of funds have been set aside, if you could?

Mr. Pilgrim: Thank you for the question, Mr. Chair.

In support of the remote communities, last year $174 million was provided to support access to remote communities, in partnership with the provinces and the smaller regional airlines, so that is taking place. There are 21 core small carriers providing regular service to northern communities that are part of this initiative. It has been very successful thus far.

Phase one, in terms of 2021, so up until April 30, there were $68 million of the $174 million provided through this initiative keeping that essential service to northern communities, with the remainder of the funding to be disbursed this year based on requirements.

It is a good program that is paying dividends. There is also, as I said earlier, another $206 million that was provided through the Fall Economic Update to regional development agencies to provide regional air transportation funding to smaller airlines and smaller airports. Combined, it’s close to $400 million going in support of this area and I think it’s paying dividends. It’s ensuring, as we say, the connectivity and the continuation of the vital service to northern communities.

Senator Smith: With the reduction of volumes of goods and services possibly going into the North, how has this impacted your air traffic controllers and downsizing and job reduction and laying people off? Do you have some specifics you could share with us about that?

Mr. Pilgrim: That’s a NAV CANADA question, which is a separate entity, but they announced late last week that there will be a continuation of service to these communities.

Transport Canada is absolutely focused on the safety and security of flights in all parts of Canada, so we’re working closely with NAV CANADA to maintain that essential coverage in remote communities and northern areas during this pandemic, even though the number of flights and the number of passengers has dropped. With the funds provided through these two initiatives I just discussed, it is maintaining that vital flow of goods. There may be fewer passengers on flights, but there is a large amount of goods being shipped to the northern regions.

Senator Smith: Have jobs been protected for the people of the North in terms of the air traffic controllers and the support elements? I’m trying to get a sense of that. Volume is down as we understand, but at the same time there has been a lot of money set aside. Has the money protected the employees’ jobs? That’s part of the game.

Mr. Pilgrim: Where feasible, this money did go a long way to maintain those flights. Where the jobs are maintained the jobs are required. Of course, some are perhaps using the wage subsidy program if there is a specific drop in a certain area. Hopefully the folks are supported by different means if there is a slowdown and requires some temporary job losses. I believe there has been some great progress in maintaining jobs with these different sources of funding over the last year and a half.

[Translation]

Senator Dagenais: I have a few questions for Mr. Pilgrim.

My first question is about the specifics of what the government is putting in place to follow up and make sure that the conditions are going to be met, and of course I am talking about the assistance that you are providing to Air Canada that could also benefit Air Transat.

In order to follow up, will the limits on salaries and benefits paid to executives still be monitored, and at what rate will you be able to provide reports?

Mr. Pilgrim: Thank you very much for the question. Yes, we have written in limits with respect to salaries as part of the conditions for transferring funds and that will of course be followed up.

With respect to reporting, because Air Canada is a public company, salaries are publicly disclosed and therefore the information is publicly available. Our department and the Department of Finance Canada will ensure that the conditions put in place as part of the transfer of funds are respected by the airlines to ensure that Canadians’ investments in these companies are protected and that services continue with a reasonable return to the country.

Senator Dagenais: We know that Air Canada has to provide regional service. Is this included in the overall funding package or will the government have to come up with more money in the next year to ensure smaller communities have access to air travel?

Mr. Pilgrim: Thanks again for the question.

The terms of the transfer of funds to Air Canada and other airlines contain requirements to keep as many routes as possible in areas where services are in demand and needed. Will more money be required? That depends on how this pandemic develops.

If, as expected, in the summer we see a decrease in the rate of infections and an increase in travel, we will not need to invest more in this area. However, if there is a fourth wave, for example, we will need to study the situation again to clarify what airlines, airports and communities need to survive the potential evolution of this pandemic. So we will need to monitor that situation.

The Chair: Thank you, Mr. Pilgrim.

[English]

Senator Galvez: My question is for Mr. Pilgrim and concerns rail safety and cutting down on greenhouse gas emissions.

The Auditor General said in her 2021 report that rail traffic has been increasing and that we transport 70% of our goods by train. Rail safety is affected by extreme weather conditions due to climate change, like coastal storm surges, landslides, avalanches, and extreme temperatures and precipitation. Your minister is responsible for assuring and overseeing safety requirements. I would like to know what specific measures you are using to reduce these risks.

On the other hand, the transport sector in Canada is increasing its emissions. In fact, some efforts to reduce emissions in other sectors are cancelled out by emissions in the transport sector. I would like you to describe the situation and tell me specifically what your department is doing to meet our Paris Agreement targets.

Mr. Pilgrim: Thank you for the questions.

I’ll answer the question about emission targets and what we are doing about it. Then I’ll pass the rail safety question to my colleague Kevin Brosseau who’s the Assistant Deputy Minister of Safety and Security.

In terms of the emission reductions, the work we are doing with the Zero-Emission Vehicle Infrastructure Program is having an impact on emissions. The transportation sector produces 25% of Canada’s greenhouse gas, and the light-duty vehicles produce 75% of that amount. It’s definitely an area that we need to focus on.

To date, through the Zero-Emission Vehicle Infrastructure Program, we have put 80,681 cars on the road. These vehicles have a reduction of 287,000 tons of greenhouse gas emissions per year and over 3 million tons during the expected lifespan of these vehicles — that’s about 12 years that a zero-emission vehicle will survive. This initiative alone has removed 3 million tons of greenhouse gas from our atmosphere. This initiative, which we are happy to continue, is paying dividends and reducing greenhouse gases. Countrywide, the target is still to have 10% of vehicles powered by electricity by 2025, with an increase to 30% by 2030 and 100% by 2040. These are aggressive targets but essential to ensure the well-being of Canadians going forward.

For the question of rail safety, I’ll pass it over to my colleague Kevin Brosseau.

Kevin Brosseau, Assistant Deputy Minister, Safety and Security, Transport Canada: Thank you. I’ll start by saying Transport Canada welcomes the follow-up audit to the 2013 audit, carried out by the Auditor General this year. Rail safety is a critical priority for Transport Canada.

In response to the recommendations made by the Auditor General, Transport Canada is taking a number of measures that build on the significant progress made since the tragedy of Lac-Mégantic. Previously, we hired more inspectors and carried out thousands of inspections on tracks in Canada. Efforts will be made with respect to collecting data for safety and risk-based auditing and evaluation. This is important for us to derive the risk-based planning for signals and tracks to identify the areas in Canada on rails that are the highest risk to Canadians, which will be a fundamental aspect of our work.

We’ll continue to improve the ongoing measurement of our performance and information, as well as create guidelines to stabilize data submissions in the way we work with railway companies. This will be fundamental to improving the already-safe rail system in this country. Then, of course, we’ll take program and regulatory action to assess any gaps and to ensure the effectiveness of safety-management-system processes in rail safety. We’ll be kicking off those consultations in early 2022 to be able to advance these. Thank you.

The Chair: Thank you.

Senator M. Deacon: Thank you everybody for being here this morning.

My first question is for Transport Canada and concerns the $567 million earmarked for the Canadian Air Transport Security Authority or CATSA. Given the unusual year the air sector has had, I’m wondering how this spending compares to previous years and how this money will be spent as you prepare for what will, hopefully, be a recovering air sector as we move deeper into 2021.

Mr. Pilgrim: Thank you for the question.

Spending this year is projected to be very similar to last year and prior to the pandemic. Costs have decreased, of course, due to the reduction in passenger volume, but there are increases due to COVID requirements and safety and security requirements. With the top-up CATSA just received through the federal budget, which was $271 million, this year’s budget will be similar last year’s.

We want to maintain the core capacity of CATSA throughout the pandemic so that once the economy returns and people start flying and travelling, this service is available and hasn’t stopped, because the restart would be complicated. We are maintaining operations, essential services and safety and security for those who are travelling. Spending should be similar year to year for CATSA with regard to both funding and spending.

Senator M. Deacon: Thank you for that. With respect to VIA Rail and the $769 million earmarked for it here in the mains — we hear a lot about the air sector and the struggles it is going through, but we haven’t heard about our rail lines — I’m wondering if you can share with the committee what last year was like for VIA Rail and the extent of the challenges you faced — you might want to compare it to the airlines or not — and what’s expected for this Crown corporation as we look forward to this year.

Mr. Pilgrim: Thank you for the question.

As I said before, last year, VIA Rail’s funding was supplemented by $187 million due to COVID impact. As my colleague Melanie Tod mentioned, Via Rail is working hard to reduce costs and offer service based on the current volume of passengers while making sure people are distanced in the trains. They have been hit extremely hard, like the airlines, probably to the same extent.

We are working closely with them. The government is in support of VIA Rail, as you can see from the $500 million that was provided to them in the budget for high frequency rail. We’ll be watching the funding this year. We have $769 million to operate today. Last year, they did require that supplemental money because of COVID.

They have had several months to better assess their operations and see where costs could be better managed. They are learning, like every enterprise in Canada is, how to operate during a pandemic. We’re there to help them along the way, and we will work with the Department of Finance to review revenues minus expenses throughout the year. As of now, $769 million will ensure continued operations based on a reduced number of travellers.

The Chair: Thank you, senator.

Senator M. Deacon: Do I have any more time?

The Chair: No, senator.

Senator Boehm: I would like to thank our witnesses for being here today. I’m going to follow on from Senator Galvez’s question on zero-emission vehicles and that very ambitious goal, Mr. Pilgrim. Zero-emission vehicles, or ZEVs, will make up 100% of new light-duty vehicle sales by 2040.

I want to refer to the April report from the other place, meaning the House of Commons Standing Committee on Environment and Sustainable Development, that found the relatively higher prices of zero-emission vehicles makes it harder for Canadians to afford them. The vehicles that are considered to be part of the program, of course, are battery, electric, plug-in hybrid electric and hydrogen fuel cell vehicles. They are all high end in terms of pricing. The report suggested that the program should be amended to allow used ZEVs to be eligible for the program and to scale the incentive to income and introduce a scrappage program for trading in old combustion engine vehicles for ZEVs. That has been done in a few countries, notably Germany.

There are two ways that the current program leads to mainly wealthier Canadians being able to purchase the ZEVs: The fact that only new zero-emission vehicles are eligible for the incentive, and the fact that it’s designed to provide funding based on the car being bought and not necessarily on the financial means of the buyer. So the program is clearly based on market analysis of the products available for purchase, but if we want all vehicle sales of ZEVs by 2040, it is crucial to come up with funding programs that are more inclusive and enable all Canadians to consider buying an electric car.

My question is whether an analysis was conducted, not on the products available but on consumers from all income strata and their ability to purchase vehicles under the current program — and you are setting aside $229 million, which is a significant amount. How can the current structure be amended to make it more inclusive to all Canadians, regardless of income, so you can achieve this 2040 target? This is a policy question for you.

Mr. Pilgrim: Thank you very much for the question, senator. This program, as I said, is going quite well. People are using the incentives. Provinces that have additional incentives are realizing a higher volume of sales of electric vehicles. Some provinces recently announced additional incentives to help the affordability of these vehicles. We know they are not cheap. That’s one of the barriers of entry and that’s why this program was put in place.

It’s a program that continues to evolve. We are looking at used vehicle programs and at programs in Europe, in Germany and so on, scrapping programs, to increase the take-up of this program. We are also looking at different types of vehicles that are a bit cost prohibitive at this time, which are the sport utilities, the heavier vehicles and the pickup trucks. A lot of those are coming on line but fall out of the scope due to cost restrictions. We are looking at potentially expanding the number of vehicles and the costs and so on.

If you look at used, scrapping, the types of vehicles in the program and who is buying them — we do have analyses of the age groups buying them and it appears to primarily be older Canadians in city areas because the infrastructure is better for charging in the city. An extreme amount of analysis is being done. It is a program we want to succeed, so we are working with essential agencies to make sure it has the right funding, the right scope and policy restraints and opportunities to ensure its success.

The manager of this program is my colleague Anuradha Marisetti who may have some additional details on this program.

Ms. Marisetti: Thank you, Ryan. Actually, you have covered the description of the program and how it works really well. In terms of the policy questions, I have nothing further to add to that. Thank you.

Senator Boehm: Thank you very much. What is being proposed is very ambitious. It will require a complete rethink socially as we move into pickup trucks and heavier vehicles. Thank you for the comprehensive answer.

The Chair: Thank you, Senator Boehm.

Honourable senators, this brings our meeting to an end. Mr. Pilgrim, I remind you to send written answers to the clerk on or before May 12. Thank you very much to you and your team for being here this morning.

Honourable senators, before we adjourn, I remind you that our next meeting is scheduled for this afternoon at 2:30 p.m. EST.

Before I officially adjourn, I will ask the steering committee members to please stay connected so that we can address the next agenda for steering. I will now adjourn the meeting of National Finance.

(The committee adjourned.)