STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Monday, June 5, 2000

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[English]

The Chair (Mr. Stan Keyes (Hamilton West, Lib.)): Good afternoon, colleagues.

Pursuant to an order of reference of the House dated June 1, 2000, we are considering Bill C-34, an act to amend the Canada Transportation Act.

We welcome to the committee this afternoon three ministers: the Minister of Transport, David Collenette; the Minister of Natural Resources and Minister responsible for the Canada Wheat Board, Ralph Goodale; and the Minister of Agriculture and Agri-Food, Lyle Vanclief. Joining Minister Collenette from Transport is his Deputy Minister, Margaret Bloodworth.

Welcome all to the Standing Committee on Transport. We look forward to your, hopefully, somewhat brief interventions to this committee, since there are three of you and you're all probably singing from the same songbook. We want to make sure the point is made, but don't knock us over the head with it.

Mr. Collenette, I've asked you to start, as the transport minister and the lead minister on the file, followed by Mr. Vanclief, and then Mr. Goodale will wrap things up.

Minister Collenette, please.

Hon. David M. Collenette (Minister of Transport): Thank you very much, Mr. Chairman. It's a pleasure to be here with my two colleagues to talk about this significant matter—significant to farmers across the country, significant to shippers, significant to all involved in the transportation of grain. This bill and other related measures gives needed savings to prairie farmers, while at the same time improving accountability and the efficiency of the system.

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We know that time is very precious here. It's of the essence in order to make sure that the improvements are in place by August 1, the beginning of the crop year, and that farmers can benefit from the package. We very much appreciate the efforts of the committee with respect to this important matter in the days ahead.

I'd like to signal that this bill is a product of almost three years of consultation. All industry stakeholders have had a chance to speak, to make representations, and to discuss their issues. The government has listened to all of these voices, and we recognize that we could not please everyone, but we do see Bill C-34 as the right policy at the right time to move the system forward.

The bill introduces important changes on four issues. The maximum rate scale in sections 150 to 152 of the Canada Transportation Act is replaced by a cap on annual grain revenues to be earned by Canadian National and Canadian Pacific. This change will increase price flexibility and efficiencies in the grain handling and transportation system while lowering costs for western producers. The revenue cap will produce an estimated $178 million in savings, and this is based on an effective rate for August 1 of $32.92 per tonne, for total rail revenues of $988 million for a typical crop of 30 million tonnes.

The government's May 10 decision has set the new revenue cap at $27 a tonne, a reduction of 18%. This would limit rail revenues next year to $810 million or a reduction of $178 million. That is indeed significant, Mr. Chairman, and I hope the farmers of western Canada can see the evidence of those savings in their accounts this coming year.

In addition, shippers on branch lines will be protected from unfair rates. This bill will require that tariff rates for single car movements on branch lines are not allowed to exceed main-line rates for similar traffic by more than 3%. This is reasonable and it's protection for shippers and farmers from price gouging.

The final-offer arbitration provisions are also being improved. A two-tier process will be put in place that will improve the access to this dispute resolution mechanism, especially for small shippers. Furthermore, final offers will now be submitted simultaneously instead of sequentially, as is currently the case. These changes reflect a longstanding shipper complaint that the final-offer arbitration process is unfair, too expensive, and takes too long.

Mr. Chairman, the third major amendment contains measures to help establish short-line railways and safeguards for existing short lines and for shippers on branch lines.

One of the government's objectives when we introduced the Canada Transportation Act in 1996 was to facilitate the establishment of short-line railways. I am pleased that the goal has been met quite successfully. About 80% of all lines that have been up for abandonment have gone to short-line companies. But during the grain consultation process, some problems were identified, which this bill addresses. Bill C-34 is going to help to further encourage the formation of short-line railways in all parts of Canada.

It will also help communities that lose a grain-dependent line by having the railways provide transitional compensation. We will protect shippers and communities from any temptation on the part of carriers to defer maintenance or to lower service levels on a grain-dependent branch line to make it uneconomical. The government will also mandate the Canadian Transportation Agency, upon complaint, to investigate and initiate remedies where it determines that carriers took such action.

To provide even further protection for shippers and short-line railways, the government will ensure that if a segment of grain-dependent branch line is transferred, then the remaining portion of that line must be maintained for three years. With this provision, a shipper and a short-line railway will have enhanced stability.

The fourth legislative initiative includes measures to allow the government to collect and convey information to a third party for the purpose of monitoring. We are proceeding with this in a way that the independent private sector third party will preserve the confidentiality of any information received.

Mr. Chairman, these are the major legislative improvements to the grain handling and transportation system contained in this bill. As indicated when I spoke on second reading last Thursday, if we want a world-class grain transportation system, then we need to move it forward. We need to make the system more accountable, more efficient, and more cost effective. This bill is part of the package that moves us even closer to the goal.

We know that the committee will be extremely busy in the days ahead, and we very much appreciate your efforts that will in the end ensure a better transportation system and benefits to the farmers.

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As I said at the outset, time is of the essence for the prairie farmers. The improvements and savings that are contained in this bill need to be in place for August 1, so the hard-pressed prairie farmers can realize benefits at the earliest possible time.

In closing, there are some who believe we have not gone far enough toward a competitive system. I will only say that we have made a start. I fully believe that in the years ahead we will have even more competition in grain handling and transportation, once the results of this proposal take effect.

I think this is the beginning of a revolution in the way grain is handled in western Canada. The ultimate result will benefit the railways, the grain handling companies, the producers, and all others that have a stake in this very important industry.

Thank you.

The Chair: Thank you, Mr. Collenette.

Mr. Vanclief, please.

Hon. Lyle Vanclief (Minister of Agriculture and Agri-Food): Thank you very much, Mr. Chairman.

I thank you and the committee for the opportunity to come before you with my colleagues today and take a minute or two to outline the benefits of the proposed changes to the grain handling system in western Canada, to Canadian farmers in rural communities.

As Minister Collenette has said, there was a long and complex process that led up to this. It involved all of the stakeholders, whether they were in the transportation system portion of it or producers. They all certainly agreed from the outset that it was time to concentrate on building a system with more accountability and reliability that would reward those in the system who overperformed and penalize those who underperformed.

After those three years, I feel that this is a very balanced package before us today. There is no question that the reduction of $178 million a year in railway revenues for moving grain in western Canada will be of great benefit to farmers. Farmers have told us that moving grain to port is too costly under the current system, and we had to find a better way and do it more efficiently and cost-effectively. So a reduction of 18% is certainly very meaningful to every producer in western Canada.

We recognize as well that as the transportation and movement of grain changes, the grain roads and the infrastructure will be affected when consolidation takes place in the rail sector and the elevator system. Therefore we have put forward $175 million over five years, starting in 2000 and 2001, to assist in upgrading the grain roads. It has been allocated based on grain-dependent branch lines, which will mean $2.2 million for British Columbia, $32.3 million for Alberta, $106.8 million for Saskatchewan, and $33.8 million for Manitoba.

As Minister Collenette has said, to cushion communities from the impact of branch-line closures, transitional compensation will be paid by railways for three years. Communities will receive $10,000 per year for each mile of grain line that is closed. The legislation will also give communities more time to formulate plans to buy and operate short-line railways. Further provisions will lengthen the time the railway company will have to reach an agreement with a potential buyer, and the period has been lengthened to six months from the current four months.

With all the converging demands of the stakeholders in the western grain industry, it was left to the government to find an appropriate balance that would satisfy the diverse needs of industry stakeholders. I believe we have met that challenge, and most importantly, the reforms will provide real benefits to our western Canadian producers through lower overall freight rates.

There is also a mechanism in this bill before us that will allow for the monitoring and access of information to see whether farmers are benefiting from the changes and whether the Canadian Wheat Board's marketing mandate is being adversely affected. It will also look at the impact of these changes on the railways, grain companies, shippers, and ports.

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I think we recognize without question the important role of grain transportation in western Canada in the rural and agricultural economies. I'm confident that these proposals will help strengthen the competitiveness of our grain sector, and I urge members to support the proposed amendments.

The Chair: Thank you, Minister Vanclief.

Minister Goodale.

Hon. Ralph E. Goodale (Minister of Natural Resources and Minister responsible for the Canadian Wheat Board): Thank you, Mr. Chairman.

As my colleagues have mentioned, we have worked very hard both within the government and with stakeholders over the last three years to try to find a good solid progressive balanced package with respect to the grain handling and transportation system in western Canada.

It is sometimes very difficult to find that balance when there are so many divergent and sometimes outright conflicting points of view, but at the end of the day, I think we have been able to overcome a good deal of the traditional fractiousness and arrive at a package that does in fact strike the right balance.

I won't repeat all of the logistical details my two colleagues have already referred to, other than to underscore the important immediate benefits for producers that may be the most obvious and tangible. That is effectively a saving, because of efficiency gains, in the order of $178 million in the coming crop year, compared to what would otherwise have been the case. That is obviously a very substantial improvement, from the producer's point of view.

Secondly, recognizing the increased pressures on prairie grain roads, there will be an important contribution by the Government of Canada to alleviate some of that pressure over the next five years.

In addition to all of those things, and the many other technical details that have already been referred to, the package involves some significant changes in the methods of operation for the Canadian Wheat Board. These include a greater reliance in the future on contractual arrangements in a competitive environment, as opposed to administrative or regulatory powers. The provisions deal with the arrangements the Canadian Wheat Board will need to make for overall railway capacity and car supply to be able to move their entire books of business during a shipping season.

There will be a substantially greater reliance on tendering for the procurement of logistical services the Canadian Wheat Board will need in order to move its product to the four ports of Vancouver, Prince Rupert, Churchill, and Thunder Bay. This will begin at a level of 25% in the coming crop year. In the second crop year it will also be at 25%, and then in the third crop year it will move up to 50%.

There will be changes as well dealing with how and when the Canadian Wheat Board uses its power under paragraph 28(k) of the Canadian Wheat Board Act, having to do with specific rail car allocation issues. There's the matter of monitoring—the process of continuously monitoring, measuring, and reporting on the impacts of all the changes we are proposing. There's also, of course, the requirement that all system participants cooperate fully with the monitoring mechanism to make sure the information that monitoring requires is provided in a timely fashion.

Also, with respect to the Canadian Wheat Board and all of the other system participants, there is a requirement for everyone to try to turn the page on all of the old difficulties and concentrate in future on new and better relationships that will provide a much improved system. There will need to be provisions that relate to the manner in which the parties deal with each other on a far more open and transparent basis, always operating on the principles of good faith negotiation and good faith respect for contractual obligations.

Those provisions that specifically relate to the activities and the conduct of the Canadian Wheat Board will be embodied in a memorandum of understanding between the government and the Wheat Board. The work to capture all of that in the appropriate legal language and get it on paper is moving forward very well. I hope to see it concluded in the next very short while so that members of this committee would have the opportunity to look at it. I hope to be able to bring that forward at a very early date.

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All of that, together with everything else my two colleagues have referred to, constitutes what I think is a good, solid, balanced package that will move us forward toward a transportation system that is for everyone less costly and for everyone more reliable, more timely, more efficient, more transparent, and more accountable, a system in which savings and productivity gains are properly and fairly shared among all the system participants. We can in fact have that world-class system Mr. Collenette referred to.

The Chair: Thank you, Minister Goodale.

Thank you, ministers, for your summaries to the committee.

Colleagues, just as a housekeeping matter, you will notice before you the new schedule for this week. If you could stick around for five minutes after we have our session with the ministers, we can go through that schedule and have explanations, if necessary.

We'll deal with questions to the ministers in ten-minute rounds so that we can try to expand our thought processes a little bit. In the past we did five-minute rounds with the ministers on airline restructuring, mainly because there were so many of us here, but we have the ministers for awhile. We might as well go to ten-minutes rounds so that we can build our questions list.

We'll start with Mr. Bailey.

Mr. Roy Bailey (Souris—Moose Mountain, Canadian Alliance): Thank you, Mr. Chairman.

We continue to hear that “we listen to all these voices”, but I just came back from the world of reality out there, being both Saskatchewan and Manitoba, and it seems nothing could be further from what was expected from the players in terms of listening. When you take a look at the massive report that came in from both Mr. Estey and Mr. Kroeger, it's obvious you didn't listen at all. That's very obvious.

I'd like to relate to the three ministers a comment a farmer in Manitoba brought forth to me in terms of what you should have done. He told me the 18% is but a dangling carrot, tempting you into a process that is almost exactly the opposite to what the report put forth.

My question is, why are we, at this time—we've had a year now—so late, with just a few days left of Parliament, getting this bill through? Why didn't this come sooner?

I'm pleased to hear what the minister in charge of the Wheat Board said, that we're going to “hopefully” get the memorandum of understanding before us. I was going to say, do you expect us to vote on a bill when we don't have the memorandum of understanding?

The other thing that really bothers the community out there, really bothers them, is that they know that everybody involved, the grain companies, and the railways... You want savings? We'll give you savings. Put in what Kroeger and Estey said, and commercialize this system. But now we're moving to more regulations. This third party is going to extract from the railways certain amounts of information, and that's going to go from the Wheat Board to the minister. The producer is not going to know the results of this.

What you're doing, really, is tying up the whole operation with less accountability, less information than we've ever had before. We've gone the wrong way. Why is it, with the changes taking place in the prairies, that...

I want you to listen to this: By this time next year I will have three main terminals on the Sioux line, the big line. Why not make it what Estey said, and why wouldn't they make it possible... They could negotiate directly with the railways. This grain has to move, and you can enter into a contract.

You know, I want to tell the Minister of Transport in particular what this is going to do. You're now going to promote something that has been the case in the past; you're going to see grain cars, because of the third-party introduction into this, being used, even more than they were, for storage purposes. That's number one.

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Two, you are going to lengthen the turnaround time for the cars to get back. There's no question in my mind that this is going to take place.

Those are things we have seen for years. With direct negotiation between the buyer, the grain company, and the railway, you would have... All of this would have been a thing of the past. The shipment would go out under contract. The empties would come back under contract.

The question is, why have you not considered the failures of the past in this bill? I want to suggest that you really haven't.

The world of reality out there also says, and very clearly, that as the government—that is, the government's agency—the Canadian Wheat Board is a very, very exclusive organization. It has long been the complaint of the producer, particularly the young producer, that they can never get the information they want out of this board.

I'm going to ask you this question. And this is a key question. Anybody farming out there under the age of 55 wants to ask this question. This third party is going to extract this information, but will that information be held in the same secrecy as the Canadian Wheat Board does for a lot of its operations now? If so, this thing isn't going to sell.

I'm sorry, gentlemen. Yes, I like the carrot. Yes, I like the savings. But those are short-lived savings. Those are short-lived savings and I will stand and make that known to you right now. Unless you can show me the efficiencies in the third-party negotiations—

Mr. Ralph Goodale: Third-party negotiations?

Mr. Roy Bailey: The Canadian Wheat Board becomes a third party in the negotiations, when the negotiations should have stayed between the grain companies and the elevators.

Finally, with regard to this memorandum of understanding, you knew you were going to do this for a long time. Why don't we have this yet?

The Chair: Thanks, Mr. Bailey.

It's a good thing we've gone to ten-minute rounds, because that was a six-minute question.

All right, ministers all in a row, I suppose.

Mr. David Collenette: Mr. Chair, I thought I was at second reading for a moment, because this was really representation by Mr. Bailey.

As I said in the House, this took a long time because this is a very complex problem, fraught with emotion. We asked two of the finest minds to come up with an analysis. They did that. We refined their analysis to make it politically acceptable. The government has to make a political choice. We have made a political choice.

I do apologize for this coming in so late, but certainly I would ask you, Mr. Bailey, isn't it better to have this bill dealt with right now, in the first week of June, than not to have it at all, and to say to prairie farmers in their hour of need that they will not have $178 million worth of savings?

Mr. Bailey talks about us dangling a carrot. He dismisses $178 million of carrot. I mean, this is not a carrot; this is a bushel of carrots. This is a reduction of 18%. It's $178 million, and those are savings that will be passed on to the producers.

He talks about third-party negotiating. I think you have to understand that the third party is the monitoring mechanism that we're going to set up, the monitoring mechanism that will have the ability to get at commercially sensitive information no matter where it comes from. We'll have to protect that commercially sensitive information.

Hopefully he will agree, when we appoint that third party, that the third party is beyond reproach and we will accept their judgment. This is a person or a corporation from the private sector who will have their professional reputations on the line.

I'll leave my colleagues to deal with the rest.

Mr. Lyle Vanclief: I have just one very quick comment.

Mr. Bailey, I find very interesting your comments that you're concerned about the gathering of information, because I thought that was what you people had been raising in question period for a long time. You're being somewhat contradictory here, then, in terms of what you've been saying in the House.

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Mr. Ralph Goodale: Perhaps I could just add that the saving of $178 million is not just a one-time saving. It's an annual savings as compared with what otherwise would pertain in successive crop years. Indeed, its value is likely to grow in successive crop years.

In addition to the $178 million, which is saved based on the calculation for 2000-01, there will be very significant efficiency gains to be made in the system over and above that $178 million through the negotiation of service packages, incentive rates, multi-spot loading, terms and conditions, and so forth. Again, that is yet to be accrued, but under the new arrangement it is very likely to accrue, and that too will benefit all the players in the system, including farmers most especially.

Finally, the monitor you've referred to, the third party, is not intended in any way—in fact, they would have no legal right—to interfere in the negotiating process among the commercial players in the system. The monitor there is to track what their conduct is and the results of their conduct. They are not there to participate in the process. They are there to monitor the results of the process. It's that kind of information that would be needed to make the determination as to whether or not the reform package is working.

In the past, there have been mechanisms like that. In a way, I guess you could say the Car Allocation Policy Group used to perform that function, in part. You could say the every-four-year costing reviews by the Canadian Transportation Agency performed that function, in part.

What we're putting in place here is a very substantial package of changes, and I think it's in everybody's best interest to have a thoroughly independent, professional, arm's-length, private sector third party that will be watching what's going on as a result of the changes in the system and reporting on whether it's working or not: Are farmers benefiting? If so, by how much, and in what way? Is there an impact, positive or negative, on the operations of the Canadian Wheat Board? Are the railways more efficient? Are the grain-handling companies more efficient? Are the ports more efficient? Is the overall system performing better?

We need to monitor that to know whether or not the reform package actually works, and to what extent, and be able to quantify that.

The Chair: Thank you, Minister.

Mr. Ralph Goodale: So it is a monitoring process—no interference in the commercial contracts.

The Chair: Mr. Calder, please.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman. This is going to be an interesting week for us as we go through this, I can see this right now.

The thing I have never been able to get my head around is this: Why can we load up potash, take it out to Vancouver, there's a ship there waiting for it, we unload it, and the turnaround on the train can be 14 days or less, and yet we can't do that with grain? That's the thing that concerns me about this right now.

Yes, there's a saving to the farmers of $178 million. That's fine. But where are the efficiencies? How does this improve that situation right now?

Specifically, there are two things I'm interested in right now. The first is the tendering process. Should we be looking at applying the Competition Act to the CWB? There's a section right now in the Canada Transportation Act, subsection 4(2), that could be applied to that.

Second, whatever's going to be contained in the memorandum of understanding, is there a chance it could affect the CWB's power of car allocation under paragraph 28(k) of the Canadian Wheat Board Act?

Mr. Ralph Goodale: In dealing with some of those issues that specifically relate to the Canadian Wheat Board, one of the reasons grain has always been more problematic in terms of the logistics and timing of its delivery is the complexity of the sourcing of the product.

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You referred to potash. In the case of potash, there is a finite number of mines or collection points in the prairies from which the product is moved. You could probably count them on the fingers of both hands.

In the case of grain, you obviously have to make collections from about 140,000 producers, scattered across three provinces, on at least three railway lines, and some 400 or 500 different delivery points. And they're not all dealing with a homogeneous or fungible product. You're delivering different grades, different types—a very complex product mix that, for the most part, needs to be kept separate and discrete as it moves through the delivery chain to the ultimate buyer. So grain has some peculiar characteristics that make the logistics, by definition, more complex.

In terms of your question about the MOU and the impact specifically with respect to paragraph 28(k), we said at the time of the announcement that there would be some changes with respect to the use of the power. It would, of course, apply only to the two grains that the Canadian Wheat Board markets, wheat and barley. It would be used in situations where the use of such power is necessary to fulfil the Canadian Wheat Board's statutory obligations.

There will be a requirement that advance notice be given of when the power is to be used and an explanation as to why it is necessary in the circumstances—all in the interests of greater transparency and greater accountability.

Mr. Murray Calder: How much advance notice?

Mr. Ralph Goodale: A minimum of five days is what's being contemplated at the present time.

On your point about the Competition Bureau, in the discussions that have gone on over the last two to three weeks, the Competition Bureau has indeed been consulted to ensure that what is embodied in the memorandum of understanding is consistent with good, solid competitive principles in terms of business operations.

Mr. Murray Calder: What was Konrad's response to what you were talking about? Was he in favour of this or did he think we should take a look at section 4?

Mr. Ralph Goodale: I think I can say that when we are in a position to table the MOU, which I hope will be very, very shortly now, it will reflect the advice from the Competition Bureau.

Mr. Murray Calder: Okay.

Mr. David Collenette: Mr. Chairman, I have just one other point.

Mr. Calder rightly asked why we do not have the same kind of efficiencies as with potash. Potash is moved in a fully competitive system. In an ideal world, we would like grain to be moved in that way, but as Mr. Goodale said, grain is incredibly more complex. You're dealing with thousands of individual producers, with their livelihoods. You're dealing with historical tradition. We think this is a step in the right direction, and hopefully one day, not too far off in the distant future, you will make the same comparison between grain and potash.

Mr. Murray Calder: Okay.

The Chair: Thanks, Mr. Calder.

Mr. Guimond, please.

[Translation]

Mr. Michel Guimond (Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans, BQ): First, let me tell the Minister of Transport that I wont start by asking a question but by making a comment. Last time, I made a comment and he put an end to his testimony saying that it was not a question but a comment.

Therefore, I will start with a comment for my colleagues from the Canadian Alliance who must be happy to realize that the Liberals are afraid to lose the few seats they have in Western Canada. They sent us three ministers. It is the first time that the Committee on Transport is hearing three ministers at once. They took out the heavy artillery and we wish to acknowledge it. This is the end of my comment.

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Now for my question which is directed to the Minister of Transport. Railway companies will have to absorb cuts in the order of $178 million. Are you not afraid that CN and CP, not to name them, will be tempted to reduce their cuts through massive layoffs? Or do you have any guarantee that it wont be so?

These companies have shown in the past that they can adapt to an over-regulated system and reorganize accordingly. These companies can reduce their costs, especially Canadian Pacific which in the past light-heartedly abolished jobs across Canada. What guarantees do we have that the $178 million in grants you are giving producers wont be financed in fact by the railway employees who will lose their job?

Mr. David Collenette: First, Mr. Chairman, I must stress that if three ministers are here today it is because the Liberal government believes that the transportation of wheat is an issue important enough to warrant the attention of three ministers. We have been working in a very efficient way at solving problems in the last three years.

As for the question you asked regarding the grant, like you say, it is not a grant; it is a sharing of the money that will be saved thanks to the package. It is not a direct grant. It is a sharing of the benefits generated by the new system with the Western producers.

You have expressed concern about the ability of the railway companies to absorb those reductions. I will remind you that railway companies are doing well. We can analyze their financial statements which are public. You know very well, Mr. Guimond, that the two railway companies have had very good years. So I think that we must strike a balance. I am happy that the railway companies should be in a position to absorb the impacts of the new system.

I don't believe that there will be job cuts. I think that there wont be any cut in investments as railway companies must, as we all know, keep on investing to raise their productivity.

Mr. Michel Guimond: Mr. Minister, allow me to mention, for your information, the record profits nearing $9 billion that accrued to the six big banks in 1999. However, the announcement of such profits by the Toronto-Dominion Bank or the Canadian Imperial Bank of Commerce is always accompanied, at shareholders' meetings, by the announcement of 2,500 job cuts. Therefore, guaranteed profits are not a protection against job cuts. Allow me to qualify the answer you gave earlier.

Here is my second question. What is there in that bill to increase grain handling in the port of Thunder Bay? If I ask this question about Thunder Bay, it is for people who are listening to us and for people here. I was not mandated to ask it by Mr. Comuzzi or Mr. Dromisky. Mr. Dromisky will say that it is a good bill even if not a single ton of grain transits through Thunder Bay.

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The Chair: Mr. Guimond...

Mr. Michel Guimond: If I ask the question about Thunder Bay, it is because, as you know, all the wheat that transits through Thunder Bay goes through Quebec's ports. Therefore, what is there in that bill that might be of interest for Thunder Bay and, by the same token, for the St. Lawrence network?

Mr. David Collenette: Mr. Chairman, it is impossible to give both guarantees to the farmers and guarantees about the level of activity in the ports. You can't have it both ways. I must say that nothing has changed regarding the flow of goods in the ports because the decision belongs to the Canadian Wheat Board and it depends in the first place on the demand. In this case, I am confident that the level of activity in the port of Thunder Bay will remain as good as it is now and will even increase. It all depends on the country or the individual buying the wheat.

You also made a comment about banks. Having worked with railway companies for several years, I think that they will show that they are better citizens than banks in the trade sector.

Mr. Michel Guimond: A third question, Mr. Chairman, the last one I have for now.

Minister Collenette, one of your predecessors, Mr. Doug Young, who is now a Canadian Alliance member, proceeded to abolish the Crow's Nest rate when he was a Liberal minister. You will remember that when we stopped financing the Crow's Nest rate, large subsidies amounting to $50,000 or $75,000 were paid directly to producers.

We have here the breakdown of the $ 175 million contribution for rural roads, that is $106 million for Saskatchewan, $33 million for Manitoba, $32 million for Alberta and $2.2 million for British Columbia. Is this contribution an acknowledgement of the fact that you did not give enough money when the Crow's Nest rate was abolished, is it because you want to be sure that you are putting even more in?

Do the $175 million given for the roads and the $178 million that Prairie farmers will save show that rural roads in Quebec and Ontario are in excellent shape and don't need improvement? Are you, as the Minister of Transport and MP for Toronto—of course you are less concerned with the state of rural roads—and your colleague the Minister of Agriculture, an Ontario producer, willing to acknowledge that?

Mr. David Collenette: Mr. Chairman, even if I come from Toronto, I am willing, like the people in Toronto, to accept sacrifices in the best interest of farmers elsewhere in Canada.

I must stress for Mr. Guimond that what we have here is a system which must bring about a change in the conditions of Western Canada, where farmers had very difficult years. We will put into place a system to improve the transportation of wheat. To do so, we need to improve rural roads because, as you know, several railway lines were abandoned after legislative changes were made four years ago.

Mr. Chairman, I must also insist for Mr. Guimond on the fact that the federal government has implemented an infrastructure program worth $2 billion and a $600 million program for national roads. We might increase this amount in the next budget. I don't know. The decision will rest with the Prime Minister and the Minister of Finances, and I will accept it without question, even as a Toronto MP. We need to invest in Western Canada's roads to help the transportation of wheat.

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[English]

The Chair: Thanks, Minister Collenette.

Just before we move along, colleagues, as a reminder, this committee works best when we stick to the issue, and let's try to stay away from any partisan shots.

Mr. Easter, please.

Mr. Wayne Easter (Malpeque, Lib.): Thank you, Mr. Chairman.

This is not a partisan shot, Mr. Chairman, but Mr. Bailey mentioned in the beginning that he'd been talking to producers. I have as well over the last week, since the announcement came down. Producers are reasonably pleased with the announcement, with the exception of three or four areas. One of those areas, Minister, is that since 1992 there's been no sharing in terms of productivity gains. It was stated, I believe about a year ago, that the railways had, through productivity gains, through closing branch lines, through getting rid of cabooses, laying off staff, etc., incurred savings of around $700 million. That, of course, was not shared with producers.

What is the reason for there being no productivity gain sharing in this bill? There are provisions to protect the railways in terms of inflation adjustments, but there does not seem to be any provision to share productivity gains with producers, or at least that I can detect at the moment.

Mr. David Collenette: I'd just like to talk in general terms. It comes back to a question really that Mr. Guimond raised a few minutes ago, and that is the ability of the railways to absorb this particular cut. As you point out, Mr. Easter, the railways really did not share as much as one would have liked. In fact, the agency found that they only shared half of their gains. Even though I was rather complimentary in my earlier answer with respect to the comparison with the banks, I think that obviously the railways have to understand that they cannot extract enormous amounts of money without making investments and without being fair to the producers. So the agency has been our guarantor on that particular point.

I think the railways can indeed absorb this increase and absorb it reasonably well.

Mr. Wayne Easter: Will the monitoring have some impact on this? If there are productivity gains that are unexpected, revenue gains that are unexpected in terms of the railways, what will be the authority of the monitoring agency to deal with that? Is there any provision there?

Mr. David Collenette: Certainly the monitor, as I understand it, will have the ability to extract confidential information and will have the ability to make that known to us to ensure that indeed the system is working—every aspect of the system: that the board is being straight with its tendering, that the grain companies are being straight in their role, and that the railways are indeed being straight in the roles they are discharging. If indeed we find a situation that is untenable, then we can act in the best interests of efficiency of the system, but certainly we can act in fairness to any party aggrieved.

Mr. Ralph Goodale: I could just add, Mr. Easter, that another part of the announcement on May 10 was the reference of a number of competitive access issues pertaining to railway transportation to be considered as part of the legislative review of the Canada Transportation Act, which is scheduled, under law already, to begin by July 1 of this year. It would be our objective that that review process would, at an early date, examine issues pertaining to the competitiveness within the rail system, so that there may be some recommendations that would come forward as to how that competition could in fact be improved further, and that further competitive discipline for the long term would be very important in ensuring the proper distribution of productivity gains down the road.

• 1625

Mr. Wayne Easter: Mr. Chairman, there is a concern that has been brought forward—and I have a concern myself—about the moving away from the freight cap to the revenue cap. Certainly without the differential of 3%, the railways, by charging freight rates, could in fact push the system to rewrite the railway maps of western Canada in their own interests, just by increasing freight rates on certain lines so that it would make it cost-prohibitive for producers to ship on those.

The differential of the 3% certainly helps in that regard. I'm wondering if anybody can give me a specific example, either now or later, in terms of how that differential of 3% will work on various commodities. As I understand it, there are some differences between commodities. So I would like at some point in time some specific examples of how that system, in and of itself, is going to work.

On the revenue cap, though, the proposal—and it's a good proposal—on branch-line closures is to provide transitional compensation at $10,000 per mile annually for three years to affected municipalities, etc. The railways have to pay that. What is the impact of that on the revenue cap? In other words, the cost of that, in effect, could be a saving that producers could have, but it's going back to communities. Put it this way. My question really is, is that money really coming out of the railways, or is it coming out of the cost savings to producers?

Mr. David Collenette: Mr. Chairman, Mr. Easter has proven his worth once again by asking us a detailed question. I'll ask my deputy to answer that.

On the other issue, with respect to the effects of the 3% on other commodities, we'll get back to him with a detailed answer.

Mr. Wayne Easter: Thanks.

Ms. Margaret Bloodworth (Deputy Minister, Department of Transport Canada): On the $10,000, it doesn't affect the revenue cap.

Mr. Wayne Easter: It doesn't affect it.

Ms. Margaret Bloodworth: No.

Mr. Wayne Easter: Are you sure? I can't see how it can't. There's a revenue cap, and if that payment is being made by the railways, then it affects them in some fashion, does it not?

Ms. Margaret Bloodworth: Yes.

Mr. Wayne Easter: And would that not have an impact...

Ms. Margaret Bloodworth: Yes.

Mr. Wayne Easter: I'll rethink that.

Ms. Margaret Bloodworth: I can certainly get you more detail, if you'd like.

Mr. Wayne Easter: If you can get me more detail, I would appreciate that.

Ms. Margaret Bloodworth: Yes.

Mr. David Collenette: That currently is in place now.

Mr. Chairman, we'll look at the transcript of Mr. Easter's question and we'll give a written response to it.

Mr. Wayne Easter: Okay.

The Chair: Hopefully through the clerk and before the end of the week.

Mr. Easter, you have one minute.

Mr. Wayne Easter: All right.

Mr. Lyle Vanclief: Mr. Chairman, I'd just like to make a comment on one of Mr. Easter's earlier comments about efficiency gain.

Mr. Wayne Easter: There goes my minute, but that's okay.

Mr. Lyle Vanclief: There's no question that we all had a concern about the sharing of the efficiency gains, and I think there were a number of studies that showed that the railways were sharing about half of those efficiency gains and maybe were somewhat reluctant about sharing any more. If that number was around 700 and they had shared half of that... if you look at the $178 million rollback, what has happened here is that the railways have now been forced to share those efficiency gains with producers. Because of the changes to the system and the process, farmers will be in a position where the whole efficiency in the system will be driven to create even more efficiency gains in the future. The farmers will certainly be the beneficiaries of many of those.

• 1630

Mr. Wayne Easter: On that point, I know the impressions left... Yes, there are savings going back to the producers. There's no question about that, but that's a saving on rail costs. Let's keep in mind that producers are paying the costs from the farm to the port. If a branch line closes down and it's trucked, then there's a cost that's not calculated in this equation.

I'm wondering if anybody at some point in time will be able to provide me with some analysis in that area. I want to know not just what the rail costs are going to be; I want to know what the cost for a producer to get grain from his farm to port actually is. What we're really talking about here is rail cost savings. Correct?

Mr. Ralph Goodale: Mr. Easter, in part your answer will come through the results of the work of the monitor. Obviously there's going to be a redistribution of impacts here, and the monitoring process will help define that. If the system is more commercial, more competitive, more contractual, then there will be service packages negotiated at delivery points that may include trucking incentives, changes in the calculation of the grain basis, incentive rates for multi-car loadings, and so forth. In addition to the $178 million, all of that reflects itself in large part back to the producers.

The Chair: Thanks, Wayne.

Mr. Proctor.

Mr. Dick Proctor (Palliser, NDP): Gentlemen, each of you in your own way in your opening statements indicated that it was time to turn the page and try to start a new chapter, if not a new book. Perhaps the minister responsible for the Wheat Board dwelt on that more than the others.

What are the early returns? It seems to me that some people, in my reading of it, are saying that this is going to be a more fractious system, a more adversarial system. The railways are unhappy, some of the elevator companies are saying there's not adequate consultation, and some producer groups are concerned for a variety of reasons. I would request a response from the minister responsible for the Wheat Board as to what he thinks since the May 10 announcement, what the response has been from his viewpoint.

Mr. Ralph Goodale: Mr. Proctor, as with almost anything in relation to the grain business, nothing will be unanimous. There's the old prairie saying that grain is 13% protein and 87% controversy. Quite frankly, I think the early returns, as you described them, have been encouraging. There have been positive reactions from organizations like Keystone Agricultural Producers in Manitoba, Saskatchewan Association of Rural Municipalities in Saskatchewan, and the Wild Rose Agriculture Producers in Alberta, as well as favourable comments from the Canadian Federation of Agriculture.

Perhaps most surprisingly, there's a favourable reaction from each of the three prairie provincial governments. They all have their own nuance to apply to their reaction, but I think all of them have characterized this as movement in the right direction. It may take some further adjustment and rejigging as experience is gained and information comes in from the monitoring process, but so far, so good, in terms of the reaction from producer organizations.

Mr. Dick Proctor: Thank you.

This is more of a technical question. You indicated, Mr. Minister, 25% this year, 25% next year, and 50% in 2002-03. In fact, I believe the legislation says “at least 25%” in each of the first two and “at least 50%” in the third year. Can you provide the committee with the rationale for the “at least” portions in those three years?

• 1635

Mr. Ralph Goodale: In moving any volume of grain, it's difficult to pin down an exact tonnage, so the better approach is to establish a threshold. The feeling is that with at least 25% in year one, at least 25% in year two, and at least 50% in year three, that would provide the critical mass to ensure that a tendering system is operating on a sound commercial, economic basis. It would be virtually impossible to pinpoint an exact number and expect anybody to hit it 100% of the time. Instead of exact numbers, we've established thresholds that need to be reached.

Mr. Dick Proctor: The reason I'm focusing on the “at least” part of it is that I think I heard you say at your May 10 news conference that you would be monitoring this, and indeed the indication has been that today. To me, the “at least” suggests that nobody's looking to turn any clocks back. In the monitoring process, we always seem to be going higher up in terms of the tendering process. That's what troubles me, or at least raises a question in my mind as to the focus on the “at least” part of the argument.

Mr. Ralph Goodale: The monitoring is meant to be a very serious effort to identify the impacts of the overall package of changes that we are introducing. We want to be able to identify, both qualitatively and quantitatively, what is the impact on farmers. Are they benefiting? In what way? By how much? With respect to the Canadian Wheat Board, are there any adverse consequences? In what way and by how much?

Again, with the efficiency of the railways, the grain companies, the ports, we need to be able to pinpoint what has changed. Is it moving in the right direction? By how much? Then, of course, there's an assessment that needs to be made about the overall system.

The monitoring is intended to be a very serious part of this process. If it indicates that something is happening in the consequences of the reform package that is moving off track, if it's having negative consequences where positive consequences were anticipated, all of that information goes to ministers and ministers are therefore well-informed. First of all, they get an early warning about which way it's headed and they are able to take timely action if something needs to be corrected.

Mr. David Collenette: Perhaps I could just say, Mr. Chairman, that the view from afar, not from the west, is that I have a suspicion that we could even see more of a rapid movement towards tendering. The benefits of embarking on this process will become evident within the first year. I wouldn't rule out the board even being a bit bolder than it is under this particular regime.

Given the fact that you have more elections coming up this year for the board, given the fact that people are seized of this issue, I think you will find that the board will be very sensitive. If this is going to work to the benefit of farmers and the entire system, as we think it will, then I think you might see a faster movement. That's why the “at least 25%”, etc., does not concern me. In fact, it leaves us with a nice safety valve, if you will.

Mr. Dick Proctor: Thank you.

Mr. Goodale, you talked about the benefits, but some people are noting that not all producers are going to benefit equally. In fact, the suggestion has been made that some won't benefit at all. How do you respond to that? If you agree with that analysis, give me some ideas about why they wouldn't benefit at all from the system.

Mr. Ralph Goodale: Overall, the system we wish to achieve is one that is more efficient, less expensive, more reliable and timely, more transparent, more accountable, and one in which productivity gains and overall cost savings are shared among system participants, including farmers. In that overall sense, a system that delivers better for farmers is bound to be advantageous to all farmers.

• 1640

In the removal of the specific rate cap that has existed in the past, the replacement of that with a revenue cap obviously allows freight rates to vary between delivery points, so that some delivery points may have a lower effective freight rate and others may have a higher effective freight rate. The grain companies and the railways, in negotiating their service packages, will obviously have in mind incentive arrangements to encourage the kinds of deliveries they would like to see. And those incentive packages can reach some considerable distance across the prairies.

One estimate would indicate that something over 80% of prairie producers—it may in fact even be higher than that—would be within a 35-mile circumference of one of the newer high-throughput facilities. Obviously, the most advantageous arrangements would be available at those high-throughput facilities. If the trucking distance is effectively in the neighbourhood of 35 miles in this day and age, that is reasonably accessible to the vast majority of farmers.

To provide a safeguard even over and above that, which is the result of the normal competitive process, there is the 3% variation rule, so that a single car movement off a remote branch line could not vary by more than 3%, compared to the similar service on a main line. That is one safeguard we have built into the system to try to make sure there is a reasonable amount of equity.

The Chair: Thanks, Mr. Proctor.

Mr. Dromisky, please.

Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.): Thank you very much, Mr. Chairman.

Parts of my questions related to the port of Thunder Bay have already been answered.

Thank you very much, Mr. Guimond, for introducing it.

There have been statements made about everyone benefiting from this package, that is, hypothetically speaking, there is a possibility that everyone throughout the system will benefit. However, when we come to the port of Thunder Bay or any other port, you're talking about cost reductions; you're talking about getting rid of some of the inefficiencies.

I'm very concerned about quality control. I have spoken to several ambassadors who talk about the fact that this country has one of the finest quality control systems in operation. When they buy a certain grain at a certain quality, they know this ship is going to be loaded with that grain, that there is no cheating taking place, simply because of the inspection systems we have in operation in our ports.

If we talk about cost reduction, what does that really mean in terms of quality control? Is it going to have any impact? Does the Wheat Board have any kind of say in this? We're talking about benefits being spread out to everyone, about inefficiencies.

I can see the companies that own the grain elevators in Thunder Bay saying, let's cut costs, let's get rid of people, let's get rid of some of the quality control. We can control the quality. Never mind the federal inspectors; let's get rid of them.

Can we have a reaction to some of my statements?

Mr. Lyle Vanclief: Mr. Dromisky, the Canadian Grain Commission controls the quality. That is not up to the Canadian Wheat Board; it's the Canadian Grain Commission. It's not up to the grain companies either. The Canadian Grain Commission ensures the quality control, and it will not in any way, shape or form be jeopardized by these changes here. We're talking to efficiencies in handling and transportation, not in quality control.

• 1645

Mr. Stan Dromisky: Very good.

Mr. Ralph Goodale: Mr. Dromisky, can I give you just a practical example of where I think in many cases Thunder Bay is doing it right and some other ports could learn a lesson?

To avoid multiple berthings of lakers when they're at Thunder Bay to be loaded, the grain companies that operate the terminals have, from time to time, stock-swapping arrangements. If a boat is already loading at a particular terminal and some other terminal down the way has some grain that needs to go into that shipment, rather than forcing them to move the boat over to the other terminal to load up there with that specific grain, the grain companies can swap stock. And that means, quite frankly, you fill up the boat faster, it's more efficient, and you don't have to go through all of the handling of moving it from this berth to that berth. It's just a common-sense, practical principle.

That practice, I understand, has not been used as well or as successfully at a port like Vancouver, for example. Therefore, there may be some lesser efficiencies in that regard in Vancouver than in Thunder Bay.

These changes we're talking about have no bearing upon Canadian quality. That will absolutely be safeguarded by the Canadian Grain Commission. We're talking about these logistical changes that can make the system more efficient, improve the turnaround time, fill the boats faster, and get the grain to the ultimate customer quicker than is presently the case. And if some other ports would perhaps take an example from Thunder Bay on this business of stock swapping, and rather than actually moving the boat, make a book entry on keeping track of the grain, then you can save time and money for everybody.

Mr. Stan Dromisky: Thank you very much.

The Chair: Thank you, Stan.

Mr. Borotsik, please.

Mr. Rick Borotsik (Brandon—Souris, PC): Thank you, Mr. Chairman.

Mr. Collenette, when you appointed Mr. Arthur Kroeger, I personally met you and congratulated you on having an individual who was very knowledgeable and certainly very capable. In order to implement the Estey report, he went out and talked to I think every stakeholder there is in western Canada, and probably even beyond that. In saying that, do you believe that with this legislation you have implemented the recommendations Mr. Kroeger came forward with?

Mr. David Collenette: There's no question we have not. We have taken Mr. Estey's report, we have taken Mr. Kroeger's recommendations, and we have put them in play in a way that I think keeps faith with the directions of both Justice Estey and Mr. Kroeger but accepts certain realities.

Mr. Rick Borotsik: The politics, Mr. Minister, being the reality...

Mr. David Collenette: The realities are that ultimately decision-makers must take into account all arguments. Mr. Kroeger and Mr. Estey were asked to do the raw analysis. If they come here, they will be the first to tell you that their mandate was not to deal with the political realities of the situation. That is for us to do, and that's why we've made the choices we've made.

Mr. Rick Borotsik: So you're suggesting that politics perhaps made a number of changes to that, where logic perhaps would have been much better with Mr. Kroeger and Mr. Estey.

Mr. David Collenette: No, I don't think you can counterweight one with the other.

Yes, there's an element of politics. We're in politics. Let's not be hypocritical. However, we believe that this system will function, that it is logical. And just because one takes into account political considerations, one is not dismissive of logic.

Mr. Rick Borotsik: Mr. Goodale, the Canadian Wheat Board still has a huge influence on the transportation of grain. We do not yet have the memorandum of understanding with respect to the Canadian Wheat Board, nor do the numbers of people who will be appearing before this committee over the next four days have the benefit of going over that MOU. Mr. Goodale, how do you believe these stakeholders can actually deal with the detail, with the legislation, when we don't know what the memorandum of understanding contains with the Canadian Wheat Board?

• 1650

Mr. Ralph Goodale: Mr. Borotsik, it's my hope and intention to get a draft of the document into your hands in the next very short while.

Mr. Rick Borotsik: Thank you, Mr. Goodale.

I want to expand on that a little bit. You said there are a lot of organizations that agree with this piece of legislation. I think you mentioned some of their names: the Wild Rose group, the KAP, perhaps the CFA—I can't recall if you mentioned them or not. How can they support this legislation when they don't know the influence the Canadian Wheat Board is going to have on the transportation?

Mr. Ralph Goodale: Mr. Borotsik, the legislation that was tabled last week brings forward very faithfully the principles we announced on May 10, insofar as those principles require amendments to the Canada Transportation Act.

The announcement on May 10 also included a number of principles that would pertain to the Canadian Wheat Board, and you can see them described in the news release. There are provisions in relation to overall railway capacity. There are provisions with respect to tendering. There are provisions with respect to the use of paragraph 28(k), provisions with respect to the monitoring, provisions with respect to the good-faith relationships among the various players in the system. That is what the MOU will capture in written form beyond the statements of principles. But the MOU will be very faithful to those principles—and I will have it in your hands as rapidly as I can.

Understand that in addition to the discussions I need to have with the Canadian Wheat Board in this regard, there are many others, as is typical in the grains industry, who want to have a little bit of input into the process.

Mr. Rick Borotsik: Mr. Goodale, if in fact that happens and the MOU does not fall in favour with some of these stakeholders you just referred to, how do they have any input at that point in time in the MOU? I'm thinking of the Canadian Federation of Agriculture. If the MOU comes forward and for some reason it doesn't speak to the principles that you came forward with on May 10, how do they have any input into how to change the MOU?

Mr. Ralph Goodale: An MOU is obviously amendable, but the government's policy position has been announced and the MOU has to reflect that policy position.

Mr. Rick Borotsik: Let's talk about policy right now. There's $178 million, which is at best an estimate as to what your savings are going to be, because you're doing it based on an 18% reduction, based on 30 million metric tonnes, I believe, Mr. Collenette, that you had indicated. If in fact it isn't 30 million metric tonnes—and in 1998 it wasn't, it was 26 million metric tonnes, which if you do the numbers is less than $178 million—are you prepared to guarantee the $178 million as being a number...

Mr. Lyle Vanclief: It's $5.92 a tonne. So you multiply that by the numbers—

Mr. Rick Borotsik: So if it's 26 million as opposed to 30 million that you've based your estimates on, then it's $150 million as opposed to $170 million.

Mr. Lyle Vanclief: If you want to play the numbers game, I suppose if you multiply by 10 tonnes it would only be $59.25.

Mr. Rick Borotsik: It's not a matter of playing numbers. We're talking realities here. You are basing it on 30 million metric tonnes statutory grain movement.

Mr. Lyle Vanclief: I'm basing it on the average movement over the last—

Mr. David Collenette: There may be more grain moved.

Mr. Rick Borotsik: There may be less.

Mr. Lyle Vanclief: It may be more.

Mr. Rick Borotsik: It may be less.

Mr. David Collenette: Let's look at the glass as half full rather than half empty.

Mr. Rick Borotsik: I'd really like to do that. Believe me, I would. In fact, Mr. Collenette, you said that eventually you would like to see no differentiation between the movement of potash and grain, and I believe you mean that. Honestly I do. I believe you looked at a commercialized system. This system we have in place now is not a truly commercialized system. It's 25% that's going to be tendered and 75% still controlled by the Canadian Wheat Board.

If you had the opportunity, Mr. Collenette, and politics did not come into play, would you prefer to have a 100% commercialized system as opposed to only 25% tendering at this point in time?

Mr. David Collenette: Mr. Chairman, in a perfect world we would have a fully commercialized system, and that's what I meant when I gave my answer on potash. But I'd like to ask Mr. Borotsik, given the realities of the situation, is he prepared to go back home and support this bill rather than the status quo?

Mr. Rick Borotsik: Absolutely.

Mr. David Collenette: Would he prefer this bill rather than the status quo?

Mr. Rick Borotsik: Absolutely.

Mr. David Collenette: And the answer is obvious.

Mr. Rick Borotsik: Absolutely, there's no question about it. Status quo is not an issue, and I'm not going to get into a debate. I just asked a simple question.

Let's go to monitoring if we can.

Mr. David Collenette: We're into a lot of navel gazing, Mr. Chairman. The fact is we have something that is positive—it's positive for the farmers—and moves us towards a more commercial system.

Mr. Rick Borotsik: It's not actually, Mr. Chairman, but we won't get into debate.

I have one last question on monitoring.

Mr. David Collenette: Is that the position of your party, that it's not positive?

• 1655

Mr. Rick Borotsik: The minister responsible for the Canadian Wheat Board has indicated that there's going to be a monitoring process, and we see that in the legislation. The monitor, the company who will be tendered, I assume, this particular contract, reports to the ministers.

Would the ministers have any difficulty in having that monitor report to Parliament, as it should be doing, as opposed to simply the ministers responsible here, so that we could have access to that information as well?

Mr. David Collenette: No, Mr. Chairman, we're dealing with commercially sensitive information of a proprietary nature that has to come to the government. So let's not even go down that road.

Mr. Rick Borotsik: Here we go.

So we will not then, Mr. Chairman, I take it by extension, know exactly what's in the report of the monitor?

Mr. David Collenette: Mr. Chairman, Mr. Borotsik and everyone else will know that the Government of Canada will have a monitor who will give advice, the best advice, which will be secured from commercial sources that would be commercially sensitive, and that the government will act in the best interest of the spirit of this legislation.

The Chair: Mr. Borotsik, we probably would have to enter a whole other debate. Maybe at the industry committee with the competition commissioner—

Mr. Rick Borotsik: I think I will ask the industry—

The Chair: Just a minute now. Maybe at that committee with the competition commissioner before us, if you wanted to start to go into a debate on whether or not commercially sensitive information being collected by an individual, an agent of the government, is going to be allowed to publicize that commercially... No one is going to give this monitor any information.

Mr. Rick Borotsik: Mr. Chairman, we will have those stakeholders before us. Perhaps we can ask them the questions as to how legitimate they feel this monitor would be.

The Chair: You're free to do with your ten minutes what you like, Mr. Borotsik. I hope you stick around for the rest of the week.

Mr. Rick Borotsik: I'll be here.

The Chair: Colleagues, we've gone through one complete round now, all parties.

Mr. Goodale, I heard you say, “Understand that I have a group of people I have to take my MOU to in order for them to have a look at it before I can sign it”. I want to make it clear on behalf of this committee that when you say very soon, I hope you mean tomorrow, because, quite frankly, you have to understand that this committee, in order to do its work, can't be getting the MOU for a day and then trying to apply its ramifications against the bill. We're going to need time to look at this thing.

I know time is sensitive, but it's as sensitive for you as it is for us. We have to do our work, and in order to do it completely we're going to need that MOU, not just for one day on Wednesday afternoon for a day.

Mr. Ralph Goodale: Mr. Keyes, I fully appreciate the urgency of the situation. This is a serious topic. From day one, I have treated it with great seriousness to ensure that all parties are heard and all views are reflected in a fair and balanced way. At the earliest possible moment, I will make that document available, making sure that those who have wanted to have input beyond the Canadian Wheat Board—this is not a board issue—have had a chance to have their input into the process. I will do it as rapidly as possible. I understand your urgency.

The Chair: Thank you.

Do you foresee any government amendments to the bill, given that you've had about a week before we've had a chance to look at it? Have you seen any problems with the bill whereby you might need a government amendment?

Mr. David Collenette: We only introduced it last week. If we haven't got it right after three years, I doubt very much we'll ever—

The Chair: No, but come on, every bill has its glitches. The airline bill you gave us two weeks ago had its glitches and we needed nine government amendments to make it right. But—

Mr. David Collenette: There were no glitches with the airline bill; there was just further refinements that only this committee could provide.

Voices: Oh, oh!

The Chair: Do you see any further refinement to Bill C-34 that might need an amendment?

Mr. David Collenette: I doubt it, Mr. Chair.

The Chair: Not so far. Thank you.

We'll go back to the list now, colleagues. We're now into five-minute rounds. Because the ministers have to be out of here at 5:30 p.m., we want to go to five-minute rounds to get as many questions in as we can.

Mr. Sekora, Mr. Hilstrom, and Mr. Calder.

Mr. Lou Sekora (Port Moody—Coquitlam—Port Coquitlam, Lib.): Thank you very much.

I've had people make some different comments, the different people who appear before us and different people visiting my office. Some say you should not have a wheat board at all. Some people say if you have a wheat board, you should not have them also be in sales. Then there are those comments that keep coming back over and over again of cars being used for storage.

How do you overcome that? How does the Wheat Board overcome that, that they're using them for storage? I've had people come to me and say, because there are cars being used for storage, they can't sell their canola, because they have a certain window frame and they can't get it to the market.

I'd like to hear from any of the ministers on some of those concerns, how they address them. What do you think is going to happen in the near future?

• 1700

Mr. Ralph Goodale: On the canola situation, I understand the Canadian Wheat Board will be here itself tomorrow, and I would invite you to ask them that question in detail. I think you'll find that in that very difficult situation with canola last year, it was the Canadian Wheat Board that tried very hard to rescue the situation to make it easier for the non-board shippers to get out of a difficulty. It was not the Canadian Wheat Board that created that difficulty. It's a technical explanation, and I would very much welcome your questioning the board on that issue, and they can describe exactly what happened in those circumstances.

But it does reflect the grain handling and transportation system as it has existed up to this time, and obviously what we're trying to do by this package is make that system substantially more flexible and agile so that all shippers will be able to have a better, more responsive system in the future, rather than the one we presently have, which unfortunately is prone to congestion, backlogs, controversy, and difficulty.

Mr. Lou Sekora: Thank you very much.

Mr. Lyle Vanclief: Mr. Chairman, just to follow on those comments, Mr. Sekora is right. There are those on both ends of the spectrum. There are those who would like the Wheat Board to be even further involved; there are those who would like the Wheat Board to totally disappear. But I think everybody agrees probably that the status quo, no matter what their view, was not acceptable.

What we have in this bill I see as a major step in the evolution of the Wheat Board, which has been put together after a long and complex amount of give and take on the part of everybody. With the make-up of the Wheat Board and with the opportunities that are here to see how other things might work, I think we have a major step in order to drive even more efficiencies to a greater extent down the road in the handling of grain in western Canada, to the benefit of everyone, primarily the producers, who start it all out and who bear the costs totally. Totally, producers bear the costs of the grain handling system.

Mr. Lou Sekora: Thank you.

Thanks, Mr. Chairman.

The Chair: Thanks, Mr. Sekora.

Mr. Hilstrom.

Mr. Howard Hilstrom (Selkirk—Interlake, Canadian Alliance): Thank you, Mr. Chairman.

Minister Goodale, as to the 25% that's going to be tendered, is the Canadian Wheat Board going to have any involvement in the car allocation or car supply of that 25%?

Mr. Ralph Goodale: As we said on 10 May, Mr. Hilstrom, the Canadian Wheat Board will have the ability in any particular shipping period to make contractual arrangements with the railways to assure itself of a sufficient overall railway capacity.

For that portion of its volume that is tendered, it will confine its negotiations to those matters that directly relate to providing itself with that capacity, and then it will turn to what is in the industry jargon called a logistic supplier, i.e. a grain company, that will handle the detailed arrangements and the detailed movement. That means the grain company then deals with the railway in negotiating the service package, the incentive rates, the multiple car loadings, and so forth.

Mr. Howard Hilstrom: Okay, thank you. That just tells me this is still the regulated system with the Wheat Board involved in the car allocation.

You disagree then with what Minister Collenette said right here in this committee today, that he sees the Canadian Wheat Board moving even faster to 100% tendering of grain than what this legislation sets out, at 25%. Do you agree with Minister Collenette or disagree with him?

Mr. Ralph Goodale: The point, Mr. Hilstrom, is—

Mr. Howard Hilstrom: No, that's not the point. The question is—

Mr. Ralph Goodale: I haven't told you what the point is, so how can you disagree with it yet?

Voices: Oh, oh!

Mr. Ralph Goodale: The point is this is a very significant change in the system, moving to 25% tendering for logistical services and ultimately up to 50%.

The fact is nobody in the system has yet the experience or the expertise to be able to determine exactly what will happen. We think certain things will happen. We're establishing a monitoring process to determine the facts of what will happen. Obviously if the experience is positive, as Mr. Collenette has indicated, everybody will want to move further and faster down that road. If it's working for everybody and at the end of the day the farmer has more money in his pocket, then people will want to move faster in that direction.

• 1705

Mr. Howard Hilstrom: Any first-year MBA student would tell you, if he looked at this package, that in fact you guys haven't moved this thing along to where it should be to obtain the most efficiencies and the lowest-cost service, with the market signals telling the industry where the cars should be, when they should be supplied, and at the lowest possible price. We're still in a highly regulated system.

That's the whole question here. There's no point in talking about the small details of this thing in the legislation, because it's still your highly regulated system versus the commercial contract system that Kroeger put forward.

I'd like to just mention a couple of people here. Back when the Crow's Nest went out, here's what the Saskatchewan Wheat Pool had to say here. The Wheat Pool had centralized its elevator system and concentrated on delivery points to make it more cost-effective. Mr. Wellbrock said:

...it is why the wheat pool prefers... to contract rail services directly with the railways, rather than with the Canadian Wheat Board as a middle broker. Forty percent of Saskatchewan grain shipments are non-[Canadian Wheat Board] grains and having the board involved is an added layer of bureaucracy and cost.

Mr. Ralph Goodale: The board is totally uninvolved in non-board movement.

Mr. Howard Hilstrom: Mr. Ian McCreary of the board of directors said—

The Chair: Mr. Hilstrom, you have one minute left.

Mr. Howard Hilstrom: Well, that's fine.

The Chair: You need an answer too.

Mr. Howard Hilstrom: Mr. McCreary said:

The MOU will be a broad commitment by the board to adhere to the government's new policies and move towards a more commercial system.

The railways held back those shared savings, because they were concerned about the unreliability of a highly regulated system. So they thought they had to protect themselves by holding back some of the savings they could have passed along to farmers.

The Chair: Thanks, Mr. Hilstrom. We'll get an answer now from Mr. Goodale or Mr. Vanclief.

Mr. Lyle Vanclief: Mr. Chairman, Mr. Hilstrom needs to understand that for non-board grains, the Wheat Board will have absolutely nothing to do with car allocation. It will be up to the non-board grain producers, shippers, etc., to make that arrangement with the railways, between themselves. The Wheat Board will have absolutely nothing to do with that. And for the cars within the tendered portion, the Wheat Board will have nothing to do with who ships it either. It will be between the grain company and the railway to make those arrangements.

Mr. David Collenette: Mr. Chairman, there's an element of semantics in Mr. Hilstrom's point that has to be outlined here.

The fact is no one denies we are still in a regulated system. However, this bill, Bill C-34, helps us to move more along towards a truly competitive system. So it will be less regulated than the status quo.

The Chair: Thank you, gentlemen.

Mr. Calder.

Mr. Murray Calder: Thank you very much, Mr. Chairman.

I want to follow a little bit on what Howard was talking about, car allocation, and actually what Stan was talking about, quality control.

The MOU, when this comes out... I'm wondering, does it deal with the fact that in the Canada Grain Act, paragraph 118(a) provides the commission with the powers for car allocation, and then paragraph 115(b) deals with the Governor in Council powers? Given the powers the CWB has under section 28, is there any chance that the CWB could override the regulatory powers of the Canadian Grain Commission, the minister, or any other agency that would fall under the Canada Grain Act?

Mr. Ralph Goodale: No. The powers that exist under the Canada Grain Act have rarely been used, but the powers remain in effect. If an Order in Council were passed passing that power of car allocation to the minister or to some other specific agent, that would take precedence.

Mr. Murray Calder: Okay. Thank you very much.

The Chair: Thanks, Mr. Calder.

Monsieur Guimond? No?

Mr. Easter.

Mr. Wayne Easter: Thank you, Mr. Chair.

How are freight rates to be determined on the short lines? I can't find it in the bill. Is there a revenue-sharing arrangement? When the short line delivers the grain to the main line and the major railways pick it up, is there any kind of mechanism to protect the interests of short lines in terms of determining that freight rate, or any revenue-sharing arrangements?

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Mr. David Collenette: One of our staff experts on the rate issue will answer that.

Ms. Guylaine Roy (Director General, Surface Policy, Department of Transport Canada): In terms of the short lines, we're not regulating the short lines in this bill. What is provided for in this bill is a revenue cap on the prescribed railways, CN and CP. We're not touching the short lines.

Mr. Wayne Easter: Yes, I recognize that. But from what position is a short line going to negotiate its freight rate? Is there no provision for revenue sharing from the main rail lines to the short lines?

It may be a question we can ask the railways. They can be at an extreme... The railways have the power. We're not providing running rights for the short lines over main rail lines. We're not doing that in this bill. So the short lines, as I see it at the moment, are in a position of weakness in negotiating the terms and conditions of the movement of product from the point of delivery to the main line.

The Chair: Mr. Goodale, how do they negotiate? What mechanism do they use to negotiate their rates as opposed to CN and CP?

Ms. Guylaine Roy: We're not touching short lines. There is no difference in this bill to short lines. It's a commercial negotiation between CN and CP, as it is now. So we're not touching the short lines, and they're going to have to still do what they do right now and negotiate their rates, as they do right now. What the bill does is touch upon the prescribed railways, CN and CP, with regard to revenues for grain.

Mr. Wayne Easter: I realize that. But if there is one thing we should be trying to do to prevent heavy movement of road traffic and wear and tear on roads, it is to enhance the capacity of short lines to develop. I'm worried that with all the power in the hands of the main-line railways, that may not happen. That's what concerns me.

And grain companies as well. I think the grain companies are a bigger obstacle to short-line development than are the major railways, because they're putting up high-capacity elevators and it's in their interest to bypass the short line by truck and put it through high-capacity elevators so they get their elevation charges, etc., and efficiencies at that level. But the producer has to pay the freight from farm to elevator.

It's something we'll bring up further with the—

Mr. David Collenette: Perhaps this bill may not make that any better, but it certainly won't make it worse.

Mr. Ralph Goodale: Maybe I could add one brief comment.

The provisions that relate to branch-line abandonment and sale under this legislation will be substantially more community friendly than under existing legislation, to encourage community-based short lines.

Secondly, Mr. Easter, the reference of certain issues to the CTA review over the next six months will provide a further opportunity for the very issue that you've described to be further ventilated. But I think the point Mr. Collenette made is the fundamental one, that certainly this legislation does not detract from the position of branch lines, and it may substantially improve it.

The Chair: Thanks, Wayne.

Mr. Proctor.

Mr. Dick Proctor: Thank you.

To Mr. Collenette, I have two questions. One is on the final-offer arbitration. I know that Canadian National, in particular, has been highly critical of the way the legislation has been drafted. I think in a letter to your deputy they said at one point that “Unless the government has the courage to revise this recommendation, access to higher quality [final offer arbitration] decisions will have been effectively defeated”. I'd like to get the government's response to that.

• 1715

The second area I'd like to explore—and I appreciate that it's not in this bill—is that open access is obviously critically important and the feeling that there won't be any real savings generated unless the railways are forced to compete for joint running rights. I'd like your response on both final offer and open access.

Mr. David Collenette: With regard to final-offer arbitration, the railways don't like that under any guise. We have accepted Mr. Kroeger's recommendation without reservation. I think that should give some solace to those who are concerned about it.

In terms of joint running rights, this was a tough one. Quite frankly, I was very sympathetic to those who believe we should open up the running rights issue to provide for greater competition, but we couldn't find a way legally to do it that would have had the desired effect.

We're not here as opponents to the railways. At least that's not the role of the Minister of Transport or the government. We're here to devise a balanced system.

We feel that with the CTA review starting in a matter of a few weeks—and we're just about to appoint an individual to head that review—these issues, including the possibility of a short-line regional railway, can be looked at and dealt with in a more comprehensive way. Also, surely, other shippers have a right to have their views known, not simply those who are in the business of moving grain. So we feel that all in all it's best to leave that issue for the CTA review.

But what we have done is we have insisted that the individual conducting the review report back to me within six months, and specifically on these issues. In other words, we're not trying to sweep this issue under the rug. Whether there is or is not an election, the fact is that we feel this issue has to be dealt with. We'll be back at the committee later this fall or early next year to deal with this particular point.

Mr. Dick Proctor: Okay.

The Chair: Thanks, Mr. Proctor.

Mr. Comuzzi.

Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.): Thank you, Mr. Chairman.

I have only two questions.

Ontario is one of the largest wheat producers in the country. I think they're the fourth largest. They're the number one producer of winter wheat, which, as I'm told by my colleagues, is beginning to be harvested now.

A voice: Not until July.

Mr. Joe Comuzzi: Oh, we're in June. So it's July; next month.

When you review the legislation and the material that has been given to us, you don't see any reference to the province of Ontario or the Ontario Wheat Producers' Marketing Board. I know they've always had a concern about the allocation of the designated cars. They always felt they were not fairly treated.

Mr. Chairman, I see that on the witness list there's no one representing any of the Ontario producers or the Ontario wheat growers' association. I'd like a response on that. If they're not interested, that's fine.

The second question would go to Minister Collenette. When we withdraw all of that money that up to this point has been made by the railways—and the railways aren't all that profitable—it's obvious that from a straight business perspective, if we're taking $75 million to $100 million out of the revenue for a railway company, they're not going to want to invest a hell of a lot of money in this business in the future. If the two railways in this country adopt that business decision, what will we see in the next five years when railways, which have to keep investing in the infrastructure, decide that this is not a profitable commodity that we should be hauling? And you can't get boats to Winnipeg.

Mr. David Collenette: Mr. Chairman, this is a hypothetical question.

Mr. Joe Comuzzi: I don't think it's hypothetical, Mr. Collenette.

Mr. David Collenette: We don't know if that's the case. Certainly, the railways will be here, and they'll give you their views on it. But I suppose that in a certain period of time they would have to make a judgment as to how interested they are in the level of service and in keeping this particular service. As in other cases, if they feel they cannot live within this particular regime, then they will perhaps make other arrangements in terms of selling off parts of their network more in order to have...

• 1720

We've heard this whole proposition about the regional railway, which has come from Omnitrax. Perhaps it will be a reconfiguration of rail on the prairies. We don't know that for sure, so we can only deal with the current realities.

With regard to the first part of your question, that's a little out of my area in terms of Ontario grain and crops. We're dealing with the transportation of western grain, and, as I understand it, we're not proposing anything that will be detrimental to the producers in the province of Ontario.

The Chair: Maybe the Minister of Agriculture, who is from Ontario, can comment on this.

Mr. Lyle Vanclief: I'm certainly not involved in who you have for witnesses. I don't know whether the Ontario wheat producers have been asked to be witnesses or what their comments are. I think it's up to the committee to make that decision.

Minister Collenette is correct; this is western grain transportation. I know there is a concern. The producers in Ontario have made their views known very clearly with regard to the availability of cars from the government-owned cars. As you know, the ownership of those cars has not changed as of now. They have made their views known on a number of proposals that came forward when that discussion was taking place in the past. It's not one that's on the table right now. I think there was very much understanding on the part of western producers, who are the primary users of the cars, that there was a need for some of those cars in Ontario, and they were prepared to recognize that. That understanding was there at that time as far as the cars are concerned.

Mr. Ralph Goodale: And it still exists.

Mr. Lyle Vanclief: That understanding still exists.

Mr. Joe Comuzzi: Maybe I misunderstood. Here it refers to the grain handling and transportation system, not the western grain handling and transportation system. Perhaps we missed a word.

The Chair: Thank you, Mr. Comuzzi.

Mr. Borotsik, you have three minutes.

Mr. Rick Borotsik: Thank you very much.

Mr. Collenette, my question is basically in the same vein as Mr. Comuzzi's. In your presentation you said:

...a cap on annual grain revenues to be earned by Canadian National and Canadian Pacific Railway. This change will increase price flexibility and efficiencies in the grain handling and transportation system...

You have an 18% reduction in revenues to the railroads. Right now they have only 25% flexibility built into the tender system, or what we would refer to as the commercialized system, of rail transportation. Tell me how the railroads are going to effect efficiencies and price flexibility in the system?

Mr. David Collenette: After analysing the proposition of the revenue cap and the tendering that is going to be done, we feel they will be able to maximize or effect those kinds of efficiencies.

Mr. Rick Borotsik: The railroads are losing $178 million, or 18% of their revenue cap. They have only 25% opportunities built into the tender process, which may or may not result in more moneys, and perhaps less, because you just said we want to have price efficiencies. How are the railroads going to get those efficiencies in order to make it profitable for them?

Mr. David Collenette: Mr. Chairman, Mr. Borotsik has forgotten that the grain company is in the equation, too, so it isn't a question of just the railways.

Mr. Rick Borotsik: That segues to my second question. How can we be assured that the producers are going to achieve some of those efficiencies, that those efficiencies may not in fact be eroded by grain companies and by the Canadian Wheat Board, which still has 75% of the influence on rail transportation? How much of that $178 million do you anticipate is actually going to flow to the producers?

Mr. David Collenette: All of it is going to go—

Mr. Rick Borotsik: All of the $178 million at $5.92—

Mr. David Collenette: —because we're establishing a certain price per tonne.

Mr. Rick Borotsik: And you say that the grain companies, or for that matter the Canadian Wheat Board, are not going to erode any of those efficiencies at $5.92.

Mr. David Collenette: Exactly, and we think this is going to work.

Mr. Rick Borotsik: Okay. We don't know how the efficiencies are going to be developed in the railroads, but we think it's going to work.

Mr. David Collenette: We have great faith in their innovation—

Mr. Rick Borotsik: From a business perspective, I hope you're right that you have that much faith in their innovation.

The Chair: Mr. Borotsik, you have 30 seconds left.

Mr. Rick Borotsik: How are you going to distribute the $175 million over five years, with $6.75 million per year for Manitoba? Is it going to be the federal government, the municipalities, or is there going to be a provincial buffer in there in some fashion?

• 1725

Mr. Lyle Vanclief: When this type of thing was done a few years ago through the CAIP program, it was done by the federal government. There will be a similar process developed for this time.

Mr. Rick Borotsik: Will it go directly to municipalities, from the federal government to municipalities?

Mr. Lyle Vanclief: The final determination has not yet been made, but it worked very well last time. I believe it went to municipalities last time, if I'm not mistaken.

Mr. Rick Borotsik: What program was that, Mr. Minister?

Mr. Lyle Vanclief: It was CAIP.

Mr. Ralph Goodale: That was the Canada agri-infrastructure program, beginning in 1995.

Mr. Rick Borotsik: This was part of the wrap-up of the—

The Chair: Mr. Morrison, you have four minutes, and then we're wrapping it up.

Mr. Lee Morrison (Cypress Hills—Grasslands, Canadian Alliance): I would like to congratulate the ministers on the exquisite timing of bringing this bill in when we have only about a week to look at it. I don't want to be cynical, but I kind of wonder if this was an accident.

Particularly, I would like to make reference to the memorandum of understanding, which we haven't seen yet, which Mr. Goodale has told us several times today he's going to get out just as quickly as he can. I wonder if we should have a pool as to when it's going to arrive, and when the stakeholders—

The Chair: Mr. Morrison, the minister has already stated that he's going to get it to us as soon as possible. Do you have a question?

Mr. Lee Morrison: Could “as soon as possible” perhaps mean Thursday afternoon?

The Chair: If it does, then we're going to have to wait another week before the House adjourns.

Mr. Lee Morrison: Mr. Collenette, you said nothing will change in this regulation with respect to port selection, that it's still going to be in the hands of the board. Isn't this one of the things Mr. Estey wanted to change? Didn't he want it to be market driven? You were telling us about an hour ago that the board is still going to select the ports.

Mr. David Collenette: Yes, based on where the orders come from.

I remember saying it in French. Perhaps I lost something in translation. I'm sure the translation was good. Perhaps my French wasn't good enough for the translator.

Mr. Ralph Goodale: The point, Mr. Morrison, is that the Canadian Wheat Board does not determine the port to which the grain moves; the customer determines the port. They specify where they want to take delivery.

Mr. Lyle Vanclief: That's right.

Mr. Lee Morrison: I've been hearing that for the last three years, but at the end of the day there is a mutual agreement made between the customer and the board, and they will mutually decide from where it's going to be shipped, what will be mutually advantageous. In the case of the board, it will probably be where it's most politically advantageous.

Thank you.

Mr. Ralph Goodale: Mr. Keyes, that remark is truly remarkable. There are basic geographic parameters that pertain to the globe. If you're moving to China, Japan, Korea, or Indonesia, you tend to move it out of the west coast. If you're moving it to Europe or northern Africa, or Latin America, you tend to move it out of the east coast. Those are geographic imperatives that no amount of politics can change.

The Chair: Thank you very much.

Ministers Collenette, Vanclief, and Goodale, we want to thank you for appearing before our committee, and we're thankful for your submissions. You may be called back if necessary, if we have to get into any detail or clarification. We hope you will make yourselves available.

Colleagues, please don't leave. We have a five-minute meeting about the agenda.

This meeting is adjourned, and we'll ask to go in camera on our schedule.

[Editor's Note: Proceedings continue in camera]