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37th PARLIAMENT, 2nd SESSION

Standing Committee on Transport

EVIDENCE

CONTENTS

Tuesday, October 21, 2003

0910

The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.))

Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance)

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mrs. Lynne Yelich (Blackstrap, Canadian Alliance)

The Chair

Mr. Roger Gallaway (Sarnia—Lambton, Lib.)

0915

The Chair

Mr. Stan Keyes (Hamilton West, Lib.)

The Chair

Mr. Ovid Jackson (Bruce—Grey—Owen Sound, Lib.)

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ)

0920

The Chair

Mr. Marcel Proulx (Hull—Aylmer, Lib.)

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

0925

Mr. Marcel Proulx

The Chair

Mr. Jim Gouk

The Chair

The Chair

The Clerk of the Committee

The Chair

Mr. Jim Gouk

The Vice-Chair (Mr. John Cannis (Scarborough Centre, Lib.))

Mr. Jim Gouk

The Vice-Chair (Mr. John Cannis)

Mr. Jim Gouk

The Vice-Chair (Mr. John Cannis)

Mr. Jim Gouk

Mr. Roger Gallaway

The Vice-Chair (Mr. John Cannis)

Mr. Jim Gouk

The Vice-Chair (Mr. John Cannis)

0930

Mr. Jim Gouk

The Vice-Chair (Mr. John Cannis)

Mr. Jim Gouk

The Vice-Chair (Mr. John Cannis)

Mr. Jim Gouk

The Vice-Chair (Mr. John Cannis)

Mr. Jim Gouk

The Vice-Chair (Mr. John Cannis)

The Chair

Mr. Roger Gallaway

The Chair

0945

The Chair

Mr. Rob Ritchie (President and CEO, Canadian Pacific Railway)

0950

0955

1000

The Chair

Mr. Dennis Apedaile (Assistant Vice-President, Government Affairs, Canadian Pacific Railway)

The Chair

Mr. Rob Ritchie

The Chair

Mr. Jim Gouk

Mr. Rob Ritchie

1005

Mr. Jim Gouk

Mr. Rob Ritchie

Mr. Jim Gouk

Mr. Rob Ritchie

Mr. Jim Gouk

Mr. Rob Ritchie

Mr. Jim Gouk

Mr. Rob Ritchie

1010

Mr. Jim Gouk

Mr. Rob Ritchie

Mr. Jim Gouk

Mr. Rob Ritchie

Mr. Jim Gouk

Mr. Rob Ritchie

The Chair

Mr. Mario Laframboise

1015

Mr. Rob Ritchie

Mr. Mario Laframboise

Mr. Rob Ritchie

Mr. Mario Laframboise

Mr. Rob Ritchie

Mr. Mario Laframboise

1020

Mr. Rob Ritchie

The Chair

Mr. Stan Keyes

1025

Mr. Rob Ritchie

Mr. Stan Keyes

The Chair

Mr. Stan Keyes

Mr. Rob Ritchie

1030

The Chair

Mr. Stan Keyes

The Chair

1035

Mrs. Lynne Yelich

Mr. Rob Ritchie

1040

Mrs. Lynne Yelich

Mr. Rob Ritchie

Mrs. Lynne Yelich

Mr. Rob Ritchie

Mrs. Lynne Yelich

Mr. Rob Ritchie

Mrs. Lynne Yelich

The Chair

Mr. Mario Laframboise

Mr. Rob Ritchie

1045

M. Mario Laframboise

The Chair

Mr. Jim Gouk

The Chair

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.)

Mr. Jim Gouk

Mr. Joseph Volpe

Mr. Jim Gouk

The Chair

Mr. Joseph Volpe

The Chair

The Chair

Mr. Joseph Volpe

Mr. Rob Ritchie

Mr. Dennis Apedaile

1050

Mr. Joseph Volpe

Mrs. Lynne Yelich

Mr. Dennis Apedaile

Mr. Rob Ritchie

Mrs. Lynne Yelich

Mr. Rob Ritchie

1055

Mr. Dennis Apedaile

Mrs. Lynne Yelich

Mr. Rob Ritchie

Mrs. Lynne Yelich

Mr. Rob Ritchie

Mr. Dennis Apedaile

Mrs. Lynne Yelich

The Chair

1100

Mr. Rob Ritchie

The Chair

Mr. Joseph Volpe

Mr. Rob Ritchie

Mr. Joseph Volpe

Mr. Rob Ritchie

Mr. Joseph Volpe

Mr. Rob Ritchie

Mr. Joseph Volpe

The Chair

1105

Mr. Rob Ritchie

The Chair

Mr. Rob Ritchie

1110

Mr. Dennis Apedaile

The Chair

Mr. Rob Ritchie

The Chair

Mr. Rob Ritchie

The Chair

Mr. Rob Ritchie

Mr. Dennis Apedaile

1115

The Chair

Mr. Rob Ritchie

The Chair

Mr. Rob Ritchie

The Chair

Mr. Rob Ritchie

The Chair

Mr. Rob Ritchie

The Chair

CANADA

Standing Committee on Transport

NUMBER 037

l

2nd SESSION

l

37th PARLIAMENT

EVIDENCE

Tuesday, October 21, 2003

[Recorded by Electronic Apparatus]

¿ (0910)

[English]

The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.)): This is the order of reference dated March 25, 2003, on Bill C-26, an act to amend the Canada Transportation Act, the Railway Safety Act, and the VIA Rail Canada Act, and to make consequential amendments to other acts as necessary.

The morning's witnesses are not here.

Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance): I have a point of order.

The Chair: Let me finish.

Mr. Leach from Greyhound Canada was supposed to be present, but there was a tragedy in the family and we have just been advised within the hour that he is not available.

The Ontario Motor Coach Association was to come at the same time. Those witnesses are not here.

So we'll spend the next little while talking about the witness lists and anything anyone would like to bring forward.

We have asked the Canadian Pacific Railway witnesses if they could come earlier. They have agreed to, and as soon as they show up we will get on with the witness, Mr. Ritchie.

You have a point of order, Mr. Gouk?

Mr. Jim Gouk: I do have a point of order, Mr. Chairman.

I would like, first of all, on record to state that this whole examination of Bill C-26 and witnesses is a phenomenal waste of the money and time of this committee. It doesn't take a crystal ball for us to know that it is extremely likely, not positive but extremely likely, that this House is going to prorogue in less than three weeks, which means this bill ceases to exist and all the work that is being done will likely go with it.

Notwithstanding the fact that the government has the ability to bring the bill back when Parliament reconvenes, it will be under a different leadership, with different directions, and this bill may not even be in order for that particular administration.

More important, there are other things this committee not only can do but should do. It is the responsibility of this committee to do things that are necessary for the preservation and well-being of the transport industry, and we are not doing that.

We have a crisis right now, which we have already addressed in the past, with the flight attendant situation. This committee took responsibility for that and asked the department for information. The department said they would come back to us. They never have. I was subsequently contacted, last night, by the flight attendants' association.

For the recollection of the members present, the situation with them is they had always been treated as flight crew by HRDC. It was determined that they were not technically, according to Transport, flight crew and therefore are treated differently by HRDC and specifically the EI program. They are paid by their flight hours only, but it is recognized in calculating that pay that they have to put a lot more hours in to earn that pay for their flight time.

As a result, with an industry now in a downturn--

The Chair: Just for clarification on that point, and not to interfere with your point of order, they weren't being allowed, if I recall, the waiting time when they show up for a flight. Explain that, please.

Mr. Jim Gouk: HRDC calculates for EI purposes only the period for which they are paid. They are paid for only a small portion of the total hours they put in, because they are paid for flying time only, and they have to put many more hours in. Their pay is adjusted accordingly. They get a very high hourly rate, but they don't actually get paid for all the hours they put in.

As a result, if they get laid off, they do not have enough hours to qualify for EI. They are in an industry downturn. They are highly subject to layoff. Some of them are being laid off and they are not able to collect.

This is something even HRDC said it was never their intention should happen. They have always liberally interpreted them as being flight crew, but now they can't because of a Transport ruling. It is Transport, not HRDC, that has to make this correction.

We just let that thing slide, and they are in crisis.

We also have fees being raised by NavCanada. I know this committee has expressed interest in that and wants to study it. We haven't done it. These are things we could do to good use.

We have CATSA. CATSA is unaccountable for the money it is spending. The lineups are getting longer. We are hearing from airport authorities that it's a nightmare, because it's the only administration in their airports they have absolutely zero control over. And members of this committee themselves have found the inconvenience that causes. It's not just to us; it's to everyone who travels.

And there are the airport rents. Now we are hearing Toronto is in crisis. We've already heard from Ottawa. They came here and told us directly. We're hearing through the media and other reports what is happening in Toronto.

We have VIA Rail. VIA Rail was also raised in this committee a week ago, because of the incredible overruns in the Alstrom cars they have. Now I have information that they have recently purchased locomotives known as P42 engines. They don't do the job they were purchased for and VIA is going back to using the old LRC locomotives.

They need to be held to account by this committee as to the incredible amount of money they are spending ineffectively.

All of these things, particularly starting with the flight attendants, should be dealt with by this committee, instead of wasting time on Bill C-26.

The Chair: Thank you, Mr. Gouk.

Are there any comments?

Mrs. Yelich.

Mrs. Lynne Yelich (Blackstrap, Canadian Alliance): I agree.

The Chair: Are there any comments on this side?

Mr. Roger Gallaway (Sarnia—Lambton, Lib.): I think Mr. Gouk has raised some very interesting points and some very valid points with respect to the airline industry and Via Rail. Although a committee can do as it pleases in terms of its agenda, if Mr. Gouk is looking to change the agenda on this point of order, I think then maybe we should propose something here.

If you're proposing to change the agenda of the committee, I don't see why that can't be discussed or can't be accomplished.

I understand that on Thursday morning we will have the officials, including the deputy minister, from the Department of Transport here to do the estimates, and that we have two weeks following that.... Certainly, last week there were a number of articles with respect to GTAA and its relationship to IATA, and in the midst of all of that is the business of fees at Pearson.

If Mr. Gouk wants to propose that we examine that, then lets hear it.

¿ (0915)

The Chair: Thank you.

Mr. Keyes, do you have any comments?

Mr. Stan Keyes (Hamilton West, Lib.): Well, maybe just briefly. Our colleague, Mr. Gouk, has found a new energy, new Wheaties, in his breakfast cereal this morning. He's very full of opinion this morning on the work of the committee. But I think it should be pointed out that any work this committee does, even if it's on Bill C-26, goes to hearing what the government's intentions are and what the ministry of transport's intentions are with the Canada Transportation Act and the amendments to it. They're important.

We'll hear from the witnesses. I don't have a crystal ball, and I'm sure the chairman doesn't have a crystal ball. We don't know when the House is going to adjourn. We could do the break for November 11 and the leadership convention of the Liberal Party and then come back after who knows when? I haven't been told one way or another, and I don't think anyone else has.

If he's basing this committee's work on an assumption, then I think we have to be careful.

The Chair: Mr. Jackson.

Mr. Ovid Jackson (Bruce—Grey—Owen Sound, Lib.): I just don't want to be in the realm of the hypothetical, Mr. Chairman.

Mr. Jim Gouk: On a point of clarification, notwithstanding my beliefs on when this House is going to prorogue and the order of merit of Bill C-26, I am not saying this committee shouldn't ultimately be looking at legislation, and I'm not saying that hearing from witnesses, even if we only hear from them for our own information or for their ability to make their presentation, isn't valid.

But in order of priority, things like the flight attendants are an imminent crisis, and I want it on record if we're going to have people say—

The Chair: Excuse me, Mr. Gouk. We're not going through that again, please.

Take him off the microphone, please.

Mr. Jim Gouk: If we are going to have people say it's not important, then I want them on record.

The Chair: Turn his microphone off.

Settle down, Mr. Gouk. You've made your point.

Mr. Jim Gouk: No, I won't, Joe. I will not settle down.

People are going to be out of work and out of pay, with no benefits, and this committee dropped the ball.

The Chair: Mr. Laframboise.

[Translation]

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ): Thank you, Mr. Chairman.

First of all, with regard to Bill C-26, we have been in touch with witnesses and I believe that an order of appearance of witnesses has already been established. It is my hope that we will be hearing those persons with whom we have been in touch.

As to the point brought up by Mr. Gouk with regard to flight attendants, I know that when we dealt with the air transportation problems we mentioned the issue of the flight attendants' situation. For my part, I believe that this is an important matter, but I leave it up to you to decide if we should devote a whole day to this problem, Mr. Chairman. Given that we have already brought up this problem in committee and that we have already put questions in this regard to HRDC, you could perhaps decide yourself to organize, amongst the meetings devoted to Bill C-26, a session dealing with the problems of flight attendants. That might be a possibility, but I leave that up to you. Given the fact that we have already discussed this in committee and that the flight attendants are themselves now bringing this once again to the fore, I believe, Mr. Chairman, that we could deal with the situation at your convenience.

¿ (0920)

[English]

The Chair: Thank you, Mr. Laframboise.

I hear what you're saying, Mr. Gouk. But we've already made the determination that Bill C-26 would take preference and priority over all other issues. I don't dispute with you about CATSA and rents at Pearson Airport and cost overruns at VIA Rail, but it has already been agreed to by the committee to proceed with Bill C-26 and get as many witnesses as we can.

We can't operate this committee on hypotheticals or an anticipation of what is going to happen in the House of Commons. I would hope my colleagues would agree we have to approach the work we are given to do with full expectations that the schedule as set out by the House of Commons will be adhered to. If something happens in the intervening time period that causes the House to either adjourn or prorogue, then we'll have to make decisions on this committee with respect to that.

We have an opportunity to discuss some of the issues you spoke about through the estimates, which are starting on Thursday morning with all of the officials from the department here—all of the officials, including those from VIA Rail. I would hope you would keep your comments and your questions in that area.

Having said that, there is an outstanding issue, and I absolutely, totally agree with you. We turned over the issue of the flight attendants to Transport Canada in one of the meetings in the spring. Do you have anything to report on that, Mr. Proulx?

Mr. Marcel Proulx (Hull—Aylmer, Lib.): No.

The Chair: It was an HRDC issue. Let me just try to succinctly put it in perspective. The flight attendants weren't being given credit for all the hours they were working. According to their contractual arrangement with the airlines, they were only given credit for the number of hours they were flying. As you well appreciate, they have to show up at the workplace one or two hours prior to the flight, in preparation for the flight. They weren't being given credit for that time. We asked HRDC at the time, and we asked Transport Canada to bring in a report.

You didn't follow through with that, Mr. Clerk?

There was no report. It's a very serious issue, Mr. Proulx. I'm going to ask you about it. I'll give you time before the estimates on Thursday morning, if you can get your department to bring in a report. Is that agreeable?

Is that agreeable, Mr. Gouk?

Mr. Jim Gouk: That's agreeable.

I would like clarification on the estimates. It's a question with regard to what you said concerning the estimates.

The Chair: This is for clarification?

Mr. Jim Gouk: It's for clarification. Your statement was that we're starting on the estimates Thursday, but are we not also finishing with them on Thursday, given that we have to report to the House this week?

The Chair: We will continue on the estimates as long as this committee wants throughout Thursday, if we have to sit until midnight.

Mr. Jim Gouk: But it will be Thursday.

The Chair: It will be Thursday. Thursday will be the final day because of the rules of the House.

Mr. Jim Gouk: And the delay of the department in coming to us.

The Chair: Last week we asked the department to attend on two days. On Tuesday they were in Washington. We asked the department to attend on Thursday, but they weren't prepared, and we asked the department to attend this morning, but they weren't prepared.

We also confirmed with the House leaders that the 28th would be the last day for supply. So we are well within the timeframe, as long as we get it in by the end of the day Thursday. So we have the estimates starting at nine o'clock, and we will sit here until everyone is satisfied the estimates are....

Will your people be here, Mr. Proulx?

¿ (0925)

Mr. Marcel Proulx: Yes.

The Chair: Does that answer your question on the point of order?

Mr. Jim Gouk: Do we not have to table our report on the Thursday?

A voice: On the Friday.

The Chair: It will be tabled on Friday, or whenever.

Let us spend the next little while on our concerns with Bill C-26 and the future witness list, please.

Subject to what the committee states, I will still be operating the committee on the understanding that we will be here until December 12. Does anybody dispute that?

An hon. member: I do.

The Chair: Well, when you can give me proof....

Ladies and gentlemen, on the list of witnesses that has been supplied, Greyhound and the Ontario Motor Coach Association, who cancelled this morning, have requested coming back. So they're still included on the witness list.

On the list before you, those who are in the grey area have already appeared as witnesses.

Where do the requests for the organization come from, Mr. Clerk? Do you want to explain where these come from? Do they come from the members or from the organization?

The Clerk of the Committee: That is the list supplied by the members.

The Chair: Is there any dispute on the Canadian Wheat Board?

Mr. Jim Gouk: On a point of order, Mr. Chairman, I think it is inappropriate.

Are you going to listen or not? A point of order is a valid process, Joe. Are you listening or not?

There are a lot of witnesses. I have submitted a list to the clerk. I came here today for the express purpose of hearing two witnesses on Bill C-26. I have been handed a rather lengthy list, and I do not have my list with me. When I don't even have my own list here for cross-reference, I cannot take a list this big and make any valid comments on it.

I think this list should be given to us for information, and we should be prepared to discuss it at the first opportunity at a future meeting, not this meeting.

The Vice-Chair (Mr. John Cannis (Scarborough Centre, Lib.)): Correct me if I am wrong, Jim, but we did discuss witnesses at some other meeting in the past. Am I correct on that?

Mr. Jim Gouk: Yes, but this list was printed this morning, and I have only just seen it for the first time. It was not on our agenda that we were going to do this, so I am not prepared to do it.

I think it is unreasonable to try to have me make comments on a list that I have only just seen when I don't have cross-referenced material with me.

The Vice-Chair (Mr. John Cannis): Correct me if I'm wrong here. We compiled this list as a result of the submissions--

Mr. Jim Gouk: Yes, but I don't have any way of telling if my witnesses are in this list or not. I don't have a cross-reference and I had no notice that this was going to be done this morning.

The Vice-Chair (Mr. John Cannis): Mr. Gallaway.

Mr. Jim Gouk: If you had done your homework, Stan, we'd be on different business.

Mr. Roger Gallaway: Perhaps our clerk can confirm if Mr. Gouk's list has in fact been incorporated into this list.

The Vice-Chair (Mr. John Cannis): Your witnesses are incorporated into this list. I recall at one of our previous meetings we all did submit. You just don't have your list to cross-reference.

Mr. Jim Gouk: I don't object to the idea that it has been submitted. What are we supposed to comment on if we don't have our own reference material?

The Vice-Chair (Mr. John Cannis): Is it acceptable that the clerk has confirmed that your submissions are included in the list? Is that satisfactory?

¿ (0930)

Mr. Jim Gouk: I will accept that on the basis that I can follow up on this if I find that some of my witnesses are not on this list. Somebody likes to follow a process, that's all.

The Vice-Chair (Mr. John Cannis): I've been informed that from page 14, including pages 15, 16, and some of 17...it's the entire list that you submitted, according to the clerk. So with the greatest of respect, I'll take his word.

Mr. Jim Gouk: I accept that on the basis that he says so.

The Vice-Chair (Mr. John Cannis): With that, can we pursue the discussion? Then at some point in time, if you cross-reference when you're back at the office and there are any discrepancies....

Mr. Jim Gouk: The committee will agree to hear that and then deal with it. Is that the undertaking of the chair?

The Vice-Chair (Mr. John Cannis): Let me reflect on it for now. I'm taking the clerk's word here that--

Mr. Jim Gouk: So am I. All I'm saying is, subject to the chair agreeing that we will redo this if I find that some people have been left off inadvertently, yes, that's fine, mistakes can be made.

The Vice-Chair (Mr. John Cannis): Any other discussions on the witness list?

The Chair: Thank you, Mr. Cannis.

Mr. Roger Gallaway: Mr. Chair, regarding the fact that there are some witnesses who are not yet here, may I suggest that we suspend for another five minutes?

The Chair: We will suspend the meeting to the call of the chair. Thank you.

¿ (0945)

The Chair: We'll call to order the suspended meeting of the transport committee, which was called for the specific purpose of reviewing Bill C-26, the subsequent acts it will affect, and any amendments that may be made.

We welcome our witnesses this morning, and we thank them for agreeing to be called sooner than anticipated. We welcome Mr. Ritchie, the president and CEO of the Canadian Pacific Railway; Mr. Apedaile--who needs no introduction, I'm sure--the assistant vice-president, government affairs; and Mr. Cairns, director of business research.

The process, as you all know, is to present a submission, which you've done, and thank you for that. Then the committee will have some questions of any of you three gentlemen.

So I'll turn it over to you, Mr. Ritchie, and anything you want to add to it would be more than welcome.

Mr. Rob Ritchie (President and CEO, Canadian Pacific Railway): Thank you, Mr. Chairman, and thank you for inviting us to be here to appear before you as you consider the bill.

I'll just make a few introductory comments, and then I'll look forward to the questions you may have going forward.

Before making some overview comments, for context I should just give you a short update on the way we at CP see the railway industry. I'll do that quickly, and I'll start at the macro level and then bring it down pretty quickly to the micro.

There have been some major changes over the past couple of decades in how railways are viewed and regulated in the industrial world. Today several countries that had single, state-owned railways are at various stages of divesting those, driven mainly by two factors: first, they want to make the railways more price- and service-responsive to the markets; and second, the countries could no longer afford the fiscal responsibility of owning those big railroads with a lot of deficits.

That trend began in the United States in the early 1970s. Something we forgot about was the collapse of the railway industry down there with the New York Central, the Pennsylvania, the Milwaukee, and the Rock Island; they all went into bankruptcy. The United States did not like that, and very quickly, in 1980, they introduced market-oriented legislation that enabled their industry to restructure radically. It provides better service today at lower relative prices than ever before.

More recently, countries such as Australia and Japan have taken steps to create a more commercial environment for their railways. These efforts have led to more efficient operations and to improvements in service as well as greatly reducing the financial costs to those governments.

In Canada, with some legislation changes and with a low dollar, our two national railways have arguably evolved into two of the better railways in the world, if you consider “better” measured on overall price, service, and safety. We have also been a success story in the short-line industry. However, it's always a challenge to keep our railways at the forefront. I believe your committee plays an important role, and I'll return to that in a moment.

At the more micro level, the CTA review panel said the Canadian railway industry had become successful, but its cashflow was the predominant source of capital, and the availability of capital is extremely sensitive to overall economic demand and sectoral variations. What did they mean by that? They meant that yes, rail traffic is growing, but the lower-margin traffic is growing more quickly, reducing the overall margins of the company. This makes new investment more difficult to justify. Of our capital program of approximately $700 million annually, only $20 million is used for capacity expansion; all the rest is what we consider maintenance capital.

Let me now say a few words about what I believe should be an integral part of our country's transportation vision. Given the dependency of Canada's prosperity on trade, almost 40%, it's key to keep the Canadian railways as the best in the world. Our traders face many issues. Transportation competitiveness is something they need to be able to count on, particularly given the vast distances they must traverse.

Best practices indicate that the best way to achieve this vision is twofold. First, let the marketplace, which will always seek the most efficient structure, find that balance. Second, treat transportation providers as contributors to our country's competitiveness. Such an approach will continue the price and service trends shippers have enjoyed, and more importantly, such an approach will help open up new investment capabilities within the rail industry and beyond. I'm sure we're all familiar with the comments in the CTA report and in the “Straight Ahead” paper, which essentially confirms the vision I outlined.

Before I get into a comparison between the policy vision and Bill C-26, I'd like to make a comment about railway investment. As you know, Canada is entering a period of huge infrastructure needs. It's going to be a critical national challenge over the next decade at least. We see it clearly in our range of transportation modes and in the public infrastructure of our cities. There are three simple reasons, I believe, for that investment crunch. First, the massive infrastructure build-up since World War II, which took place a lot in the sixties and seventies, needs renewal, expansion, and modernization. It is simply either worn out or obsolete.

¿ (0950)

Second, as a country, on the public side we did not make a provision to recover the full costs of this public infrastructure from its users, including the cost of eventual replacement, which is creating that deferred capital gap we're seeing right now.

Third, on the private sector infrastructure side of things, it could in some cases recover its full costs through differential pricing of its services, but regulatory constraints, including unfair and inappropriate taxation, have inhibited this cost recovery.

In the railway industry, we've made innumerable changes to squeeze out more capacity from the original network, which was built mostly a century ago. Our changes have really been equivalent to the evolution from man's first flight to today's latest wide-bodied jets. However, we face issues that air travel does not. Our basic network today is, in places, approaching operating capacity. New physical track capacity—the network—is also very costly.

To ensure that infrastructure moneys are most effectively invested, we need the market's assessment. The market cannot provide those signals if policy measures continue to confuse both consumers and providers of transportation services. It would be a huge miscalculation if Canada were to oversee the decline of its rail infrastructure, as it did on the prairies during the Crow rate era, when all of Canada's exports, particularly in western Canada, were put at risk.

How does Bill C-26 measure up against the vision I spoke of and the vision in the paper “Straight Ahead”?

Let me make a few points, Mr. Chairman. First, declarations of principle in the bill are often very general; you know that better than I do. However, there are a couple of statements in clause 5 that are worth underlining. The first is that “The price paid by users” should better reflect “the full cost of the services”. The second quote is that “governments and the private sector” should “work together for the achievement of an integrated transportation system”. The first points to modal equity and the second to public-private partnerships, the three Ps. These are both good ideas, and they are consistent with the vision.

The second observation I would like to make is that after the CTA review, it was disappointing to see Bill C-26 deviate from the vision and continue along the path of regulation. It contains a series of modest increases in regulation at a time when the overall trend in developed economies is toward less regulation. Canada and its rail shippers have been reaping the benefit of less regulation for many years. At the same time, the shippers' use of market-intervention provisions has driven rail revenues down below where they need to be to fully support network reinvestment. Our question is, why tinker toward more regulation at this time? Why make it more unfriendly to rail investment? This is not consistent with the vision for success.

My third point is that I realize legislation has its politics, but there is no case here for increased regulation. The railways' record of service improvement, safety, and low rail prices is exemplary in this country. For example, shippers' comments during the debate on the future of the BCR were to encourage that railway to become a federal railway. Why? So that it could benefit from all those shipper-friendly regulations, especially final offer arbitration, available today with no legislative changes—an arbitration process that the shipper, frankly, can't lose from.

Finally, I also admit that grain producers have issues—but freight rates aren't one of them. Although the farmer does pay the single-car rate when he delivers his grain, it should be common knowledge now that most grain moves under multi-car contract rates, which see rate reductions of up to 30% per tonne. These incentives are driving the investment efficiency and lower costs in the grain handling and transportation system, and farmers are benefiting. They're getting truck subsidies; they're getting better deals on drying, grading, protein, and dockage; and they are getting reduced storage charges, all paid for courtesy of the grain company savings from the multi-car contract rates.

Wrapping up, I have a few comments on access or forced running rates.

¿ (0955)

Access is not in the bill, I know, but apparently there are some who still yearn for it, so before closing, let me be perfectly clear why I do not support this measure and why I think it's bad for the industry.

First, access does not bring more competition. It forces one infrastructure in order to allow other operators on its property at regulated rates. I know most Canadian short-line investments over the past ten years would not have occurred if access had been anticipated.

Secondly, there has been a huge amount of study on the topic, and as the review panel acknowledged, the rail sector is not the same as other network industries, for a range of reasons. The best modern illustration of the lack of wisdom concerning a rail access type regime is the disastrous experience in the U.K., where the public and the government have taken a huge hit that they're still trying to work out today.

I agree that shippers could initially experience lower rates with access, but that binge would surely be short lived and service would suffer immediately.

The spectre of an increased number of trains trying to operate safely over limited capacity networks has one potentially negative result. For example, potash containers, coal, or grain would not get more easily to tidewater at Vancouver if there were more trains trying to operate on the route. In CPR's case, we are approaching capacity in several corridors, including the Calgary-Vancouver corridor. Third-party trains would not be of optimal size. Scheduling would always be an issue, and the capacity of the line would be reduced because of their presence.

The other negative result would be a reduction in investment by the entire rail industry at a time when increased investment is the biggest challenge facing the industry today.

Mr. Chairman, let me conclude by saying that we've tabled, and I hope you have it, a detailed assessment of the issues of concern to CPR and have provided some selective proposals that we would encourage you to make.

Some of these items relate mainly to drafting. Others address issues where we think the bill has gone further than necessary to achieve the purpose of the drafters, and I encourage you to revise some of the existing provisions and pass the bill.

We have tried not to debate some of the fundamental issues in the bill because we believe that, generally, the marketplace wants to get the uncertainty of legislative change behind us. I can tell you my investors certainly do. They have been watching this slow motion policy-making now for three years and it has gone on long enough.

Frankly, Mr. Chairman, I believe this committee needs to address other challenges. We look forward to hearing your committee's voice on critical issues for Canada's exporters. It is not good enough, for example, for that document “Straight Ahead” to say, and I quote again, “federal fuel taxes are an instrument of fiscal policy, not transportation policy”. It has a big impact on transportation, and Scott needs to take on directly these issues of modal equity, infrastructure, and taxation.

I thank you for your attention. Now is a great opportunity to begin working to ensure Canada continues to be at the forefront of a competitive and export-driven economy, and I look forward to your questions.

À (1000)

The Chair: Thank you, Mr. Ritchie.

Mr. Apedaile, do you want to add to that?

Mr. Dennis Apedaile (Assistant Vice-President, Government Affairs, Canadian Pacific Railway): No. My CEO has said anything I would have thought of--more articulately, of course, than I would have.

The Chair: What a wise man you are, Mr. Apedaile.

We'll begin questions.

As a preamble, by all the criteria they use to measure the railways in North America--I don't know if all the committee members are of this mind or if they know what those criteria are--in the last three and a half to four years, both your railway, Mr. Ritchie, and CNR have become the two top railways in North America, and as a result of that the top two railways in the world. So I think all Canadians have to be very proud of the work under both your leadership and the leadership of CNR that has taken our railways to that position. I compliment you on that.

Mr. Rob Ritchie: I think one of the statistics that both of us are very proud of--I know we are in our company--is that we lead North America in the lowest numbers of train accidents per million train miles. I think this is a direct comment on the professionalism of the Canadian railways crews, and management has done an excellent job. Service has improved.

I sat in this room when service wasn't so good, Mr. Chairman, but our argument is that the whole industry is underperforming from an investment point of view. We have poor multiples. It's not a place where people run to put money, but it is a privately held railroad network. I think that's unique in the world, and it is something that needs to be protected and not chipped away at.

That was the whole purpose of my paper, summed up in one sentence.

The Chair: Mr. Gouk.

Mr. Jim Gouk: Thank you, Mr. Chair.

Actually, in your presentation you answered a couple of the key questions I was going to ask, but I just want to clarify and make sure.

You mentioned that the Vancouver area is reaching saturation in terms of your capacity in that area. So if something in the bill were to provide for commuter rail to arbitrarily inform you that it was going to use your track and when, would that cause a serious problem for you?

Mr. Rob Ritchie: It certainly would, Mr. Gouk. We pushed very hard in this area. It's one of the most damaging areas that need to be addressed.

We have a history, both ourselves and CN, of cooperating with commuter rail. I think you can see that in the expansion in Toronto, where it is mainly CN, and with us in Montreal, where it's mainly CP, where we've added service to both the north and the south of the island, east and west, and in Vancouver.

There was a lot of flurry in Vancouver about us charging so much, but that was really a hangover from the NDP regime, being so out of favour that anything it did was looked upon skeptically. We ended up reducing those rates, which was money we could ill afford to give up, but it was done for longer-term purposes.

We disagree with the way commuter operators, under the bill, could potentially get access. We believe all our assets should be judged at fair market value, and that includes land, because that's what we pay property tax on, not book value. But most importantly, if we don't have the major nodes like Vancouver, Edmonton, Regina, Toronto, and so on, in which to operate our transcontinental trains, if we can't get into windows in there and our transcontinental trains lose their service, we'd lose the business to truck. It's highly truck competitive, so those aspects of the bill need to be looked after.

À (1005)

Mr. Jim Gouk: You also mentioned Calgary-Vancouver. Would not your greatest concern at this point primarily be Calgary to Kamloops?

Mr. Rob Ritchie: It is. There are several corridors where we are facing capacity crunches. One would be Galt to Windsor. Another one would be Moose Jaw to Calgary, and on the Shuswap subdivision, from Revelstoke to Salmon Arm.

So those are areas that need particular attention. The investment is estimated to be approaching over $500,000, and to get that financed we need to have a good long-term prospect of making money.

Mr. Jim Gouk: Would additional operators on there--that is, passenger rail--paying some rate be a plus or a negative to you, in terms of rent versus capacity of your line?

Mr. Rob Ritchie: If we had enough capacity, we would welcome passenger rail. That's what we did with Rocky Mountaineer Railtours. We have arrived at a commercial deal with Rocky Mountaineer Railtours, which, by the way, would like to expand and we would like to accommodate that. We cannot do that right now, because although we're satisfied that we have a fair rate with Rocky Mountaineer Railtours, we make more money with freight than we do with Rocky Mountaineer Railtours. But he's charging as much as he can to his passengers to make a go of it. So we would like to expand the Rocky Mountaineer Railtours.

Our concern about VIA Rail is that it has expressed a desire to come in, and it obviously doesn't want to pay, on a train-mile basis, what Rocky Mountaineer Railtours pays. That's a concern to me, because we have had a partnership with Rocky Mountaineer Railtours for many years. We've watched it grow from a struggling start-up operation to what I think is a tourism success story in British Columbia and Alberta, and we don't need, at this point, to bring in federal government competition at subsidized rates.

Mr. Jim Gouk: Speaking of subsidy, you said on page 25 of your English presentation, in the last paragraph, that the cost structure for commuter rail, and in essence, I believe, the way it is structured for VIA Rail as well, amounts to a subsidy. Do you believe there is any provision within the passenger rail system, or for that matter the rail system, that should be publicly subsidized, or should the market determine those rates and they should respond to market needs?

Mr. Rob Ritchie: Our longer-term vision says users should pay. That would be users of rail and users of highways.

Unfortunately, the trend on highways is going to be slow to reverse. So I believe the users of commuter rail will probably have to be subsidized to compete against the alternative they have with highways, because it's less expensive for cities to provide commuter rail than highways. But as providers of services to commuter rail, we cannot subsidize commuter rail to do that. We're private operators, both CN and CP. We need to charge market rates for the services we provide.

Mr. Jim Gouk: Are you in general in favour of this bill? You have made clear that there are some changes you would like to see, but are you generally in favour of it?

Mr. Rob Ritchie: Overall, as I said at the wrap-up, this review has been going on for too long. We would like to see some modest changes. We've proposed those in that submission, but overall we believe the railway industry would be well served by getting on with it and passing it.

À (1010)

Mr. Jim Gouk: Would it be fair to say that although there are things you don't like in this bill, you would prefer to see it passed, in part because of what you said, that you need certainty, and with that, I guess, the concern that if this bill goes away and comes back yet again, it could be much worse than it is right now, but primarily because of running rights? Is that where your concern is?

Mr. Rob Ritchie: That's the concern I mentioned on forced access. This is an undercurrent continuing to be debated by a very small group of vocal shippers who believe they will get lower rates for a short period of time. They're probably correct.

Mr. Jim Gouk: If this bill were to be split in two, with VIA Rail being one part and the rest of the bill being the other, and if a part dealing with all the transportation issues minus VIA Rail were to proceed and VIA were to be moved into second place, from your perspective, would that be a plus or a minus?

Mr. Rob Ritchie: I don't think it would be a plus or a minus. If it helped pass the bill, it would be a plus. So if that took place, we would be much more interested in the freight aspects of the bill passing.

Mr. Jim Gouk: Is there anything in the VIA section of this bill that is a plus for the rail industry in general, outside of VIA Rail?

Mr. Rob Ritchie: No. There are some benefits for upgrading your track to handle faster VIA trains that the freight does have knock-off benefits on. That's not in the bill, the VIA money, but the overall prospects of increasing passenger travel do have freight benefits.

The Chair: Thank you.

Monsieur Laframboise.

[Translation]

Mr. Mario Laframboise: Thank you.

You say that you are asking for modest changes, but you have been rather critical of the bill. I will rely on two issues to illustrate my point: the matter of noise and that of arbitration.

With regard to noise, having participated in meetings between railway companies and residents in Hochelaga-Maisonneuve, among others, and in Charny, I believe it is time the government got involved in the negotiations in order to improve the situation for people living near railroad yards. Why am I telling you this? It is not because there are no solutions on the table, but because the railways simply do not want to implement the solutions. I participated in a meeting where there were representatives from your company. Out of 12 proposed solutions, only two were put in place. The companies had no desire to try to improve things for the residents. In my opinion, there is noise pollution in the areas surrounding railroad yards. It is time the government established a dispute resolution mechanism, because there has thus far been no agreement reached, be it in Hochelaga-Maisonneuve or in Charny. We have reached an impasse.

My second point deals with dispute arbitration. We have received documents from other witnesses who will be appearing before the committee. I have heard you criticize arbitration and all of the rest. I would have you know that an association involved in freight, called Conseillers en taux de fret (G.P.) limitée, has warned us and would like to see the arbitration process improved. This association has squarely told us that Quebec companies are being taken, among other things, by a surtax aimed at compensating you for the exchange rate. It has also told us that at present Quebec companies are losing 15 to 20 million dollars which are being held in the coffers of Canadian railway companies. The association is asking us to maintain the provisions governing arbitration and even to ensure that confidential contracts come under arbitration.

This is why I am having difficulty when I hear you say that we must restrain ourselves somewhat and not be too hard on you, whereas Quebeckers and Quebec companies are losing between 15 and 20 million dollars that are kept in your coffers because of the surtax that is applied. I hope that arbitration will resolve this.

Therefore, I would like you to try to convince me we should relax the provisions, including those on noise and arbitration.

À (1015)

[English]

Mr. Rob Ritchie: First, on noise, our overall position is that the railways have to be recognized in legislation. We have a duty to do that. And our noise levels are part of the existence of our industry. The noise, we're saying, should not be unreasonable. We should do everything we can to try to accommodate our neighbours.

I'm sure you know that with the Federation of Canadian Municipalities we have a process in place that calls for a work-out solution between ourselves and our neighbours over factors that exist in places like Outremont, in places like St-Luc.

On the particular situation at Outremont, I disagree, sir, that we are indifferent and insensitive to the factors that are taking place there. The yard at Outremont is integral to the railway operations of the Quebec Gatineau Railway, which is one of our feeder lines that serves from Hull down to Outremont and from Quebec City to Outremont. They are operating in a traditional yard that people knew existed. Now, I'm not pointing the finger and saying since we were there first we have no obligation, but on the obligation to remove the noise, there's no technical solution.

I met with Robert Libman, who suggested that perhaps the railways could invest in technology to put silencers on the couplers. It's that banging of the cars. I think I convinced him that it is not a realistic solution. The most realistic solution is to move the yard out of there so that it then can become another property development. We need to take the operations that are being done at Outremont and move them to St-Luc. Quite expensive. We say if the public wants that to move, the public pays.

And so far in my discussions with the mayor of Montreal, they have accepted that position. So I know it is on the agenda for the City of Montreal to address this issue and to do so in the very near future. The solution is going to be very expensive, and who should pay? The people who benefit will be those individuals on the edge of the yard at Outremont who built very expensive condominiums knowing that a railway yard existed there. Do they have an obligation to pay? That's going to be part of the debate, I'm sure.

On arbitration, we are not saying get rid of arbitration. What we're saying is, why change it? If it's satisfactory, as you said, for your shippers right now, we're saying leave it in place. What the bill is suggesting is to tinker with the arbitration process to make it more accessible to groups of shippers who may not have a dog in the fight, who may not have any real freight that's moving under those tariffs. So we're saying if the arbitration is working, as your constituents say it is, leave it alone, don't change it.

[Translation]

Mr. Mario Laframboise: Do you want confidential rates to be subject to arbitration also?

[English]

Mr. Rob Ritchie: Right now they are. Confidential rates are arbitrated under the process that exists today. The majority of our rates are confidential.

[Translation]

Mr. Mario Laframboise: Do you want this to be included in the bill?

[English]

Mr. Rob Ritchie: As it is today, sir.

[Translation]

Mr. Mario Laframboise: Regarding noise, I was made aware of a solution that had been proposed by the two parties. Sometimes an engine is kept running non-stop for twenty-four hours. I think the company should show some good faith. The proposals put forward by the citizens committees were feasible. The company had told them that if it was not economically feasible, it would not do it. As I said, there is a communications problem between your company and the neighbouring community.

You may well insist that this is a municipal problem but you know that cities do not have jurisdiction to regulate noise on federal property. As a former president of the Union des municipalités du Québec, I would be in favour of railways being regulated by municipalities. That would be the best because then they would be able to determine the quality of life of citizens and businesses. But the government does not want to go that far. If I had a recommendation to make, it would be to let cities regulate noise and pollution. The problem, as you well know, is that they do not have jurisdiction over federal lands.

À (1020)

[English]

Mr. Rob Ritchie: You're right. I think you would agree, though, that underlying the thinking for having federal legislation across the country is that we deal with the problems in a uniform manner. To your point, we must deal with the problems.

I agree that having an engine running under a neighbour's window for 24 hours is not appropriate railroad procedure. We are trying to address those. On the one hand, the people who leave the train running do have some valid arguments. The arguments, however, come back to mainly a question of investment.

It's not too expensive and we are introducing it, and it's what's called “Smart Start” technology. Locomotives, for a variety of reasons, don't have anti-freeze. They have water, so you have to keep them warm. With microprocesser technologies, we are introducing “Smart Start” devices that will turn them off and turn them on to keep the batteries and the temperature of the locomotive at a certain level. It's not only good for noise, it's also good for the environment, for fuel, for the railway, because we save money. We can move the locomotives. We don't need to leave them where they are. So we work out that process with the Federation of Canadian Municipalities, and we need to proceed.

I would urge us as a...the railroads have to stay under federal jurisdiction or we'll just be picked off one at a time. We will never have enough staff to deal with the myriad communities we operate in. I would say the situation would deteriorate, not improve, because we couldn't handle everybody's solution to what they could perceive to be local railway problems.

The Chair: Mr. Keyes.

Mr. Stan Keyes: Thank you, Mr. Chairman.

I'm going to wander here a little, Mr. Ritchie. Thank you for coming before the committee.

Mr. Chairman, clearly you don't get to be the top railroads in the world here in Canada without the professional decision-making that goes on at both railways, CN and CP, and, I dare say, without good government policy to begin with in order to allow and to facilitate the railroads to do their business.

As a legislator, the balance we have to try to find, of course, is the understanding and the rationalization that the railroads are a business that needs to prosper. When we speak to the railroads and to what is contained in Bill C-26, we must be careful to recognize, I think, the larger picture, which is the integrity of the entire system.

I've gleaned through some of the recommendations in your report.... Through the hearings they had across the country, Transport Canada did speak with hundreds of individuals, companies, and users, etc. The Ministry of Transport addressed things like substantial commercial harm, which I understand has been dropped with this piece of legislation, final offer arbitration and the changes there, and competitive line rates and competitive connection rates. I've heard your arguments on the competitive connection rates. The bottom line, however, Mr. Chairman, is that I don't think we can dispute the facts and figures.

Mr. Ritchie, as an aside, in your very thorough brief before us, rather thick and with many pages, is there any reference directly to interlining?

À (1025)

Mr. Rob Ritchie: No, there isn't, Mr. Keyes.

Mr. Stan Keyes: I think this probably speaks to an industry that has so many facets that we could probably sit here for the next month and deal with Bill C-26 just on the railroad industry, its importance to the country and its balance with the shippers, to try to come to a better balance—if you could come to that term.

As Canadians, I think we have to be really proud of the fact that we have a railroad industry that can make $5 billion in capital investments in itself over the last five years. How do you achieve that? You wouldn't have got that kind of money out of the federal government over a five-year period; that comes with good management policy, good government policy, good management decisions. The combination is there.

How do you not recognize that for a 10-year period between 1988 and 1999 we were able to see 43% production gains in the industry—43%—and then see 75% of that 43% going directly to lowering freight rates for the customers they serve? This speaks to a success story that I think is overlooked at times. Sometimes, as I think Mr. Ritchie referred to, this business of the squeaky wheel getting the grease, of someone coming forward and saying they're being harmed and treated unfairly by the railroads, isn't based in fact.

On interlining, which is not in the brief you presented to us but which I think is an important issue, especially for those in western Canada who are looking for the best opportunity they can at the best rates they can, and then servicing their rail lines on your networks.... And I speak to both CP and CN—it's delicate. I want to hear, Mr. Chairman, and I think it's important that we hear, from the squeaky wheel. I'm not so sure it's such a squeaky wheel as an important group of shippers. We can't dispute the facts and we can't dispute the figures, but if possible, an argument could be made, and I think has been made by the railroads, that, “Hey, guys, if we have this success story behind us, and we have the lowest freight rates in the world, etc., then we could almost apply that old axiom, if it ain't broke, don't try to fix it”—

The Chair: Are you going to leave some time for the answer?

Mr. Stan Keyes: I'm trying to build my case, just like a lawyer might in a courtroom, Mr. Chairman.

Given everything we're trying to do, and given the importance of interlining, can I have some information from you, Mr. Ritchie, on your opinion of the interlining issue and whether or not there should be more study or time given to that issue?

Mr. Rob Ritchie: Certainly, Mr. Keyes. You summarized what I think is an excellent position that I think the Canadian government should take. There's far more success here, and no regulation is going to handle all issues dealing with some people who have different problems at different times with railways.

Monsieur Laframboise mentioned certain noise. I mentioned the situation with West Coast Express. We don't ignore those. We're a business, we try to get along with our neighbours and our customers, and we try to grow the business. I think CN and CP have been quite successful in doing that.

You have to know that the men and women of Canadian Pacific go out of their way to try to solve those problems. You mentioned a very interesting point, which is interlining. Some 40% of the Canadian Pacific business is interlined, and, interestingly, that is a common statistic for all the six major railways in North America.

The other thing that's interesting about interlining is that for Canadian railways it's generally north-south. That is where the Canadian economy is growing and that is where we are putting more and more emphasis.

Interestingly, particularly west of the Great Lakes, north-south was not an actual way to go. Manifest destiny was taking both countries to the west coast, so everything is lined up to go to the west coast, except the mountains. What we have now is trying to get the infrastructure to be...it's there, but it's not very robust, so we're working very closely with partners such as Union Pacific.

We started with what was a Can-Am corridor, and, Mr. Keyes, that has grown 15% a year for the four years during which we've concentrated on it. I would welcome the opportunity to expose to the committee how it works; there are no secrets here because my biggest competitor is the highway.

My home province of Alberta thinks they need to build publicly funded highways and tax us at the same time when we're trying to build privately funded railways. That infrastructure needs to grow, and it's not simple. I'll make this point too: some of the discussion around further railway consolidation is to try to handle the issues of interlining. That is where the service failures take place; that is where customers are saying as an industry you have to do a better job.

You can merge down to two national or international railway systems--that would handle the problem--or you can work with it on very close partnerships such as we have with Union Pacific and the two eastern carriers, where you treat the route as one route. You have protocols on how you sell it, how you divide the dollars for rates, and who services it after it's sold. So if we sell it in Edmonton and it is going to Roseville, California, when it crosses some imaginary line they don't want to have a different person telling them where the car is.

It's complicated. It's dealing with human beings; it's dealing with a desire to do business totally out of the realm of regulation. It's an area we've been concentrating very hard on, because, first, those routes generally are not at capacity, and generally those routes are facing competition from trucks that don't have backhauls, so there is some attractiveness to the rates in those areas. It's an extremely important area of the railway business. I think you're wise to bring it up because it's something that is ignored.

I would add one other point on competitive line rates and interlining. People seem to be frustrated that our American colleagues have not used competitive line rates to drain Canadian traffic, to weaken the Canadian railway system. They don't participate for two reasons. One, they think the legislation is so wrong that they don't even want to see it anywhere in the United States, because it would just kill their railway network down there. Secondly, they're our partners, they're our business partners, and they believe in win-win solutions. That's something I really worry about, particularly in the Canadian farming community, where it's win-lose, where a lot of the regulation comes from the idea that railroads don't want to do business, from the idea that railroads are an evil empire and are trying to take any dollar they can out of someone's pocket. And they don't know what they're doing with it; they're not investing it back in the railroad industry and they're killing their customer. It's so wrong. Our American partners don't believe in doing business that way, and neither do we and the vast majority of our customers.

À (1030)

Interlining, Mr. Keyes, is a hugely complex area with wonderful opportunities for our industry, our company, and for the country. So we can move on...and that is one of the areas I would suggest, Mr. Chairman, that you should focus on. We would be more than happy to sit down and explore that in an open way.

The Chair: For a little while there I thought you were going to leave politics and look for a job as a spokesperson for the railways of Canada.

Mr. Stan Keyes: Actually, I'm a proud spokesman for our government policy, Mr. Chair.

The Chair: A seeker of truth.

We're going into five minutes now.

Mr. Ritchie, before we get to the five minutes, you mentioned several times the consultative process prior to the drafting of this legislation, and I know how important this legislation is to get through, but the evidence we've heard to date indicates that a lot of the people who--this review only comes once every five years--were consulted felt the consultative process wasn't as thorough as it should be. I'm not necessarily asking you to comment on that, but that has prompted a huge amount of witnesses who want to come before the committee, and this is delaying the passage of the legislation. But it's only fair that we hear everyone in order to come up with the funds.

So it may be a little more time than people in the.... I'm advising that this is the process we're going through. Perhaps if the consultative process had been more thorough we wouldn't have to waste--not waste, but we wouldn't have to spend all the time on the witnesses. But as you can see, the witness list is extensive, and we think it's only fair that they all be heard, or those groups that we can group together be heard.

Mrs. Yelich.

À (1035)

Mrs. Lynne Yelich: Thank you. I would like you to quickly go through the points on grain shippers in western Canada and the protections they're provided and say how you would do it differently. The revenue cap and...these were all put in for a reason. I want to know what you would do then.

Right now in western Canada our grain is quite worthless. You are saying it's almost not worth shipping with all of these protections the farmer has. I think you specifically said the farmer is protected through this in the shipping of the grain.

So what would you do to make it affordable for the grain to be shipped? Now, if we get a cheque for $6,000 or $7,000, $1,400 of it can be for shipping alone. What is your suggestion?

Mr. Rob Ritchie: I never did say the grain was worthless.

À (1040)

Mrs. Lynne Yelich: No, I am sure you didn't. I am dealing with farmers right now--

Mr. Rob Ritchie: I want to move grain, and less and less grain is moving as the Crow rate so-called advantage is taken forward. You know far more about the grain economics and whether you want to use it locally or ship it for export.

What we said was that on grain.... As you know, all of it starts at the farm on a truck. I was recently up in the Peace River area. Those trucks now are big. They are double-bottomed. They are huge. They can economically reach out to competing elevators, generally on competing railway systems. So there is competition out there. Over 75% of the grain moved in western Canada now for export moves in solid trains, multi-car lots, with up to 30% reduction in grain rates. That's off the single-car rate.

When the farmer delivers grain, he says, yes, this is what the grain is, less the single-car rate. But the elevator is paying for all of those things that you know far more about than I do. It is very competitive between the grain companies, and they are financing that through the reduction on the multi-car rate. They are financing it so much that I worry, as I'm sure you do, that Agricore and Sask Pool and several other elevators aren't going to make it.

This is another worrisome thing that I see in the debate on the grain handling transportation that goes to that win-lose proposition. A lot of people who should be worried about that aren't worried about that. I think if we lose one of those major grain-handling companies, it will be chaos in western Canada for shipping grain. It certainly won't be an improvement. Yet people feel that normal commercial business should be such that the buyer of transportation, which in this case is the Wheat Board, should have the power to dictate whether they will go under a private contract or go back under a distribution network for cars that was based on last year's method of allocation. It is unfair. If it's to be bid on privately, bid on private contracts, let's go that way. If it is to be allocated based on last year's shipments, let's go that way. But let's not have the Wheat Board being able to swing that balance back and forth.

I say this: I tell the Wheat Board that I'm watching this from the sidelines, but we also have a dog in that fight. It is important for us, because it is 23% of our business, that the grain-handling transportation shipment is efficient. It is not efficient now. What more would I do? I would suggest we either regulate it and regulate it properly, or we deregulate it and deregulate it properly. In trying to please everybody, we are pleasing no one.

I don't understand farmers' issues. I am not in agriculture. However, grain handling seems to be the lightning rod that they use to get debate at the public level. If we have an agricultural gap in our policy, let's deal with it within agriculture, not within transportation.

Mrs. Lynne Yelich: In those six points, is there any suggestion, like the ceiling on the maximum revenues earned by the railway, that it should be done away with, the revenue cap? Is that what you are suggesting in these points, because it's protection?

Mr. Rob Ritchie: No.

Mrs. Lynne Yelich: No. You are just showing me--

Mr. Rob Ritchie: We introduced the revenue cap. Why did we do such a thing? We did such a thing through the Estey process and the Kroeger process. My God, Mr. Chairman, there was enough consultation at that time. But we did it because...when I mentioned that all grain begins on a truck, there are certain sectors, like our area of southwestern Alberta, down in the Lethbridge area...there are areas that are further than that magic 90 miles away from competing railways and competing trucks. We said that if you are at all concerned about those small areas--and they appeared to be--why don't we introduce a revenue cap so that overall everyone will get a kind of blended rate. That's why we suggested it.

We suggested the revenue cap, and then they took that 18% cut two years ago, Dennis, was it? That was supposed to be a quid pro quo to move toward a more deregulated system. We said this is wrong. You don't come in and take 18% off a private company's revenue because it makes good local politics--I believe we had an election coming up.

We said that in the longer term, if we get to a deregulated system, we believe the system will be more efficient. As Mr. Keyes pointed out, about 75%, generally, of our savings goes to the shipper, to the farmer in this case, and we think that moving toward a deregulated system would be better overall for us. We think it would be better overall for the shipper, the farmer in that case, as well.

Mrs. Lynne Yelich: Thank you.

The Chair: Thank you, Ms. Yelich.

Mr. Laframboise.

[Translation]

Mr. Mario Laframboise: Thank you very much, Mr. Chairman.

I would like to return to the issue of arbitration, Mr. Ritchie. I want to hear your opinion. I am going to quote a statement that future witnesses have sent to me and I am going to read from the letter to make sure we understand each other. They state:

... it can be said that Quebec shippers pay some 15 to 20 million dollars too much through the surtax, compared to what Canadian rail companies have to pay out in order to compensate American railways for the difference between the currencies.

Of course, they want the surtax to become subject to arbitration. In your view, under the bill as tabled, could this surtax be subject to arbitration?

[English]

Mr. Rob Ritchie: I think I could better serve you, sir, if I looked at the details of that.

I'm aware of the surtax. It's been in place for a long time. It tries to compensate for the fact that we publish tariffs in Canadian dollars. About 50% of the interline is by U.S. carriers, so they try to make sure that the U.S. component is covered, and it's smoothed out.

That is an open tariff; it is not a contract that you were asking about. Whether or not the present shippers can appeal that open tariff as a class action, as is being proposed under the new bill, I'm not certain, but I can come back to you.

We can answer that question through the committee, Mr. Chairman. I don't know the answer to it right now.

À (1045)

[Translation]

M. Mario Laframboise: Thank you.

[English]

The Chair: Thank you, Mr. Laframboise.

Mr. Gouk, did you have a final word? I usually think you would.

Mr. Jim Gouk: No, but I think it was very well presented and concise, and pretty much what I expected.

The Chair: Thank you, Mr. Gouk.

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.): Does that mean you agree with it?

Mr. Jim Gouk: He's not agreeing with you, so why should I?

Mr. Joseph Volpe: It's just a question.

Mr. Jim Gouk: It's just an answer.

The Chair: Are you all through now, you folks? Did you have some questions?

Mr. Joseph Volpe: I didn't really want to....

The Chair: I thought you had passed.

Some hon. members: He did.

The Chair: Would you like to ask some questions? Is it correct that you'd like the floor?

Mr. Joseph Volpe: Yes, sir.

I have a question on those Kroeger hearings and consultations you referred to a moment ago, which are very much in the news. It seemed to me that the biggest issue was always whether the railways were gouging the shippers, to use a term of ours from central and eastern Canada. I guess I wanted to come back to that. The reason I got into this exchange with Mr. Gouk was that, in some respects, the issue of shippers and the railways seemed to be going in the direction where there is an attempt to bring the two sides together, though not necessarily smoothing it out. Judging from your response, it appears that the legislation is headed in that direction.

I was more interested in what Mr. Gouk raised earlier, the separation of the freight part of the business from the passenger side of the business, as reflected in the legislation.... I guess Mr. Gouk asked whether you felt that would make the legislation much more palatable, i.e., easier to pass.

I suppose it's the same question for us as well. Rather than saying whether it serves your purposes, is it in fact fair from your perspective, and to some of the issues of concern to this committee and to some of its members, that the passenger component of the legislation ought to be included in this?

Mr. Rob Ritchie: Maybe I'll put my colleagues to work here.

I've been concentrating mainly on the VIA issues through VIAFast. I haven't really concentrated a heck of a lot on how the VIA legislation pertains to Bill C-26.

Dennis, do you want to see if you can...?

Mr. Dennis Apedaile: On the VIA legislation, as I understand it, the component in Bill C-26 relating to VIA is simply to bring a formal recognition of it as a proper crown corporation and so on, as distinct from making policies about how it would operate, or its relationships with other players in the business. It's really just to give VIA a corporate entity.

In Bill C-26 proper, of course, there is the mention of those conditions that apply to passenger services and community services, and we've spoken about those in our brief and mentioned them this morning. Basically our concern there is that we don't believe a passenger operator should have a natural entitlement to come on our lines. We think that should be negotiated commercially. Frankly, there's success all across this country.

In fact, when the Canadian Pacific Railway was still in Montreal, 10 years ago we began something called “Bonjour Montréal incorporé”, which was the name of an effort on our part to get commuter services expanded in the Montreal region. We've been very positive about commuter services, and we don't think there have to be provisions in the law that skew the relationship. So that's one issue.

The second issue is in the compensation that's been allowed in the bill. We think it's really inequitable. We're very concerned about that. We're concerned that (a) a passenger or commuter operator would have an entitlement to come on the line, and (b) if we couldn't reach an agreement on compensation, they'd be able to go to the agency.

The guidelines given to the agency are insufficient. They're vague, in a way. In one case they have a situation where the agency would be directed to use assets at book value. The ridiculousness of that is proven in the fact that when it comes to land, the agency would be instructed to use land at net book value, while at the same time all the municipalities are taxing the railway on current market value. You have two very conflicting situations in there. One allows the municipalities to tax the railways at a high rate and the other requires the agency to adjudicate a low rate for compensation.

On that relationship part between our largely freight railway being very interested in passenger services wherever we can operate them, we think there's too much intervention in the marketplace, and the bill contains those provisions. As to the component of the bill pertaining specifically to VIA, we don't really have issues there because it doesn't really involve us per se. It's almost a housekeeping bill.

À (1050)

Mr. Joseph Volpe: Thank you, Mr. Chairman.

Mrs. Lynne Yelich: Are you saying the municipalities treat you unfairly with the tax?

Mr. Dennis Apedaile: There's a municipality in British Columbia that for a long time was taxing a single bridge in that municipality at $1 million or more a year. I would say they're taxing us unfairly.

Mr. Rob Ritchie: I've had correspondence and they say, well, who is going to educate the children? I say the children have to be educated and they're educated now through property tax.

My problem is my biggest competitor is the truck. Truckers will come to you and say they pay for the highways through fuel tax. I don't believe that for a moment, but let's assume they do. We know their fuel tax does not cover property tax on road. So why is my competitor not paying property tax and I am? I'm saying get them both to pay property tax or take the property tax off us. So it's unfair that way.

The other way it's unfair is that there are disproportionate takes by provinces. Under a federal regime, that is absolutely wrong. Dennis mentioned Vancouver. We pay $9,000 a mile on property tax in British Columbia; $800 a mile in Alberta. It's not just in British Columbia. In Saskatchewan it is very high. With all the money they make out of the railway industry on sales taxes on materials in Ontario, it takes a huge amount of money on property tax. It's not just Saskatchewan.

Mrs. Lynne Yelich: Yes. Actually, when you come to property tax it is a very big election issue right now, so I'd love to have you meet with them.

Also, on the trucking end of it, in some defence, I think they pay a lot of tax on just about everything from their tires to...the gas tax is very high in Saskatchewan. They don't have to worry about such things as railroad crossings. Municipalities have to make sure that railroad crossings are well....

Mr. Rob Ritchie: Which we pay for, Madam. I understand your cri du coeurand I understand that municipalities need money, but we are killing the goose that's laying the golden egg and you're subsidizing a more expensive mode. It's not black and white. I'm not saying to go back to the days of CP Express when we used to deliver eggs in rural Saskatchewan. The inappropriate taxation by communities on fuel and property on railways is driving business onto the highway, which is a lot more expensive.

Perhaps I could give you a little factoid, because this is on the agenda in the United States and it's not on the agenda here, Mr. Chairman. I suggest you put it there. That's called the Association of State Highway and Transportation Officials, AASHTO. They have looked out to the year 2020, because the highways in the United States are mainly federal. Truck size and weights in the United States are federal. It's not the situation here in Canada. So they've looked out and they've said, in the year 2020, how much is the American economy going to move in the way of goods and services? How many ton-miles? They've said, what is the infrastructure in place and planned for 2020 in highways? It's totally incompetent to handle it. They said, what are the railways doing? They are doing virtually nothing, because the situation exists in the United States as well.

They've looked at it and they've said, for every dollar that we encourage the railways to put in place, we save $10 in highway dollars. That's straight. It's a ten-to-one advantage that they don't have to put into highways. Shippers save a factor of five times that ten. For the general public who share the highways with trucks, it's an enormous factor in safety, in pollution, and in mobility.

You have to look at that, Mr. Chairman, because there's a huge infrastructure problem.

We know Montreal and Toronto. I talk to people. I say, for $1 billion we can expand that railway in our own land to handle one-third of the trucks between Montreal and Toronto.

So what plans do we have for Highway 401? Zero, none. We have a few ring roads. We have Highway 30 in Montreal, which is a ring road, and we have perhaps another four or whatever to go around Toronto, but you have nothing going between Windsor and Quebec City in the way of main highways.

What are we doing to encourage railways to do that? We're fiddling around with a bill that's going to increase regulation in areas where there's no problem except for the fact that we can't get unanimity in this country, which is not new.

À (1055)

Mr. Dennis Apedaile: Mr. Chairman, perhaps I may add to that slightly. On the fuel taxes--in fact, perhaps we can just pick those. They are an interprovincial trade barrier. Saskatchewan has the highest fuel taxes in North America, probably in the world. We just haven't gone around and checked all the countries. So if you're moving goods from Toronto to Vancouver, you go through Saskatchewan or you go through the States. And at the margin it really is an interprovincial trade barrier.

It's always struck us as somewhat bizarre that Saskatchewan, which is so land-locked, does not treat its service providers as business partners, but instead treats them as some sort of big thing that seems to be related to the federal government, and it does its best to rip out whatever money it can take. It's not a glass half full approach, really, which we've been trying to encourage for a long time, by the way.

Mrs. Lynne Yelich: I couldn't agree with you more.

I have a few really simple questions. Is there an imbalance in freight rates when it comes to grain as opposed to, let's say, potash? And do you think the Canadian Wheat Board is the biggest impediment in moving grain? Is that where we should be? We should probably be trying to meet the Wheat Board and rail. And the farmer, of course, is the loser in this win-lose situation. Everybody else appears to be the winner but the farmer right now.

Mr. Rob Ritchie: The last one is loaded with land mines for us.

Mrs. Lynne Yelich: That's all I want to know then.

Mr. Rob Ritchie: Is there an imbalance? No. The very nature of the legislation says the grain rates will be an average of the major bulk commodities moving in western Canada. People are more content, in that case, with certain rates that are average. For example, rates off branch lines can't be any lower than rates off main lines. If I were a main-line farmer, I would be upset with that. So rates to Quebec City in the winter are lower than rates to Vancouver. But those are market-related things. Overall I would say they're in line.

On the Wheat Board, I would make the observation that we're not talking about transportation here. There's a whole bunch of other issues that I think need to be addressed. I have great respect for the people on the Wheat Board, Adrian Measner, etc. We've grown up in the industry together, and I think they're trying to do a very good job, and in a lot of cases they do. But there's also this question: does the Wheat Board have a job to do for the farmer? I don't want to get my little railway caught up in that debate.

Mr. Dennis Apedaile: We never win in that one.

Mrs. Lynne Yelich: Thank you very much.

The Chair: Thank you, Ms. Yelich.

Just on two things you said, Mr. Apedaile and Mr. Ritchie, we also sit on a highway committee, and in our research to date we've tried to address the issue that you don't increase the capacity by building more highways. Sometimes there may be other modes we should be looking at in order to alleviate. As an example, we have the empirical data that if we were to put a high-speed link between Pearson and Union Station...24% of the traffic that's currently on Highway 427 between the hours of 5:30 in the morning and 4 p.m., or whatever the situation is, comes off the highways, because people would rather use a high-speed link to get to their place of work. We're talking about the employees at Pearson. I guess maybe what I'm trying to say is that you can increase your highway capacity by means other than building new roads. That's one issue.

Then the American Association of State Highway and Transportation Officials.... I think Mr. Volpe is on that committee. I wonder if we could ask Mr. Apedaile to visit with us real soon to discuss...we need more information on that as we go down the road. We would very much like that. We'd also like information on the association.

Á (1100)

Mr. Rob Ritchie: I think it's dead on, Mr. Chairman, and we'd be happy to. The railway association is involved in that too. They're doing a good job. Dennis works with them very closely; we'll make sure you get all that information.

The Chair: Mr. Volpe.

Mr. Joseph Volpe: Thanks for giving me the floor again, Mr. Chairman.

Mr. Ritchie, I wonder if you'd just be patient with me for a moment, because there's something you said that's connected with the chair's response in this last moment regarding increasing capacity or diminishing motor vehicle incidents on the 401. I thought you said if you spent a billion dollars investing in a new railway line between Montreal and Toronto, if I heard you correctly, you'd be moving about 30% of the truck traffic between those two cities.

Now, I travel the 401 a lot, but I also travel the 401 west of Toronto a lot. In your next statement then, you talked about a Quebec-Windsor corridor. I'm just wondering whether it was perhaps a misstatement on your part that your billion dollar investment was really for Windsor-Montreal or for Montreal-Toronto. If that's the case, how much would you invest in the rail line between Toronto and Windsor? That stretch of the 401 is at least, if not more, overburdened than the stretch between Toronto and Montreal.

Mr. Rob Ritchie: The number I gave you is for Montreal-Toronto because it was easier for us to get our hand around the market. We have what is called an expressway service, which is a very...it's the old “iron highway”. We're not in the retail business. We don't approach the trucks as customers. The truck makes its decision between putting it on an expressway or putting it on the highway. What we've done is expanded that to say, okay, let's make it really big, and what can we do? That was the $1 billion figure.

Mr. Joseph Volpe: That's all privately funded.

Mr. Rob Ritchie: Well, no, we were suggesting a public-private partnership on that, because since the highway charges do not recover the full cost of providing and maintaining that highway, I can't put the billion dollars up and make the money. I would, because I have the right of way right now. It's 100 feet wide. That can easily take four tracks. And there are no huge environmental issues, so we could do that.

We have a very interesting presentation that Mr. Apedaile can give you folks on that iron highway concept, but it also applies...we have the iron highway between Montreal and Windsor right now. Because of capacity issues in that corridor, interestingly, we're debating with the Ontario government whether to take it off, because Ontario is a huge tax-taking province. We're saying, well, we can't afford to expand that capacity between Galt junction and Windsor because it's not in the cards. And we have 30,000 trucks on that expressway service right now, which we're going to be taking off if they don't agree to sit down and talk to us about what's going on.

We can give you that presentation. It's extremely interesting. It asks a lot of questions that we as a country should be dealing with. Let's say we decided in this room that we wanted to expand the highway between Quebec City and Windsor. We're not going to live to see it. There's going to be all the environmental issues, and then the construction issues are going to be huge, and the disruption--it's just going to be phenomenal. We can do that in the railway industry right now. We can have it up and running in three to four years.

Mr. Joseph Volpe: Because you already have that corridor, and you're already running track on it, you're telling me you don't need to do environmental assessments?

Mr. Rob Ritchie: No, we have to. But it's much different. It's just an expansion of an existing federal railway operation. Yes, we have to do an environmental assessment, as we do with all the expansions of all our railway projects. We have to look after drainage and all that. But we're not taking land from anyone else. The corridor is there. We generally don't have many noise issues on the corridor, but that's something we have to be careful of.

Mr. Joseph Volpe: Mr. Chairman, I think it might be well worth our while for this committee or the highways committee to hear that particular presentation. I'll leave it to your good judgment to....

The Chair: Yes, thank you. That's very important. We may have a combined meeting before...whenever we're going to leave.

With the permission of the committee, there's one other issue that hasn't been touched today, and that's in your area, Mr. Volpe.

The railway's main business, I think, is still the moving of containers across the country, taking containers in from the east and the west coasts. I would imagine they don't go from coast to coast: with the north-south railways we may get things in at the west coast and put them through the Chicago route and so on, whatever the case may be, wherever they go.

But when we accept the containers into Canada, there is a security risk. When we transport them to the United States, I think the security risk for us is with the Canadian shipper, mainly because the Americans are very concerned about what's inside those containers, and it's something we have to address very seriously. I wonder if you would like to--

Á (1105)

Mr. Rob Ritchie: Mr. Chairman, it is something obviously that has not been left unattended. Deputy Prime Minister Manley and Governor Ridge addressed that very quickly. We agreed 100% with the smart border protocol. We work through the Railway Association of Canada and the Association of American Railroads, and with Canadian and U.S. customs.

Very early after September 11 we arrived at what protocols would be required in the way of employee security and certification, making sure inappropriate people couldn't drive trains. We looked at dangerous commodities; there are some interesting things on trains that could, not unlike an airplane in the wrong hands, act as a bomb.

We satisfied the U.S. and Canadian customs that was good. Now, they said longer term we have to do a better job. We just finished negotiating that with the U.S. and Canadian customs. We now have VACIS machines, which are gamma ray machines, at eight border points. We have a protocol of when we have to give the manifests, the bills of lading, to the U.S. customs. There are whole procedures between the Canadian and U.S. security and police forces to ensure we're doing the right things to make sure we get the bad guys early. That's not just a border inspection situation.

It is well looked at. It always can be improved, but there has been an awful lot of attention given by both Canadian railways. We've had great cooperation with our American colleagues too.

The Chair: Mr. Ritchie, could you go to the next step and explain what happens from the point of loading that container, where it's being loaded? I understand what you're saying about the security issues you have within the country, when we accept it, but what happens until it gets into our country, and what kinds of security do you have in place for it?

Mr. Rob Ritchie: Containers are about 25% of our business: 50% of that 25% is import containers; the rest is domestic.

For import containers, the shipping line gives us a manifest before or just as the ship is leaving. They're giving that to the ports—Montreal and Vancouver, in our case—and they're giving it to us. Officials are looking at those manifests. They're selecting containers they want to inspect at the port. I think the issues are still mainly smuggling, thank God, but obviously, although I can't say too much about the security ones, there are issues on that score as well.

So they're being pre-screened. Then the train is loaded. We then give U.S. Customs the manifest of that train, listing the container and the order in which it is on the train, and it must be presented to the U.S. Customs at the border. They want it as early as possible. They've agreed now for it generally to take two hours—two to four, I'm not quite sure; there's still a debate going on about it—but they're working with us. They'd like it earlier, naturally, so that they can deal with the issues. One thing they do not want to do is discriminate against the railways and drive more business to trucks, because at least in the railways there is a finite number of crossings. In our case, it's eight. Sandra, yours at CN is about the same, isn't it?

It's the same crews, back and forth. These are people who work in London, go to Detroit, and come back. There are about 70 of them. People know who they are, so it's easy to watch a change.

They like the railway business. They don't want it to change, so they're working quite closely. That is how it works.

Then every vehicle that crosses the border on the railway, including the locomotive, gets “VACIS-ed”, if I may turn that noun into a verb. It then is inspected to see what is in that container, that railway car—to see whether there are bad things in there or bad people in there. It shows up quite well.

Á (1110)

Mr. Dennis Apedaile: And there are two pieces to it.

If there is an enforcement issue, then the train has to be stopped, the car taken out, the container they want to look at—of course, Murphy's law says it will always be on the bottom—put on a side track. You have to have a facility that's covered and you have to have people to do the job and a toplifter to take it off, so there are considerable expenses associated with it.

If it's a compliance issue, which means if the manifest says it's refrigerators and it turns out to be sofas, that's an issue that waits until it gets to the destination in Chicago to be verified.

But the secondary inspections, to speak to Rob's point about treatment of trucks and rail to make sure rail is not treated in a way that would drive more business to truck, involve a tricky situation. When the containers come in from offshore, there are VACIS machines at the port that do about 3% of the containers that come off the ship. Then, when trucks go across the border, about 3% of them are inspected across the border, because if they did every one the border would just close right down. But with a train, when it goes past the VACIS machine, you can't turn it on and off, so essentially you get 100% primary inspection of the trains that go across—they have to slow down to five to seven miles an hour—and then the secondaries are done at the other side.

The secondaries for rail tend to be between 1% and 3% of 100%, whereas the secondaries on those other locations tend to be roughly 1% to 3% of the 3%. So it's a very different level of inspection, and it's partly due to the technology.

We still have issues to work out to make sure rail remains and is enhanced as a preferential way of moving safely across the border.

The Chair: What other containers come in? Not all of the containers are moved by the railways.

Mr. Rob Ritchie: Not all. Montreal is a huge port, with over a million containers a year. About 50% of those go to what they call OCP or “overland common points”. Mainly Montreal's catchment area is Montreal and Toronto, which is the 50%. It's mainly truck. Then the rest is.... Montreal, for example, is the strongest port for the city of Chicago.

The Chair: Mr. Ritchie, if you're satisfied that the railways have complied with a very secure inspection system on containers going into the United States, does the same system apply to containers that use modes of transportation other than rail?

Mr. Rob Ritchie: As Dennis explained, there are rules in place for trucks, and I think they are as thorough as they can make them right now to keep the border as they want it, fluid and secure. Sometimes those are competing objectives.

My thrust, Mr. Chairman, was that rail is more secure. Interestingly, it's more fluid too. But that's also because we're smaller and we're set up to handle it.

The Chair: So of all the containers that come into Canada, just 50% are transported by rail to the United States?

Mr. Rob Ritchie: I made that point with respect to Montreal. From Halifax a lot more would be, because it has a lot less local area and is a port that's serving Montreal, Toronto, and the midwest. For Vancouver, about 50% are for local delivery and the other 50% go on.

Mr. Dennis Apedaile: It's a big success story, in fact, in Vancouver. By getting first port of call you always take off more than just the containers that are due for that country. We have built up a service with the port and with the shipping lines to say we can move them from Vancouver to Moose Jaw and south to Chicago. That has attracted “first ports of call” from foreign shipping lines. It's a great success for the port of Montreal and for the port of Vancouver.

Á (1115)

The Chair: We're going to ask you for some help again. My reason is a lot of the elected members in the United States don't know this. They think there's a bit of a porous border. We have to figure out a way to get our message across, that we're really, from what you say, very secure—I'm not talking about the people now, which is another issue, but the stuff we're shipping in—and that you as an industry are doing a job that is accepted by their customs officials. This is, I think, critical; if you get an approval from those guys....

Mr. Rob Ritchie: It's taken a while to get there.

The Chair: Yes, I'm sure it has.

Mr. Rob Ritchie: The government of the United States is very complex. Some elected officials you have to work on harder than others to get the point across. I think some of them are using the Canadian situation—you know better than I do, Mr. Chair—for their own reasons. We've worked very hard as a railway industry to get our story to the Office of Homeland Security. They understand. We work very closely with them. The Canadians have been very helpful too. There's a good rapport between our two countries. Regardless of what's going on in the newspapers about Mr. Bush not talking to Mr. Chrétien at APEC, there is a good working level going on there.

The Chair: That's a message we're going to have to spend a little time getting out, because as Mr. Cellucci says, we have to do something positive on a daily basis to build a relationship.

Mr. Rob Ritchie: Yes. Well, I have a solution. We can build the Detroit River tunnel.

Some hon. members: Oh, oh!

The Chair: I thank you. It's been very helpful. Some of the stuff you brought forward is very important. As I said, there's a whole stream of witnesses we have to hear, but what you've given us today has been extremely helpful. I thank all three of you for taking the time out to be with us.

Mr. Rob Ritchie: Thank you, Mr. Chair. It's a pleasure to be here.

The Chair: Thank you. We are adjourned.