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37th PARLIAMENT, 2nd SESSION

Standing Committee on Transport


EVIDENCE

CONTENTS

Wednesday, May 7, 2003




¹ 1535
V         The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.))
V         Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ)
V         Mrs. Bev Desjarlais (Churchill, NDP)
V         The Chair
V         Mrs. Bev Desjarlais
V         The Chair
V         Mr. David W. Goffin (Vice-President, Business and Economics, Canadian Chemical Producers' Association)
V         Mr. Geoff Cowell (Director of Distribution, NorFalco Sales Inc., Canadian Chemical Producers' Association)

¹ 1540
V         Mr. David Goffin

¹ 1545

¹ 1550

¹ 1555
V         The Chair
V         Mr. Louis Laferriere (Senior Manager, Logistics, Technical Affairs, Canadian Chemical Producers' Association)
V         The Chair
V         Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance)

º 1600
V         Mr. David Goffin
V         Mr. Geoff Cowell
V         Mr. Jim Gouk
V         The Chair
V         Mr. Jim Gouk

º 1605
V         Mr. David Goffin
V         The Chair
V         Mr. David Goffin
V         The Chair
V         Mr. Mario Laframboise
V         Mr. David Goffin

º 1610
V         Mr. Mario Laframboise
V         Mr. David Goffin
V         Mr. Mario Laframboise
V         The Chair
V         Mrs. Bev Desjarlais
V         Mr. David Goffin
V         Mrs. Bev Desjarlais
V         Mr. David Goffin
V         Mrs. Bev Desjarlais
V         Mr. David Goffin
V         Mrs. Bev Desjarlais
V         Mr. David Goffin

º 1615
V         Mrs. Bev Desjarlais
V         Mr. David Goffin
V         Mrs. Bev Desjarlais
V         Mr. David Goffin
V         Mr. Geoff Cowell
V         Mrs. Bev Desjarlais
V         Mr. Geoff Cowell
V         Mrs. Bev Desjarlais
V         Mr. Geoff Cowell
V         Mrs. Bev Desjarlais
V         The Chair
V         Mr. Roger Gallaway (Sarnia—Lambton, Lib.)

º 1620
V         Mr. David Goffin
V         Mr. Roger Gallaway
V         Mr. David Goffin
V         Mr. Roger Gallaway
V         Mr. David Goffin
V         Mr. Roger Gallaway

º 1625
V         Mr. David Goffin
V         Mr. Roger Gallaway
V         Mr. David Goffin
V         Mr. Roger Gallaway
V         Mr. David Goffin
V         Mr. Roger Gallaway
V         Mr. David Goffin
V         Mr. Roger Gallaway
V         Mr. David Goffin
V         Mr. Roger Gallaway
V         The Chair
V         Mr. Geoff Cowell
V         The Chair
V         Mr. David Goffin
V         The Chair
V         Mr. Geoff Cowell
V         The Chair

º 1630
V         Mr. David Goffin
V         The Chair
V         Mr. Stan Keyes (Hamilton West, Lib.)
V         The Chair
V         Mr. Stan Keyes
V         The Chair
V         Mr. Stan Keyes
V         The Chair

º 1635
V         Mr. Roger Gallaway
V         The Chair
V         Mr. Roger Gallaway
V         Mr. Stan Keyes
V         Mr. Roger Gallaway
V         The Chair
V         Mr. Mario Laframboise
V         The Chair
V         Mr. Jim Gouk
V         The Chair
V         Mrs. Bev Desjarlais
V         The Chair
V         Mr. John Christopher (Committee Researcher)
V         Mr. Mario Laframboise
V         Mr. John Christopher
V         The Chair
V         Mr. Jim Gouk
V         The Chair
V         Mr. Jim Gouk
V         The Chair

º 1640
V         Mr. Jim Gouk
V         Mr. Stan Keyes
V         Mr. Jim Gouk
V         The Chair
V         Mr. Jim Gouk
V         The Chair
V         Mr. Roger Gallaway
V         Mr. Jim Gouk
V         Mr. Roger Gallaway
V         Mr. Stan Keyes
V         Mr. Jim Gouk
V         Mr. Stan Keyes
V         Mr. Jim Gouk
V         Mr. Stan Keyes
V         The Chair
V         Mrs. Bev Desjarlais
V         Mr. Jim Gouk
V         Mrs. Bev Desjarlais
V         Mr. Roger Gallaway
V         Mrs. Bev Desjarlais
V         Mr. John Christopher
V         The Chair
V         Mr. Stan Keyes
V         The Chair
V         Mr. Roger Gallaway
V         Mr. Jim Gouk
V         The Chair

º 1645
V         Mr. Jim Gouk
V         The Chair
V         Mr. Jim Gouk
V         Mr. Stan Keyes
V         The Chair
V         Mr. Jim Gouk
V         The Chair
V         Mr. Roger Gallaway
V         The Chair
V         Mr. Roger Gallaway
V         The Chair
V         Mrs. Bev Desjarlais
V         The Chair
V         Mrs. Bev Desjarlais
V         The Chair
V         Mr. Stan Keyes
V         The Chair
V         Mr. Stan Keyes
V         Mrs. Bev Desjarlais
V         Mr. Mario Laframboise
V         The Chair
V         Mr. Mario Laframboise
V         Mr. John Christopher
V         The Chair
V         Mr. John Christopher
V         The Chair
V         Mr. John Christopher
V         The Chair
V         Mr. Jacques Duchesneau (President and Chief Executive Officer, Canadian Air Transport Security Authority)

º 1650
V         The Chair
V         Mr. Jacques Duchesneau
V         The Chair
V         Mr. Jacques Duchesneau
V         The Chair

º 1655
V         Mr. Jacques Duchesneau
V         The Chair
V         Mr. Michael McLaughlin (Vice-President and Chief Financial Officer, Canadian Air Transport Security Authority)
V         The Chair
V         Mr. Michael McLaughlin
V         The Chair
V         Mr. Michael McLaughlin
V         The Chair
V         Mr. Michael McLaughlin
V         The Chair
V         Mr. Michael McLaughlin
V         The Chair
V         Mr. Jim Gouk
V         The Chair
V         Mr. Jim Gouk
V         The Chair
V         Mr. Jim Gouk

» 1700
V         Mr. Jacques Duchesneau
V         The Chair
V         Mr. Jacques Duchesneau
V         Mr. Mark Duncan (Vice-President, Operations, Canadian Air Transport Security Authority)
V         Mr. Jim Gouk
V         Mr. Jacques Duchesneau

» 1705
V         Mr. Jim Gouk
V         Mr. Jacques Duchesneau
V         The Chair
V         Mr. Roger Gallaway
V         Mr. Jacques Duchesneau
V         Mr. Roger Gallaway
V         Mr. Jacques Duchesneau
V         Mr. Roger Gallaway
V         Mr. Jacques Duchesneau
V         Mr. Roger Gallaway
V         Mr. Jacques Duchesneau
V         Mr. Roger Gallaway
V         Mr. Jacques Duchesneau
V         Mr. Roger Gallaway
V         Mr. Jacques Duchesneau

» 1710
V         Mrs. Bev Desjarlais
V         Mr. Michael McLaughlin
V         The Chair
V         Mr. Michael McLaughlin
V         The Chair
V         Mrs. Bev Desjarlais
V         Mr. Roger Gallaway
V         The Chair
V         Mr. Michael McLaughlin
V         The Chair
V         Mr. Michael McLaughlin
V         The Chair
V         Mr. Michael McLaughlin
V         The Chair
V         Mr. Michael McLaughlin
V         Mr. Roger Gallaway
V         The Chair
V         Mr. Jacques Duchesneau
V         The Chair
V         Mr. Jacques Duchesneau
V         The Chair
V         Mr. Jacques Duchesneau

» 1715
V         The Chair
V         Mrs. Bev Desjarlais
V         Mr. Stan Keyes
V         Mr. Jacques Duchesneau
V         Mr. Stan Keyes

» 1720
V         The Chair
V         Mr. Ovid Jackson (Bruce—Grey—Owen Sound, Lib.)
V         The Chair
V         Mr. Mario Laframboise
V         Mr. Jacques Duchesneau
V         The Chair
V         Mr. Mario Laframboise
V         The Chair
V         Mr. Mario Laframboise
V         Mr. Jacques Duchesneau
V         Mr. Mario Laframboise
V         Mr. Jacques Duchesneau
V         Mr. Mario Laframboise
V         Mr. Jacques Duchesneau
V         Mr. Mario Laframboise
V         Mr. Jacques Duchesneau
V         Mr. Mario Laframboise
V         The Chair










CANADA

Standing Committee on Transport


NUMBER 026 
l
2nd SESSION 
l
37th PARLIAMENT 

EVIDENCE

Wednesday, May 7, 2003

[Recorded by Electronic Apparatus]

¹  +(1535)  

[English]

+

    The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.)): This is the transport committee to review Bill C-26, an act to amend the Canada Transportation Act, the Railway Safety Act, to bring in some legislation on VIA Rail, and to make some amendments to the other acts as needed.

    I welcome our first witnesses today from the Canadian Chemical Producers' Association: Mr. Cowell, Mr. Goffin, and Mr. Laferriere. All three of you can make some introductory remarks, usually about 10 minutes. But feel comfortable, it's rather informal. Then we'll go around and I'm sure everyone will have some questions on your presentation.

    The brief has been prepared and I'll need an all-party resolution to have it translated. It will be translated, unfortunately not prior to the hearing. I think we're moving too fast for the translators. Will you approve of its distribution?

[Translation]

+-

    Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ): Thank you, Mr. Chairman, I do not accept it.

[English]

+-

    Mrs. Bev Desjarlais (Churchill, NDP): I won't either.

+-

    The Chair: Fine.

    Boy, get these guys something to eat before we go any further here. It's going to be a rough meeting.

+-

    Mrs. Bev Desjarlais: Don't tick us off then.

+-

    The Chair: That's fine.

    Mr. Goffin.

+-

    Mr. David W. Goffin (Vice-President, Business and Economics, Canadian Chemical Producers' Association): I apologize for coming without the French version of our brief. The process has moved too quickly for our translation, in any event.

    We realize there are a number of important aspects of Bill C-26. As a group that's going to concentrate on the rail aspects, we appreciate this opportunity to be in quite early in the process.

    The Canadian Chemical Producers' Association represents approximately 65 member companies. They produce $17 billion worth of chemicals annually. We export 77% of our production. Out of that 77%, 85% of our exports go to the United States.

    Approximately 50 of our 65 companies rely on rail transportation, to one extent or another. We have major petrochemical companies in Alberta with very large-volume shipments that rely virtually totally on rail transportation. From there we go down to smaller formulated and speciality chemical companies in places like Ontario and Quebec that use trucks, to a fairly large extent, and have some or no rail shipments.

    Where does that leave us as an industry? When you look at rail car loadings, we rank about sixth among major commodity sectors. Where we really come to the forefront is on export shipments. If you look at export rail tonnage, we are second only to forest products in the exports we're sending across the border by rail. In terms of import rail tonnage, by far the largest component of the rail transportation business is chemicals.

    Before going any further I'll ask Mr. Cowell to explain where his company, one of our members, fits into this as a rail transporter.

    Geoff.

+-

    Mr. Geoff Cowell (Director of Distribution, NorFalco Sales Inc., Canadian Chemical Producers' Association): Thank you.

    NorFalco is a division of Noranda and Falconbridge, two Canadian mining companies. Our responsibility is marketing and distribution of the sulphuric acid that is produced by Noranda and Falconbridge. Sulphuric acid is a corrosive liquid chemical.

    We produce approximately 2 million tonnes a year, and 1.8 million tonnes of that is shipped by rail. We spend $112 million a year on transportation costs, and $96 million of that is for rail. We do about 19,000 rail car shipments a year from five plants in eastern Canada. So rail is very important to us. The distance between our plants and our customers is approximately 1,200 miles, so we're essentially captive to rail.

    Of our five plants, three are competitively served, and two are served through the competitive access provisions of interswitching. One of those is jointly served by the Ontario Northland Railway and CN. The other plant is captive to CN, although we do a portion of that business by marine transportation. We have modal competition at that location.

    As David said, the bulk of our business--80% of our sales--is to the United States.

¹  +-(1540)  

+-

    Mr. David Goffin: When the Canada Transportation Act review panel looked at the rail system, they said it worked well for most users most of the time. We would agree that statement is basically correct for shippers that have access to the lines of more than one railway, either through direct access or interswitching. But what about the companies that don't have competitive rail access?

    In 1998, in preparing for that review process, we surveyed our members. They identified 45 plants that depended on rail and could not switch to trucks, largely either because of the volumes they were shipping or, in some cases, for safety reasons. For example, chlorine shippers will ship by rail rather than truck to keep the commodity off the highways. So they identified for us 45 rail-dependent plants at 34 locations across Canada.

    Of course, in some of our locations like Sarnia--Mr. Gallaway's riding--or Fort Saskatchewan, we have many plants in the same general area, as far as rail transportation is concerned. Of those 34 locations, we found that only half of them had either interswitching arrangements or direct access to the two railways. The other half did not have competitive rail service.

    What does that translate to in the actual effect on the shipper? It's harder to determine than it used to be, with today's widespread use of confidential contracts. The prices at which different chemicals are moving are not transparent to us or to other people. But there is one indication of what it means.

    In 2001, Alberta Transportation did a study using Travacon Research, and you can find that study on their website. They found that petrochemicals and chemical products, including fertilizers, were among four sectors that were captive to rail, and they had less rail competition than would exist in a competitive market. That meant their rail rates were higher. In our case the rates in Alberta, as a sector, comprise a 9% greater contribution to the railway costs than you would find in a competitive system.

    So the companies in that situation are finding that their rail rates are higher than they would be if they had competitive options. They also frequently point out that they feel their service is not what they would expect in the competitive market. One of the key things we're looking at in Bill C-26 is what the bill will do to help address that. Unfortunately, we don't find all that much. But before I go into that area, let me mention a few things that Bill C-26 does that we find generally positive.

    First, it removes the requirement for the Canadian Transportation Agency to assess whether a shipper would suffer substantial commercial harm before they had access to a regulatory remedy. This is something that was put in the 1996 legislation. Shippers didn't feel it was needed. It's a subjective test that even today is not fully understood, and from our point of view it's positive that it's being removed.

    The bill retains interswitching, which as I pointed out is very important to our members in providing competitive access where they have it. It expands the final offer arbitration provisions to clarify that a group of shippers may join in one proceeding and submit one offer for arbitration when their offer seeks common relief. In “Straight Ahead”, the example they use is railway charges for car cleaning. If a group of shippers has a problem with that, this makes it clear they can join in on an FOA process.

    It's not only car cleaning. Last year we found that 26 of our members had serious difficulties with the railways for costs that were being imposed through tariffs for things like car switching, car placement and supply, car demurrage, storage, and weighing. Through disagreements between railways and shippers, shippers were facing bills of many thousands of dollars for these services, many of which were in dispute.

    We supported the Canadian Industrial Transportation Association in going to the agency to ask for relief. The agency found it had no statutory authority to provide relief in this instance, and suggested that either final offer arbitration or the court system was the remedy for shippers. This provision in Bill C-26 would make it perfectly clear that FOA was an option for shippers in this situation.

¹  +-(1545)  

    There's one thing we might look at in the wording for the provision that's been added. It provides that if a group of shippers makes an offer in this situation, the terms of the offer must apply to all of them equally. At this point I find it difficult to get my head around exactly the type of offer a group of shippers might make in this instance. It might be problematic to make the offer equally from all shippers who face these charges in different circumstances. That is one aspect of that provision, which is a very good one overall, we might want to look at.

    Bill C-26 retains the current level of service provisions, which we agree works well. It will also give the Canadian Transportation Agency the statutory authority to engage in mediation when there is agreement by the parties. The agency may also, on its own initiative, refer a dispute for mediation. Our members view this greater use of mediation in the future as positive, rather than going to more litigious means of dispute resolution. If the agency is going to refer something for mediation on its initiative, we trust the agency to be judicious in doing so and only refer matters to mediation when they know there's a reasonable chance of having success, rather than just slowing down the process and adding cost to it if the mediation is highly likely to fail.

    Now let me turn to Bill C-26, where it attempts to address those situations I referred to where shippers do not have competitive access through interswitching or direct access. The bill proposes to replace the competitive line rate mechanism with a competitive connection rate. I think everybody understands that what we're talking about here is a shipper with a plant that's not within interswitching limits, so he can't get from his local railway to a connecting railway using interswitching. He needs a connection rate from his plant to another railway when that other railway is prepared to give him a better deal than his local railway.

    How does he get from his plant out to that competing railway? The competitive connection rate would attempt to do that. The shipper would first try to negotiate with his local railway, as he does today. If that failed, he would then go to the agency for a competitive connection rate, very similar to the current competitive line rate mechanism.

    Bill C-26 makes the positive step of removing the requirement that before the shipper goes to the agency he must have an agreement with a connecting railway. That's a barrier that some of our companies have found, in using the current provision. They go to a connecting railway to see if it's possible to reach a better agreement with them than with their local railway. The connecting railway says they might be interested in that business. But then the customer, the shipper, has to say, “I have to go to the agency to get a rate because I can't get a rate from my local carrier. Once I have that rate in a few months I'll come back to you and we can talk about this”.

    The reaction at that point is that the connecting railway's interest disappears. “Who knows what might happen two or three months down the line? You have to go to this agency. Maybe we should forget this whole idea”. Removing that requirement and letting the shipper get the rate first is a good step.

    With a competitive connection rate, two new tests are proposed that the shipper must satisfy before they get to the agency. They have to show that the rate they're being offered by the local railway is in the 75th percentile of revenue-per-tonne-kilometre. They also have to satisfy a captivity test to show they are captive to their local railway.

    We think both of these hurdles are going to be difficult to address. They're going to slow down this process and impose unnecessary costs. Currently, in the CLR provision there is no such test as this 75th percentile of revenue. In terms of a captivity test, there's a very simple statement in the CLR that the shipper applying for the rate must have access to the line of only one railway. From our point of view, that is sufficient.

¹  +-(1550)  

    We suggest that rather than introducing this new competitive connection rate, just go back to the CLR provision, without the requirement for a prior agreement and the substantial commercial harm test, and leave it at that. Will that work for our members? We're not totally sure. Some of them think that would make the mechanism viable; others aren't so sure.

    Bill C-26 also introduces a provision that if through using this mechanism there's a real financial viability effect on the railways, the governor in council has the power to suspend the provision. We fully support that safeguard. It was in the 1987 act. It didn't have to be used when CLRs were first introduced, and we don't think it would have to be used now. But if there is concern about railway viability due to this provision--which seems to have stimulated these two tests I've referred to--leave in that financial viability safeguard and act upon it, if there's a need to do so.

    We had hoped to see railway running rights in the legislation. We have a few members who would be interested in using running rights in very limited circumstances. I'm not going to go into them in these opening remarks; you're going to be hearing quite a bit about them from the forest products people when they meet with you. We can talk about how we might use running rights, but I'll leave that for now.

    Bill C-26 substantially changes the national transportation policy, and that causes us some concern. For shippers like Mr. Cowell who's out there on a day-to-day basis, or even for me in the association, what's in the national transportation policy doesn't affect us all that much. But it becomes vitally important when a shipper goes to the agency, or if a decision from the agency ends up in the federal court. This policy statement in the act then becomes very much a basis for the case that is made in those venues.

    In the old act we had some very powerful statements in the chapeau of section 5. It referred to the best use of all available modes of transportation at the lowest total cost as being essential to serve the transportation needs of shippers. It commented that the objectives of the transportation policy were most likely to be achieved when all carriers were able to compete both within and among the various modes of transportation. So in that chapeau, these very strong statements concerning competition and the needs of shippers modified the whole of the transportation policy.

    In Bill C-26 some of this wording is continued, but now most of it--if it's in there at all--is taken out of the chapeau and appears as one of six conditions in the national transportation policy. We feel that has considerably weakened the emphasis on competition and transportation at the lowest possible rate.

    The new section 5, in proposed paragraph 5(d), would also introduce a somewhat confusing new statement that:

(d) the price paid by users for transportation services better reflects the full cost of services chosen;
Now when you go to “Straight Ahead”, it seems this is aimed at incorporating environmental, infrastructure, and social costs into the transportation costs. We agree with that direction, but we question whether it's timely to introduce this in the legislation.

    “Straight Ahead” points out that Transport Canada has concluded that establishing a financial value for these costs remains very uncertain. We are concerned about what this might mean in the legislation; what it might mean in the negotiating process with the railway; or if you end up in front of the agency, how the railways might suggest this section be interpreted in terms of the costs that should be covered by a rate.

    On transportation mergers and acquisitions, we feel that the process set out is a good one. From our interest in future rail mergers, we would like to see them being handled by the agency. Right now, it may be the agency, or it may be somebody else appointed by the minister. We have a good deal of confidence in the agency--in its expertise and its ability to run a public hearing process, if that's required--and we would like to see the agency have that jurisdiction.

¹  +-(1555)  

    To sum up, we think Bill C-26 makes a number of improvements to the existing rail transportation legislation. When it comes down to really improving competitive access to shippers who don't have that today, we question whether the provisions in the bill are going to make much difference. That's disappointing, because in “Straight Ahead” the government comments that it shares the panel's view that there may be instances of inadequate market forces, and in those cases, targeted provisions or recourse are needed to protect users from potential abuse of market dominance. They point out that such provisions could also be expected to stimulate further carrier efficiency.

    Those are two really good goals to try to achieve, but unfortunately we don't think the CCR provision and leaving expanded running rights out of the legislation will help to achieve those goals.

    With those opening comments, Mr. Chairman, thank you very much. We'll attempt to respond to your questions.

+-

    The Chair: Thank you, Mr. Goffin.

    Mr. Laferriere, do you wish to add anything to those comments?

+-

    Mr. Louis Laferriere (Senior Manager, Logistics, Technical Affairs, Canadian Chemical Producers' Association): No.

+-

    The Chair: Mr. Gouk.

+-

    Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance): Thank you, Mr. Chair.

    I've already talked to a couple of groups that are going to come before this committee and haven't yet. To use an incredibly overused adage, I find a lot of this bill, particularly as it relates to the rail provisions, to be the old “rearranging the deck chairs on the Titanic”.

    I get the impression from the rail companies that they don't really like a lot of this bill yet they support it, not because it has a lot of good stuff in it, but because there has to be a review of the Canada Transportation Act and this doesn't open it up to wide-open running rights, which I think they are justified being concerned about.

    I've talked to another big shipper group that is going to come before us. They are looking for things and have a lot of concerns about the preamble to the act itself, with regard to competition and the attitude about competition.

    At best, particularly if we put in the amendments that you and others are asking for, I think this bill is shuffling around the problem. But we have a much bigger problem in how the whole system operates. The rail companies have a lot of legitimate complaints that have nothing to do with shippers. There are the antiquated capital cost allowance problems, and the fuel tax they pay when they provide 100% of their own infrastructure and then get taxed on it to boot.

    I've had conversations on the concept of getting government funding--as shocking as this might be--for rail infrastructure. There's the rationale--to pick a figure--that $1 billion spent by the government on rail infrastructure could conceivably save as much as $3 billion on the highway system, if they could move a lot of the heavy long-haul traffic off highways and stop wearing out the highways, with all the associated problems.

    Right now, with your comments and the things that are in the bill, we're trying to say, “You know, we have a lot of problems. We can put a damper on this problem by putting this rule into place that will sort of stop that. They want something else over here that'll offset what we're doing on it”.

    Frankly, I honest to God do not believe this bill is going to see the light of day. It's a bad bill, not because of the shipper thing or because of the rail, but because it's just a plain, stupid, bad bill. When you start getting into the airline aspects of this thing, it's ordering stuff on both sides that isn't going to do any good for either side, and that neither side wants. We're putting things on the rail line that the rail doesn't want. It's pretty bad when the rail companies say, “We want this bill because, by God, it could be worse”.

    Notwithstanding there are certain changes you're going to be looking for, even if we pass this bill and put in some of your amendments, and so on, there will always be some things you'd like to see changed, either because the light of day exposes a problem or something else. As the bill stands right now, as opposed to what you have right now, is it worse to pass the bill without amendments, or just not pass the bill at this time--basically not deal with it for quite some time?

    Let's face it, there are a lot of things happening in federal politics right now. There are going to be a lot of changes; there are going to be changes in attitude. You can decide if those are going to be either better or worse, but there are clearly going to be changes, and this thing is coming right in the middle of them.

    So from your perspective, which is more desirable: the situation as it stands right now, with the proviso that there is going to be a review and maybe an opportunity...? Frankly, I would prefer it if the shipping organizations got together with the things they would like to see, sat down with the rail companies, and said, “Here's what we need. What impact does it have on you? What do you need to make this work for you or to offset this so we can actually get a system that works for both of us?” Which of those two scenarios would you prefer?

º  +-(1600)  

+-

    Mr. David Goffin: Mr. Gouk always asks easy questions to respond to.

    That would be an easy question to respond to, except for one aspect of the bill--the expanded FOA provision I mentioned that is important to us. In that area of charges for various services, we are sitting down with the railways. We hope we are making some headway. When we sit down and talk about competitive access and rates, it's more difficult.

    In the competitive access area of this bill, which is very important, the way it's drafted now is not going to do very much. It will do virtually nothing, so leave it. The only question is the FOA provision, which I know is very important to a number of our members, including Mr. Cowell's company. So I'll ask him for his response to that easy question.

+-

    Mr. Geoff Cowell: Thanks.

    I agree that in the absence of change I would prefer the current legislation to the one that's proposed. But on the accessorial charges, the FOA is very important. Over the past year, we've seen a number of instances of unilateral action by the railways to impose new rules or higher charges for some of these costs, and an unwillingness to negotiate. We feel that this small change in clarifying whether FOA applies will go a long way toward bringing the railways to the table to discuss the issues.

    We understand some of their concerns, and in some cases they have legitimate concerns. They're using monetary penalities as a way of changing 100 years of bad practice, but they want to implement them in 20 days and you can't turn the ship around that fast.

    As David said, we are sitting down with them on some of these issues and working through them as a group, but in the absence of that change, the current legislation is preferred by me.

+-

    Mr. Jim Gouk: Could I just have a quick one, so you'll have the comparison between the long one and the short one?

+-

    The Chair: It will be the first one you've had that's quick.

+-

    Mr. Jim Gouk: That wasn't a quick one.

    I've talked to a number of groups, and they've brought up a number of complaints about problems they've had with the railway. When they've asked me what they should do about this I've told them, “For starters, don't come after the legislation is written and tell me about all these problems I don't know about. Get together as an industry, do a paper, and ask to meet with this committee to tell us what your problems are so we can have some input”. It's a whole lot easier to try to influence the legislation that's going to be written than to try to change it after the minister has put his name to it.

    If this thing fails, will you undertake to go back, work as an industry, and put something together so you can discuss with us what you need? Then we can talk to the railroads and say, “What implications does this have on you? What would make this work for you”? Then we can do something ahead of time and do our work more constructively as a committee, rather than trying to tinker around with what the minister has put his name to.

º  +-(1605)  

+-

    Mr. David Goffin: We'll certainly do that. As a group of shippers, we do work cooperatively. Hopefully, you'll hear from the entire group of shippers later on in this process. As we indicated, whenever we can sit down with the railways, we do so. We'll certainly undertake to do that.

+-

    The Chair: Thank you, Mr. Gouk.

    In your cost of shipping, there's a lot of litigation involved in final offer arbitration, and so on. How do you asses the cost of legal bills? It gets to be pretty expensive running to tribunals all the time, doesn't it?

+-

    Mr. David Goffin: It does, and our members certainly prefer to avoid that. Very soon after the 1987 legislation was introduced, one of our members was the first to use the competitive line rate provision. Since then, our industry hasn't been before the agency, just for the reason you've pointed out--the cost of doing so. Even our large members think twice before getting to that point. They've had cases in preparation and have managed to settle, but the cost of going there is certainly something to keep in mind.

+-

    The Chair: I can't comment.

    Monsieur Laframboise.

[Translation]

+-

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

    You said you were part of a task force. It has surely submitted its recommendations to the minister. You do realize that the content of the bill is not the same as what your task force discussed. Could you tell us what the major differences are, for the benefit of those who will read the minutes of our meeting or who are listening?

[English]

+-

    Mr. David Goffin: The most significant differences are in the competitive access areas. When we look at the competitive connection rate process that's proposed, what we have today is a competitive line rate process that isn't working. Our recommendation was to make it as simple as possible and as close as possible to the interswitching provisions, in terms of process, because interswitching does work. The competitive connection rate is much more cumbersome and complex than what we have today.

    I referred to two aspects of it, particularly the 75th percentile test and the captivity test. Our members say, because of the reasons raised by the chairman, “We will never use this provision. We are looking for a simple provision to get from my plant to a connecting carrier. What we have here is an agency process that we feel is going to be time-consuming and costly for us”.

    The second area is running rights. Our members do not expect to use running rights to any great extent. We have about seven or eight companies that would like the possibility of using running rights. These are generally companies that are on provincial railways today, so any competitive access mechanisms in the federal legislation does not apply to them.

    If the provincial railways they are on had the ability to run over the lines of federal railways to connecting carriers, that would give them competitive access. In our particular case, that would involve running over those lines for a pretty short distance. So if there had been expanded running rights in the legislation, particularly including provincial railways, our members would have been interested in that.

    So those two areas of competitive access are the key deficiencies in the bill, from our point of view.

º  +-(1610)  

[Translation]

+-

    Mr. Mario Laframboise: Is it the rail companies who asked the government to submit the provision on the 75th percentile? How can you arrive at that figure? If it is not supported by your industry, how can the government end up with the provision on the 75th percentile?

[English]

+-

    Mr. David Goffin: It came from the members of the Canada Transportation Act review panel that reviewed the legislation. I assume the expert advice provided to them was certainly not recommended by shippers. I can't recall railways or academics--from the evidence I saw anyway--making this recommendation.

    I mentioned that a financial viability test has been added to this provision as well. I think the 75th percentile test was put in to try to ensure that if this competitive connection rate actually worked and shippers used it there would not be an undue impact on railways.

    We said to Transport Canada when we saw it, “Look, this isn't going to work, but reintroduce the financial viability test that was in the 1987 legislation. If there's a really dramatic effect on the railways, suspend the provision and we'll start over again”. Ironically, that's in the bill, but they left in the 75th percentile test. So we have kind of belt and suspenders in there today. We're protecting the railways at the front end and at the back end as well.

[Translation]

+-

    Mr. Mario Laframboise: Thank you.

[English]

+-

    The Chair: Thank you, Mr. LaFramboise.

    Mrs. Desjarlais.

+-

    Mrs. Bev Desjarlais: Your presentation was very good, and I look forward to seeing it in print. I was trying to keep notes on the different things, but I just want to verify something. You said you have 65 members, and $72 billion annually.

+-

    Mr. David Goffin: No, it's $17 billion. We'd like to have $72 billion.

+-

    Mrs. Bev Desjarlais: I had to verify that.

    When you're talking about the competitive lines rates, as opposed to the competitive connection rates, can you explain exactly how each would work? How exactly would that process play out from start to finish on either side, just for those of us who have no idea how it works?

+-

    Mr. David Goffin: To respond to that question fully would take a good deal of time, but we have a side-by-side comparison I can provide to the clerk after today.

    Briefly, today a shipper seeking a competitive line rate to reach a competing carrier has to go to the competing carrier first, reach an agreement on a rate, commit the traffic to that competing railway, and then go to the agency. That's the major barrier our members have found to using this provision. It just intrudes so much upon the usual negotiation process where you sit down, make a deal, and it goes into effect.

    Bill C-26 would actually resolve that. I have to give credit to the drafters of the legislation for acting on that and removing that barrier. But they introduced two other barriers. You have to satisfy this 75th percentile entry test. Before you can get to the agency you have to satisfy the agency that the rate you're being offered by the railway--

+-

    Mrs. Bev Desjarlais: When you say the agency, who are you specifically talking about?

+-

    Mr. David Goffin: The Canadian Transportation Agency.

+-

    Mrs. Bev Desjarlais: Okay, I just wanted to verify that. That's fine, because I got your comments before about it getting you at both ends.

    So your answer is they could go back to the competitive line rate, just remove those qualifiers, and you'd have a better system. Is that what you are looking for?

+-

    Mr. David Goffin: That's right. That would give us a better system than what we have today and what this competitive connection rate would provide. We'd like to see whether that would work in the marketplace.

º  +-(1615)  

+-

    Mrs. Bev Desjarlais: You made the notation about the paragraph in the bill or in “Straight Ahead” that said “a long environmental, social, and infrastructure...”. I don't have the exact wording in front of me here. Although you agreed with that, you said it just wasn't the right time. When would the right time be?

+-

    Mr. David Goffin: That's a good question. This goes to what's called the concept of full-cost accounting, and being chemical companies, our members tend to use that quite a bit. So you should build into your decision-making the full cost of your operations on society. Our member companies are generally doing that. They use it today if they're making a decision to put in one type of plant or another, or one type of process or another. They will look at the full cost and make their decision based on that.

    It becomes more difficult to apply in the marketplace because it's a kind of “who goes first” question. If you build those costs into your pricing and your competitor doesn't, despite what we all say as citizens about valuing the environment and society, when we go to the store to buy a product we pick the cheapest one. So that becomes a barrier.

    It also becomes a barrier when you're export-oriented like us. We're shipping, for example, into U.S. markets, and all of a sudden we have the full costs built into our price but our U.S. competitor does not, either in their market or when they compete in our market. Then we have problems in the market.

    So we have to get over that hurdle one way or another, but we don't feel we're at that point today. How you get to that point is a very difficult question, and I don't know what the answer is.

+-

    Mrs. Bev Desjarlais: Do you know how the shippers operate in conjunction with the U.S. railways? What type of processes do they have in place? Do they have something like the competitive line rate? How do they deal with things?

+-

    Mr. David Goffin: Do you want to comment on that, Mr. Cowell?

+-

    Mr. Geoff Cowell: Sure. We do a lot of our negotiations directly with the U.S. railways. Legislation in the U.S. is completely different. There are no competitive access provisions in the U.S. whatsoever. Their process for resolving a dispute between a shipper and a railway is much more cumbersome, expensive, and time-consuming than the process we currently have in place.

    Frankly, one of my concerns is that with these small changes, as we go through these reviews, it almost feels like we're getting closer and closer to the U.S. system, whereas the U.S. system is taking a look at some of the competitive access provisions we have and trying to improve their situation for their shippers, in terms of competitive access. So in some respects the U.S. is trying to come closer to our legislation, and we're trying to get closer to theirs. From the shipper's perspective, ours is far easier to use and it takes far less time to get disputes resolved.

+-

    Mrs. Bev Desjarlais: You said theirs is much worse. Can you tell me what they do?

+-

    Mr. Geoff Cowell: In as polite a way as possible it's really, “Here's our offer; take it or leave it”.

+-

    Mrs. Bev Desjarlais: It's my party.

+-

    Mr. Geoff Cowell: There's very little negotiation with the U.S. railway. Our customers are captive, so if we're going to sell to an American company, the railway we use is determined by who serves their plant. They don't have competitive access, so we're forced to negotiate with a certain railway. They know that if this traffic is going to come in by rail, it's going to be coming in on their railway. Whether NorFalco handles it or ABC company, they don't care. They determine what their revenue requirement is, and it's pretty much take it or leave it.

+-

    Mrs. Bev Desjarlais: Thank you.

+-

    The Chair: Thank you.

    Mr. Gallaway.

+-

    Mr. Roger Gallaway (Sarnia—Lambton, Lib.): Thank you.

    One of the criticisms--if I can be polite about it--we've been hearing around this legislation is not just about railroads and shipping, but about the process. You've made reference to the Canadian Transportation Act review panel and expert advice given to Transport Canada, but we learned yesterday and in some previous meetings that there are provisions in this bill that are regarded as being extremely negative. But it's worse than that, because nobody knows where they came from. It's a form of policy that springs from unknown sources.

    In terms of making these references to the competitive access problems in this bill and the fact that you engaged in the CTA review process, of the four or five things you most dislike in this bill, can you identify their genesis? Where did they come from?

º  +-(1620)  

+-

    Mr. David Goffin: In terms of the competitive connection rates, as shippers we seemed to make no headway with the review panel at all. Although there have been only five or six applications under the competitive line rate mechanism that exists today, if it were a stronger provision there would have been more, but we still don't feel there would have been that many. But the review panel seemed to fear that if it made any improvements to the mechanism at all it would open the floodgates to shippers approaching the agency for competitive line rates. We're convinced that wouldn't happen. We don't have companies out there wanting to go to the agency.

    The chairman commented on the cost and time involved in going to the agency. We don't feel that would happen, so we think the review panel--with respect--was misplaced in its concern in this area. I think that's largely why they didn't accept the arguments of shippers.

    The review panel did recommend there should be running rights. There's a long history of recommendations for running rights, starting with the work Mr. Justice Estey did a few years ago. “Straight Ahead” was our first indication that expanded running rights were not going to make it into the legislation. That was one that came from Transport Canada.

    We had never seen these changes to the policy, to my recollection, or even heard them discussed. The review panel did lay out a number of recommendations on how the policy might be revised, but it pointed out that it was a very difficult provision to revise. They laid out some guidelines for revising it, but in our discussions after that with the government I can't recall this really coming up. So it was a surprise to us when we saw the extent of the revisions in the legislation.

    That again came from Transport Canada.

+-

    Mr. Roger Gallaway: You mentioned, in your last statement, your discussions with the government. I'm assuming you're referring to your discussions with Transport Canada.

+-

    Mr. David Goffin: Yes. After the review panel came out we had discussions with both the agency and Transport Canada. I must say that compared to 1996, we found the consultation process much improved. We felt we had a number of good meetings with Transport Canada, although we were quite surprised with the outcome we saw in the bill, in some respects.

    We also felt it was positive that Transport Canada, this time around, seemed to consult quite a bit with the agency that actually had to apply this legislation. So in many respects we felt the consultation process was good. We're just not all that happy with the outcome.

+-

    Mr. Roger Gallaway: Mr. Coffin, what is a consultation? I'm really confused. I hear about consultations going on. There are bureaucrats running all over the place here and they're consulting, but is there any record kept of your discussions? Is there any chance for you to examine that record? Is there a record of who was in attendance and what happened to whatever you said?

+-

    Mr. David Goffin: No, there isn't.

+-

    Mr. Roger Gallaway: So with whom did you consult at Transport Canada? Could you give us names?

º  +-(1625)  

+-

    Mr. David Goffin: The people moved from position to position as the process took place, but we generally met with people at the director general level or director level in policy.

+-

    Mr. Roger Gallaway: What were their names? I'd like their names. Can you recall?

+-

    Mr. David Goffin: I can let you know their names, but I'd rather not put that on the record today.

+-

    Mr. Roger Gallaway: This is a parliamentary committee. You can put their names on the record; that's not a problem. This is a court of Parliament.

+-

    Mr. David Goffin: I guess I'm getting to the age where my memory isn't as good as it used to be--

+-

    Mr. Roger Gallaway: Okay, that's fair. I'll accept that. But there's no reason to be reticent about naming names here. You're fully protected.

+-

    Mr. David Goffin: I'll come back to the clerk with a list of the meetings we had and who we met with.

+-

    Mr. Roger Gallaway: Is it fair to say that at least some parts of this legislation--and you've identified some today--spring from a policy base that came about post-consultation, and you really don't know where they came from?

+-

    Mr. David Goffin: Other than the competitive connection rate, which goes back to the review panel report, that's right.

+-

    Mr. Roger Gallaway: Okay.

    Thank you.

+-

    The Chair: Mr. Keyes.

    Mr. Jackson.

    Thank you all.

    Mr. Goffin, on the productivity aspect, you said that 80% of your business is in the United States. So with the sulfur dioxide Mr. Cowell was talking about, and so on, you're not only competing with those industries in Canada that produce that, you're competing with industries in the United States. In Canada, about one-third of the cost of the product is made up of transportation costs. Is that fairly accurate?

+-

    Mr. Geoff Cowell: Our transportation costs reflect 80% to 85% of the revenue we earn from sulphuric acid. They're extremely high. Sulphuric acid is a low-value commodity chemical, and because we're a long way from the market, our freight costs are proportionately higher. They're not 30% in our case.

+-

    The Chair: In what you produce in the industries you represent, what is the average cost of transportation, as a percentage?

+-

    Mr. David Goffin: You've probably picked one of the more difficult sectors to ask that. We have a number of members that are rail shippers, and the transportation costs are generally about 10% to 40% of the selling price. But when you get to situations like Mr. Cowell's, they're considerably more.

+-

    The Chair: If you lose a client in Canada because of the 80%, everybody loses. If we lose the sulfur dioxide market--

+-

    Mr. Geoff Cowell: Sulphuric acid.

+-

    The Chair: If we lose that market in Canada, not only do you lose a 20% profit, but everybody loses--the railways and the people who work on them. We just lose an industry.

    What we're trying to do here is get the government out of the way. Lots of us on this panel have been around the government a long time. It gets pretty confusing with all the regulatory controls we have.

    You're a mature industry and the railways are a mature industry. Isn't there some other way to handle this problem you have, other than through the costly regulatory process?

º  +-(1630)  

+-

    Mr. David Goffin: Unfortunately, I don't think so in the area we are focused on, where a shipper has access to the lines of only one railway. As I indicated, in other areas we do sit down with the railways and make progress. When it comes down to rates or moving the business perhaps to a competing carrier, it's a very difficult area for the railway involved to deal with.

    However, we don't expect the type of regulatory process we're asking for to be invoked very often. It would become something that was used between the railway and the shipper in the negotiating process, for sure. On the extra 10% on rates that Alberta Transportation calculates we pay in Alberta, we would like this mechanism in the background--have the railway know it's there--to give our shippers a bit more leverage when they negotiate with the railways, but they wouldn't actually go to the agency and invoke that unless they really had to.

+-

    The Chair: Mr. Goffin, Mr. Laferriere, and Mr. Cowell, thank you for coming today.

+-

    Mr. Stan Keyes (Hamilton West, Lib.): Mr. Chairman, may I ask a question?

    There are so many committees meeting on the Hill today, we're just trying to rustle up a couple more members so we can have quorum to carry through with your agenda, as posted on the request for travel of this committee. While we're waiting for the requisite number of members to be here to deal with the issue on the record can we--of course, with the approval the opposition--at least start a discussion on this now?

+-

    The Chair: Sure. That's a good point. Thank you.

+-

    Mr. Stan Keyes: It has to go to liaison anyway.

+-

    The Chair: When is the liaison meeting?

+-

    Mr. Stan Keyes: It's tomorrow. You'll want to have this discussion so we can submit their request.

+-

    The Chair: Does anybody have a copy of what we're trying to do?

    Thank you.

    Does everybody have a motion in front of them?

º  +-(1635)  

+-

    Mr. Roger Gallaway: I think the motion before us is redundant because according to our schedule CATSA is the next witness. They are here, so we don't need to deal with that.

    On motion number two, why don't I kick things off by moving it?

+-

    The Chair: You're right. Go ahead.

+-

    Mr. Roger Gallaway: I think it's somewhat self-explanatory. It's to travel with respect to Bill C-26. I note that Thompson, Churchill, and Kamloops are all included.

+-

    Mr. Stan Keyes: This time.

+-

    Mr. Roger Gallaway: In any event, the numbers are before us. It involves $381,071. I move the motion and open it for discussion.

+-

    The Chair: Mr. Laframboise.

[Translation]

+-

    Mr. Mario Laframboise: In your last proposal, you spoke of going to Montreal for two days. I see that in this one, there is reference to one day in Montreal. Will that allow enough time to hear all the witnesses whose names I submitted, Mr. Clerk? In the motion tabled in the previous meeting, if my memory serves, there was reference to spending two days in Montreal. Today we are being told that we will spend two weeks in western Canada and one week in eastern Canada, namely one day in Moncton, one in Halifax, one in Montreal and two in Toronto. In the previous submission, there was talk of spending two days in Montreal.

[English]

+-

    The Chair: Mr. Clerk, you answer that question.

+-

    Mr. Jim Gouk: You schedule all the witnesses for Quebec in one day.

+-

    The Chair: Yes, go ahead. I seem to recall that, Mr. Laframboise. There were two days in Montreal.

+-

    Mrs. Bev Desjarlais: Much like we recall Churchill and Kamloops.

+-

    The Chair: I'll go to Churchill but I'm not going to Thompson. Somebody else can go.

    Go ahead.

+-

    Mr. John Christopher (Committee Researcher): The idea is that the witnesses we have now will only take one day. If we get more witnesses, we can extend the time in Montreal and cut the time in another centre. We have some flexibility.

[Translation]

+-

    Mr. Mario Laframboise: That is why I asked you whether the witnesses whose names I submitted would all be heard. That is what you told me. I submitted a list of nine witnesses. I want to ensure we have enough time to hear those witnesses, assuming they agree to come.

[English]

+-

    Mr. John Christopher: They will be heard.

+-

    The Chair: Mr. Laframboise, I can guarantee that we will listen to your witnesses. If we can consolidate them, that will be fine. If need be we will sit in the evening to accommodate your witnesses and take whatever days are necessary.

    Can I make that commitment, ladies and gentlemen? Thank you.

    Mr. Gouk, what's your problem now?

+-

    Mr. Jim Gouk: Other than the attitude of the chair, nothing.

+-

    The Chair: I'm going nowhere else in British Columbia.

+-

    Mr. Jim Gouk: You could do worse, Joe.

    I'd be interested in the answer to this question. In the interest of saving money by cutting down on the cost of travel, it says there will be one member from each opposition party for a total of four. I'm curious. Given there will be no votes, no dilatory motions, and we're going there to hear witnesses, why will we have just one from each of the opposition parties for a total of four, and five Liberals? What's the reason for having five times as many members as any opposition party and having an overall majority, when there are no votes and nothing that you need a majority for?

+-

    The Chair: Off the top of my head, if I'm going to try to answer this question--somebody correct me who's better qualified in parliamentary procedure--evidently the liaison committee doesn't approve anything over nine members. Is that correct?

º  +-(1640)  

+-

    Mr. Jim Gouk: Is that over nine or under nine?

+-

    Mr. Stan Keyes: He's talking about sending fewer members, Mr. Chair.

+-

    Mr. Jim Gouk: I'm not trying to send more.

+-

    The Chair: Oh, you want fewer members.

+-

    Mr. Jim Gouk: It says right here that in order to reduce the cost of travel we have reduced the number of members to nine, including one from each opposition party. I personally don't have a problem with that. I don't have problem with one Conservative and one Canadian Alliance; or one NDP and one Canadian Alliance. To hell with the difference in the size of our parties; we're going there to hear evidence and I can hear it as well as two people. But why do we need five Liberals if we're trying to cut down on the number travelling to save money?

+-

    The Chair: Mr. Gallaway.

+-

    Mr. Roger Gallaway: The rules of the standing orders, as I understand them, require that there be one more government member than opposition members. So the clerk is required to propose a budget premised on four opposition members, representing each opposition party, and five government members. He has no control--

+-

    Mr. Jim Gouk: The standing orders say that? I can understand that when there are votes, or that sort of thing.

+-

    Mr. Roger Gallaway: If there are votes in the House, then the proportionate balance is absent--in a sense paired--when they're out of town. That is the reason for it.

    In any event, we have found that although the budget says nine people, we always come in under budget because people come and go, or not everybody goes. The clerk is constrained by that.

+-

    Mr. Stan Keyes: It's not just the clerk, Mr. Chairman, but the whips of the parties as well. They have a concern about ensuring there is a balance in the committee when they're on the road and absent from the House.

    Beyond that, even though the government side has nine members from one party, at least five of them will go because, unbelievable as this may sound, Jim, a lot of us have a great interest in hearing what the witnesses have to say and going to the territory where we're dealing with the subject matter. It would be great if we just sent one from each party, but a number of us care to go and actually hear the witnesses in that location--just as you supported Kamloops.

+-

    Mr. Jim Gouk: Okay, I can go along with that, notwithstanding the fact, Stan, that every time we talk about not needing to have witnesses, you're one of the people who points out it still can be submitted into the record and we can all read it.

+-

    Mr. Stan Keyes: You can.

+-

    Mr. Jim Gouk: I'm not trying to stop it; I'm just curious--

+-

    Mr. Stan Keyes: That's at the witnesses' convenience, though.

+-

    The Chair: We're into a debate.

    Mrs. Desjarlais.

+-

    Mrs. Bev Desjarlais: I just want to point out that in the second week--I know we've planned for a whole week there--of our discussions it was suggested that because of the overnight trip by rail from Thompson to Churchill we could actually hear witnesses on the train. That kind of arrangement could be made.

+-

    Mr. Jim Gouk: We might as well, as there's no place to sleep. We're leaving those arrangements to you.

+-

    Mrs. Bev Desjarlais: I don't believe it. There is a baggage car....

    I would be surprised if seven days were used for that Winnipeg-Thompson-Churchill-Thunder Bay section.

+-

    Mr. Roger Gallaway: It'll take hours to get there.

+-

    Mrs. Bev Desjarlais: You can hear witnesses in the evening and in the morning, and when you get to Churchill there may be some. There's also a charter taking us on this trip; it's not by scheduled air. So that gives us more time. But even if you have fewer members going from Ottawa to Winnipeg, it's not going to cost any less for the charter.

+-

    Mr. John Christopher: Again, those were put in as maximums. We realize there will probably be less time required.

+-

    The Chair: Mr. Keyes.

+-

    Mr. Stan Keyes: I'm going to leave it to the experts, the clerk, and the researcher to organize these things and the hours between visits to particular municipalities. Any trip I've ever taken with a committee to do some work has rarely left any time to go to the washroom, never mind entertain anything beyond the committee's work. There's really no downtime, relaxation time, or time that wouldn't be used by this committee.

+-

    The Chair: All in favour of acceptance of the budget.

    (Motion agreed to)

    The Chair:Thank you.

    Do you want to take the chair for the subcommittee?

+-

    Mr. Roger Gallaway: No, you go ahead.

+-

    Mr. Jim Gouk: I just have one question that's relevant

+-

    The Chair: Is this one question on the motion we just passed?

º  +-(1645)  

+-

    Mr. Jim Gouk: It's relative to the motion we passed. When will the clerk have more specifics on flights and when we will be in a given town, so we can plan around that?

+-

    The Chair: He's very good, so I'm sure he'll get it to you.

    We're in the formative stages. Tomorrow we go to liaison.

+-

    Mr. Jim Gouk: I'm looking for an indication; I'm not looking for something written.

+-

    Mr. Stan Keyes: ASAP.

+-

    The Chair: As soon as we know, you will know. How is that?

+-

    Mr. Jim Gouk: I'll hold you to that.

+-

    The Chair: Next is item 2, subcommittee.

+-

    Mr. Roger Gallaway: I'll start by moving the motion, but I would delete paragraph 2 on hiring the services of a consultant. So the motion will be all that is printed, save and except paragraph 2.

+-

    The Chair: You're moving the motion with the exception of item 2.

+-

    Mr. Roger Gallaway: Yes.

+-

    The Chair: So item 2 will not be discussed.

    Mr. Gaudet or Mr. Laframboise? No.

    Mrs. Desjarlais.

+-

    Mrs. Bev Desjarlais: As I indicated yesterday, I have every intention of talking to my colleagues who have traveled with the marine subcommittee. I haven't had an opportunity to do that yet, so until I do I'm not in agreement with this because I would like to discuss with them the necessity of this trip.

+-

    The Chair: You can abstain.

+-

    Mrs. Bev Desjarlais: Sure I could.

+-

    The Chair: If you agree, and after you talk to--

+-

    Mr. Stan Keyes: I have a question.

+-

    The Chair: Just let me go through this process.

+-

    Mr. Stan Keyes: There's no need.

+-

    Mrs. Bev Desjarlais: You have the majority anyway, so go ahead.

[Translation]

+-

    Mr. Mario Laframboise: I would like to intervene, Mr. Chairman.

[English]

+-

    The Chair: Mr. Laframboise.

[Translation]

+-

    Mr. Mario Laframboise: With regard to the date, this committee is scheduled to travel from the 20th to the 30th of May. My understanding is that some committees will probably travel after the Standing Committee on Transport. Can't we move our trip forward one week? Will the members on that trip go on the other trips? June 24th is the Quebec national holiday and we would certainly like to be home to celebrate it.

[English]

+-

    Mr. John Christopher: We'll have to talk to the stakeholders, but I think we could shift it a little bit earlier.

+-

    The Chair: You want to be back on June 24.

+-

    Mr. John Christopher: You want to be back before June 24.

+-

    The Chair: If we can't be back on June 24, you would come back on your own.

+-

    Mr. John Christopher: We could try to accommodate that

    (Motion agreed to)

+-

    The Chair: Thank you, everybody.

    Thanks, Diane. Thank you, Mr. Charbonneau. Thank you very much.

    We will continue the meeting, pursuant to an order of the House dated Wednesday, February 26, consideration of the Estimates 2003-04, votes 2, 5, 10, 15, 20, 25, 30, 35, 40, 45, 50, 55 and 60.

    We welcome our witnesses on the estimates today from the Canadian Air Transport Security Authority: Mr. Duchesneau, Mr. McLaughlin, and Mr. Duncan.

    Do you want to make a statement, Mr. Duchesneau?

+-

    Mr. Jacques Duchesneau (President and Chief Executive Officer, Canadian Air Transport Security Authority): Yes, Mr. Chair. I have a statement of roughly 10 minutes on what has been done over the last year.

    Good afternoon, Mr. Chair and members of the committee. Thank you for inviting us here today to talk about the main estimates. Before I go any further I would like to introduce my two colleagues. Mr. Mark Duncan is a vice-president and chief operating officer. Mr. Michael McLaughlin is a vice-president and chief financial officer of CATSA.

    As you know, we appeared before this committee just a few short months ago. At that time we had only just begun our operations and had not yet taken over full responsibility for pre-board screening, or PBS, as we know it. With a new fiscal year before us and your committee's recent report, it is an opportune time for CATSA to be here today to answer your questions on the estimates, within the context of our activities over the past year, and our priorities for the coming years.

    Our fiscal year ended only a month ago, so you can appreciate we are still in the process of reconciling our expenditures to close the books. However, I would like to share with you as much information as possible.

    Despite the challenges the airline industry posed by economic slowdowns, the September 2001 terrorist attacks, the emergence and growth of competitors, rising fuel costs, the war in Iraq, and the outbreak of SARS, it is clear that the most far-reaching and long lasting--

º  +-(1650)  

+-

    The Chair: We all know that. Can we get right down to what we're trying to discuss, please, Mr. Duchesneau?

    Our five-year budget is $1.9 billion. This is an expenditure, and it comes from the Consolidated Revenue Fund. Is that correct? Carry on from there. We know all the history of the airline business. If there's anything this committee knows, it's the problems in the airline business. We don't have to go through it again. Let's just talk about the expenditures, if we can.

+-

    Mr. Jacques Duchesneau: So you would like to talk about numbers?

+-

    The Chair: Yes, please.

+-

    Mr. Jacques Duchesneau: Okay. Our funding level established last September for this year was $459.676 million, which can be broken down into $181.891 million for capital and $277.785 million for operations.

    Capital expenditures include all costs related to the purchase and installation of explosives detection systems, while operating costs or expenditures include labour costs for pre-board screening, checked baggage screening, as well as policing programs and administration costs.

    I would like to underline the fact we've begun a review of all airport integration plans to ensure that the best technical and financial solutions are met. To date, we have been able to identify cost savings of about $30 million, as we move along and meet with airport authorities.

    We under-spent last year by roughly $75 million, for many reasons. Mainly, the equipment we have to put in place is huge, and sometimes we needed to work closely with the airport authorities, so we could not spend as planned because of certain problems.

    One important message I also have to underline is that we cannot rely only on equipment, but on human resources--on people handling that equipment. So we've put a lot of effort and work into training our people. So far it's been quite good.

    I think that's my message, Mr. Chair.

+-

    The Chair: I thank you for that.

    According to your evidence you spent approximately $458 million in the first year, and you under-spent by $75 million.

º  +-(1655)  

+-

    Mr. Jacques Duchesneau: No.

+-

    The Chair: Our funding level established is $459 million.

+-

    Mr. Michael McLaughlin (Vice-President and Chief Financial Officer, Canadian Air Transport Security Authority): Perhaps, Mr. Chair, I can clarify.

+-

    The Chair: Please do.

+-

    Mr. Michael McLaughlin: The $459 million is the estimate for the fiscal year 2003-04. The estimate for the prior fiscal year, which we have just completed, was $323 million, and we've under-spent by approximately $75 million. Our books aren't closed yet, so there's still some work to be done. The Auditor General's in the process of completing the audit.

+-

    The Chair: Of that $250 million, how much was spent on capital and how much was spent on operating?

+-

    Mr. Michael McLaughlin: We spent $78.2 million on capital and $166 million on operating, which included the pre-board screening operating expenses.

+-

    The Chair: Do you want to add anything else to that, Mr. McLaughlin? Those are the figures that are in the past, and now we're looking at the estimates of--

+-

    Mr. Michael McLaughlin: For the upcoming year, the current estimates are $181.9 million for capital expenditures, and $277.8 million for the operating expenditures.

+-

    The Chair: That would be an increase of almost double on capital and another $110 million on operating expenses.

+-

    Mr. Michael McLaughlin: We also have to realize the year completed was the first year of operation and was only a partial year. Equipment was brought in and deployed during that year. The deployment schedule is much more rapid through the second year.

+-

    The Chair: Does everybody understand those numbers? So we're operating with the same numbers.

    Mr. Gouk.

+-

    Mr. Jim Gouk: Thank you.

    Gentlemen, I've worked in air traffic services for 22 years, and I will make a blatant statement to you right now that I can get a great assortment of weapons--explosive and non-explosive alike--into Vancouver, Calgary, Ottawa, or whichever airport you choose. If anyone wants me to challenge that, get me the legal authority to demonstrate it and I'll do it.

    I have great concern. It's not because I think you're doing a poor job; it's because there are inherent weaknesses in the system that defy the ability to stop a determined person.

    I'll let you comment on that, but I have two other questions I want to ask.

+-

    The Chair: Can I seek your indulgence for just a moment? I've just been advised that Mr. Gallaway has a commitment.

+-

    Mr. Jim Gouk: So do I. I'm waiting for a phone call to pick up my wife.

+-

    The Chair: Sorry, go ahead. Then we'll allow Mr. Gouk to go next.

+-

    Mr. Jim Gouk: I have two other things. I'll get them both out and then let you comment on them.

    First, there's a tremendous back-up, and it's obviously to be expected from this kind of security. The American border, back and forth--this is something they're very concerned about securing. They allow pre-screened people with Nexus cards, subject to spot checks and so on, to cross the border without being stopped.

    Can we come up with something to pre-clear frequent travellers by having them go through a full security screen and background check, to cut down on the backlog of people trying to get through security at a given time?

    On the other one, there's the old adage that a chain is as strong as its weakest link. We're putting the equivalent of CAT scans into some major airports, but there are a lot of little airports--in my area there's Cranbrook, Castlegar, and Penticton--that don't even have basic X-ray. Without even basic X-ray, we check people through there, load them on planes, and then fly them around all the sophisticated equipment in Vancouver, Calgary, or wherever else these things occur.

    I've heard the argument from the minister that you're going to downstream everything, and once you get a CAT scan you're going to take the basic X-ray machine and put it into Castlegar or Penticton. But it's still not as good as what you have. You still have the weakest link at that point.

    The alternative is that you take the small airports that don't have jet traffic, turbo prop traffic, or planes you can rent or lease, and get rid of screening there completely, just like in the south terminal of Vancouver. You simply load the people on board, fly them to Vancouver or Calgary, and unload them into the unsecured area of the airport. If that's as far as they're going, they're on their way. If they're going on a major flight, then they go through your more sophisticated security. It would cut down on the costs tremendously, for one thing, and cut down a lot of the hassles for a lot of the passengers who don't even need to be going through security.

    So I ask you on those points whether or not this thing can really stop people, and I challenge you to let me prove it can't, if you think it can. There's the idea of an equivalent of a Nexus card, and then maybe eliminating security entirely at small airports that don't have jet service.

    Obviously, there'd have to be a minor modification to terminals. The most incredibly easy one would be Calgary, where you're all of 50 feet inside the terminal and you back out on baggage. It would be just as easy to route around that 50 feet; that's all it would take.

»  +-(1700)  

+-

    Mr. Jacques Duchesneau: I will answer the first part of the question, and Mr. Duncan will take care of the second part of the question.

    Yes, we are looking at what we call a trusted traveller card system. Before doing that, because it was one of the new mandates given to us by the minister, we are implementing a new enhanced restricted area pass system for non-passengers using biometrics; making a full investigation into the person we're going to be giving the card to. So that's the first step toward going to a trusted traveller card.

    Yesterday I was with my colleague from the TSA, and they're also looking at that. I think it's important to have a system that connects with our--

+-

    The Chair: What is TSA, Mr. Duchesneau?

+-

    Mr. Jacques Duchesneau: It's the Transportation Security Administration, the equivalent of CATSA in the United States.

    We're working closely together to implement such a system. I know that Customs will be implementing a similar system pretty soon.

    As for the deployment of the system of security in the second part of the question, Mr. Duncan will answer that.

+-

    Mr. Mark Duncan (Vice-President, Operations, Canadian Air Transport Security Authority): I'm certainly aware of Castlegar and all of the British Columbia airports.

    On the issue of the number of airports that actually have screening, it's been set at 89 by Transport Canada, based on a risk-based analysis.

    In terms of operating from an airport that does not have security clearance into an airport that does, we have that capability right now in most locations. In fact, when you fly from a remote location, say Le Pas, to Winnipeg, you go into the non-secure side of the airport.

    The list of airports to which we provide service is basically set by the regulator. The regulator would have to determine the criteria of entry and exit of an airport that would be defined as a security risk.

    On the type of equipment, Transport's direction and our implementation is to have the equivalent level of screening. We're interested in the output. Ultimately, the best search anywhere is to open the bag and search it. You can also X-ray the bag. If you're looking inside the bag with a machine, that allows you a higher volume.

    At smaller airports, traditionally the approach has been to open the bag. We are deploying an explosives detection unit to those smaller airports, so we have enhanced security with that unit, which is actually the end point. If you go through pre-board screening right now, you'll see an X-ray plus an explosives detection unit. So at a smaller airport, we would argue that you're actually getting an equivalent level of service as you would at a larger airport because the bag is actually searched.

+-

    Mr. Jim Gouk: Would anyone care to comment on my argument that I could get a tremendous assortment of explosive and non-explosive lethal weapons into the secure side of an airport, without using any credentials, inside friendships, or anything else--just as a passenger? I challenge anyone who thinks I can't.

+-

    Mr. Jacques Duchesneau: I don't think I would go into that type of challenge. I think the foolproof system would be a police state, where everybody would be searched. We're in the risk management system, and I think our people are doing a great job. I can assure you of that. The measures that have been put in place after September 11 are good measures, and we have improved the system.

    Is the system 100% foolproof? I would not challenge you on that, but that's where we're going. I know there has been a lot of effort to make sure we will reach that 100%

»  +-(1705)  

+-

    Mr. Jim Gouk: The weapon that was used to highjack the planes involved in September 11 was a box cutter...the sharpened edge of a credit card, a pencil, never mind a pen held like this in the hands of somebody properly trained, glass on board.

    Passengers are required to break the little nail file part of their nail clippers off to get on board the plane, yet once on board they're issued with two steel forks, the tines of which are longer than the little clipper they've broken off. Are we going to do some kind of rationalization or balancing out of that?

    I can understand. I accept that the initial reaction is to over-react, and I don't say that unkindly because you're faced with a pretty catastrophic thing. But are you examining whether we should be backing off on some of these things? Maybe we've gone too far. Maybe we've gone a little over the top and should relax some of these points. Once having moved there, do you feel you're stuck there?

+-

    Mr. Jacques Duchesneau: Our job is to always be one step ahead of people who have bad intentions. Our job is to make sure people who board planes are not carrying weapons, and that people within the plane are safe. The measures we have put in place that are still in place are good measures, as I said, but we are improving. We need to put in place a continually improving system, and thinking that equipment alone can solve the problem is making a mistake.

    We need to share information with the RCMP, CSIS, and other agencies around the world. We need intelligence. We need to make sure we have tools of deterrence to make sure people who have these bad intentions will not get close to airports.

    As I said, we're in the business of risk management. Measures are in place now, and I believe they are good measures. Can they be improved? Of course they can, and that's what we're looking at. That's why we need to make good contacts with people around the world to find the best practices.

+-

    The Chair: Mr. Gallaway.

+-

    Mr. Roger Gallaway: Mr. Duchesneau, I went back and looked at the transcript from the last time you were here. You talked about your budget and stated:

We were allocated $2.2 billion for the next five years, of which $1.9 billion precisely has been allocated to CATSA.

    Where did that $300 million difference go?

+-

    Mr. Jacques Duchesneau: There were other measures, but the difference was given, I think, to Transport Canada. Our budget at first was $1.942 billion.

+-

    Mr. Roger Gallaway: In part I and part II of this year's estimates, you say one of the things you'll be doing is developing and implementing an enhanced restricted area pass system, and a system for the random screening of non-passengers going into restricted areas.

    You have 85 employees at your head office. Who is developing this system?

+-

    Mr. Jacques Duchesneau: We have a team right now of six persons, but we're working closely with the airport authorities and Transport Canada to put in place--

+-

    Mr. Roger Gallaway: Do you have a consultant involved?

+-

    Mr. Jacques Duchesneau: Yes, but we are doing more than consulting; we're really working together.

+-

    Mr. Roger Gallaway: I'm not asking if you're consulting. Do you have an outside contract with somebody who is helping you develop this system?

+-

    Mr. Jacques Duchesneau: Yes we do, for the biometrics.

+-

    Mr. Roger Gallaway: I don't know whether it's biometrics. I'm reading from the estimates document and it doesn't tell me that. Your plans and priorities aren't available, so I'm dealing with something that's a very general statement.

    You have a consultant who is working to develop a system for random screening of non-passengers accessing restricted areas at certain Canadian airports. That's what I'm referring to. It's in the document. Who is the consultant?

+-

    Mr. Jacques Duchesneau: IBM is working to find the best system there is. The contract has not been allocated yet; we're trying to find the best way. Are we going to use fingerprints, irises, or whatever system? They're working with us to--

+-

    Mr. Roger Gallaway: I understand that you have a contract with IBM and they're going to make recommendations to you, which you can accept, reject, modify, or whatever. Can you tell us how much you are paying IBM for this contract?

+-

    Mr. Jacques Duchesneau: I don't have the figure.

»  +-(1710)  

+-

    Mrs. Bev Desjarlais: Let's ask his deputy auditor general.

+-

    Mr. Michael McLaughlin: I'm the former deputy auditor general.

    I don't have those figures at my fingertips at the moment.

+-

    The Chair: Can you undertake to get them?

+-

    Mr. Michael McLaughlin: Yes. We will also have to vet it with the Minister of Transport, prior to releasing specific information like that.

+-

    The Chair: I beg your pardon.

+-

    Mrs. Bev Desjarlais: I have a point of order, Mr. Chair.

    They appeared here with the intention of meeting these questions about the estimates. How can they possibly not have that information with them? That was the sole purpose of this.

+-

    Mr. Roger Gallaway: I don't disagree with you.

    Secondly, this is a committee of Parliament, not a committee of the minister. This is a court of Parliament. We're looking for an answer. It's not for the minister to decide whether you can answer; it's for you to answer. The question is to undertake to deliver this.

+-

    The Chair: Obviously, you're not prepared.

    Can I suggest we come back another day, Mr. Clerk, and have another meeting? Apprise yourself of the responsibility of the witnesses. Do I have your permission to do this, ladies and gentlemen? Apprise yourself of the responsibilities of a committee.

    When a committee of the House of Commons brings people before the committee and makes a time available to ask questions on the estimates that will go to the House of Commons and are due within two or three weeks, we expect to get the answers. We don't expect to be told that they have to process the answers through the minister.

    This committee is responsible to the House of Commons for all expenditures. We're dead serious--all expenditures. If you want to hide behind that again as you did the last time, it's not going to work. You're responsible to this committee for answering anything to do with expenditures. Do you understand that, Mr. McLaughlin?

+-

    Mr. Michael McLaughlin: Mr. Chairman, I do understand--

+-

    The Chair: The question is, do you understand the responsibility of a person who is spending taxpayers' money in Canada to answer questions legitimately put by this committee on those expenditures? You said you have to vet that with the minister. That was your answer.

+-

    Mr. Michael McLaughlin: My answer Mr. Chairman, if you will allow me, is that within the CATSA act, section 32--

+-

    The Chair: I don't care about the CATSA act, to be quite truthful with you.

+-

    Mr. Michael McLaughlin: It prohibits the disclosure of information related to security, without the approval of the minister.

+-

    The Chair: Well then the act is....

+-

    Mr. Michael McLaughlin: It prohibits it. So we have an act of Parliament that says we cannot disclose to Parliament this information.

+-

    Mr. Roger Gallaway: May I suggest we adjourn this meeting on the understanding that these witnesses will return, and when they do so we will have legislative counsel present, and they may want to bring their legal counsel? I have a great problem with the idea that questions can't be answered on the basis of security.

    I understand that in certain cases there may be “a legitimate concern”. But if we are to really examine the estimates, particularly of an agency that is new--and I understand it involves a lot of public money from the Consolidated Revenue Fund--I think we need advice and these gentlemen need advice. We need to develop a clear understanding that we're not here to micro-manage security issues; we're here about public money.

    I suggest to committee members that I don't for one moment believe that the expenditure of public money can always be overridden by our witnesses' interpretation of what is a security matter. I think we'll have to get some advice.

+-

    The Chair: Thank you.

+-

    Mr. Jacques Duchesneau: Mr. Chair, may I make a comment?

+-

    The Chair: Yes, by all means.

+-

    Mr. Jacques Duchesneau: I just want to assure you of one thing. It's obvious that you're mad--okay, it's my interpretation--but we're not trying to hide anything.

+-

    The Chair: No one has accused you of that.

+-

    Mr. Jacques Duchesneau: I know, but I just want to make sure, so we're on the same level.

    I've come here with an open book, but how can you ask us to breach a law that has been voted by Parliament? That's the information we had from our legal counsel.

»  +-(1715)  

+-

    The Chair: Mrs. Desjarlais.

+-

    Mrs. Bev Desjarlais: With all due respect, if that's the position being taken, I think each of us as committee members had quite a different impression of what CATSA was all about. I don't think anybody is arguing that there are degrees of security that can't be brought out at a committee. But to suggest that wanting to know how much money is being spent, not even on the equipment--that wasn't the question--but for this consulting firm.... Quite frankly, it sets a very strong feeling of not trusting what you're going to tell us.

    I think it's a big issue for Parliament, even bigger than we're seeing here. You haven't even started, yet there are already questions about the amount of money and whether or not we should even proceed with CATSA, and now you're taking that position.

    I'm even more greatly concerned because you're the former Deputy Auditor General, so you certainly must know the feelings Canadians have about the stringent use of taxpayers' dollars. I think this is even greater than what we're looking at here, simply because you have made the statement that you can't tell us how much money was spent on a contract because of security issues. That's crap, pure and simple.

+-

    Mr. Stan Keyes: Gentlemen, did you bring any of your information on how much is spent in any particular area, at any particular time, on any particular contract, on any particular issue that this committee--as you might guess--might ask you about?

+-

    Mr. Jacques Duchesneau: If the question is whether we have a breakdown of what is being spent, the answer is yes. Part of my speech was to tell you that we are under budget. We are working closely with Treasury Board, and we're not overspending the allocation that was given to us.

+-

    Mr. Stan Keyes: Maybe it would help if I put it into context for you.

    Everybody is aware of what the Auditor General put the House of Commons through the last time she dealt with estimates. It was a wake-up call for many to start taking a look at where money is spent. It was even a greater wake-up call for members of Parliament who sit on committees to bring responsible agencies like yourselves to our committee and to ask the tough questions to get the answers to find out where this money is being spent. So you can see it from our point of view. We have a job to do.

    Now you are called before us on the estimates, so someone had to say to you, “Well, they're probably going to ask for a breakdown of how much money was spent”. You had a wonderful speech and talked, in global terms, about how much money you have and how much money you need. But we're going to start breaking things down, as my colleague, Mr. Gallaway, started to do. So you should have come here prepared to give us some more specifics on the amount of money spent in any particular area of your organization.

    Then, in order to further prepare, you probably should have had legal counsel with you to say whether or not the question was in order, to prevent you from breaking the rule that says, “In some particular cases we can't answer that question because we can't let anybody know how much this particular doodad is going to cost because it might relate to its ability to do a job, and somebody with any kind of bad tendencies could figure out that it might not be able to do the job it's supposed to do because you didn't spend enough money on it, etc”. So all that kind of thing flows.

    So I guess we're frustrated because you came here on estimates, we needed the breakdown of the money, you're not prepared to get that to us because you're not prepared to give us those numbers, and you didn't have your legal counsel here to determine whether or not we could even get the answer because it may infringe upon the laws that govern you.

    So I guess we're asking that the next time you show up, which I hope is going to be in short order, you have your big books with you on the breakdown of costs, as well as legal counsel who can say, “You'd better not ask this because...and there's a good reason for it”. We have to trust counsel for those reasons. We'll have our legal counsel sitting here as well to say “No, you could probably answer that question.” and we can take things from there. But we have to ask these questions.

»  -(1720)  

+-

    The Chair: Thank you, Mr. Keyes.

    Mr. Jackson.

+-

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

    In all fairness to the witness, I think we're in unchartered waters here. Security is a culture, and all of us have to be mindful of it. We usually have CSIS and other organizations here, and there are protocols. Some of it is done in camera. We may have to clear the room if we want all the information.

    So I think the problem we have today is how to establish that protocol where we get all the information and everything without having a fight about whether somebody is trying to hide the information.

    I would say to the witnesses that it's all new to them and they don't quite understand the way the process is meant to be. It's not perhaps that they're trying to withhold information. Security is very important, in terms of what information is given out, because it can be interpreted in different ways. So it's just the protocol we have to establish so we get all the information. Part of it may well be that they have to have counsel, and it may have to be carried out in camera as well.

+-

    The Chair: I think the question was about a contract to a reputable company called IBM to propose some kind of scheme or make a recommendation on what kind of system could be implemented on non-travellers coming to airports going into secure areas. I very much anticipate the legal interpretation of that being a security issue.

    Mr. Laframboise.

[Translation]

+-

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

    Mr. Duchesneau, I am familiar with your rigour and integrity and I am sure we will not catch you next time. Mr. Chairman, I hope the witnesses have been told that we would ask very specific questions on the contracts. I was not involved in the committee representatives' discussions, but I know you and I know that you will be well prepared to answer the next time.

    You say that this year's budget contained $181 million in capital. Will you still be making the usual investments in equipment or do you spread out the loans over several years? Will you be spending $181 million on equipment this year?

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    Mr. Jacques Duchesneau: Mr. Chairman...

[English]

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    The Chair: Mr. Laframboise, with respect, we're going to adjourn this meeting to allow the witnesses to return to their offices, prepare the proper information, and come back with legal council to answer our questions.

    I ask your indulgence, Mr. Laframboise, in saving that question until the witnesses return. Would you mind doing that, because we're going to adjourn?

[Translation]

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    Mr. Mario Laframboise: May I finish? I did not have a chance to speak.

[English]

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    The Chair: You can conclude, yes.

[Translation]

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    Mr. Mario Laframboise: So are those running expenses?

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    Mr. Jacques Duchesneau: Mr. Chairman, that includes cash purchases of equipment as well as installation costs.

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    Mr. Mario Laframboise: We purchased equipment in Dorval. I was told that the level of security at Mirabel is not the same as Dorval. Is that true? Is my interpretation correct?

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    Mr. Jacques Duchesneau: I think the level of security is the same. Did we install the same type of equipment? The answer is no, but we have equipment that meets the requirements very well and provides excellent protection for passengers.

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    Mr. Mario Laframboise: Why wouldn't there be the same equipment at Mirabel?

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    Mr. Jacques Duchesneau: It depends on the type of passenger. At Mirabel, you find mostly people flying to very specific destinations. So you need a special type of equipment. At Dorval, there are all sorts of travellers, people taking national, transborder and international flights, and the volume is totally different.

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    Mr. Mario Laframboise: Who chooses the type of equipment? Is it you or Transport Canada?

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    Mr. Jacques Duchesneau: Transport Canada makes suggestions to us and we install the systems. In fact, we are currently looking at new equipment.

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    Mr. Mario Laframboise: Thank you.

[English]

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    The Chair: Thank you.

    The meeting is adjourned.