[Recorded by Electronic Apparatus]

Thursday, October 3, 1996

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[English]

The Chairman: To help us keep on our schedule, we'll get under way.

I understand from the minister the prairie ministers will be making a joint presentation on Bill C-44, the marine legislation, in Ottawa after we've completed our tour, and today you're here to talk about the TTT study.

If you could take it away, Glen, we'll turn to questions as soon as you've had a chance to enlighten us.

The Honourable Glen Findlay (Minister of Highways and Transportation, Province of Manitoba): Thanks, Reg. It's a pleasure for us to be here. I will speak briefly from abbreviated notes. We have a brief you probably received yesterday. You may have had a chance to read it. But the best dialogue is always in questioning and answering. You can raise what you want to hear comment on and we'll try to comment.

With me I have my deputy minister Andrew Horosko and ADM of policy Don Norquay. Where I can't answer I will defer to them very quickly.

It's indeed a pleasure to be here, and yes, we're going to stick just to the TTT comments this morning. We will make comment on Bill C-44 as the four western provinces and the two territories under what we label ``Team West'', where we have opportunity on various occasions to have similar thoughts on things. The bill just went through early this week or last week...maybe early this week you just got it ready to go to committee stage. There wasn't time for us to put all that together.

Transportation is key to our hearts out here. It has played a big role in the development of Manitoba, and I can guarantee you it will continue to play a bigger and bigger role. It will be the heart of our economic activity in the new economy we're growing into. As I will highlight later on, I feel the proportion of our economy that depends on transportation is very high, and I can't see it changing at all, because we are an export-based economy here in Manitoba, and I imagine most of the prairies, and certainly central Canada, would likely agree they are in the same position.

The last five years have been characterized by withdrawal of government from the provision of or operation of or subsidization of the transport industry. I don't say that's bad. In some cases it may have been long overdue.

Governments have understood that the inefficiencies associated with government intervention can no longer be reconciled with the need for our transport system to be cost-effective and efficient in a global marketplace, where our business community, which is heavily into exports, must compete today. Every sector and mode has been marked by change, and in some cases very dramatic change. The question is why. Certainly in previous times transport was used as a public policy tool, driving all modes of economic development. It was closely controlled and firmly in the hands of governments. Innovation was stifled and market conditions were predictable.

In the development of the country government had a major role to play, but hindsight tells me one thing, that government didn't know when to get out soon enough. We stayed in with certain restrictions and ownership and stifled economic development, stifled initiative, when we should have got out earlier. Now transport is evolving into being a traditional service industry in which it will have to change to meet rapidly shifting market conditions.

Being from rural Manitoba and having been a former Minister of Agriculture, and now being Minister of Transportation, I'm very aware of the dramatic changes going on in rural Manitoba, and I think it's fair to say rural western Canada, in that not only do we want to produce commodities and export the raw product to some degree in the future as we traditionally have but there's now a dramatic shift to saying that's not good enough, because we're exporting jobs in doing that, we want to be able to add value to a lot of those products here and sell a higher-value or consumer-ready product.

We have umpteen examples in Manitoba where private sector investment is investing, whether it's in French fries for Japan, canola crushing plants, strawboard plants, or ethanol and gluten plants - the idea of taking a raw product off the land, converting it into some higher-value product, and exporting it to a market somewhere in the world. The need for transportation services to serve all of that is changing dramatically.

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In that context, I got hold of a couple of the major elevator companies last year and said that the traditional system that people think of is that grain comes in the front door of the elevator and it goes out by rail, and I feel that's changing dramatically. I asked them what portion of the grain now leaving their elevator does not leave by rail - in other words, leaves by truck. They said it was 25%, and growing. That means it's going by the road system instead of the rail system. For us, as we have a significant provincial responsibility for roads, it's a big impact, but at the same time there's economic activity around that, so there's a good and a bad to it.

Changes in all modes will pose a challenge to shippers and carriers, as well as communities. In many cases, difficult decisions lie ahead for government, carriers, and shippers. The current debate surrounding Churchill and rail abandonment is certainly testimony to this. Some will adjust well; others will have really significant challenges and may not be able to adjust.

Change, however, also affords Manitoba an opportunity for economic growth. It is the gains to be made from this new environment in transport that I wish to focus on. From goods-producing industries and also transport industries themselves, the Manitoba government is committed to providing an environment whereby Manitoban and Canadian transport industries will excel and thrive in this market-driven atmosphere. If they are allowed to excel, it will make shippers more competitive globally and therefore they will be able to do more business.

In our context here, we export about $7 billion in total of goods from Manitoba. Of that, $4 billion is to the U.S., and in 1990 we exported only $2 billion to the U.S. So basically 70% of our exports are now going to the U.S. It has been a doubling in five to six years. And because we're so far from salt water, that growth in that market will certainly continue to escalate, to my mind.

Certainly, in terms of the new initiatives, Winnport is a classic example of some forward-thinking business people coming forward and seeking an opportunity they think exists. Certainly their desire is to share the increasing volume of cargo traffic moving between the U.S., Asia, and Europe.

Winnipeg, geographically in the heart of the North American continent, is the shortest route for the circumpolar flights into the North American continent. The vision is for Winnipeg to evolve as a warehousing and distribution centre for the North American continent, and Winnport to be a hub for the air-truck intermodal activity.

I think you're fully aware that there is an increase in cargo going on in terms of air movement. Passenger growth is there, but the big growth in the future will be cargo. The cost of moving that cargo by air is now becoming more price-competitive, plus a lot of that cargo is very time-sensitive, so you can afford to pay for your freight bill to get it there overnight as opposed to over the next two weeks.

We think our location and our hub is well suited in terms of rail, road and air, along with a 24-hour airport and an entrepreneurial business community that wants to make that happen. We're well positioned to have it developed here, and I think over two years of development has now gone on in that direction. I don't know of a single individual in Winnipeg or indeed in Manitoba who doesn't think that's a very positive development for the future, not only for Winnipeg and for Manitoba but for this region of North America.

Certainly the Winnport success will be a big boost to the Manitoba economy. The prediction is that it could be in the vicinity of 5,000 to 6,000 jobs. Positive impact on transportation, distribution, and logistic industries will happen, and value-added manufacturing services will build up around the Winnport initiative. There will be increased employment, which I've already mentioned, and certainly there will be an increased tax base for Manitoba and Canada.

Certainly there are some impediments that exist, and this is where governments must help. Winnport's Canadian operator partner needs to get the necessary rights to operate on routes customers need, and that falls back into the federal bailiwick.

The Government of Manitoba is strongly supportive of the Winnport initiative and expects the federal government to take the necessary steps to facilitate this initiative. I want to stress here that I don't for a moment think you don't want to. It's just that we have to be able to move fast enough to be sure we allow this opportunity to develop here, because we all know where there's a real opportunity somebody else is looking at it too, and that somebody else is definitely not too far south of us. So the people here need to have a proactive ability to be able to set it up and operate competitively, and I have a lot of confidence they'll succeed if we don't give them impediments that cause them difficulty.

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Certainly Winnport will not occur in a vacuum. Other simultaneous initiatives must occur to help it succeed. For example, a longstanding issue with us, and what I would like to see, is a national highway system, a national highway program involving the federal and provincial governments, and the trade corridor development, which is the north-south that we talk about to quite an extent here in Manitoba.

Certainly a national highway policy initiative is not something that is new to you. Since 1987, the eleven governments across Canada - ten provincial, one federal - have been working towards that kind of initiative.

The urgency we see hasn't changed at all; in fact, it has heightened. We spend out of our budget in Manitoba $100 million a year in capital on roads. Independent studies say we should be spending $140 million a year - at least.

In terms of the demand on our system, I mentioned the amount of grain going from elevators, plus all the commercial interactive activity that is happening. The growth in the trucking industry is phenomenal. They're using roads.

We put back into our system approximately what we collect out of it in the way of taxes from various ways and means, fees, registrations, and that sort of thing: $100 million on road capital; $60 million on maintenance. So we basically are in balance from what we collect from the system and what we put back in. At the same time, in terms of the taxes you collect from the system, in Manitoba it's about $180 million, in round figures. This year we're getting back from you in the SIP program $3 million.

We've been after some better cost-sharing on federal-provincial relationships that would see some more of your money come back into the system, because the payback is big time. You've gone through an infrastructure program and you've seen the success of that. Your payback is really quick because of taxes. In any investment in the highway infrastructure, the payback will also be every bit as quick.

I think it's fair to say all provinces have been onside moving this way, whether it's transport ministers, finance ministers or premiers, and we continue to push and hope that some day there will be a sharing situation with regard to the road network.

The road network we've identified in Manitoba that would be part of that system is really Highways 1 and 16, two Trans-Canadas; the perimeter around Winnipeg, which is a big commercial entity; and Highway 75 going south. That amounts to 5% of our network in Manitoba, about 29% of the traffic on all the highways. That's how important it is.

We have spent $100 million to do the four-laning of Highway 75 for about 17 miles, roughly 100 kilometres. That took place over 15 years. That was as fast as we could build it. The very last piece is in St. Norbert, where the bridge is just getting completed now and should be open before Christmas. But I can assure you that a lot of the rest of that system is in continuous need of upgrade improvements, not only for transport efficiency but for safety, and we would strongly recommend that it would be a very good initiative investment for the federal government to work with the provinces in that regard.

Certainly when we talk about Highway 75, we talk about the north-south corridor. With Winnport, you move the product from air onto truck, and where is it likely to go 90% of the time? It's going to go to the U.S., and chances are it will go down Highway 75. That traffic volume, as I said earlier, has increased a lot and will continue to increase, and that's why Highway 75 is very important for us. But there's always more to do, and I wish we could be more proactive in moving in that direction.

Certainly there's a lot of initiative here on the north-south corridor. We see that corridor, certainly, from here south to Mexico. But if you stand back further and look, you see that corridor really could be from Hudson's Bay all the way to Mexico, really from ocean to ocean, north to south.

That's why we have such a high desire in the process of the decisions that CN is making right now, that the rail network in the north be actively developed as a short line operation. We certainly met with CN and presented the case to them of the value of that network, not only to the Manitoba economy but to them. I mean, any rail traffic that comes off that short line is something for CN to pick up to run on their main line, east, west or south.

Several people are looking at that initiative right now, of developing a short line and purchasing it from CN. There are very active processes going on right now involving CN, and I think the federal government has a serious role to play here too, because the port is a federal responsibility and the port is an integral part of that system - the port and the rail network - certainly in the eyes of one of the major investor groups, to make the whole thing economically viable.

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I'm sure most of you know that rail is the only surface transportation system for many people in that area. It's the only efficient way for the mining industry and the pulp industry to exist up there. Clearly, if we're going to have import-export in the future through Churchill, and if the initiative of Akjuit in terms of the space program is ever going to develop, the rail has to be there. So it's imperative that we find the ways and means to make an economic revival. That's why I strongly support the people who are there trying to develop a short line. We hope those negotiations are successful.

I have just a few comments on the trucking industry before I close. We are all having some difficulties with the adjustments that are happening in the rail industry with the number of jobs going down and down. They're going down and down because technology is changing and less service is needed with modern locomotives - that sort of thing. We certainly have had success attracting the customer service centres here to Winnipeg, both CN and CP, which is the new technology. Those two service centres represent over 700 jobs in Manitoba. That's good news.

When you look for really good news in Manitoba it's in the trucking industry and the growth that's happened there. Seven very large, very successful international trucking companies have succeeded through the deregulation process over the last number of years. A lot of trucking firms have developed in rural Manitoba in the last few years because economic opportunity was there. It's partly because of what I said earlier, that less and less product is leaving rural communities by rail and more and more by truck. So there has been a lot of success there, and 80% of the trade we do via truck is going into the U.S. Some of those trucking firms run 80% of their road miles in the U.S., but they're stationed here in Canada, and that's very positive for us.

We see a very symbiotic relationship between trade development - particularly south - and the trucking industry. We've seen great success and great entrepreneurship there. Just in case you don't know, the president and owner of one of the major trucking companies is the lead guy in Winnport. He has seen the vision of what can happen there.

So I will leave it at that. I've touched a little on everything I'd like to talk about. We can open up to your questions so we can enter into a bit of a dialogue. Thank you very much.

The Chairman: Thank you, Mr. Findlay.

Mr. Comuzzi.

Mr. Comuzzi (Thunder Bay - Nipigon): Welcome, gentlemen. That was a great presentation.

I would just talk about your Highway 75 for a moment. It's so important to have access to the United States highway system. So you have just about completed that stretch, with the exception of that bridge?

Mr. Findlay: Yes, there is that little stretch just south of the city where we have a two-lane bridge, and now a new four-lane bridge is being built. It'll be four lanes right from outside the door here all the way to the U.S. border. Of course, from there you can pick up I-29 and I-35, which take you straight south into Mexico.

We've been proactive in working with states. The deputy premier and the mayor have gone down, and we interrelate. I think in the United States everybody is as interested as we are in making sure the corridor is kept in good shape. Certainly we are very pleased with the U.S. government because through its ISTEA initiative, some $80 billion for road infrastructure will help build that. I guess we're envious sometimes that the corridor down there is federally owned, built and all that sort of thing. Up here on the 75 - I'm not putting the blame on anybody - of the $100 million spent, certainly over $80 million was provincial money over 15 years. Through the SIP program, around $20 million came from the federal government. So that kind of sharing is critical to allow us to do further corridor development, because we want to see an east-west corridor in this country that's effective too.

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In the truck industry we're always looking for efficiency. Think of the Trans-Canada route, where trucks are initiating in Montreal and Toronto and going to the west coast. We want them to take Canadian roads - get Canadian miles - to get the economic activity. If they identify a 100-kilometre or 50-kilometre stretch of road they hate, they're apt to take the southern route to make that trip as opposed to the northern route, and that's serious for us. That's why in the east-west corridor the federal government has a lot of responsibility, because if we're going to develop our economy, we have to focus more on the north-south route. We used to think east-west, but now we realize it's the north-south activity. There has to be the connection east-west and north-south.

Mr. Comuzzi: Absolutely. I appreciate what you said about the east-west route, because I, for one, and I'm sure the chairman and members of the committee, don't believe it's a question of whether we can build it - it's a matter of when we can build it, how we can build it and how it can be financed. It's going to replace a railroad in this country.

Is your Highway 75 equal to the standards of the interstate highway system?

Mr. Findlay: I'll let my deputy comment. He's my expert.

Mr. Andrew Horosko (Deputy Minister of Highways and Transportation, Province of Manitoba): It's certainly equal in terms of load-carrying capacity. Generally, Canadian highways allow heavier vehicle weights - particular axle weights and gross vehicle weights. It's lesser in standard than the interstate in that there isn't full-access control. Once you cross over into Minnesota or north into the Dakotas, the interstates have full-access control so you can access the highway by interchange. Although we've limited it to a one-mile grid, we still have access all the way along the road. Certainly with regard to load carrying, which is really the issue for us now, it's equal to the U.S.

Mr. Comuzzi: You're aware that Transport Canada is trying to harmonize truck sizes and weight distribution on the axles to get some form of consistency across the country. Although we haven't seen any of this, I'm a bit concerned what its results will be. I think the way it's heading now it will prohibit some of their trucks from entering our market because they don't meet the standard. Are you playing an active role in trying to ascertain what those regulatory standards should be, so they don't put us out of a competitive framework with our friends in the United States?

Mr. Horosko: Yes, we're playing a role on two levels. There is a vehicle weights and dimensions task force for Canada, on which we are participating. On vehicle weights, the task force will be making a presentation next week to both the council of deputies and the council of ministers responsible for transportation and highway safety. We're working to try to develop greater harmonization within Canada.

We had some success in the 1980s with the signing of a memorandum of understanding that for the very first time started to develop some minimums and maximums. We twice renegotiated the MOU - in 1991, I believe, and in 1994. So we're working to improve harmony within the country. We're also working - again largely led by the federal government through the NAFTA process - on the land transportation standard subcommittee. We are participating there jointly with the U.S. and Mexico to try to find some harmonization, in terms of vehicle weights and dimensions, that would allow transit right from Mexico into Canada, as well as regulatory harmonization on drivers' licences, drug testing and that sort of sphere.

Mr. Comuzzi: I think that's going to be very important.

Mr. Findlay: We strongly support the harmonization principle. It's unfortunate that over the course of time different territories, provinces, regions and states used regulations as trade barriers to protect their industries. I think that's counter-productive in this day and age. On every initiative we want to maximize our ability to harmonize because I have total confidence our trucking companies can compete. We don't need to create barriers to protect them. The faster we bring down barriers, the greater we will increase the capacity to be competitive. I don't think they're prepared to bring them down as fast south of here as we are here.

Mr. Comuzzi: As you're aware, we're attempting to change the complete port structure in Canada.

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I don't want this to sound parochial, but the Manitoba basin is close to the Great Lakes and St. Lawrence Seaway and the port of Thunder Bay as a starting point. I'm wondering if you folks have ever considered that because of the closeness of that situation, perhaps you should have representation on that new port authority. What would your comments be on that?

Mr. Findlay: Well, that opens up a big question for me, Joe, I can assure you.

There's been a dramatic change in where our international markets are across the oceans. You know what's happening. Over the last 10 or 15 years there's been a tremendous shift of moving product through the Great Lakes system to the Pacific Rim markets.

There are certain grains, such as durum, that primarily grow out east and come right across the prairies to go out through Thunder Bay. On the other hand, we have malting barley, high-protein wheats and canola all going to the west coast, if it's going to salt water, but it is moving south, too, in greater and greater volumes. So the trade patterns and directions of product movement have changed very significantly.

We believe Churchill has a role to play in the future, not only in the grain sector, but in many other sectors. It's a package deal, and we want to see development there.

We want to have representation on the authority there and we want to have representation on the authority on the west coast, but in the evolution of that policy, we don't want to see Churchill left out. This might be a slightly unfair comment, but I have to make it. There are still going to be federal dollars flowing into the Great Lakes system, and the federal government wants to pull out of Churchill. That's not fair. That's not fair.

If you're going to support a system of trade on waterways there, why do you want to shut down Churchill? It has certain advantages. It has other economic activities for Manitoba, the northern region and northern Canada and the territories up there, plus the initiative on tourism. There's just so much that would be closed off. It's not just closing a rail or closing a port; it's closing down the industry, period.

So yes, we'd like to be represented everywhere, but we'd also like you to be sure you don't shut off what is considered to be the northern start of the north-south corridor all the way down to the Caribbean, I guess.

The Chairman: Thank you, Mr. Comuzzi and Mr. Findlay.

Time is closing in on us, and I know Mr. Crête has some questions.

[Translation]

Mr. Crête (Kamouraska - Rivière-du-Loup): I want to congratulate you for your submission that covers all transport issues, which fits in well for the purpose of our consultation.

I have two brief questions to ask. First, have you made any projections concerning the use of the North-South corridor rather than the East-West corridor for trading with the United States, within the next 10 or 15 years, considering the Free Trade Agreement? Are you planning to concentrate on the North-South corridor?

My other question deals with the Trans-Canadian Highway Program and the Trans-Canadian road system. There may have been an answer to my question in the report, but I had not enough time to run through it. Are you suggesting 50-50 financing by the provincial governments and the federal government? At what level would a decision be made concerning the Manitoba roads? Would the provincial government determine what the problems are and what the priorities would be concerning the roads? What would the decision process be in such a program?

[English]

Mr. Findlay: Thank you for both questions. I'd like to spend a few moments commenting on them.

With regard to north-south trade in Manitoba, let's go back. In 1990 we exported $2 billion to the U.S., in all types of commodities: grain, minerals, pulp, farm machinery, furniture, textiles. In 1995 it passed $4 billion, so it's more than doubled in five years. Now 70% of our exports outside of Canada go to the U.S. It will only continue to grow, because of our situation in terms of transportation costs to get to the final consumer.

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Plus, I strongly believe that as that trade was developed, Americans buyers found we have quality products and reliable quality in our products, no matter what they are, that's superior to what they've found elsewhere. We've discovered them and they've discovered us.

There seemed to be an invisible barrier on that border, in many respects. We were both expected to export to the rest of the world, going east and west, and we didn't trade with each other as much as we probably should have. Now those doors are open, and I don't see anything but expanded activity going to the U.S. for us. And we're so far from salt water that it's just natural.

The second question was on the infrastructure national highway program. The process of discussion - to answer both your questions - started in 1987 and it has evolved. The whole system was identified about 1992. The total mileage was 25,000 kilometres right across the country. It's the major system, the interprovincial routes, the corridors east and west and the corridors going south, and it links all major cities and all major ports. For us it's highway 1 and highway 16, which are Trans Canada routes, highway 75 going south, and the perimeter around Winnipeg. It's 5% of our network. As I said, it carries 29% of our traffic. So the network is identified.

Decisions will be joint. I think that relationship is all set up. Everything is set to roll, with the exception of two questions. One is on federal money and the second is on the ultimate cost-sharing.

There have been proposals put forward of I think it was an A pool and a B pool, and cost-sharing differently on that. But the discussion hasn't taken place now for at least two years as to how that division would happen. Once we get an offer of some money, then we might discuss how it would be shared.

I don't think there are any problems. It's not that don't want to discuss sharing. We're prepared to discuss sharing. One is fifty-fifty and one is sixty-forty. Some provinces in the Maritimes argue there's no way they could come up with 50%.

When ministers of transport met here in October 1994, all ten provinces were there, and I took the lead to be sure we got a commitment from the provinces to put money on the table. Nine out of ten provinces committed $2.5 billion. Mr. Young was the transport minister at that time, and he said he'd respond by December 15. He responded by saying ``No, we can't at this time''.

We have commitments from the provinces. Every province is prepared to come to the table. Just give us some money. We'll worry about cost-sharing later. One is fifty-fifty, and that might be the easy saw-off. I could argue that it's wrong, but that can't be clarified until we have some money that we can start talking about. But don't forget there are some provinces more capable than others of putting money up.

We always want to stress in that situation that we shouldn't always spend the money on the high-volume corridors, which might be in southern Ontario. It's important that we keep the stretch around the Great Lakes up to date; otherwise the trucks are going to take the U.S. route.

There are a lot of dynamics here.

The Chairman: Thank you, Mr. Minister.

Mr. Gouk.

Mr. Gouk (Kootenay West - Revelstoke): Thank you, Mr. Chairman.

I have a couple of comments relative to the text, which I quickly went through beyond what you were talking about. I have maybe one question.

You mentioned quite a bit about rail, and most of my concern is on rail. One of the things I've found interesting in our committee system here is that we've had a lot of cooperation on this committee. We're sitting here with three different parties, including the Bloc Québécois, which some people consider a political anomaly. In fact we've had some very penetrating questions from the members travelling with us now.

You mentioned subclause 27(2) as a bit of a sore point in the rail thing. It was a sore point with me, too. But there was also a lot of movement from the government to blend a lot of ideas and make some things work a lot better.

One of the things you mentioned in your brief is with regard to the negotiation on a price when the rail line wishes to abandon a line. They may hold out for too high a price, and you're looking for some dispute mechanism. I looked at that when it was happening. Keep in mind that in the next part, if they cannot agree on a price, it's then offered in sequence to the federal government, then the provincial and then the local regional government at net salvage value.

If I were a railroad asking $5 million for a line and somebody was offering me $2.5 million, and the net salvage value was $1.5 million, I would think awfully hard before I'd let that $2.5 million get away. That's because the Manitoba government, I'm sure, being very sharp, can then go to that same person and say they can pick it up for $1.5 million, so if you give us $2 million, that saves you $500,000. If you even give us the $1.5 million, then put $500,000 into further development of that line, which will make us feel good, you've still saved $500,000.

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If the railroad is too dumb to recognize that they should have taken the $2.5 million, it's a win-win situation for everybody, except the railroad. Consequently, as the railroad is not dumb, I suspect they would probably accept that $2.5 million under those circumstances.

With regard to your comments on the national size and weight standardization of trucks, I think we do need to have some standardization. But I come from British Columbia. Keep in mind that, provincial trade barriers notwithstanding, we have different constraints when winding these big trucks through the mountains than what you have certainly on the prairies. So there are factors that have to be taken into consideration.

The one area I wanted to ask about was with regard to funding for highways. I have written a policy for our party that's referred to as ``dedicated revenues''. I have a problem with the idea that the government takes in billions of dollars per year in fuel taxes without returning even barely a small portion of that.

The auto industry is now coming out with a program called ``Put Your Two Cents' Worth In''. I anticipate that tomorrow in British Columbia, the Premier of British Columbia is going to announce that they will commit two cents a litre to a dedicated revenue fund for road rebuilding, and challenge the federal government to match it. It will be probably conditional on the federal government matching it.

Is the Province of Manitoba interested in participating in such an event, whereby you will commit some portion at least of your provincial fuel excise tax if the federal government will make a commitment to you as well on a federal portion of that tax?

Mr. Findlay: The simple answer to that, Jim, is that we're doing it now. We have 11.5¢ per litre on fuel in Manitoba. The revenue that flows from that, plus all the revenue from our licensing division, truck registration, amounts to around $160 million per year in the province of Manitoba.

We spend that on our highway system, with $100 million on capital, plus $60 million on maintenance. So we're not dedicating it, but through the budgeting process, the dollars that flow in from all the road-related taxes, fees and dues, rolls back out to the road system in capital and maintenance.

So we are already indirectly dedicating our revenue in that context. We've heard loud and clear from the public that they don't want any more taxes. We've not raised taxes in this province for nine consecutive budgets in this context of personal taxes. We have to use existing resources more cost-effectively.

Yes, the federal government across Canada takes out roughly $5 billion, and more, of excise tax on gas and diesel, plus GST. It's a big chunk of money. I just hope that there's a will sooner or later to devote some of it back. That's where a national policy comes in. We are, as provinces, all dedicating money back. We just need some commitment out of that pool the feds receive from that road system for something back into the system, because the needs and demands of the system are not going away overnight.

Mr. Gouk: Given that British Columbia, I suspect, is doing that.... I'm certainly not running up the political banners, because we're about as opposite as you can get.

Mr. Findlay: I think so.

Mr. Gouk: That notwithstanding, you might want to have a close look at what they do and the way in which they do it. If you're already unofficially dedicating that money to that, you may wish to alter your commitment to make it a dedicated form so that you can match what B.C. is doing and look for some kind of pledge from the federal government.

Mr. Findlay: We're open to discussion to achieve that end result of more dollars to that capital infrastructure. I don't think anybody would say we shouldn't be devoting input into keeping that infrastructure up to date and modern for safety and efficiency.

The Chairman: Thank you, Mr. Gouk. Mr. Keyes, one short question.

Mr. Keyes (Hamilton West): I have about three short questions, Mr. Chair.

Good to see you again, Glen. Thanks for your report.

Have you done a cost analysis? Let's just say there is going to be a national highways infrastructure program in this country. Has Manitoba done an analysis on just how much work would have to be done and how much that would cost as a ballpark figure?

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Mr. Findlay: Yes. I'll give it to you this way. I became minister just three years plus two months ago. I went to the deputy here and I said to him that we're having trouble meeting all the needs and demands of municipalities, trucking industry, and so on and so forth. He wondered what the wish list was. What was in the tank of requests when we try to make our decisions on $100 million of available capital every year? I think I said that it would be roughly around $600 million. He said no, no. He came back a few days later and said that it was not far off.

It's now $1.1 billion in the tank or the wish list on which the department is developing standards. We know we need to upgrade. So for every $11 in requests, we have $1 capital annually. So what's coming into the tank is growing much faster than our ability to serve. So there's a tremendous list in the tank.

As for what we can handle annually, I think the construction industry might like to answer that question.

Mr. Keyes: But say we had the program, and Manitoba put their wish list on the table and said that this is what they want to do to participate in that program. You're saying that would be $1.1 billion?

Mr. Findlay: That's over the course of time. Look at how significant it is: it's gone to $1,100 million from $600 million.

Mr. Keyes: You can imagine, Glen, $1.1 billion just from the province of Manitoba, as a wish list, on a national highways program.

Look, the Manitoba government has its eye on the budget. Other provinces have their eyes on the budgets. The federal government has its eye on the deficit.

To be fair, Glen, when you sat here in 1994, as a group you said that you committed $2.5 billion to a national highways infrastructure program, or something similar, and that Doug will get back to you. Doug's reponse - you all know what it was - was that, hey guys, it's not enough. Realistically, if you're going to have any kind of a national highways infrastructure program, it's going to be, what, $20 billion.

The Chairman: It would be $10 billion to $12 billion.

Mr. Findlay: It's the 1989 number.

Mr. Keyes: The number the provinces were bringing forward was $2.5 billion out of $12 billion. The response was that they'll worry about the 50-50 cost-share stuff later. They would just go ahead.

Well, you know, it's a big difference between $10 billion coming from the federal government and $2.5 billion from the provincial governments for a national highways infrastructure program.

Mr. Findlay: Nobody expects that $12 billion to come up overnight; that's a multi-year process. I worked hard to get that commitment from the provincial government. If you want sharing, you have to cough up. We coughed up, at least nine out of ten. If you matched the $2.5 billion at 50-50, we would have $5 billion of additional expenditure going to the system over a period of three to five years, which is what I think everybody is committing to, and we would have got started.

This way, we haven't got started. I can accept the arguments from the other side that there isn't the money. Logically, you would have to think that if you're spending $100 million today, then we can handle $150 million, $160 million, $170 million per year, or something like that. You would whittle down that list much more rapidly than we are today.

Mr. Keyes: But I think we both agree that, most certainly, a national highways infrastructure system is certainly a growing need in the country.

Mr. Chairman, just while we have them here, the matter of ports sort of dovetails the reason we're here.

Glen, you mentioned that 70% of.... Now, I'm a little fuzzy on this. Is it all grain? Is it all product?

Mr. Findlay: Of all products.

Mr. Keyes: Of all products, 70% is going out southbound. That, of course, is on the roads, the networks and all that kind -

Mr. Findlay: It's rail to some extent, but primarily on roads.

Mr. Keyes: Do you have any plans to build roads in the best part of northern Manitoba let's say, if there was a highways infrastructure program?

Mr. Findlay: About 11% of our total network is north of the 53rd parallel on roads that were built in the 1960s and early 1970s for mining and pulp activity. These are roads that were built to a pioneer standard, which is just to get the ore in and out. They said citizens will never use these roads. Well, it turned out to be quite the opposite. So our network up there is not as good as it should be. It doesn't go to every destination.

Mr. Keyes: You would want to improve it, of course.

Mr. Findlay: We continue to improve it generally in a year.

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Mr. Keyes: You see, I'm having a tough time rationalizing something here. Seventy percent of your overall product is going south now, the majority of it by road. There's a cry to keep the port of Churchill open to ship out what is probably going to be only 200 tonnes to 300 tonnes of grain, when even that amount of grain could be put through my colleague's port of Thunder Bay faster than it can through Churchill. When you put all those facts together, you have to say that what we're doing there just doesn't make sense.

The Chairman: Mr. Keyes doesn't speak for the committee, Mr. Minister.

Some hon. members: Oh, oh!

Mr. Keyes: I'm speaking for the taxpayers who have only one pocket. We're pushing out dough like crazy for something that doesn't seem rational.

Mr. Findlay: Can I just give a broader picture of the port of Churchill? Clearly there hasn't been enough grain going through to justify it economically. There's no question about that.

A lot of people think that because of government regulations and other factors in the system it hasn't been allowed to go.... There are all kinds of claims that it's more cost-effective to reach markets in Europe, Russia and Africa through the port of Churchill than it is through the Great Lakes system. Studies show that. Economies of scale show that the port of Churchill has economic opportunities beyond grain, whether it's the find in Voisey Bay Inco is involved in where they might bring that ore in through Hudson's Bay down to Thompson for smelting potential in the future.... If you close the port, it's ruled out.

There is also the Akjuit space program. It has to have a rail network to Churchill because that's where Akjuit is located. There are tourism activities and the resupply of the goods to the Northwest Territories.... All of those kinds of things would be shut off if you close.... Tens of thousands of people along the rail lines for whom rail is the only form of surface transportation would be shut off. It's the only form of surface transportation they can get in that part of Manitoba.

Churchill is a lot more than grain. I think it has been choked off with grain. And many people would say that. We're struggling to keep the one port that we have in this province viable, because otherwise it's a land-locked province.

I think there's an economic opportunity that the private sector sees, and they're not going to come in.... They're wanting to buy the rail network in the north and the port to create an economically viable entity, period. They see opportunities. They see people who want to ship through there, who want to ship not only grain but other commodities. That's where there is economic viability. I think we need to look at the future they see as opposed to the past that maybe wasn't the full truth or what it could -

Mr. Keyes: How about a task force on Churchill here, Mr. Chairman?

The Chairman: I think there is little need for a task force on Churchill.

Mr. Minister, I have two very quick questions related to the highway question. You spend $100 million a year in new highways infrastructure. The national highway system is 5% of the network, 29% of the -

Mr. Findlay: Vehicle traffic.

The Chairman: - vehicle traffic. When you talk about a commitment to the national highways.... Because all we're talking about is that 5% of the network -

Mr. Findlay: That's right.

The Chairman: - so are you talking about a commitment of 5% or 30% of your annual expenditure? Would you be looking for matching on 5% or on 30%?

Mr. Findlay: The figure will vary by year, but we're in the $20 million to $30 million range on that network each year. TC, 75, 1 and the perimeter...it accumulates. It's a lot of our expenditure because of the volumes of traffic.

The Chairman: My second point is just a comment on the other decision-making on this. Yes, all of the highways ministers came to the table quite prepared to participate at some level in the renewal of the national highways. It is my understanding, however, that at a meeting of all of the finance ministers only one of the finance ministers was prepared to participate. Is your finance minister now prepared to support an investment of that nature?

Mr. Findlay: I think they're prepared to support from within existing lines of revenue. If they're asked to find additional lines of revenue by more taxation, that's where there's a knot in the rope.

Some hon. members: Oh, oh!

Mr. Findlay: But the needs in infrastructure won't go away because of that knot. We have to find ways to untie that knot so that within existing revenue sources that come in from the system we can find some dollars that can be dedicated.

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The Chairman: Yes, very quickly, Mr. Gouk.

Mr. Gouk: I have just one short comment to put things in perspective. We've heard from a number of experts who say that we need a 10-year, $10-billion national rebuilding system. To put it in perspective as to whether or not that is doable with existing revenues, from British Columbia alone the federal revenue on gas and diesel - just from that one province without touching any provincial money or any of the other provinces' money - is almost enough to fund that entire program. When you consider all of the provincial revenues and the revenues at the federal level from Alberta eastward, I'd say yes, we can sit down, sharpen our pencils, and find the money to do it up to Wells.

The Chairman: Of course, Mr. Gouk, the current federal deficit is greater than the entire domestic product of this province.

Mr. Minister, it's been a a pleasure to have you here. I thank you, and we look forward to seeing you in Ottawa for the presentation on Bill C-44.

Mr. Findlay: One of the four provinces or two territories will definitely be there, and hopefully more than one. It all depends on their schedules. Saskatchewan is definitely committed to going to Ottawa. I'm hopefully going to be with them. I have House commitments and you know what they're like.

The Chairman: Our considerations will be enhanced by your presence.

Mr. Findlay: Thank you very much.

The Chairman: Chairmen can be eloquent also.

From the Canadian Wheat Board, we have Lorne Hehn. Welcome, Commissioner. I appreciate your patience. I allowed us to go somewhat over our time with the minister because there were a number of topics we wished to cover.

You're here today, I understand, to present specifically on the issue of Bill C-44 and the ports legislation. I will ask you to introduce your colleagues and take it away.

Mr. Lorne Hehn (Chief Commissioner, Canadian Wheat Board): Thank you,Mr. Chairman. We are pleased to have the opportunity to address the Standing Committee on Transport. You're correct when you say that our presentation this morning will be considering Bill C-44 and one or two other associated marine issues.

We weren't aware that the committee had broadened the scope of this particular sitting to include broader issues of transportation and trade, but we certainly would be in a position to forward our remarks in those areas. If that's the desire of the committee, we'd be pleased to do that.

I have Tami-Lee Reynolds with me today. Tami is an adviser in our corporate policy group. She currently is working closely with our transportation division at the Wheat Board on transportation policy and related issues. I also have Patricia Rosher with me. Patricia is in our transportation division and devotes a lot of time to the marine part of our transportation logistics.

In April of last year, the board made a submission to the SCOT committee for consideration in its report on national marine issues. I won't go through that report, but our submission concentrated on the issue of competitiveness between Canadian ports. Many of my comments today will build on that particular submission and on issues of national competitiveness as it relates to our vision for a national marine system.

As you know, Mr. Chairman, the Canadian Wheat Board markets wheat and barley on behalf of farmers, to whom all sales revenues less operating expenses are returned. You'll also know that western Canadian farmers are not buffered from the realities and the fluctuations of the international grain market, as are farmers in the European Union and the United States. They continue to maintain an extensive arsenal of support programs, albeit some of them have now been uncoupled from direct commodity support.

As we enter a new GATT world trade round we hope to successfully reduce the use of the damaging policies. However, I think it's important this morning to underscore that western Canadian wheat and barley farmers continue to remain more exposed to market forces than their competitors in either the United States or the European Union.

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From a transportation perspective, western Canadian farmers are also shouldering more and more of the full cost of transporting their product to market, first with the the repeal of the WGTA and the associated government support, and now with marine policy reform and cost recovery. It's important to take into account the effect of this on the international competitiveness of the grain sector.

We have minimal commercial storage in our system, compared to our competitors. We're a lot further from port, and our reliance on the export market is much different. These three realities face western Canadian farmers and put them in a different sort of competitive position relative to the U.S. and the E.U.

These realities highlight the need for an efficient and seamless handling and transportation system if farmers are to remain competitive with our counterparts in the U.S., Europe, Australia, and Argentina.

Decisions, therefore, regarding the national marine infrastructure cannot be made in isolation, nor can they be driven strictly by and mainly by deficit considerations. These decisions must be part of a national strategy of competitiveness in the agricultural industry and of competitiveness in all industries whose livelihood depends on our marine system.

Marine policy reform will result in a system in which responsibility for efficiency and competitiveness is shared by port interests, users, and the government. That's an important and a necessary evolution, and we are congratulatory about the progress so far. It certainly is a Team Canada approach - the kind of approach where the whole is greater than the sum of its parts - and that kind of thing that will keep us competitive in the international environment.

We support the government's objective of modernizing marine management and regulations. However we believe that the federal government also has a responsibility to ensure and maintain a competitive marine infrastructure on an ongoing basis.

If Canada's marine system is to promote international competitiveness, it should first of all ensure that the port and seaway users have access to marine facilities at a cost which is fair, but also recognizes the international competitive environment in which we operate.

To this end, we support the provision which stipulates that a Canada port authority must publish a new fee or a change to an existing fee 30 days before it comes into effect. However, in reality, the Wheat Board firms up its shipping program months in advance of the actual execution date. Our sales, in many cases, have shipping periods that are three or four months distant from the actual sale. We would benefit by a period of at least 60 days to fully incorporate the new information into our sales planning and sales execution.

The act also specifies that fees charged by Canada port authorities must be fair and reasonable, and not unjustly discriminate between users. We are concerned, however, that the act fails to define a specific dispute settlement mechanism in the event that users feel the fee is unreasonable and does discriminate. In the interests of efficiency we believe that the Canada Transportation Agency is probably the best choice to fulfil the dispute settlement role in marine transportation, similar to what you are now doing in surface transportation. The CTA's powers with respect to the fees and services offered by ports, the seaway, and the pilotage authorities should be as well defined in this act as they are in the Canada Transportation Act.

The second characteristic of a competitive marine system is that it allows those managing the ports and the seaway to provide innovative and timely service to users. For example, if there is a shift in the nature of traffic that goes through a particular port, in terms of either product or mode, the port must be able to accommodate that traffic and maintain efficient use of its facilities.

However, when we look at section 24 in this regard, we are concerned that the capacity and powers provisions as applied to the port authorities tend to be somewhat restrictive. Specifically, we feel that a CPA will be restricted in its ability to provide service to users if the changes it makes to land use and subsidiary holdings are irreversible.

If an existing grain terminal and wharf at Thunder Bay, for example, ceases operation and the wharf is used for other reasons or other commodities, and if the world trade shifts in the next five to ten years, does this rule out putting that terminal back into operation, if it's economic to do so?

We can appreciate that the federal government wishes to ensure that national interests are met. However, this can be achieved through the setting of standards for port activity and contributing a national perspective through the federal government's involvement on the board of directors. Some flexibility in meeting the government's interests as well as accommodating market cycles - and that's our concern, the market cycles - would be useful. Certainly we have to keep in mind the cyclical nature of the grain business.

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In the early 1990s, the former Soviet Union countries represented in excess of 20% of our sales of wheat. We haven't made a sale to a Russian country since June of 1993, and that demonstrates the kind of cyclical nature that we face in this business and that has implications for east-west movement, north-south movement, and north movement.

We can appreciate that the federal government wishes to ensure that national interests are met. However, this can be achieved through the setting of standards, as we said.

We have to also touch briefly on the borrowing powers discussed in clause 27. That is of some concern to us. Related to this issue is the restriction on the CPA with respect to mortgaging property. This kind of restriction will increase the cost of financing. We recognize the federal government's concern on the exposure side, but we also have to keep in mind the cost side. When one is financing new development that increased cost will certainly be paid for by the user, and in our case that user is certainly the farmer. We must find a way to reconcile the national interests of government on the risk side with the business interests of the port authorities.

The wheat board suggests that CPAs be given the authority to mortgage port land for development capital purposes, conditional on ministerial approval. Lending institutions would still consider cashflow and revenue generation - that is, the ability to service a loan - as the number one lending criteria, but the cost of borrowing would likely be dramatically reduced if substantive property could be offered as collateral to offset that cost.

The federal government's marine reform was intended to have the major ports essentially run as businesses, and we certainly support that approach. With this in mind, we see some problems, however, with a stipend based on gross revenue to be paid to the federal government on an ongoing basis.

The current stipend procedure suggests that a CPA must submit payment on an annual basis for land with restricted use. It is the CWB's understanding that the government's mandate with respect to marine reform was certainly one of cost recovery, and we support that, but we did not notice that it was also one of revenue generation. It's the revenue generation aspect and principle that we have some trouble with.

While our competitors continue to receive direct support for infrastructure by way of maintenance and development grants, Canada port authorities would be faced with a stipend, or a check-off, or a tax, if you like, on gross revenue. We have some problem with that, because it's not consistent with keeping that international competitiveness principle up front.

With respect to pilotage, the Canadian Wheat Board recognizes the government's concern. We agree that the act should not allow for radical changes until we are all satisfied that environment and safety issues are addressed.

However, there are captains - and I guess the correct term is masters - of many of our Canadian flag vessels, in particular our laker fleet, who have the experience and the skill and the knowledge to navigate the river systems.

That is not to say that there shouldn't be an appropriate certification process. That's a definite must in the interests of safety and the environment. There would be merit, I think, in the committee considering having a training and testing certification program in place, done by an independent type of body or institution, and we would ask for your consideration in that area.

Finally, in our vision of a competitive marine system, users and port interests participate in setting transportation policy which has the potential to affect their livelihood. Likewise, a stated objective of the act is to manage infrastructure and services that encourages and considers input from users.

To this end, we agree with the provision that a CPA must develop a land-use plan. It's very important that sucy a plan contain objectives and policies for the physical development of the property it manages or could in fact own in the future.

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As well, we agree with the provision for the appointment of a board of directors. However, we believe other ports, in addition to Vancouver, may also benefit by the appointment of one director from a provincial government other than that in which the port is situated. We'll use Prince Rupert as an example. Here's a port, an extremely important port, at export position for commodities, grain included, that come mainly out of the three prairie provinces rather than the province of British Columbia.

Although the Canadian Wheat Board cannot be directly represented on the CPA or the seaway board of directors because of conflict of interest related to public office, the interests of the board stakeholders, mainly farmers, we believe, should be represented in some way. We raise this as a concern, and as an example we point to Minister Anderson's northwest transportation quarter task force, which indeed does provide for this kind of representation. Perhaps we could work together with the committee and with organizations, such as the next group, that are going to provide testimony and work out a creative solution which would apply to CPA and seaway directorship.

In addition to representing users, the CPA board of directors should also have one or two directors representing broader business interests, because as we say, we're moving them to a business-type corporate organization - outside directors, if you like, as the term is normally used, because as I stated previously the CPA is essentially a business entity.

We would like to stress that the board of directors should be balanced between user and port interests. The suggestion for the board of eleven in our view seems reasonable, to accommodate some of the arguments we've presented on representation.

Mr. Chairman, I have one other issue. It isn't in Bill C-44 but I would like to mention it briefly. It deals with coast guard cost recovery. Although the issue of Canadian Coast Guard cost recovery is not covered in the proposed marine act and not within the mandate of these hearings as we understood it originally, we did want to take this opportunity to comment quickly, because grain farmers will also be paying this marine-related fee for services such as navigational aids and ice-breaking.

The board has participated in the Canadian Coast Guard's cost-recovery process from its earliest proposals, and we will continue to cooperate closely and work closely with the coast guard on the economic impact study currently under way. Our objective is not to hinder that process, it's to assist it. But we want to also ensure farmers participate in this process at a fair and reasonable level. This is difficult to do, we would suggest, when the coast guard continue to be intent on meeting seemingly arbitrary revenue targets, with cost-recovery mechanisms that are inappropriate to the nature of our shipments, for example an annual marine services fee on gross registered tonnage for laker movement.

Mr. Comuzzi would be very interested in this, because we're in a year when we came off with fairly light movement through the eastern sector of our system. However, we have good sales on the books for fall movement. It's a time of the year when we would hope the lakers would bring out extra equipment. If they are faced with this gross registered tonnage fee, it may very well prevent that from happening. It's that kind of situation I think we need to deal with in this area.

In conclusion, the Wheat Board's objective, in our submission, is to ensure western Canadian farmers end up with a marine system that ensures their product remains competitive by keeping ports efficient, with sufficient base capacity to meet long-term needs. We bring that up because there is a point in all these decisions where efficiencies and cost reduction and capacity all intersect. It's important that we keep that base capacity, to take account of any opportunities that may come up in the next five to ten years. We of course also want to ensure that costs are reasonable and farmers' interests are heard.

I would ask that members please refer to our written submission, because it has a lot more detail. Some of the things I've mentioned this morning are mentioned in that submission. Others are not.

We're open for questions, Mr. Chairman, on this or any other transportation matter.

The Chairman: I think we'll try to compress the questioning a bit. We're beginning to slip badly behind time.

Mr. Dubé.

[Translation]

Mr. Dubé (Lévis): As you know, Mr. Chairman, I only speak French. It is not a matter of choice, but of necessity.

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I find this issue very interesting because I belong to the riding of Lévis, across the river from Quebec City. A lot of western grain comes through it.

You explained that since the iron curtain was lifted and the USSR ceased to exist a such, you are pratically selling no more grain to the East European countries. I have two questions. First, currently, who are the main buyers for our grain, especially our wheat? Could you give me some figures or percentages? What percentage of the sales is moved by sea? What ports are you currently using as opposed to five years ago? I am not asking for specific figures - I can always find them later - , but I would appreciate if you could draw a general comparison between the current situation and what it was five years ago, if it is at all possible. Thank you.

[English]

Mr. Hehn: Thank you very much. Those are very good questions. We can certainly give the committee more detail when we get back to the office, but I'll answer in a very general way.

Incidentally, by accident I happened to be in Lévis some time ago. I drove down the one-lane street and I ended up on the ferry. I decided I might as well go across and have a look, and I was very impressed with the activity over there.

Your question relates to the shift in sales. There has been a dramatic shift in sales out of both the former U.S.S.R. and the eastern European countries to the Latin American countries and to Asian countries, but also to countries that are attracted to the St. Lawrence. I'm thinking particularly here of the Middle East and the African countries.

So while there has been some shift away from northern Europe, some of this has been picked up by the Middle East and by the African nations. The amount of grain moving through the eastern system hasn't deteriorated as much as it would have had we not been able to pick that up.

In 1994-95, for example, we had 3.2 million tonnes move through the Thunder Bay system. This is all grain movement, not just board grains. We had 4.9 million tonnes through the St. Lawrence. In 1995-96 we had 1.4 million through Thunder Bay and a total of 3.6 million through the eastern system. We expect this will pick up somewhat this year. As I say, we've got some pretty good sales on the books, and we expect this will pick up somewhat.

We tend to run our sales book much along the lines of maximizing the west coast movement because of the growth in Asia, in particular, but also the growth in Latin America. Latin America is rather a swing market. It is attracted to either the west coast or east coast depending on the cost of getting there.

So we tend to set our system up so we're maximizing west coast movement because this is where the biggest portion of our customer base is. Some of that has to move east because we can't service all of those customers who would normally be attracted to the west coast. So some of that moves through east coast ports as well.

We've had a considerable build-up in the Middle East, as I said. I think this year Iran could probably end up being one of our best and biggest customers. It depends how it shakes down. I believe last year Iran was about fourth or fifth. This year Iran could very well be third, depending on how exports shake down. Iran has some attraction to the east coast as well as the west coast. They do lift -

[Translation]

Mr. Dubé: You have just quoted a figure which I am not quite sure I have perfectly understood. You said that 1.4 million tons were shipped from Thunder Bay and 3.6 millions tonnes were shipped to the West. It that correct?

[English]

Mr. Hehn: This is correct. The 1.4 million would be Thunder Bay direct. That would include exports into the U.S. by water. It would also include Thunder Bay direct exports on salties.

[Translation]

Mr. Dubé: Well, the figures were approximately the same five years ago?

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[English]

Mr. Hehn: Five years ago they would have been higher because of the amount of grain we were selling to eastern Europe and in particular to the Soviet Union. Some of the Soviet Union's purchases were also for what they call the far east, the Vladivostok region. Those are naturally attractive to west coast ports, but by and large a big percentage of the Soviet purchases were east coast serviced.

We might also give you a feel for how we -

The Chairman: Perhaps we could move on, and you could forward some of this for the information of the committee members.

Mr. Gouk.

Mr. Gouk: Thank you, Mr. Chairman. I'll try to keep this brief.

Your amendment sheet is very helpful. It is laid out well. There are good ideas in there that quite frankly I hadn't spent much time considering before. I guess this is why we go to more than one location, and certainly we will consider those.

There are a couple of things, as we travel as a committee, that we have come to realize we need to make some changes on, and on which I suspect there will be agreement among committee members. Things like the operation of subsidiary businesses is likely going to be one of those. I think we'll be able to come to some agreement on this and on some other aspects.

On the matter of loans and fees, I think the two have some interlinking. You mentioned them and I agree wholly with you about the cost of a loan being much higher if you can't touch property. You put in one modification, one amendment.

Do you think it would be appropriate to go a little further than you have? A lot of the ports - it varies from port to port - have purchased lands. Federal lands were not provided. In the future, they're going to buy new lands. Would you think it appropriate that they be able to mortgage and touch those, without any ministerial approval, if this is not federal land provided by the federal government, and then have the conditional aspect on actual federal lands, which they hold and operate?

Mr. Hehn: I believe we could support this, providing they're not using the mortgage on federal lands to make the other purchase. I think this should come out of revenues, and then they can mortgage that in any way they see fit, I would think.

Mr. Gouk: Yes. The other side that concerns me is if we start talking about a fee. I suspect there will be a fee beyond what you have recommended in here. If they are paying this out of gross revenues and the only thing they have to mortgage against is their gross revenues, and the government puts first claim on that, and if you think they have problems not being able to use the land, they're going to have another problem right there. I don't know a pragmatic lender in the world who is going to lend under those conditions.

I would like to go to one other point you touched on. You are the first ones, in my recollection, who have endorsed and supported an eleven-member board. Do you not see that some ports, necessarily, should have smaller boards than this, and this might be a little cumbersome? Also keep in mind boards cost money. If you have an eleven-member board as opposed to a seven-member board, you have about a 40% increase in your board.

Mr. Hehn: That's true. One has to keep cost in perspective. There may very well be some smaller ports that wouldn't necessarily require an eleven-member board. But we're talking about the eleven or twelve ports we deal with, and in particular the ones that aren't going to be totally privatized.

An eleven-member board, to me, is not an unwieldy size. I mean, these people are running a pretty big business. To get the kind of broad representation you need from the government, the user and the producer side and then to have one or two outside directors as well to give it that other business neutrality, eleven seems to be a reasonable number. I was president of a board for nine years that had twelve, and to me it was a really useful, workable number.

The Chairman: Thank you, Mr. Gouk. Mr. Comuzzi.

Mr. Comuzzi: Mr. Hehn, thank you for your assistance.

The chairman is going to cut me off here, so I only have one question. You were going to cut me off, were you not, Mr. Chairman?

The Chairman: You may ask your fourth and final question.

Mr. Comuzzi: I was very interested in your remarks about the competitiveness we have to achieve in the transportation system. I think we all would agree you can't look at the west coast and compare it to the east coast. It has different problems. We can't compare the Great Lakes with the west coast, and so on.

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I want to talk about the Great Lakes and St. Lawrence system, because a debate is going on now in the House of Commons that the Great Lakes and St. Lawrence system should be turned over exclusively to some users, namely Cargill, United Grain Growers, Louis Dreyfus, Upper Lakes Shipping, and Dofasco, I think, without any public concerns being addressed. I think that's fair to say. The other side of the debate is that we want to get the costs of the seaway down, and they have to come down, especially the tolls. This other group has indicated to the deputy minister that there would be an increase in tolls. The economies of scale....

You see, the seaway has been built up over the last 25 years, and it has a certain amount of fat in the system and a certain amount of expense that shouldn't be there. What some of us are proposing is that we form a binational, not-for-profit organization with the United States, which also has a real vested interest in the operation of the seaway. You see, it's only fifteen locks. When we really cut out everything, the seaway is running fifteen locks. It's not a huge job.

We could do several things. You talked about cost recovery by the coast guard. There are a lot of instances where those things can be farmed out instead of someone having to rely on the coast guard. I often wonder how the farmers feel when they're paying for all the little frills these ports and harbours have, when they really don't participate in any of the benefits. What we have to do is align ourselves with what we mean by commercial traffic - not pleasure traffic but commercial traffic.

The Americans put their buoys in. They have their own buoy system. The pilotage we can't seem to come to grips with, but I think we can under a binational panel. The Americans have done the research into geo-positioning and how it can affect their...and they brought their pilots in. The pilots work for the St. Lawrence Seaway Development Corporation. If we can get those economies of scale into a not-for-profit corporation, what would the Wheat Board's position be on dealing with what I class as a dual entity?

Mr. Hehn: I can't see where we would be opposed to that happening. It would seem to me a first step would be to have these groups of seaway users operate the seaway on a not-for-profit basis, and the next challenge for them would be to get a similar group in the U.S. doing the same thing. Then perhaps we could have them merge. In my view that could happen in the next two or three years. To me, it doesn't make sense to have two separate entities on the same water system. I'm right on line with you here.

Mr. Comuzzi: We have four administrative offices in Canada, for example. They have three administrative offices. We have a set of engineers. They have a set of engineers. We have a set of maintenance people. They have a set of maintenance people. They can put in those buoys. They have the tender and everything for that. We do it through the coast guard, and now we pay a fee for service.

I'm thinking particularly of ice-breaking. It's going to be costly. We can consolidate that.

Mr. Hehn: Yes, providing the national safety and environmental objectives are met, for commercial reasons it would make sense to consolidate that.

The Chairman: Thank you, Mr. Comuzzi. I appreciate that.

And thank you very much, Commissioner. I should say I also want to thank Ms Reynolds, who has been particularly helpful to me in sorting out some of these issues.

Okay. From the Saskatchewan Association of Rural Municipalities we have Mr. Harris and Ms Smith. Oh, we have somebody else. Mr. Gleim, is it?

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Mr. Ron Gleim (Director, Saskatchewan Association of Rural Municipalities): Yes, right. I met you in Winnipeg a while ago.

The Chairman: Yes.

I appreciate your patience and that of other witnesses as we have run a bit overtime. You have a very comprehensive brief here. If you can move through it efficiently, then we will get a chance to get a round of questions in.

Ms Patty Smith (Manager, Agriculture and Communications, Saskatchewan Association of Rural Municipalities): Yes, we will.

Mr. Gleim: Patty Smith is manager of agriculture and communications.

I farm and ranch in southwest Saskatchewan. I'm the reeve of the local municipality and I represent 50 municipalities on a larger board of directors for the Saskatchewan Association of Rural Municipalities. When we left home we had eight inches of snow, and I have 600 acres of crop standing in it. It's not doing too well.

Anyway, Saskatchewan is made up of 290 municipalities. We represent about 235,000 rural residents. We are involved in transportation, municipal, agricultural, and socio-economic issues. Just about any issue that affects rural Saskatchewan we end up getting involved in.

We also have about 160,000 kilometres of road under our jurisdiction. We spend a little over $100 million a year on that infrastructure. Before we get into the trade, tourism, and safety issues, we'd like to tell you how the recent transportation changes have had an impact on rural Saskatchewan.

When I was talking about our rural municipal roads, our highways have doubled their kilometres in the last 20 years. There are about 25,000 kilometres. Of the 160,000 kilometres we have in rural Saskatchewan, 53,000 are under the designated system, which means they handle a significant amount more traffic, and that's where we spend probably 80% of our dollars.

The value of our infrastructure in Saskatchewan is estimated to be around $8 billion. While the expenditures on annual maintenance have been reduced over the last six years, our roads are deteriorating at quite a level. If you drive in Saskatchewan, you need a four-wheel-drive to get around in parts of the province.

Also, our revenue.... As the minister from Manitoba was talking about, Saskatchewan takes in about $360 million a year. We spend approximately half that back on the road system. The federal government takes in about $150 million, and they spend maybe 3% or 4% of it.

Another note would be that our province has announced it's going to cut provincial revenue-sharing by $20 million in 1997. That will have a major impact on what we're going to be able to do with our infrastructure.

During the last twenty years in the province government expenditures have increased about eight and a half times. During this period the number of kilometres of highways has just about doubled. Yet during that same period total expenditures on highways have decreased from 12% of the total provincial expenditures to about 4%. We are deficit-financing our road infrastructure in Saskatchewan, and have been for quite a while. Clearly our provincial government is not keeping up with the maintenance and reconstruction needs, and there is a need for a Canada federal infrastructure program.

Some other countries, such as the United States, spend about 31% of the dollars they collect on their highway system. Canada is around 6%. Great Britain is around 100%. When you look at Canada, it has to be very difficult to visualize how growth in a north-south trading area will be able to increase. As the minister from Manitoba was saying, it is in Manitoba so it is also in Saskatchewan.

Many taxpayers believe their dollars are being spent on transportation issues. The governments of the day have chosen to spend them in other areas. I think we'll pay for this in the future.

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One of the studies we looked at says traffic is expected to increase by about 32%, the numbers of registered trucks will increase by 24% and the freight hauled by trucks could probably exceed 80%. We're going to have more trucks, we're going to have heavier trucks and we're going to have them on fewer kilometres of road.

I'd just like to give you a little background on Saskatchewan. Saskatchewan has 48% of Canada's arable land. We seed about 50 million acres. I guess people have to get their priorities straight. The commodities we produce on these acres of land have to find a way to market, and that is by road. We have probably more kilometres of road than any other province in Canada, but we also have the fewest kilometres per 100 cultivated acres. Most of our roads are access roads, and you need access to bring product in and take product out.

I'll talk a little bit about commercialization. Transport Canada is carrying out substantial downsizing. They're talking about downsizing the dollars they put into transportation. With the federal government intent on commercializing and minimizing their future involvement in the transportation sector, it becomes a major challenge for the provincial government, municipalities and users to maintain and upgrade their transportation infrastructure, especially when it has been severely underfunded for the last seven or eight years.

In Saskatchewan in the next 10 years we believe we will have to upgrade 33,000 kilometres of road at a cost of around $30,000 a kilometre. That will upgrade them to the standard they are at today. With the loss of the WGTA and the increased grain traffic that will be moving on them, the standard of many of those roads will have to be raised. You're looking at probably $100,000 a click to raise them to that standard.

With the government funding reductions and increased traffic on both our highways and our municipal roads, our roads are deteriorating. It's like a cancer: it's moving faster and faster all the time. We can't keep up.

With the loss of the WGTA, the grain is starting to move more by truck. The value and the benefits of the WGTA were around $390 million for Saskatchewan, and the farmer has to pick up that extra cost. They have to make that up somehow. That used to be money that was put in their pocket. Today that $390 million is gone. Plus with the cancerous way our roads are deteriorating, their costs are going to go up even more.

Also, about 20 years ago we had 1,900 delivery points, and today we have about 700 in Saskatchewan. CN has announced about 4,000 miles of branch line that they want to rationalize. CP said they'll have their list out probably in December. We're already seeing increased truck traffic and there's more to come. We're going to be hauling longer distances with larger trucks, we're going to have higher costs, and most of those costs are just going to be transferred back down to the producer.

Speaking about transportation costs, the commercialization of the grain handling and transportation systems means we're going to have fewer points to deliver grain. The cost savings that the elevators and railroads get will just be shifted back down to the producer. In the case of the Central Butte line abandonment, it will cost the producers $27 a tonne to move their grain, because it's going to hit the road system. There isn't a road there that can handle anywhere close to the traffic that's already on it, let alone when the line is gone.

So it must be recognized that the grain producers will pay the full cost of the system no matter how it turns out. It is only legitimate that the full cost of moving grain be taken into consideration to ensure that when changes are contemplated in the system, it will result in a true transportation savings rather than simply transferring the cost. What we're looking at in SARM is the least-cost method for producers.

Patty will continue on some of the regulations for a minute.

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Ms Smith: Just turning to the transportation and tourism section briefly, to highlight, Saskatchewan has about 1.8 million visitors who travel through our province each year. More and more we're seeing an increase of United States visitors to our province. It's up 7% since 1994. In Saskatchewan it's a significant industry, generating about $1 billion for the provincial economy, with over 25% of those dollars spent by out-of-province visitors. Clearly it's becoming a more important industry for our province and we need an infrastructure that's there to continue to see the expansion of that industry.

Throughout the summer of 1996 we saw several media interviewed several visitors to Saskatchewan and they commented very negatively that they would not likely be back to our province, because of the dire condition of the infrastructure. There were actual incidents where vehicles ended up being damaged because of travelling on Saskatchewan roads.

More importantly, to shift to the transportation trade sector, we know Saskatchewan is going to increase north-south trade. Our highways are going to be the mode of transport that accommodates that increase in north-south trade. Primarily, as you know, our railways are east-west oriented. With the growth in trade and the liberalization of trading agreements, that's going to put further pressure on the north-south trade arrangement.

When we look at the NAFTA region, there's a population of about 376 million people, with a gross domestic product in the region of $7.2 trillion. The growth among the NAFTA partners in 1994 was about $350 billion, with about $250 billion, or 70% of that, being Canada-U.S. trade. That clearly is going to continue to grow. As we say on page 12 in our presentation, about 68% of the Canada-U.S. trade moves by truck, and it's expected to grow. The current state of our highways is they are not in any condition to accommodate that.

We looked at one case study that was done and presented to the Canada transportation research forum by Dr. Ken Casavant and Ken Eriksen. They studied transportation costs in B.C. and Washington and they looked at four major transportation outlets. They said in order to accommodate the needs of the infrastructure and to see that trade continues to grow just in that region, we are looking at increased costs to sustain that movement on the highways of about $740 million per year. That's just one trade corridor. What about all the other trade corridors across Canada? If we want to look at expanding that trade, which is important to our economy, we have to look at the needs of the infrastructure to see that grow.

On weights and dimensions, we talked briefly today about the weights and dimensions that need to be harmonized in Canada, but clearly with NAFTA we need to see weights and dimensions harmonized among the three trading countries before trade can continue to grow. I have some more details in the brief, but I won't go through them, other to say about five committees are looking at some of the major areas where some of these issues can be harmonized and they are expected to report back in January 1997.

On trade and technology, we think there is a real opportunity there to see some efficiencies in border movement where we're moving to a paperless clearance system. There certainly are some growing pains with the EDI technology, but we think there is some real opportunity for that to increase the efficiency of our north-south trade movement.

On safety, there are many things. With the underfunding of the system, with the increase in north-south trade there are also implications for the safety of the public and for the safety of goods flowing back and forth across the border. Transport Canada estimates it costs the country about $1.5 million per fatality. If you used that and benchmarked that as a figure, it would have cost about $14 billion in 1991 in total costs for accidents on roads. Very simply, if the system continues to deteriorate, there's a higher chance that there will be increased fatalities on highway systems, and how do you put a value on human life? We need to look at the upgrading of our infrastructure not just for economic reasons but for public safety reasons as well.

On economic development in Saskatchewan, as Ron previously mentioned, about $360 million is collected in road-related revenues. Half is returned to the system. A study was done by the Saskatchewan Road Builders Association. They showed that if you increased that expenditure by another $150 million per year it results in about 4,300 full-time jobs in the heavy construction industry and related fields and the economic multiplier effect of that could result in another 5,600 jobs supported in that way. So clearly there are some real economic spin-offs from infrastructure upgrading.

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I'll turn it back to Ron to talk about the future.

Mr. Gleim: I'll just take another five minutes -

The Chairman: How about another minute?

Mr. Gleim: Well, I'll try.

Some of the things we have looked at in Saskatchewan.... We have agreements we can sign with oil industries and people who use our roads. They think they're paying for all the costs of upgrading our roads. For the R and M of Highway 121 in Saskatchewan they had an agreement with the oil industry. They paid probably $8,000 to use six kilometres of the road. The annual maintenance is around $30,000. Gravelling is $5,000. To rebuild a road is $45,000 a kilometre. They're not paying for even a small portion of what it costs to maintain the road.

So in Saskatchewan we're trying, but the user-pay system doesn't always work.

Also, we're looking at short-line rail lines as a viable alternative to mitigate some of the costs that will be there on our road system if the branch lines are abandoned. We looked at the U.S. system. A lot of the branch lines they have in the U.S. are economical. We have met with many short-line companies in the U.S. They're efficient. They're an alternative to increased road traffic and increased expenses. We believe in Saskatchewan that's something we have to look at.

We are dealing with the province to deal with successor rights, to make Saskatchewan a short-line-friendly province. We think we have that under control. There are jurisdictional issues, provincial and federal operating issues, for a fair revenue division between the class I carrier and the short line. Funding and financing have to be addressed in the very near future.

I briefly want to talk about something I'm also involved in. In Saskatchewan we had 46 rural municipalities, 61 urban, in the southwest get together to look at their transportation needs for the future. They did a lot of work. We came up with a report I'd like to leave with you. We compiled an inventory of municipal roads, highways, rural infrastructure, maintenance expenditures, capital expenditures, grain delivery points, production, and population, to see where we're going to end up down the road. We talked with all four major elevator companies, with the railroads, with short-line operators. We said together we have to develop a plan that benefits all of us, not just one or two of us. We looked at three different scenarios, and I'll end with these. They're very important.

With the status quo today in Saskatchewan on that branch line we have road costs of $8 million, trucking costs of $20 million, and rail costs also of $20 million. If we go to the scenario that the elevator companies and railroads spoke of, in ten years, with deregulation, there will not be a branch line south of Highway 1 and you will not have an elevator south of Highway 1.

This is what it looks like. The road costs go up $6 million, trucking costs go up $10 million, and rail costs go down $15 million. That's a shift producers will pay for out of their pockets. That's in just one area.

We looked at the short-line alternative. We can save $5 million in rail costs. Producers are looking.... They have a meeting set with CP Rail and with other operators to look at that option.

They've also talked to some counties in Alberta. Much of our grain is going to Alberta because of the difference in the freight rate. They have concerns about their highway system. They said they can't allow our traffic to continue on their roads. They may charge tariffs. That's going to go back to the producer also.

We talked with Burlington Northern. Half the producers in southwest Saskatchewan are closer to the Burlington Northern line in the U.S. than they are to CP Rail. They say if we're going to build a road, let's build one and let's make sure we're spending our money wisely. They went down and talked to Burlington Northern, Columbia Grain, the Port of Portland, U.S. farmers, and the executive director of the Montana Grain Growers. They have a commitment from those people that says if you want to move your grain down here, we will build a facility for you, and if the Canadian Wheat Board will move it, they're out for business.

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We also are looking into the logistics with the provincial government. We believe there are more dollars to be saved in logistics - and that's what producers are looking at - today than in rail line abandonment and elevator consolidation. That will save no money in the long term. It will shift costs, but the end result will be the same.

We believe we can save what we lost in the Crow if we deal with logistics from the farm bin to the vessel. In the southwest, those are some of the things we're looking at. In conclusion, as I said, probably the wild card out there is incentive rates, the incentive rates that elevator companies are offering today. This map shows you what could happen. You throw incentive rates on there, and that grain will move in six other directions.

When we're talking about planning, we ask which road do we build, and how do we best spend our money? We're sitting down with all the stakeholders we have to deal with in our province, and we're trying to come up with a rational plan. Incentive rates are the wild card, and we really don't know how to handle those.

Thank you very much. We certainly appreciate the time you've allowed us. If there are any questions, we'd be pleased to answer them.

The Chairman: Thank you, Mr. Gleim. It's a very thorough brief, and I appreciate the efficiency with which you've moved through it.

You noted another report we'd be most interested in getting.

Mr. Gleim: Yes, I'll leave you some copies.

The Chairman: We'll make sure the clerk has those for distribution to all of the members.

Mr. Gouk.

Mr. Gouk: Thank you, Mr. Chairman. For brevity, I have only a couple of remarks here.

Your book is very well laid out, and you've raised some interesting points, particularly with your conclusion.

There's no doubt that short-line railways are the thing of the future. The railways are also looking at internal short lines in order to reduce their costs, to work through problems. I think there is a lot of potential there.

There is one other thing I want to touch on. You mentioned the need for dedicated revenues. That is something I happen to believe very strongly in and have written policy on, but it won't happen because one person pushes for it or even because one opposition party pushes for it. If you want it, you have to organize. You have to put a lot of public input. There has to be a strong indication of public support, and then we will get that. I think that's an idea whose time has come.

[Translation]

Mr. Dubé: We are running out of time. I would simply like to tell you that I greatly enjoyed your presentation. We support your rational approach and agree with your comparison between the various transportation modes. It provides a global vision of the situation. You deserve to be congratulated for having succeeded in your endeavour.

[English]

Mr. Gleim: Thank you very much.

Mr. Keyes: To ditto Mr. Dubé's remarks, thank you very much for coming all this way and making this very thorough presentation.

The Chairman: If I may, Mr. Gleim, you covered in your presentation a great many areas, some of which are not directly the object of this particular study and some of which we are going to deal with post-Christmas. But on the issue of the highway system, on the national highway system, have you differentiated between that part of your road map that is affected by the abandonment and consolidations and that part that is part of the proposed national highway system, which is essentially Yellowhead Highway 1 and a couple of the north-south routes?

Mr. Gleim: Yes, we have. Actually the road going south of Swift Current is being used by our minerals and by grain, and that is one of the roads that -

The Chairman: The one-side-strengthened road, as I recall.

Mr. Gleim: Pardon me?

The Chairman: Is there a differential thickness on that road because of the haul?

Mr. Gleim: Yes.

Ms Smith: I would briefly point out as well that in order for Saskatchewan just to bring the present highway system back to its standard, without having more grain or more mineral flow on it, we're looking at about $1 billion worth of expenditure. If we look at Highways 20, 16 and 1, which should be for public safety reasons because more and more trucks are going on the roads, that cost is going to escalate. So it's a significant cost.

The Chairman: Thank you very much. We appreciate the time and energy that's gone into this.

Mr. Comuzzi: Under clause 8, through your analysis I notice that shipping your grain through Portland is a lower freight rate than shipping your grain through Vancouver.

Mr. Gleim: It's not necessarily the freight rate, but as a package it's cheaper.

Mr. Comuzzi: The package.

Mr. Gleim: Yes.

Mr. Comuzzi: You mean it's more advantageous for the farmers in Saskatchewan to ship through the United States lines in Portland than it is to ship through Vancouver?

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Mr. Gleim: Yes, at certain times. The elevation charges and the terminal charges are less; the freight rate is actually higher. What Columbia Grain and the Port of Portland told us was ``If we're going to do business with you we'll give you a package deal that will either meet or beat any price you can get in Saskatchewan, or we won't do business with you.''

The Chairman: Thank you very much.

Now from the Infrastructure Council of Manitoba, we have Mr. Lorenc. Good morning,Mr. Lorenc.

Mr. Chris Lorenc (Chief Executive Officer, Infrastructure Council of Manitoba): Good morning, Mr. Chairman and members of the committee.

I'm joined this morning by Mr. Jim Terris, who is a member of the executive committee of the Infrastructure Council of Manitoba. Mr. Brown, the chairman of our board, unfortunately was taken away for business reasons out of the city and is not able to be here; he expresses his regrets.

Mr. Chairman, we are pleased this morning to make a presentation before this committee to address a topic very important to the country - namely, the development of a national highways system to service the economic, social and tourism needs of Canada. We are under no illusion that the choices you will ultimately make on behalf of Canadians are easy. We are, however, certain that in order for Canada to compete effectively, it will have to embark on a sustained program of rebuilding and reinvesting in a critical component of our economic success - namely, a national highways system.

The objectives of the ICM, outlined in attachment one, are to promote fiscally responsible and strategically important infrastructure investment and reinvestment policies.

The ICM represents approximately 1,200 Manitoba employers, providing jobs for 39,000 Manitobans, and doing and annual business volume of approximately $2.6 billion.

We clearly have an interest in the infrastructure. We also have an interest in the policies of the federal government. The federal government has worked hard to reduce its deficit. It has targeted not only its reduction but its elimination. Those goals are worthy of support because they sustain national best interests; namely, balancing the nation's finances to set an economic platform upon which our economy can continue to expand and grow.

If the above approach is supportable, then to be consistent, governments at all levels cannot ignore a second deficit, which we refer to as the ``infrastructure deficit''. We define that as the gap between what we as a nation invest as compared to what we ought to invest and reinvest in our infrastructure. Canada's infrastructure deficit is growing - it's staggering - and like the balance sheet deficit, it cannot be ignored.

The FCM estimates a municipal infrastructure deficit of $44 billion. The Transportation Association of Canada, in its NHP studies, has identified an $18 billion investment requirement for the national highways system, depending on which scenario is followed.

To the best of our knowledge, Mr. Chairman, no parliamentarian has been heard to say ``Let the nation's municipal or transportation infrastructure fall apart to a state where it is rendered useless and unable to service the needs of society.'' That being the case, the question is not whether to fund the national infrastructure program, but rather at what level and under what arrangements.

The first Canada infrastructure works program was successful. There was criticism of it, but overall I would suggest it was successful. We have identified some of its successes in the brief. In light of the above, the ICM respectfully recommends for your committee - and ultimately government - to consider the following.

First, we believe that there exists a need for national infrastructure programs targeted at essentially three broad areas. The first is the municipal infrastructure, identified above. The second is the national highways system, and the third a series of strategic infrastructure investments which would serve to generate new areas of economic activity and therefore wealth.

Secondly, we encourage you to use advanced technology. With federal government leadership, the private sector has invested significant dollars in research and development of technologies for application to infrastructure construction and rehabilitation. In the case of Intelligent Sensing for Innovative Structures (ISIS Canada), funded in part through the federal network of centres of excellence program, there is technology now available for application to broad infrastructure needs, including highways, bridges and structures, in many cases at great savings to owners of infrastructure, whether public or private.

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Having developed this technology with a significant cost saving and positive life cycle benefit to infrastructure, we should encourage its application as was done in the Canada-Quebec infrastructure works program.

Use of the technology creates an opening for new and existing Canadian businesses to an estimated $900 billion worldwide demand for infrastructure rehabilitation. As the Prime Minister has said, for every $1 billion worth of export there are 11,000 new jobs created for Canadians.

Attachment four to our brief is in fact a brief from ISIS Canada about ISIS Canada. It identifies the technology, its application, and how it sustains jobs and growth. Attachment five is its inaugural newsletter announcing to the business communities the successes of the technology and the economic advantages of linking up with ISIS. The newsletter has a circulation in excess of 10,000.

As further proof of its viability and application, attachment six is a letter from Mr. Walter Saltzberg, a director of bridges and structures with the Manitoba highways department. He has personal knowledge of the application of ISIS Canada in the context of his own role as a director of bridges and structures.

We believe municipal governments too have a role, and we've identified this in very quick fashion in the brief.

As the result of the size of Canada's infrastructure deficit, we submit that a successor infrastructure program must be sustained over a period of time. Studies have consistently identified a positive relationship between investment in infrastructure and the economy's performance. Attachment seven, from Transport Canada, speaks to this issue.

Of course, the big issue we want to address today is the national highways system. Our national highway, much like the whole of the transport network, must be the subject of a consistent, systemic strategy on the part of government.

The current piecemeal approach by governments means key highways in our nation vary in comfort, efficiency, reliability and safety from jurisdiction to jurisdictions. An inconsistent and inadequate infrastructure will drive carriers and travellers to use U.S. networks wherever they can.

You heard those comments from the delegation before us and the from the province's Minister of Highways and Transportation. But even those provinces with a better or an excellent system lose out on potential economic revenue because of the poor infrastructure of adjoining or neighbouring provinces.

Serious problems exist in Manitoba. Approximately 20% of the system has an inadequate surface condition and requires rehabilitation. You heard the minister indicate that for the entire system we're looking at a $1.1 billion demand.

Canada's performance internationally in this area is not good. Of the seven industrialized countries, Canada is the only one where the federal government does not participate in sustaining a national system. We have the lowest level of investment or reinvestment in our highways.

From our perspective, the stumbling block has been a series of successive federal government positions indicating an unwillingness to fund a fair share despite ample evidence a national highway system would contribute greatly to the Canadian economy. The federal government invests in the order of only one-tenth of the fuel taxes it collects back into national highway infrastructure. In our view, the federal government should return a reasonable portion of this tax revenue, given the amount it collects and the benefits to the economy.

Attachments eight and nine identify the taxes collected and the past federal government involvement.

In terms of funding the highway system with respect to Manitoba, Manitoba is unable - you've heard this from the minister - to finance in the same way and to the same extent as may have been the case in the past, because of the same problems that frankly all levels of government are having. And so the province of Manitoba, not unlike any other province and not unlike the federal government, needs to review other ways of financing.

You have, as a national government, eliminated cost centres from your transportation department. You are still receiving the plus or minus $5 billion income generated by fuel taxes. We suggest, Mr. Chairman, Canadians are in fact receptive to the designation of two cents per litre of existing fuel towards a sustained funded national highway system. Surveys conducted by national polling agencies, including Angus Reid, have confirmed public acceptance of an assured designated taxation.

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Attachment number 10 identifies the sources of tax presently recovered. But the government should also look at non-traditional forms of funding. When I say ``non-traditional'' I refer to public-private partnership. There has been considerable work done in that field by the Canadian Construction Association and the Canadian Council on Public-Private Partnerships. The notion of triple-P is well advanced in some jurisdictions in Canada and in many throughout the United States, and we should take serious note of their successes and failures and learn from them.

User fees are still another area of discussion. These were covered in a tax-sponsored symposium, and attachment 11 is an interesting excerpt identifying the ways in which user fees are considered.

The benefits to a national highway system were many, and attachment number 12 is an excerpt from Transport Canada's highway policy and programs branch, which speaks not only to the needs but the benefits.

In conclusion, Mr. Chairman, the premiers' Jasper communiqué of August 1996 - attachment 13 - is unique to the history of this country, because for the first time provincial ministers of finance have been directed by the premiers to work within a consensus document to finalize a national infrastructure program, including a highways component in partnership with the federal government by November 1, 1996, with a targeted implementation date of April 1, 1997.

This, we submit, is a national opportunity not to be missed. This cross-country committee process adds to the momentum, to public discussion and information distribution, and to consideration of an important element of that policy development process.

As correct as the federal and provincial governments are in reducing the deficits, we respectfully submit that the infrastructure deficit and an absence of a national highway policy can no longer be ignored by government.

The ICM does not envy the decisions you are obliged to make. Your responsibilities are difficult in that you respond to the demands of many constituencies. We wish, however, only to suggest that infrastructure reinvestment policies of government are no less important and indeed are growing in relative importance to the needs of health, education, social services and debt and deficit management.

We ask that the government ultimately demonstrate leadership, because failure will result in an infrastructure that will include a highway system unable to sustain our competitiveness domestically or globally, unable to sustain our existing or acceptable quality of life, and unable to fully take advantage of the NAFTA and FTA accords. As a legacy, this failure will leave an infrastructure deficit that is financially utterly unmanageable.

Mr. Chairman, that, in short form, is our brief. We hope the attachments expand on the positions we have identified. Either of us are pleased to address any questions.

The Vice-Chairman (Mr. Comuzzi): Thank you, Mr. Lorenc. Does Mr. Terris have anything to add?

A voice: No.

The Vice-Chairman (Mr. Comuzzi): Thank you.

We'll go to Mr. Gouk.

Mr. Gouk: For brevity's sake, I'll say - after just a quick look - that you've presented a very large brief with a lot of good details. Hopefully, I'll get a chance to go through it in the near future.

I have just a couple of points. You mentioned the infrastructure deficit, and it is something that we have to keep in mind. If we eliminated all government spending, we could wipe out the federal debt in four or five years, but obviously we can't do that, and this falls into just how far we can go, how fast.

You also mentioned the dedicated revenues, something close to my heart. As I said to the previous witness, it won't happen because one person or even one group says that it's a good idea; it needs a lot of public support and a lot of public input, and it needs your efforts as well as the efforts of everyone else to keep the idea at the forefront. I think it is an idea that ultimately will be implemented in some manner.

I'll go through the rest of this and expect to get a lot of good information from it. Thank you for your submission, sir.

The Vice-Chairman (Mr. Comuzzi): Thank you. Mr. Dubé.

[Translation]

Mr. Dubé: I think it is an excellent, exhaustive submission. Unfortunately, we have not enough time to read it through. You focus on the road system. However, something bothers me. In mentioning the other G-7 nation countries, you indicate that Canada takes less of a part than other nations in road infrastructure development. That may be the case, but perhaps it was because the sharing of the money was more of a necessity. The provinces have been doing that for a long time. To this day, they have invested a lot of money in the road system.

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We have seen how the railway system has been privatized. The same is being considered for the ports. The market forces almost prevail. Ports are less likely to be considered a public service.

Transport has to be considered from a global perspective. We can keep developing the road system, but if the number of users increases, it will continue to deteriorate. It would be the same if we allowed the transit of goods which could be moved by other modes of transportation. A study made by the Ministry of Transport proves that, at certain periods of the year, the passage of a road train is equivalent to the passage of more then 16,000 vehicles.

There is nothing wrong with investing in infrastructure, but if we do not act with caution... It's as if a person who knows that smoking is hazardous to his wealth, smokes twice as much instead of quitting. I would appreciate if you took into consideration the consequences of the integration of these modes of transportation.

[English]

Mr. Lorenc: I think the question has really hit the nail on the head, because clearly we are not, as a nation, financially in a position to address the entire infrastructure deficit, which is why our approach recommends that you really target three areas as part of an overall program.

Number one, we need to make strategic investments in infrastructure that serve to expand the size of the economic pie. There is no benefit to the economy if whatever resources we have we simply put into rehabilitation for rehabilitation sake.

What we need to do is target three areas, strategic investments that expand the economic pie. There's a generation of new wealth and a generation of new revenues for governments.

We need to target as has the NHP study, strategically national highway system, not a national highway system that attempts to correct the failing of provincial or federal governments of the past thirty years, but identifies the strategic component parts of the system that are necessary so that we can compete east-west but more importantly expand the north-south trade through the NAFTA and FTA accords.

Lastly, but certainly not last in order of priority, are the municipal infrastructure elements that need to be in place in order for commerce that is there now to be sustainable and for the new commerce that we hope to attract to walk into a situation where there is the infrastructure to be able to handle it.

To put it in a personal term, imagine what you would look like if you didn't have a skeleton. You wouldn't be able to function, you wouldn't be able to walk, because there is no infrastructure over which the rest of your body can function. That is really what the infrastructure is to the economy: it is the skeleton. What we need to do is strategically develop that skeleton so that the economy can function.

Our industries are under no illusion that there's a bag of money somewhere for the federal or provincial or municipal governments to reach into and say here's $44 billion, go fix your municipal infrastructure problem. That's not a reality. That's why we're saying you have to look at user fees, the federal government has done that rather astutely quite frankly in transport. You're no longer in rail, air, marine, air traffic control, you're getting rid of cost centres, you're transferring the costs to the user where it ought to be paid for, you're eliminating costs off your budgets. But at the same time, you're not making a reinvestment in the skeleton, and the skeleton has to be maintained because it can only last for so long.

We're looking at an infrastructure that essentially was built after World War II and is reaching the end of its life cycle. We should not knowingly be putting ourselves in a position where we are prejudicing the opportunity of the economy to grow. Again, that's why we're suggesting that you take advantage of the technologies that are presenting through ISIS Canada.

There is a $900 billion worldwide demand today for infrastucture rehabilitation, and the analogy I'd like to leave you with on ISIS is this. Everybody knows about the shuttle and you know it for two reasons. Number one, it's American and it's reusable. And number two, it's the Canadarm, a Canadian invention, a Canadian technology.

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By using advanced composite materials that are 20% the weight of steel, non-corrosive, and ten times the strength of steel, integrated with fibre-optic sensing, we have the opportunity, through ISIS Canada, to repair the world's infrastructure using Canadian expertise and Canadian technology. That approach is being used successfully in Quebec in partnership with ISIS, and that is something the Canadian government ought to take notice of and inject as part of its strategic infrastructure program.

The Chairman: Mr. Keyes.

Mr. Keyes: Thank you, Mr. Chairman.

Thank you, Chris and Mr. Terris, for this presentation. It's very thorough and focused, and heck, it's colourful too. It's very pleasing to the eye.

This skeleton you speak of, Chris, is certainly a bag of bones that's going to need bags of money to correct. How do we collect this money, and where is the division of responsibility vis-à-vis who pays?

I totally agree with the preface of all your remarks today when you speak of the federal government's response to climbing deficits and debt, etc., and the work of the provincial governments nationally against growing deficits as well. But you're right, and I agree with you: there is a deficit on the infrastructure side, in particular in the chief highways of this country, because of what we can achieve in this country in economics, tourism, etc., that can be a benefit and that could help us.

If we spend some money, we'll make some money. I suppose that's the bottom line there.

But if we could focus for a moment, I'm a little confused here. Your brief talks of many formulas and many opportunities, but does the Infrastructure Council have a single idea of what the split would be? Is it fifty-fifty federal-provincial? Is it tolls on highways? Is it public-private partnerships? Or is it a combination of all three, and has your organization worked out exactly what that combination of all three would be?

Mr. Lorenc: I would boil it down to one word, and that's leadership. We are one country; we are one family; we have one problem. I don't buy the notion that highways are a provincial jurisdiction and therefore the federal government doesn't have to get involved, or of the province saying you have a broader responsibility, because the economy is in your bailiwick.

What we need to do, as responsible people and responsible governments, is say we have a problem here and we have to come to grips with it. We can't, over jurisdictional issues, let the future of the country be sacrificed. The answer is not a simple fifty-fifty split or a sixty-forty split. The answer is a combination. In some sectors of the transportation system, electronic tooling may be the answer. In some sectors, public-private partnerships may be the answer.

We have the geography, but we don't have the population of the United States. We don't have the kinds of routes that are prevalent in California, where tolling will allow you to recover the capital cost in a matter of five to ten years. But there are examples within Canada where that can work. Highway 407 is an example.

Mr. Keyes: Yes. I was just reading about the 407 in your brief.

Mr. Lorenc: Exactly. So what we need to do is recognize that, really, we are a patchwork of experiences in this country, and therefore the policy has to be reflective of that. But it boils down to having the political will at the national level to say this is the problem and this is what we propose as a solution. Let's sit down, seriously negotiate and come up with an agreement.

Mr. Keyes: Absolutely.

Mr. Lorenc: You made a comment earlier that the provinces came to the table with $2.5 billion, and you indicated that Minister Young's reply was that's not enough. With the greatest of respect, I don't accept that.

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I don't accept that because that was the first time in the history of this country that all provinces, save one, put money on the table and said ``This is our starting position. We have $2.5 billion over three to five years that we are prepared to invest.'' All of the indications to that point in time were that if the provinces came to the table with money, there would be a program. No one's suggesting that you start off over here. Start off on a smaller level but have a sustained program that builds, with a plan and a vision of how we can correct the problem.

Mr. Keyes: I should have explained myself. I didn't mean there wasn't enough money. I meant there wasn't enough consideration of all the opportunities that could be had provincially as well as federally - but more so provincially - when we speak of all the different inventive ways. The province or anyone can't just come to the table and say ``Well, here's my share - end of story - let's build highways''. When I say it isn't enough I mean - and I think the previous minister also meant - where are your ideas on public-private partnerships? Where are your ideas on tolling and all the rest of it so we can put the skeleton, as you call it, in place before we start spending money building highways just because we're going to contribute and the province is going to contribute? This is what we mean by not enough. The ideas have to come together, as you have suggested.

Mr. Lorenc: Governments only need to encourage the private sector to come forward with proposals, instead of being locked in the mind-set that because we've done things one way for 50 years we're going to continue doing things in the same manner for the next 50 years.

There's the Charleswood Bridge example in Manitoba. It's a public-private partnership. It doesn't have source revenue generated from the asset, but it saved the City of Winnipeg in excess of one million capital dollars because it went to the private sector and said ``Build us a bridge as cheaply as you can to function for the next 30 years and you will be responsible for maintaining it''. Not only was there a saving to the tax purse of in excess of a million dollars, but the bridge was built a year sooner and will last longer than was initially specified.

Mr. Keyes: That's why when we say it's not enough, we mean it's not enough on the creative side, not necessarily on the money side. We'll have to start somewhere on the money side, but -

The Chairman: Thank you, Mr. Keyes.

Mr. Keyes: Thank you very much.

The Chairman: For input on the creative side, I think Mr. Lorenc has met the test.

Thank you, Mr. Lorenc.

Mr. Lorenc: Thank you, Mr. Chairman and members.

The Chairman: Thank you, and we'll see you, Jim, in a couple of days.

From Canadian Pacific Railways, we have Dennis Apedaile, vice-president of government and public affairs. We're happy to have you here, sir.

Mr. Dennis Apedaile (Vice-President, Government and Public Affairs, Canadian Pacific Railway): Mr. Chairman, it's kind of you to have us here. We appreciate being with you, this august body, in this august city.

Mr. Keyes: No brief?

Mr. Apedaile: It's downsizing, Stan. I rewrote it on the plane this morning.

Mr. Keyes: In both official languages.

[Translation]

Mr. Apedaile: I shall be pleased to answer your questions in French. No, we don't have any submission to present, as yet.

[English]

I will file a memorandum plus a little addendum just to make sure anything I say about taxes has pictures to support it. If I'd arrived a little earlier, maybe I could have negotiated a deal on the hopper cars with Sinc. I'm sorry I missed it.

Canada's coming through a substantial period of transportation policy consultation, study and reform that's occurred over the past few years. For the railways, the CTA acknowledges for the first time that viability of the transportation industry is a policy objective in Canada, and we think that is extremely important. Bill C-44, like the CTA, speaks to the need for viable and competitive ports and a viable and competitive seaway. Likewise, this is an important recognition.

The overall transportation reform agenda acknowledges the absolute necessity of dealing with all the modes in an integrated way, especially as it relates to surface modes. Surface modes of course both compete with each other and cooperate in intermodal activities. So you have rail representatives appear before this committee when marine legislation is on your agenda.

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We have a few observations to make and some recommendations for the bill. Some of the comments I will make relate to your three-T studies - certainly the transportation and trade components.

Given that Canada is an export nation, its railways and ports have really a fundamental working relationship. A quarter of what Canadians produce goes for export, 40% of what Canada exports moves by rail, and exports are two-thirds of the railway business. A high proportion of this activity involves moving Canadian exports from inland destinations to ocean, lake, and river ports.

The CPR - the great CPR - has been linking Canada's interior with export ports since 1886. It built the first port facilities in Vancouver and the first grain elevators at the Lakehead. It helped develop Montreal as a major container port and has and is working with Vancouver today on a number of port development projects.

But today the reality is that the role of Canada's ports has less to do with the local market in port areas and more to do with their railway links to the interior - the links ports have with Toronto, Winnipeg, Regina, Calgary, and the resource producers across the country. Montreal and Vancouver, together with the Canadian railways, compete for traffic moving between the Atlantic and Pacific rims in many North American cities. Today more transatlantic container traffic moves between Chicago and Europe through the port of Montreal than by any other rail-port routing.

But Canadian imports and exports are also needlessly routed to and from U.S. ports by U.S. railroads. Provisions of the CTA, like its predecessor the NTA of 1987, actually facilitate the routing of Canadian traffic via U.S. railroads and ports. At the same time Canadians and Americans export many of the same commodities and compete in the same offshore markets. There's a problem there.

This underlines the importance of the competitiveness of the Canadian transportation system versus the American system. Canada can't have great ports without strong inland transportation services linking them to markets. Ports policy, in our view, should have as an objective encouraging Canadian shippers to select Canadian rail-port routings and helping to ensure Canadian shippers do not have to seek elsewhere to find a jurisdiction where they can achieve their required transportation services. This committee knows the problem is growing as we speak.

We favour lower-cost operations for both Canada's ports and the seaway, even though that may make the marine mode more competitive than the railways. Measures to improve the competitiveness of Canada's ports and the seaway need to be coordinated with efforts to treat the railways in a balanced and equitable way. Apart from the obvious reasons, we're sure this committee would not wish to approve marine policy that would be at variance with national transportation policy, which acknowledges that policy objectives are most likely to be achieved when each mode of transportation is economically viable.

Policy coordination is needed in several areas. It needs to ensure that competitive equity exists among the modes, that provincial and municipal authorities are involved - and we heard something from the previous witness about collaboration from the different levels of government - and that all surface modes are taken into account when policy is made, so in the end Canada really does end up with more competitive surface transportation in support of its ports and its export economy.

The CTA makes some important policy statements: the best use of all available modes of transportation at the lowest total cost; and each carrier or mode bears a fair proportion of the real cost of the resources provided to that carrier at public expense. We're pleased to see that some of those CTA policy principles are carried forward in Bill C-44. As well, we strongly support the government commitment to introduce business principles and commercial discipline.

Improving Canada's competitiveness really should be your driving force here. In our view, the test of this bill and the major provisions in it should be that all significant features of the bill are able to contribute to Canada's competitiveness. That's a way of measuring, in our view, the kinds of components that are there in the bill.

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Today, Canadian transportation is regulatively uncompetitive with other jurisdictions, both in shipper-carrier relationships and fiscal policy. That's something that's really part of the larger view of what the task of legislators is as they move to update legislation. In our view, they should be guided by the fact that we are a trading nation. We can never forget that our legislation should advantage the infrastructure and the carriers of our country vis-à-vis other jurisdictions. We think that this somehow occasionally gets left behind as the focus is on more parochial issues.

The railway generally agrees that increased local port autonomy is desirable. We believe it should be clear by now that centrally controlled or appointed directors are unlikely to be an effective way to provide guidance to regional enterprises, notwithstanding their national importance. Our past experience in trying to achieve pro-competitive changes in ports confirms this view.

The major concern of the railway with the port portions of Bill C-44 is the possibility that its objectives may not be realized without other reforms. The legislative and regulatory environment for Canadian railways must be made more competitive vis-à-vis U.S. roads. Work needs to be done fast to address tax differences between Canada and the U.S. for ports and railways.

As for this need for tax reform, we're pretty familiar with some of the problems the ports have because we've been living with the same thing on the rail side. Certainly strengthening the railway side of the rail-port partnership means overcoming, in our case, a 40% tax disadvantage suffered by Canadian railways vis-à-vis U.S. counterparts, which is after taking into account the difference in social benefits and payroll-related taxation. It is a net 40% disadvantage.

Canadian ports tend to be viewed as a handy source of taxes for the communities they've grown up around, or that have grown up around them, rather than as catalysts for economic activity in their city, province and country. When competitive forces in the world were less significant, we in Canada could get away with this kind of shortsighted approach.

This is not so from now on, especially when U.S. ports receive tax supports from their surrounding regions that explicitly value the economic contribution stimulus that ports and their users provide.

Port-railway tax issues, of course, are not a federal problem alone; they involve all levels of government. The growth in U.S. rail-port competitiveness emanating from recent U.S. railroad mergers is a further omen as we look at Canada's competitiveness. The lack of fiscal policy coordination has placed railway and port competitiveness, hence Canadian economic competitiveness, under needless financial stress. If Canadian railways were ever to merge with U.S. railroads, Canadian ports would be disadvantaged still further unless Canada's port competitiveness at that time was actually clearly better than that of the United States.

So I've got a couple of comments on port tax reform and then a couple on rail, and then I'll speak to the seaway.

In May 1995 this committee recommended a comprehensive review of assessment practices and all other government-imposed taxes for port infrastructure. The objective was to ensure that the level of taxation did not endanger the viability and competitiveness of our ports. And the federal government has indicated that it will take steps to ensure that Canada port authorities are subject to fair and competitive levels of taxation.

These are welcome initiatives. I'll believe it when I see it.

Similar recommendations have been made about railway taxation. Some provincial actions are now being taken. Federally the problem has been exhaustively examined by publicly funded studies. The consistent recommendations for change are only matched by a consistent refusal to act.

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The tax disadvantage of Canadian railways vis-à-vis U.S. railroads is matched also by a disadvantage vis-à-vis Canadian and U.S. trucking industries, the marine industry and the seaway. Today, Canada's port-rail system competitiveness is really more at risk than ever.

I have for you a reminder of some specific recommendations that come in under your transportation examination vis-à-vis railway taxes.

Federally, reduce the rate of Canadian federal excise tax to the U.S. level, down from 4¢ to 2.2¢. Incidentally, Canada's commercial marine sector pays no federal fuel excise tax at all. I believe the rationale is that the sector operates and competes in an international environment. Well, so do railways.

Secondly, implement an accelerated capital cost allowance on rail investment for five years to stimulate the catch-up reinvestment that the industry needs for its aging infrastructure. CCAs for railways are much less favourable than they are U.S. railroads or for other sectors of Canadian business; it's right off the map.

Provincially, eliminate the property tax on unserviced railway rights of way. These taxes distort the rail industry's unique situation of having to finance, build, maintain and pay taxes on its own infrastructure. Federal leadership and match-up with provincial initiatives is overdue. The provinces have begun to move. The federal government wanted to see some provincial movement, and that's starting to happen. It's time for the feds to move together and work with the provinces.

The second item provincially is reduce provincial fuel tax rates. There's no magic amount here. We would like to see it be equivalent to the U.S. 21 northern states. These are not side issues. The Government of Canada acknowledged that they should be addressed.

On highways, the St. Lawrence Seaway and port projects have depended on public sector financing. Rail infrastructure depends on private sector financing. This imbalance has had a very major impact on mobile relationships, drawing traffic away from rail for non-market reasons and onto the higher cost highway and seaway infrastructure. Canada can't afford such inefficient allocation of resources any further.

Speaking to the seaway and trying to respond to the Chairman's desire to move along, there are some excellent proposals vis-à-vis the seaway in Bill C-44. However, no mention is made in the bill about making provision over time for seaway operations to contribute to covering the cost of capital of the existing seaway infrastructure or to finance new capital. I wonder whether the federal Nelson is looking through its telescope with a blind eye.

Not having to cover the cost of capital appears to be at variance also with paragraph 67(e) of the bill, which states that one objective is to protect the significant investment that the Government of Canada has made in respect of the seaway. It's hard to see how this is going to be done and how this investment is going to be renewed unless there is some allowance for that existing infrastructure and for its renewal, which was also mentioned by the previous witnesses.

The seaway's new operator is advised to not unjustly discriminate against any user. Competitors should be included in that proscription. Your committee found that the seaway system is too costly. Railway operations in eastern Canada are also too costly. The seaway faces viability problems from the Lakehead to the St. Lawrence, and so do the railways. The railways compete directly with the seaway for a large amount of grain traffic.

We do not argue that the full contribution to past capital investments be returned to the government, but the cost competitive advantage inherent in the formula for commercializing the seaway should be acknowledge as a matter of principle and steps taken to offset it, in addition to resolving some of those outstanding rail renewal issues. For the future, a provision could be included in the act to require that new investment be made only when there's a reasonable expectation that its cost of capital can be recovered from operations.

The government has said that the Great Lakes and St. Lawrence Seaway is a crucial waterway but is also a business. It's time to treat it that way.

In conclusion, if these matters are resolved successfully, Canada would be well positioned to face the competitive demands placed upon its transportation system from sea to sea to sea. If they're not resolved, world markets are unlikely to be forgiving.

I'd be happy to answer any questions.

The Chairman: Well, Mr. Apedaile, you've left us remarkably little time for questions, but we'll attempt to get a few in.

Mr. Keyes.

Mr. Keyes: Mr. Chairman, I'll only attempt to resolve two matters that Mr. Apedaile has brought forward. I want to thank him for his presentation, and of course his eloquence was only surpassed by his cynicism. I say that to everybody. I can understand. I've known Dennis many years.

Mr. Comuzzi: It's the first time I've ever heard you say it.

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Mr. Keyes: It was so negative, wasn't it?

There are two matters I'd like to clear up. First, I'd like to clear up what has become a malignant misconception that the board at the Canadian port authorities would be centrally appointed. That may be so in the final analysis if one just went to the bottom line and saw who was appointed, but it's the process that's important to remember. To clear it up, the appointments are going to be made by the minister, but from lists that will be supplied to him by the different port authorities and the users and community interests at those ports. So the community and the users of those ports, Dennis, will come together to create the list.

We're suggesting to them that this list be tight and short. There would be a look-see by the department to ensure the code of conflict had been met. The appointment would be the manual step that would come as a result.

On the other comment you made that you'll believe it when you see it vis-à-vis the municipal or provincial taxation on the ports, we are hearing - and the suggestion was made in the original SCOT report of May 1995 - that federal agency status will be applied to all the ports and harbours.

Mr. Apedaile: Will it be applied to railways so we can get in on this terrific advance that's going to be made?

The Chairman: Do you want to become a crown corporation?

Mr. Apedaile: They're like tax relief.

Mr. Keyes: Let's spin out into the ports. We'll talk, Dennis, if you'd like to talk about the railway stuff. But to keep it specific to the ports, the federal agency status opportunity is more a continuum of exactly what they have now. There are harbour commissions across this country that have the luxury of exemptions from municipal and provincial taxation, but they also pay their grants in lieu. That allows them to stay competitive, which is exactly the same interest the railways would have with their American partners or competitors.

It's the opportunity we're hearing about time and time again. Yes, this bill is void of that particular opportunity, but that's because we wanted to hear, in our travels as a committee, what the different options were so the ports can remain competitive. We are hearing from every port we go into that federal agency status must be applied if a CPA is to be successful economically and competitively, especially with the U.S.

Mr. Apedaile: I haven't studied this exhaustively, but I think in certain areas of the United States the local community and region act as a tax support source for some of the investment in the ports. So I think the real question is whether we should make the Canadian system match its competitor, especially where that issue is so serious on the west coast of this country, where your competitors have port facilities nearby.

Mr. Keyes: I guess we have to have a saw-off, because where we are today, the municipality receives its grants in lieu from the port for the land the port uses. If we want to take it all the way to the other side, as you suggest, instead of being a receiver of cash from the port, the municipality would be a payer of incentive money to the port. That would be a bit of a shock, because we all realize the port is the economic jewel in any given community, which benefits from huge economic and job-creating opportunities. To say that federal agency status would protect them against having to pay these municipal and provincial capital expenditures, etc., would be a way to go halfway on this.

Mr. Apedaile: If we accept the logic that the port-rail combination is what creates the port's success, then my plea to you is that somehow the policy environment should also flow out and deal with the rail issue, because we could improve the ports' tax situation and still hamper the rail one, and that is not going to improve the overall situation.

Mr. Keyes: One day, Mr. Chairman, I'm sure you're going to call a meeting of this committee to address that very question.

The Chairman: I quiver with anticipation.

[Translation]

Mr. Dubé.

Mr. Dubé: I enjoyed your presentation and I look forward to getting your written submission.

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I am very familiar with the CP activities. I noticed that it had recently adapted to a socio-political or geo-political change, Notably in the East, where the company has established a new section called St. Laurent - Hudson. You talk about competition with the North American States. At the same time, you are clearly trying to adapt to each of the regions, including the Eastern Region. Is it not true that it is impossible to have the same transport policy in the East as in the West? The American States, from East to West, do not operate in the same way in the area of transportation, which fosters competition. I like what you said about competitivity. I totally agree with you. It must absolutely be taken into account.

I do not want to belittle the previous witnesses; they may be right to demand a road infrastructure. But I would like to take this opportunity to tell you that I find it odd to ask money from the public while for the rail road, everything is taxed, at the municipal as well as provincial levels. You are overtaxed and you do not get any favour. You do not get much support for your development. Besides, we see that roads deteriorating at a terrific rate because of trucking. I said earlier, and I repeat, that at certain periods of the year in Canada, because of our northern climate, the passage of a road train equals the passage of at least 16,000 cars.

That should be taken into account. That is why I am glad that you are here. But I would like to know what principles you are using for change, I would like to know whether you have a vision for the future.

Mr. Apedaile: You are raising several questions in our comments.

In the East, our approach was dictated by the fundamental realities of the market. If similar policies had been used in the past, those changes might not be necessary in the East.

It is true that trucking is more competitive in the East then in the West, by I still think it is possible to have national policies like in the United States, where each state has its own policies. It is true these policies vary between states to. However, when you cross international borders, you eventually have to set up national policies. If we do not do it, it will be obvious that there are more states along the border then there are Canadian provinces. So, we should aim at establishing a national policy, otherwise, we'll be eaten alive, because the states are much more numerous.

Because of the realities of trading, we have introduced some changes. If the policies had been different, it might not to be necessary to do so.

As far as land taxes are concerned, one may add that the railways are not provided any municipal service in the areas where they pay taxes on their lines. The tax system in Canada, and elsewhere, should be based on economic policy, by it is always determined by political imperatives. There lies the problem.

[English]

I'm sorry. I know.

The Chairman: Thank you, Monsieur Dubé.

Mr. Gouk, just before you begin, for the information of members, witnesses and the public I should say that we're running a bit over our time. We have a number of important presentations and I've asked the clerk to bring sandwiches in, since we're getting into the lunch hour. We'll just continue until we've heard all of the witnesses.

Mr. Comuzzi: Can you ask them to bring us some heat, too?

The Chairman: They're bringing a fireplace in, sir. This is actually comfortable weather in Manitoba. I'm surprised that a person from the Lakehead isn't used to this.

Mr. Gouk.

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Mr. Gouk: With all due respect, Mr. Chairman, some of us are not designed, shall we say, for the temperatures of Winnipeg.

First of all, I'm happy to hear the parliamentary secretary to the minister make this commitment on the nomination process in front of the committee. I believe him when he says that this is what he is going to change in this legislation, because that is not what the legislation says, and I have a similar concern.

I have one word of caution. With the rail system coming before us, with the ports coming before us, of course everyone wants tax relief. Frankly, I would like to have a little tax relief too. But if you get the tax relief you want, if the ports get all of the tax relief they would like to have and if everybody gets the tax relief they want, financially you will have the most wonderfully structured railway going through bankrupt town after bankrupt town and bankrupt province after bankrupt province.

Mr. Apedaile: I don't accept that logic. As far as our fuel tax goes, across Canada in 1979 no province taxed us at more than 1¢ a litre. By 1987 the level was 15¢ a litre in Saskatchewan and 13.6¢ in Manitoba. What happened? What happened other than profligacy at the other government levels, which caused a situation where our taxes had to be increased by 1,500% over a period of seven years?

The Chairman: And today in Manitoba it is....

Mr. Apedaile: I beg your pardon?

The Chairman: And today in Manitoba?

Mr. Apedaile: And today in Manitoba, thanks to a far-sighted group of people in Manitoba, the fuel taxes have been cut in half, and we're grateful.

The Chairman: Sorry, Mr. Gouk.

Mr. Gouk: There are anomalies. For example, I'm not totally opposed to your cost-recovery proposal on the seaway, but it doesn't necessarily translate.... If they have higher costs and there's more business for rail, it could in fact mean that a lot of our traffic would go south rather than east. And CP may or may not be carrying that.

Mr. Apedaile: Mr. Chairman, on the question of rail traffic, it's very interesting as far as the seaway goes. We do not carry a huge amount of seaway-available traffic right now, but we are so much on the margin that in the summer if there are high volumes and the rates go up on the lakes, we become very close. And in the winter, of course, we are close.

If the seaway ships have to be replaced - they last forever because they're in fresh water - the replacement costs would be such that we would be very competitive with the seaway. If it weren't for some existing inequities, the margin is close enough that we believe we'd have a significant piece of that. And Canadian shippers who love competition ought to be happy.

Mr. Gouk: I don't want to imply that there don't need to be adjustments. The wonderful far-sightedness of Manitoba with regard to the fuel tax was brought up. Likewise, I point out to you the new initiatives by the B.C. government with regard to property tax. We are aware of your situation.

Could you comment on one last thing? It's specific to me, but I think it relates to concerns that have been brought before us with regard to rail line abandonment, short lines and so on. Each time -

Mr. Apedaile: We never abandon, Mr. Gouk. We discontinue occasionally.

Mr. Gouk: Abandonment is the term that was used when CP Rail pulled out of the Slocan valley during this term of office. By any other name -

Mr. Apedaile: That's a bad word.

Mr. Gouk: Yes, I know the name. At any rate, right now we're looking at Yahk-Warfield. But the new envisioning of the internal short line is being looked at, and if that's successful, I think it bodes well for other jurisdictions. Could you comment on whether or not there's any progress?

Mr. Apedaile: Yes. First of all, I'd like to say that one of the principal issues the railway industry faces is that as an old industry, which imported labour practices from the United States, where the industry was older, it has taken a long time to evolve some of the labour practices. I think we are now closer to having the kind of partnership with our workforce that every employer should have, to the point where the workforce is starting to recognize that sometimes the choice is a lower-cost operation or no line.

That has helped stimulate the movement towards internal short lines. We're very pleased with that. We are also going to be doing a bunch of external short lines. But the more internal ones we can do, the better, to keep traffic on rails but at a lower cost with a more flexible approach.

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Mr. Gouk: How is Yahk-Warfield going? I'm speaking on this at a symposium in my riding on Saturday.

Mr. Apedaile: I will check that out. You mentioned that to me the other day, and I will get some information for you before Saturday. I can't speak to it right now.

The Chairman: Thank you, Mr. Gouk.

Thank you, Mr. Apedaile. It's a pleasure to have you here in town. There are a group of farmers just south of Brandon who will probably want to talk to you. I think they're barricading the way out, but I'll introduce you to them later. It's a serious issue.

Mr. Comuzzi: Are they not located in western Canada now?

The Chairman: Yes. Western Canada, Mr. Comuzzi, is a very large place.

Mr. Comuzzi: I thought the centre was Winnipeg.

The Chairman: The centre of the universe is Winnipeg. However, CP has chosen to locate somewhat west of centre.

Mr. Gouk: It's all a matter of perspective. We were going to change the name from Canadian Pacific to Western Pacific.

Mr. Comuzzi: Is that in order or -

Mr. Apedaile: Well, Joe, we just moved some jobs into Thunder Bay. Give me a break.

The Chairman: Careful, Dennis, because you moved them out of Winnipeg.

The next presentation is Mr. Gordon MacMichael from Gateway North International.

I'm also informed that Mayor Archer is here. We'll be continuing right through lunch, Mayor Archer, if you could stand by to present when Mr. MacMichael is finished.

Gordon, welcome. You could introduce the organization. I see you have some prepared text. If you could move through that, then we'll have an opportunity for some questions.

Mr. Gordon MacMichael (Vice-President, Market Development, Gateway North International): Let me say at the outset that Mr. Terry Duguid, our president, is unable to be here today because of a prior engagement in Churchill. He sends his regrets and has asked me to extend our appreciation to the committee for coming to Winnipeg and providing us with the opportunity to comment on the agenda items the committee is considering.

Gateway North International is the marketing agency for the Port of Churchill, which was created in January this year by the Honourable Lloyd Axworthy when he was the Minister of Western Economic Diversification.

The creation of the marketing agency for the Port of Churchill was one of the key recommendations of the federally initiated Churchill task force, which reported in 1995.

In our presentation we will attempt to respond to the committee's agenda by first commenting on the trade, transportation and tourism study and then commenting briefly on Bill C-44.

Concerning the trade, transportation and tourism study, I think it's important to keep some trade figures in mind. Canadian exports have been rising sharply in recent years, as is noted in the attached charts to our presentation. For the prairie provinces alone, exports have risen by 13.8% from 1994 to 1995, while imports increased by 9.8%.

Canada's aggressive trade policy is illustrated by our support for the GATT Uruguay Round agreement, an expanded NAFTA, and a new World Trade Organization.

In the agricultural sector alone, the federal agriculture minister has indicated his objective of obtaining $23 billion U.S. worth of agrifood exports by the year 2000, up from $17.5 billion in 1995.

In order to meet the demands of that expanding trade pie, we believe Canadian shippers will need to not only maintain existing trade-oriented infrastructure but also engage in selective expansion of existing capacity and re-examine the use made of existing facilities to better meet the demands of niche markets.

Every port has a list of its own advantages. I'll briefly cover what we believe are ours.

The port has long been recognized as being positioned well geographically for trade between western Canada and overseas destinations. The advantage of the location for penetrating deep into the heart of North America with ocean-going vessels, which was evident to the Hudson's Bay Company 300 years ago, remains today. By way of illustration, the distance from Churchill to the Amsterdam-Rotterdam-Antwerp region of western Europe is 3,344 nautical miles. From Thunder Bay to the same region is approximately 4,196 nautical miles.

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Even more importantly, western Canadian shippers, using Churchill, avoid the additional cost and time of using either the seaway or an all-rail service to a St. Lawrence port. Again, to illustrate, the rail mileage from Saskatoon to Churchill is 814 miles. From Saskatoon to Montreal, it's 1,828 miles. From Saskatoon to Montreal, using the Great Lakes system, it's 2,105 miles.

As well, with the 9.5-metre water depth at low tide, Churchill typically loads an average of 30,000 tonnes of grain aboard an ocean-going vessel for direct shipment to final overseas destinations. Grain shippers using Churchill can avoid the second elevation costs of storing grain in transfer elevators on the St. Lawrence before being loaded into ocean-going vessels.

Over the years, ships out of Churchill have served a multitude of destinations. Shippers find that Churchill can profitably serve not only the coastal European destinations, but also further points, such as the Mideast and South America. So far this year, for example, shippers have found it advantageous to use Churchill for grain bound to east Africa, Brazil, Colombia and Mexico.

But Churchill is not only a grain port; it is also the base for the Northern Transportation Company Ltd.'s annual resupply operation for isolated communities on the west coast of Hudson Bay. This resupply operation involves the movement, by tug and barge, of about 30,000 tonnes of cargo each year. Churchill thus serves as a crucial link between southern Canada and the new territory of Nunavut.

I should add that from our discussions with shippers and carriers involved in northern resupply operations, we also believe that Churchill provides an opportunity for opening up new trade relations with other isolated northern regions, particularly Greenland.

In this regard, we've been very pleased to note as well the very recent creation of the new Arctic Council of circumpolar nations, for which the secretariat will be initially headquartered in Canada. We believe this council will, among other things, provide new opportunities for developing trade between Canada and other council members, such as Russia and the Scandinavian countries. Churchill, as a northern port, is well positioned to facilitate trade between these circumpolar nations.

The bulk of cargo passing through the port of Churchill over the years has been Canadian Wheat Board grains. I'd like to take this opportunity to acknowledge and express our appreciation for the Canadian Wheat Board as Churchill's largest customer, by far, over the years. Their continued support has been critical to the port's ongoing viability. As the marketing agent for the port, we look forward to continuing to serve the board's needs as fully as possible and to work with the board for helping to adapt port services, wherever practical, to better meet their requirements.

As the Churchill task force has pointed out, however, it is also important for the port to diversify its cargo base. More imports would create opportunities for the two-way utilization of ships and rail cars and the prospect of lower rates for shippers.

As we look at diversification options, the question inevitably arises as to what facilities exist at the port to accommodate other cargo. By reference to the diagram attached to our paper, I'll just briefly discuss some of the points of service available at the port.

The Churchill wharf area has a covered transit shed for the protected handling of general cargo. This transit shed is invaluable, of course, for the work of the Northern Transportation Company Ltd. in unloading cars and preparing cargo for loading on barges.

Not all of the space in that shed, though, is occupied by NTCL activities. There would appear to be significant scope to work jointly with the staff of the Northern Transportation Company Ltd. and other players to expand the use of this transit shed and to open the area north of the shed for general cargo bulk-bound for other destinations.

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Still looking at the wharf area only, to the south of the transit shed there is a large open area, transited by railroad tracks. It is available for the storage of either bulk or containerized cargo.

As intermodalism is one of the themes of SCOT's transportation trade and tourism study, allow me to elaborate a little on the possibilities for modest container traffic at the port.

It should be noted that specialty crops such as peas and lentils are grown in abundance on the prairies and there is a strong market for these products in Europe and other regions of the world. Europe, of course, is a market that Churchill is well positioned to serve, and this was among the reasons that specialty crops were identified in the Churchill task force report as a target market for the port of Churchill.

As it happens, much of the traffic in specialty crops is in containers and this accounts in part for our interest in pursuing the possibility of a modest container operation at the port. I want to emphasize that the intention would be to create a small-scale container operation to service niche markets. Cranes would be provided by self-loading vessels and no significant investment on the port side would be required.

A model of such a small container operation would be the container operation that exists at Nuuk, Greenland, where they handle cargo without the use of large crane facilities.

Touching on tourism, which is a third pillar of your study, Churchill has seen its tourism traffic grow continually over the years. It is estimated that Churchill will receive approximately 10,000 visitors this year. This is roughly ten times the permanent population of the community. The area is known for its polar bears, whales and exotic bird population. It is also becoming an attractive site for people who wish to view the northern lights. Of course it now has a new national park located in the area.

Visitor profiles show that, on average, over half the visitors are from the U.S. and over 70% are from outside Canada. They also tend to be older, well educated and with incomes in the over-$80,000 range.

Churchill's transportation infrastructure is essential to its present and future tourism possibilities. Nearly half of all visitors travel by train to Churchill, and tourism studies have shown that travel by train is in many cases a critical part of the tourist experience to Churchill.

Last, but by no means least, it should be noted that the passenger train service to Churchill also serves as a vital transportation link for isolated communities in northern Manitoba.

I'd like to comment just briefly on Bill C-44. Gateway North International recognizes that government support for transportation infrastructure has been a cornerstone of development for our nation. In this context, we note that government assistance for the seaway will continue, with the provisions of part III of the act providing authority for federal investment and seaway infrastructure. Our only observation in this regard is that we trust similar support for infrastructure requirements identified to facilitate the transfer of ownership of public ports, such as Churchill, under part II of the act will be forthcoming as required with appropriate allowance for the relative scale of activities at these public ports vis-à-vis what is happening in the seaway.

Turning particularly to part II of the act concerning public ports, we note that the government has allowed up to six years for the negotiation of a satisfactory transfer of these smaller public ports. Depending on the length of time it takes to negotiate a satisfactory transfer agreement, it is possible a port such as Churchill could continue to be operated under a centralized regime in Ottawa for some time while the larger local port authorities and the seaway get an early start on more autonomous operations to customize their services and fees to meet the demands of their users and broaden their customer base.

The Churchill task force report of January 1995 recommended transfer of Churchill transportation infrastructure to local control. We believe this is a crucial recommendation, as it is evident to us, after only a short period of marketing the port, that considerable local autonomy is desirable to achieve the utmost flexibility and rapid response on issues of rates and service to attract new business and investors to the port.

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We therefore welcome those provisions in part II of the act that provide the Minister of Transport with a range of mechanisms to fulfil the two key objectives of the act, which I would like to quote if I might. They are to ``ensure that marine transportation services are organized to satisfy the needs of users and are available at a reasonable cost to the users'', and to ``provide a high degree of autonomy for local or regional management of components of the system of services and facilities and be responsive to local needs and priorities''.

In conclusion, I would like to take this opportunity to advertise one of our newest information sources. We now have a home page on the Internet. If members or staff of the committee should want to get themselves quickly up to date on what's happening at the port, our home page address is shown in our submission.

I would like to again thank you for the opportunity to address the committee and would welcome any questions you might have at this time.

The Chairman: Thank you very much, Gordon.

We'll begin with the Reform Party. Mr. Gouk.

Mr. Gouk: Thank you. I need to take a little bit of time to go through your stuff. You've presented a lot of information.

Right now there's a subsidy. Obviously there's an operating deficit, so there's a subsidy that goes into it. If the federal government were prepared to sign over that port - whether it was to the Town of Churchill, or a consortium of Churchill and the provincial government, or whoever - and phase out the subsidy portion over a negotiated period, would there be viability in some entity taking over that port under those types of conditions?

Mr. MacMichael: Yes. I think certainly the intent of the transfer policy the federal government is pursuing - and indeed the finding of the Churchill task force report - was that the port could become commercially viable in its own right and that the potential does certainly exist for the phase-out of operating subsidies.

Mr. Gouk: So rather than trying to make it into a CPA as such, if the federal government were willing to enter into a process whereby they would simply turn it over in fee simple, if you would, and phase out federal support, Churchill could stand on its own and be a viable port for you?

Mr. MacMichael: First of all, the people who have been involved in promoting an acquisition of the port have not, to my knowledge, to date sought part I status for the port. That's one point I'd like to make with respect to your question.

The task force that studied the Churchill question believe that with a period of time to help build up new markets for the port, commercial viability and an ability to stand on its own is well within reach.

Mr. Gouk: Thank you.

The Chairman: Mr. Comuzzi.

Mr. Comuzzi: I sympathize with your serious problems. There are 1,000 residents in Churchill, approximately?

Mr. MacMichael: Approximately.

Mr. Comuzzi: Over the last period of time, how much has Churchill received in government grants, from the Province of Manitoba and the federal government, etc.?

Mr. MacMichael: I wouldn't have that figure, I'm afraid, nor would I have that figure for other transportation corridors that have enjoyed government support over the years.

Mr. Comuzzi: We're just talking about Churchill now, in the last year. There was a $27 million grant given to Churchill outright when we were on the last road.

[Tecnical difficulty - Editor]

The Chairman: ...was required to bring the port up. I think the total grant to date has been about $1 million.

Mr. MacMichael: If I might, Mr. Chairman, the lead-up to the question I think was related to the number of people at the port.

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Mr. Comuzzi: Yes, the number of people, and I'm trying to figure out what both levels of government contribute to ensure that it continues to be viable.

Mr. MacMichael: What do both levels...? There is support for our marketing agency from the federal government and from the Province of Manitoba, and a small contribution as well from the local government of the district of Churchill.

I should say, though, and I don't know whether the lead-up to your question was to try to get at the dollar figure per person of subsidies that has been provided over the years -

Mr. Comuzzi: No, I can't get to anything unless you tell me the answer, which you're not going to, obviously. I'll get the information elsewhere.

Mr. MacMichael: I think that in general terms, of course - if I might make the point - we don't view the port of Churchill and our work to market the port of Churchill as an initiative that's focused on helping the one particular community. We see the port of Churchill as a trade route for western Canada and for western Canadian shippers.

Mr. Comuzzi: Do you think you could meet the threshold entry of becoming a Canadian port and being self-sufficient?

Mr. MacMichael: I think that's within the realm of possibility, yes.

Mr. Comuzzi: Those are my questions.

The Chairman: Mr. Keyes.

Mr. Keyes: Thank you very much, Mr. MacMichael, for your report.

As a supplementary, I go to the bottom of page three, where you illustrate the distance from Churchill to Amsterdam-Rotterdam as being 3,344 nautical miles, as compared to Thunder Bay, which is 4,196. But how many months of the year does Churchill operate?

Mr. MacMichael: The season for the port without ice-strengthened vessels is July 20 to October 31. It is indeed one of the seasonal routes that Canada operates.

Mr. Keyes: So it's three months of the year.

Mr. MacMichael: Without ice-strengthened vessels. With ice-strengthened vessels, it extends into June, under the Canadian Coast Guard's ice control zone regime.

Mr. Keyes: Okay then, let's say ice-strengthened vessels without the necessity of ice-breaking by outside sources. What would your season be?

Mr. MacMichael: The time period for ice-strengthened vessels is from June 20 to November 30. Last year we did have a vessel leave the port on November 28; it did enjoy ice-breaking support, so the cost -

Mr. Comuzzi: That was a late delivery.

Mr. Keyes: The cost to the shipper to put their product on a vessel and send it out with ice-breaking assistance is naturally going to be higher than if the vessel were to call at the port, pick up grain, and leave on its own.

Mr. MacMichael: There's no question that there is a cost to operating the ice-breakers, and how those costs are allocated is certainly something I know Transport Canada is looking at.

Mr. Keyes: Which is the subsidy the government pays.

I think the question was very direct. If you know the answer, great; if you don't, then you call tell us. Say in the most recent shipping season, the last one you have numbers for - I guess it would be 1995 - what was the amount of provincial and federal subsidy that went to the Port of Churchill for that shipping season? Are you aware of that amount?

Mr. MacMichael: I don't have that figure.

Mr. Keyes: You don't have that figure? All right. Thanks very much.

The Chairman: Thank you, Mr. Keyes.

Monsieur Dubé.

[Translation]

Mr. Dubé: Mr. Keyes has asked the questions that I wanted to ask myself concerning the period of operation. I have never been in Churchill, but you only have to look at the map to realize what the difficulties must be. Concerning the movement of goods, you made a comparison with the distance from Thunder Bay. You did not make any comparison, for example with Vancouver in the West. Do you have this kind of data? On page 4 of your submission, you mention shipping to Montreal.

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[English]

Mr. MacMichael: I can comment on the rail costs from certain points in Saskatchewan to western ports. As you know, there is a regulated distance space to rate regime in place for rail movements out of western Canada and from points in the so-called Churchill catchment area, which are basically in the northeastern Saskatchewan region.

The rail rate to Churchill is about $15 less per tonne than the rail rates to Vancouver. So there are some savings to be achieved because of the shorter distance to Churchill - in terms of rail rates at any rate - in transiting from that particular region, northeastern Saskatchewan, to Vancouver. There are definitely savings in rail rates to the west coast as well.

[Translation]

Mr. Dubé: That's all. Thank you. I am a member of the Opposition and I will not have to make any decision. However, I am very conscious of the fact that your port should be treated differently, considering its geographical location.

[English]

The Chairman: Thank you, Mr. Dubé.

Thank you, Mr. MacMichael.

Mr. MacMichael: Thank you.

The Chairman: Perhaps we can ask Mayor Archer to come forward. I don't know whether you're interested in having a sandwich, but we'll take a 10-minute break, people can grab their plates of sandwiches, and we'll continue. Audience members, you are welcome to partake. Let's adjourn for 15 minutes.

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The Chairman: Let's get under way.

I appreciate your willingness to present your brief earlier, Mayor Archer. I understand that our next presenter is equally willing to do so. I also very much appreciate the flexibility of the staff, who are giving up a portion of a needed break in order to support us through these last few presentations so that we can get to our plane on time to be in Thunder Bay to do the same thing there.

Next is Mayor Archer of the City of Regina, from the TransCanada #1 West Association. Sir, if you could confine your remarks to roughly ten minutes or so in length, I'm sure members will have many questions.

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Mr. Douglas Archer (President, Trans Canada #1 West Association): Thank you very much, Mr. Chairman and members of the committee. On behalf of the Trans Canada #1 West Association, I'd like to thank you for the opportunity to make this presentation. We certainly welcome the decision of the committee to undertake a study on transportation, trade and tourism and their linkages.

You will see that our submission to your committee urges you to recommend the completion of the twinning of Canada's main street, the Trans-Canada Highway, as a national priority.

Our association was formed with a mandate that is directly related to the terms of reference the standing committee has established for your study. We established the association with the objective of improving our highway transportation linkages in order to improve safety, business trade, and of course our tourism potential.

Your committee will undoubtedly be hearing from many people from many different parts of the country who have an interest in highway infrastructure and improvements. Our central concern and recommendation, as I've indicated, is the urgent need to complete the twinning of the Trans-Canada #1 in western Canada, and we urge you to establish this as a national priority.

In recent years, federal and provincial governments have put money into the national highway system. However, the money has not been used to complete the twinning of the Trans-Canada #1. Instead, it has been spent in other areas. This means that significant parts of our major east-west highway route have not been twinned. In Saskatchewan alone there is a 168 km stretch of highway on the east side of the province that still has not been twinned. The estimated cost of twinning is $57 million. On the west side of the province, a 108 km stretch of highway has not been twinned. The estimated cost of this work is $36.6 million.

Work is being done in Manitoba, but I understand it is going to slow down because there is no allocation and no commitment at this point by the Saskatchewan government to address twinning. And they say to me that they are not prepared to address twinning unless there is a cost-sharing arrangement with the federal government. So we regard this proposal and the possibility of a cost-sharing arrangement with priority attention paid to the twinning of the Trans-Canada #1 west as a major priority and a major opportunity for us.

According to the latest information from Saskatchewan Highways and Transportation - and I've provided you with a handout since this information was not available to us at the time that the brief was prepared - you will see that there is a very heavy commercial load on the Trans-Canada Highway. If you look at the numbers for Fleming, on the eastern border of Saskatchewan, and Maple Creek, on the western border, you'll see that for Fleming, 34% of the traffic on that highway is commercial traffic. And that's not 34% of a small volume of traffic; it's 34% of a very large volume of traffic. Maple Creek is a little lower at 28%. But this represents a major safety issue for people using the Trans-Canada.

There is a concern in the western part of the province about the rolling hills and the inability to move around slower-moving commercial traffic. Of course, that traffic is not only slower-moving, it's much more difficult to move around than a passenger vehicle is.

Likewise, in the eastern part of the province, while we don't have those rolling hills, I can tell you from my personal experience that the changes in elevation are very deceiving. So you appear to be going down a highway that is completely flat, but there are rises and dips that are really very, very deceptive. As a result, there have been a number of accidents in the past, and I suspect that some of those accidents are due to misjudging the nature of the highway in the eastern part of the province.

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I want to emphasize that not only is there a high percentage of commercial traffic but a very wide mix of traffic. Of course, anywhere from 60% to 70% is private passenger vehicles, but you get semi-trailers, semi-trailers with pups, a wide variety of commercial vehicles. When these commercial vehicles get lined up one behind the other, you end up with long lines of traffic.

So we get a good number of comments at Tourism Regina, and through the various tourism associations we receive the same kinds of comments from other people travelling in passenger vehicles, that there is a very real concern about safety.

I can tell you in an anecdotal fashion that we also receive comments from American visitors who travel north in the eastern part of our province. As they travel north, they come to the Trans-Canada Highway. They look around, and they keep travelling past the Trans-Canada because they can't believe this is our national highway. The comparison, of course, with the interstate highway system in the United States is not a very flattering one, especially when you see some of the portions that are not twinned in the eastern and western parts of the province.

I don't know if any of you will recall the royal commission on rail passenger service that reported a number of years ago, but VIA Rail used to travel through western Canada on the CP line and on the CN line. Well, the CP line had a very low subsidy, and the CN line going north had a very high subsidy. For reasons that did not make any economic sense, and ones that we were never able to identify, the decision was made to move the rail passenger service onto the higher subsidy route, leaving the southern route without rail passenger service. The parenthetical observation was made: Well, you have the Trans-Canada Highway.

That may be a fair observation, but it's also a fair observation that the Trans-Canada Highway, in its present state, is not an adequate transportation route when we consider it from the perspective of a national transportation system. It is currently being treated as a local transportation route, and the linkages from province to province are simply not being attended to in a way that reflects any kind of national priority and any kind of national strategy. We believe in the long run that has created and will continue to create problems in terms of encouraging people to travel in the southern part of our province in Saskatchewan, but across the southern part of Manitoba and Alberta as well.

There have been significant changes made in terms of tourism potential. I can refer to some possible developments, with the RCMP training academy in the city of Regina, a mineral spa in the city of Moose Jaw, and the dinosaur digs in the western part of the province. Of course, you'll find the dinosaurs in eastern Alberta as well. These attractions are new. They have received relatively little attention in the past, but we believe they will be a key part of our economy, just like tourism is going to be a key part of the economies of all parts of Canada.

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If we're going to be able to capitalize on that we need to have the proper highway infrastructure, and that really requires the twinning of the Trans-Canada, with a national priority assigned to that end.

There are - and I think SARM referred to this earlier in the day - changes occurring in western grain transportation that will have an impact on local roads in Saskatchewan, but they will inevitably have an impact as well on the national transportation system road network. Again, that's simply another instance where there will be a further load of commercial traffic onto our major highways.

One of the concerns we have is that many travellers - Americans on the one hand and Canadians on the other - choose to travel through the United States when travelling from eastern Canada to western Canada. They choose to do so in part because of the safety aspects and the better highway systems. We think this is a loss to our country in economic terms and a challenge to us in terms of nation-building.

It strikes me that while we have financial challenges - and I support federal and provincial efforts to address those financial challenges - we also have to engage in nation-building. We cannot lose the sense of vision and purpose that was a part of our country for so many years when we built the railroad from one end of the country to the other. That was a unifying force.

We seem to have placed much less priority on that sense of unity of purpose and nation-building. I understand that it may have fallen off the priority list because it's hard to assign an economic value to building a nation. But at some point we have to do it, simply because we are proud to be Canadians and we like to have a strong tie from one part of the country through to the next and beyond, from coast to coast to coast.

With regard to American visitors, we have several major exhibitions in our city, one of which is the Royal Red Arabian Horse Show. It's the Canadian national show, but we attract a very large number of Americans since it's the second-largest Arabian horse show in North America.

Last year we undertook a survey and asked American visitors how they travelled and where they came through the border into Canada. We wanted to help them with any problems in getting through the border crossings, since they had animals and a few special needs. They told us they travelled in the United States as far as they could and came into Canada only at the last minute. They mentioned the state of the highways as the reason for that.

So I think there is plenty of anecdotal evidence, if not actual research, to back up the observation that we are losing out with respect to potential tourism support that we might generate if we were to make some improvements to our highway system.

In conclusion, we want to see this committee, if it's your judgment, make a strong recommendation to prioritize the national highway system, and within that overall priority of completing the Trans-Canada on a coast-to-coast basis, to advocate the twinning of the Trans-Canada Highway 1 west from Winnipeg through to Calgary. We hope your committee will see the wisdom of that recommendation.

The Chairman: Thank you, Mayor Archer. You might avail yourself of a translation device.

Mr. Dubé.

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[Translation]

Mr. Dubé: Thank you, Mr. Mayor. At the beginning of your presentation you said something that struck me or at least surprised me. You said that some 20 or 25 year ago, funds allocated by the federal government were used for other purposes by the provinces. Could you be more specific, so I can really understand what you mean?

[English]

Mr. Archer: The funding that has been used on the national highway system that was allocated for the province of Saskatchewan again went into the northern part of the province on the Yellowhead Highway, which certainly has a significant volume of traffic but not as heavy as the Trans-Canada, and I think is meant to sustain more of the local needs than to address the national transportation requirements of the country as a whole.

[Translation]

Mr. Dubé: I agree with you on this point. I was surprised because being from Quebec, I thought, without knowing the exact percentage, that the funds were used for the Jean-Lesage Highway, Highway 20, or for the Trans-Canadian. It was at the beginning of the 70s and if my memory serves me right, it was within the framework of the federal-provincial program. It is a four lanes highway that runs all the way to the New Brunswick border, or thereabouts, specifically to Rivière-du-Loup, about 50 kilometres away from New Brunswick.

Did the road you are talking about - I am not quite as familiar with the geography of your province as you are - ran parallel to the Trans-Canadian or followed a North-South direction?

[English]

Mr. Archer: The Yellowhead branches off from the Trans-Canada just a little east of Brandon and goes in a northwest direction through Saskatoon to Edmonton.

Mr. Dubé: Okay.

The Chairman: Thank you, Mr. Dubé.

I know, Mayor Archer, that you are most interested in the Trans-Canada Highway, but the Yellowhead is also part of the national highway system. Is it twinned in any place in Saskatchewan?

Mr. Archer: The Yellowhead is twinned for a portion just east of Saskatoon and is being twinned from Saskatoon to North Battleford. The original plan was to complete the twinning from North Battleford to Lloydminster. I'm not sure that the province is going to carry forward with that plan because of a shortage of funding.

If I might, I don't want to suggest that Trans-Canada Highway 1 is the only priority and that nobody else has any claim to support, but what we're urging is that we at least complete something, instead of patchworks of here and there and leaving holes in the middle. It doesn't speak to any overall strategy.

The Chairman: I know you touched on this briefly in your comments, but on the position of the provincial government of Saskatchewan, have you had any indications from them as to what their participation might be?

Mr. Archer: I have spoken with the province. They acknowledge that the Trans-Canada does need attention, and they did indicate - I think it was last year when there was some discussion, or maybe it was even the year before - there was some possibility that the federal government might look at a cost-sharing arrangement again on highways. The provincial government indicated to me and publicly that they were prepared to spend money on Highway 1 if there was some funding available in partnership with the federal government on a highway system.

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The Chairman: Thank you very much. I appreciate your time.

From the look of the next group, they're all fertilizer people.

Some hon. members: Oh, oh!

The Chairman: Would you care to come to the table, please?

We have Mr. Larson, Mr. Rooney, Mr. Foley and Mr. Murphy.

Unlike some of these easterners you'll encounter at this table, we in western Canada take our fertilizer very seriously.

I appreciate you being able to advance your time a little bit. We are attempting to catch a plane to Thunder Bay and didn't want to be too badly squeezed. You are presenting on the marine bill, Bill C-44.

Mr. Larson, perhaps you could introduce your colleagues and take it away.

Mr. Roger L. Larson (Managing Director, Canadian Fertilizer Institute): Thank you,Mr. Chairman. It's a pleasure to make a presentation in western Canada for a change. As you know, so much of our industry is based here.

Our representatives today are as follows. Mr. Patrick Rooney is the chairman of our transportation economics subcommittee and director of supply and distribution with Viridian in Edmonton. Mr. Bud Foley is vice-president of planning and distribution of the Potash Company of Canada. He's based in Toronto; their potash line is in New Brunswick. Mr. Brian Murphy is manager of transportation operations with the Potash Corporation of Saskatchewan in Saskatoon. And as you mentioned, I'm the managing director of the Canadian Fertilizer Institute.

I'd like to mention that CFI members produced 22 million metric tonnes of fertilizer last year. Our exports were valued at $3 billion at the point of export. This represents 6.2 million metric tonnes of exports and 1.3 million metric tonnes of imports in addition to these exports. Our total marine traffic as an industry is therefore 7.5 million metric tonnes.

We have made most of our general comments in our executive summary. In the interest of time, we will not go through those. If there are specific questions afterwards on the principles we have discussed in our executive summary, we'd be pleased to respond.

What I'd like to do is just take two quick moments and outline a few key points on the three areas that the bill covers.

First is the CPAs. Our first point here deals with governance. If the system of governance in the new port system and the CPAs is going to work, we believe it is essential that users, or shippers, need to be on the boards of the CPAs. Further, we believe shipper representatives should be appointed by shippers. We recognize the minister has a role in naming people. However, we think it is very important that a very clear linkage be made that will allow shippers to see and support their representatives on these boards.

The second point is with regard to the stipend or rent that the federal government will be charging the CPAs. Ideally we would suggest there should not be any rent on the capital assets that the CPAs are leasing from the government. We feel CPA profits should be reinvested in the port facilities. Any fees that are ultimately charged in recognition of the government's fiscal considerations must recognize the international competitive environment in which shippers - both exporters and importers - must operate. We would suggest that a multi-year fee schedule is preferable from a business planning perspective, rather than single-year fee schedules.

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Our last point is on the CPAs, and it deals with dispute resolution. Members of the standing committee will recall that we have talked about dispute resolution issues in the past. Dispute resolution is an important part of the Transport Act. We need to recognize that the creation of the CPAs will result in the creation of local monopolies. We believe that a CPA-type dispute resolution mechanism should apply to both fee and service problems that could potentially arise in the future between shippers and terminal and port suppliers. We also believe the establishment of dispute resolution mechanisms will go a long way toward encouraging the informal resolution of disputes.

There are two points on the St. Lawrence Seaway. We recognize the delicate competitive situation that the minister has seen in the operation and survival of the seaway. We would like to encourage the government to echo these fiscal concerns with regard to the ports. We also feel dispute resolution mechanisms similar to those we recommended have for the CPAs would be appropriate.

On pilotage, we support the thrust of the statements of principle that are contained in the Canada Marine Act. When changes are made to the system to ensure that it becomes self-financing, we expect that changes will also be made to ensure that competitive market forces are able to come into play. We have made some recommendations in our brief. Central to these is establishing a governing college that is separate from the providers of pilotage services, in order to establish what the needs are from a safety perspective.

That concludes our opening comments. We will entertain any questions that you direct to the industry representatives. Thank you.

The Chairman: Thank you very much. It was a most succinct and interesting presentation.

We have been gesticulating to each other as you have been raising the various points, because they have been points that we've been discussing among the committee members. I think Mr. Keyes will clarify the issue of separate representation on the boards of the CPAs. The question of the dispute resolution mechanism is something that we are discussing right now.

I'm interested in your comment on the fees. If I understand you correctly, you are suggesting that there'd be no fees charged in an ideal world. Like you, however, we also have costs. In the current fiscal climate, when we're struggling so hard to get the deficit down, it's unlikely that we'd be prepared to forego an existing stream of revenue. We are looking at mechanisms to try to keep it within that realm, though, so that we're not taking any greater load than we currently are.

Your other comment that intrigued me was relative to the seaway. Are you suggesting there should be comparable treatment of the seaway and the ports as far as the question of a fee on gross revenues is concerned?

Mr. Larson: No, we're not. We're saying that we recognize the delicate competitive situation that the seaway is in. We note that the minister saw fit to include in the legislation that there would not be fees collected from the seaway. What we are encouraging is that a similar fiscally prudent attitude be taken to the CPAs because the shippers who use the ports also have to be internationally competitive.

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The Chairman: Does anyone else have a comment?

A voice: No, I think that succinctly expresses our feelings.

The Chairman: Mr. Keyes.

Mr. Keyes: Thank you for your report, gentlemen.

To supplement our chairman's question to you, and your answer vis-à-vis the stipend that the ports would be paying back to the federal government, I think the government is very sensitive to the amount of that stipend. I would hope that it would be ratcheted to a degree. The suggestion or idea being kicked around right now is that any kind of a stipend paid from the port to the federal government would be one that would be graduated. It would not just begin immediately.

I think you would also have to acknowledge that it can't be payment-free, if only because - let's face it - the Canadian taxpayer invested huge sums of moneys to make these ports what they are today. As a result, the Canadian taxpayer does deserve a return on some of that investment. But it is going to be a fair return, not one that hamstrings or handcuffs the ports vis-à-vis their competitiveness with other ports in the U.S., for example. Would you acknowledge that such a return should be there?

Mr. Brian E. Murphy (Manager, Transportation Operations, PCS Sales (Canada) Inc.; Canadian Fertilizer Institute): As we said, in a perfect world that wouldn't be necessary. We do recognize, however, that it's necessary to do that at the present time. Obviously, if things become much better, we would hope that the fees could be ratcheted down. Presumably that freedom will exist in the legislation.

One thing we would very much like to stress is that the fees should be published well in advance, hopefully over a several-year period. I'm sure you gentlemen are very well aware of this. But what we're thinking is that it is indeed very difficult to make an investment in port structure or to make a decision as to which port to use, to make agreements with shipping lines, and this kind of thing, if you don't know what the fees are going to be next year or the year after that. We would love to see something that says what's going to happen for the next five years. Or we would like to know that it will be discussed in four years, and that you then have another five-year plan or something along those lines.

Mr. Keyes: Absolutely, Mr. Murphy. That's been a consistent message that we've been receiving as well.

On the issue of governance, I just wanted to make it clear that the boards of directors, when they are made up.... The individuals who will make up the majority on the boards will be individuals chosen by the users, chosen by the people in the communities at the ports. They will be put on a list, and that list will be submitted to the minister for his eventual appointments. What's crucial here is to understand that it is not just a minister's wish to go into a port area and to say that he wants to appoint these particular individuals and there's your board. Those names come to him via the list.

As far as direct user or shipper representation on the board is concerned, we've been around the horn on this for two years, mainly because there are so many different issues to discuss around governance when we speak of it. Of course, there are the conflict of interest guidelines and regulations that have to be followed. That's part of the reason why the minister wants the final say in terms of who on that list will be on the board.

More importantly, however, if you go to a particular port and you have a multitude of users or a multitude of shippers, the problem that arises is pretty obvious: unless you are prepared to have a board of 37 because you have 37 users at this particular port, you're going to have to ratchet it down and ensure there is no direct user or shipper representative on the board, because that individual would of course be privy to information that competing shippers in the port would not be privy to vis-à-vis tariffs, rates, etc. So it seems only logical that the users or shippers at the particular port or harbour would put their names forward.

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I think if it's a group of grain shippers or a group of coal shippers, its industry representative would be put on the list for the eventual appointment to the board.

The Chairman: Mr. Foley is a user. It's good to see you.

Mr. Bud Foley (Vice-President, Planning and Distribution, Potash Company of Canada): It's good to see you.

I don't agree with you, as a user. If you exclude the users, as defined in the bill, as anybody who has a commercial relationship, you virtually wipe out any access to any type of knowledge about the port and how it should be run. You won't have anybody with any ability. We threw an example out here at somebody earlier in the discussion. What about a marine attorney who acts on my behalf in the port of Saint John? Frankly, I'd maybe classify him as a user because he has commercial interests in it.

I think you just absolutely have to have users in there, because they have the experience in how the port is going to be run and should be run. I know there's a risk of some bias, speaking for the port of Saint John, but that's a risk I'm prepared to take, because there are provisions in here for rotating every three years.

Mr. Keyes: But outside the port of Saint John, I don't think that's a risk - because we are gathering information here - the federal government is willing to take.

To say we should exclude the users, I want to bring around the lingo for you, Bud: we're not excluding any users; we're telling the users to sit down and work out the names they think would best represent them on the list. Then we'll put that list to the minister.

Mr. Foley: Okay. Then I go down to the port of Saint John and look around and ask who the hell knows something about running this port. We're apt to wind up nominating the high school principal.

Mr. Keyes: I don't think so. A retired ex-CEO in the potash industry wouldn't be interested in representing your interests on a board?

Mr. Foley: I guess we could get into an argument about whether he held any shares. I don't know.

Mr. Keyes: Maybe when you retire you'll want to be on that board, Bud.

Mr. Foley: It may come sooner than we think.

I just think you would have a hell of a problem finding the expertise you want.

I'd like to make another point on how the bill is currently worded. Maybe it is not the intent, but I have this fear of government patronage in all the appointments. If you're going to say let me prepare the list and give it to you to make the choice, then I would like to see that wording in the bill. I would like it to say that the port presents you with a list of directors and you pick from that list. I might give you twenty people and you pick five, or whatever the number is. But that's not what the bill says right now.

Mr. Keyes: Yes, we've heard that before.

Mr. Foley: I would rather see a little more protection. If I can't sit on the board until I retire -

Mr. Keyes: Well, I don't know if ``protection'' is a good word, but a check and balance would be a nice thing.

Mr. Foley: Yes, I think so.

Mr. Keyes: Thank you.

Mr. Murphy: Could I just make one small suggestion in this? One of the concerns that crossed our minds when we were looking at this is exactly what you're saying. Many of the port directors might in fact wind up being retired people. I have nothing against them - I'm going to be one very soon myself - but I do not think it would be good if the ports of Canada were basically governed by directors composed almost entirely of retired people.

Mr. Keyes: I'm just saying, Mr. Murphy, that's one element - a possibility.

Mr. Murphy: That's certainly one possibility. I have the same problem -

Mr. Keyes: Some people who are 65 refuse to retire. They have a wealth of experience.

Mr. Murphy: Oh, definitely. These people exist and would do very well on a board. But if you're having problems filling a board, you might in fact fill it with people who were not that keen.

Mr. Keyes: In models I've seen, there wouldn't be much difficulty finding responsible, dedicated, port-interested individuals to sit on a board.

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Mr. Foley: You're saying they've done some work in this area already.

Mr. Keyes: No, from my personal trips, and including my own port of Hamilton, which has a harbour commission and is very happy with the Hamilton Harbour Commission status, but at the same time understands the advantages of moving towards CPA.

Mr. Patrick Rooney (Director, Supply and Distribution, Viridian Inc.; Chair, Transportation Economics Subcommittee, Canadian Fertilizer Institute): Sir, I want to state for the record that I don't intend to retire shortly.

Mr. Keyes: We can have a young member on the board.

Mr. Rooney: One of the concerns I have in terms of the composition of the board, in terms of this whole issue of users being involved, is there's a real importance from the shippers' perspective that a global view is always being taken.

Working for a company now that imports in excess of a million tonnes of phosphate rock a year and exports in excess of 300,000 tonnes of fertilizer, we have a lot of involvement at the port. We've also put facilities down into California, which will give us an opportunity to start moving product on water from the port of Vancouver down into California, something we haven't done. So there are new opportunities out there.

But one of the things we're seeing on a regular basis now is people coming up from Portland and other U.S. ports saying to us: Vancouver doesn't work very well; why don't you come and do business with us? I think it's critical that when you look at the composition of the board there are people actively engaged in business that really understand the current environment very, very well and can bring to bear on the executive management level a perspective that can often be lost when you get too wrapped up in your own thing.

Mr. Keyes: I think it was Ron Longstaffe at Vancouver port that described that particular board as one that would be in the community interest, that it has to be all-encompassing. Let's not just sit down with the hard-nosed big users of the port. There has to be a community interest involved with that port as well.

Mr. Comuzzi: If I could follow up on what Mr. Keyes's question, what we're saying on the composition is that although users should play an important role in the administration of all the ports in Canada, they should not be exclusive, and there should be representation on those boards of governance that have certain amounts of public policy that bring some other aspects of good management and understanding to the board other than just the users. A good combination of users and others is a very important mix. Would you agree with that on the present trend?

There's a debate going on. They're thinking of turning the Great Lakes and St. Lawrence Seaway over to a group of users exclusively, without having anyone else on there representing other interests that are important to the seaway. The group of users is the grain companies and a steel company and the shippers, the guys who own the boats. Give me a break. You know what your rates will be then. So I'd appreciate your comments.

Mr. Murphy: I think you might say that we certainly would more strongly and more comfortably support a mixed board that does not exclude the users but is certainly not exclusive to users. I agree with you, depending to some extent on your definition of users. To us, the definition of users includes shippers.

Mr. Comuzzi: Oh yes.

Mr. Murphy: Some people think of users as only those such as stevedores or shipping companies or steamship companies. But if it's only those, that's an even bigger problem.

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Mr. Chairman, if I could just add one more brief comment, some of the U.S. ports of course do not pay the fees we're talking about. That's just for your consideration when you're thinking of fee levels.

The Chairman: Monsieur Dubé.

[Translation]

Mr. Dubé: The Act varies concerning the appointment of the members of the board and of the users. My experience is more directly based on my observations in the port of Quebec City. I know that things are different because there are references to port authorities or to a situation that is comparable to the proposition contained in the Bill.

In Quebec, the Vignola Report concluded that appointments were not always determined by the knowledge and competence of the candidates, but that they were a form of political reward. The Liberal Party was not in power; the appointments had been made by the previous Conservative government. You agree with me that, whatever the situation, it is not a good thing. I am a little concerned that the Act...

At any rate, the Quebekers expressed that concern. A list of suggested names is mentioned, but it all remains a little bit hazy. There is always a possibility... I am not taking a shot at the current Minister, but when an Act is passed, it is for the long haul. There should be better warning indicators to prevent this kind of thing. Do you agree that appointments should not be political rewards?

[English]

Mr. Murphy: I don't think we could comment on the actual structure of the bill, but we would certainly regard it as a very desirable result if these awards were not patronage awards. In fact we're convinced that they must be commercial awards, business awards. The facts of political life sometimes are.... Let's say that political reality is somewhat different sometimes from economic reality. They operate on different levels, and political reality has no place in the running of a port.

Mr. Rooney: I'd like to make a comment on that in a broader context. There's a lot of discussion about the attitude of Canadians towards their institutions today. I agree 100% with what you've said, and it's at this level that the change can take place.

When we start seeing these kinds of organizations populated by people who are representative of - in this case - the user groups in the communities, without any regard to their political involvement, I think you'll start seeing not only better performances by those boards, you'll also see a different attitude emerging in terms of people's respect for politicians and government process.

[Translation]

Mr. Dubé: I have a different kind of question that may not be directly related to the Bill as such, but which would help me better understand the issue.

You work in the area of chemical fertilizers. We are talking about ports; so, you naturally mention the transport of fertilizers. What I would like to know is what main mode of transportation you use to get to the port? Train or truck? Does it depend of the type of fertilizer?

We have also talked about exports. Do you also have to import some products, inputs for example? Traffic must always be two-ways.

[English]

Mr. Rooney: Generally speaking, we move product to the ports by rail. In terms of imports, in terms of our own company, we import a million tonnes of phosphate rock every year. We import it into Vancouver and rail it from there. So it's rail in and ship out, or ship in and rail out. And again, when people ask where the shippers fit in the port side of it, in both cases we don't have extensive storage facilities at the port. We're linking up the timing of our rail cars with the timing of the ships, and you can imagine the logistical issues involved.

[Translation]

Mr. Dubé: Thank you.

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[English]

The Chairman: I'd like to thank you for taking the time to come and make the presentation.

I would like to respond, however, to the final comment about patronage. As the appointments process has occupied a lot of the discussion, the comments Mr. Rooney made at the end illustrate an issue we've been struggling with.

If you look at all of the efforts we've been undertaking since coming to government in this whole issue of the privatization and commercialization of transportation, it has been to do exactly that. If you look at what's been done with the airports, with NAV CAN and so on, and what's been done with CN, you'll see, I think, a very sincere attempt to commercialize these operations.

As has been pointed out in the discussions taking place here, there are some tricky questions, because there is also inter-shipper competition that one doesn't want to introduce biases into. We will think very long and hard about the process and the question of enshrining this process.

Mr. Foley, you make a very good point. We want people who are expert in this field offering input to those ports.

But I can guarantee you, Mr. Rooney, we will not be appointing anybody's hairdresser.

Thank you.

Mr. Rooney: Thank you.

The Chairman: That's it. The meeting is adjourned.

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