:
Good morning, everyone, and welcome to the Standing Committee on Transport, Infrastructure and Communities, meeting 43. Orders of the day are pursuant to Standing Order 108(2), a study of innovative transportation technologies.
Joining us today from the Railway Association of Canada is Michael Bourque, president and chief executive officer; from the Canadian Pacific Railway, Mike Roney, general manager, technical standards; and from the Canadian National Railway Company, Dwight Tays, chief, engineering technology.
Michael, I know you're going to open with comments, so I'll open the floor to you, and then we'll move to questions from the committee.
:
Thank you very much, Mr. Chairman.
I'm delighted to be here. I think it's fantastic that this committee is taking the time to look at innovation and technology across the transportation sector. Of course, I don't understand why you'd want to talk about any mode other than rail, but I understand.
I'm going to speak very briefly; I have the pleasure of being flanked by two real experts from our industry.
I'm going to kick things off by repeating something I have found in my short time as president of the Railway Association, and that is that we are currently enjoying a real renaissance in rail in this country. And renaissance is the right word because of our tremendous history in Canada, where we have the privilege of living in a country that was built by a railway and not by a rebellion. We now are enjoying tremendous growth and competitiveness in the railway sector that we have not seen before.
We also enjoy tremendous public support. We recently did some survey work through Leger Marketing, and fully 93% of Canadians believe the railway sector is critically important to the Canadian economy.
The Railway Association of Canada represents the industry. People always ask me if I have two railways, and maybe I've perpetuated that myth by being here with CN and CP, but in fact we have 55 railway members currently. We also have an affiliation with the whole supplier industry. It's a significant industry when you mark it all up.
We have 40 short-line railways in this country, and each and every one of them is an amazing story about how we move products.
I always like to show this map, because it really tells the story of our industry. We have a tremendous coast to coast reach. As you can see, we are moving products into the United States. We obviously represent North American integration in terms of our supply chain logistics, all the way down to New Orleans. We have 1,100 trains a day moving freight. We contribute $12 billion to the economy in Canada annually, with 35,000 employees.
On that note, I'll turn it over to Mike, who will talk about the innovation and technology of the industry.
It's great to be here.
When I joined the railway as a young engineer in the seventies, my friends thought that was kind of crazy. At that time, of course, a locomotive would pull into a station and the locomotive engineer would pick up a piece of paper. That was his authority to move to the next station. It seemed fairly antiquated, and who would have thought you could make a 30-plus-year career out of that sort of thing? How wrong my friends were.
I have had a lot of fun over the years, being an engineer, working in an industry that always had an inherent ability to use technology. Of course, with trains there's a lot of potential for automation. I'll talk a lot about the potential for diagnostics, and of course the inherent energy benefits from steel wheel on steel rail. Obviously Warren Buffett understands all of that.
All we really needed was the 1996 Canada Transportation Act to give us revenue adequacy and allow us to invest in these various potentials, and that's exactly what the railways have been doing. We've been investing in next-generation technologies that have made us the North American leader in safety, and will continue to be; that have given us the service reliability that our customers are willing to pay for; that have continually reduced the dollars per gross tonne kilometre, which has enabled Canada to be competitive in global markets, on bulk commodities in particular; and that have given us the capacity to grow with the growth of Canada's business.
I'm going to talk about four prime technology streams that we are working on and are very excited about. The first one is trains with locomotive power distributed throughout the train. The second is automated inspection technologies that are turning our finders into fixers. The third is predictive technologies and the data management that goes with it. The fourth is electronic instantaneous application of brakes.
First, talking about predictive technologies and data management, this is the modern way to predict problems before they develop. We are trying very hard to produce an environment where we know signs well in advance of things happening that may require us to schedule to move a freight car into a depot, a locomotive into servicing, or a work order to dispatch a crew to do work on a section of track. We are trying to find things before they become service disruptions. We are trying to find things in particular before they might ultimately produce an incident.
We're doing a pretty good job of that. CN and CP are the most aggressive together of North American railways. We have 13 different types of wayside inspection detectors. Between us we represent 40% of the intelligent detection network in North America. These detectors provide early warnings of weaknesses and monitor the network for any sort of a developing condition requiring maintenance.
There are many examples. We have detectors that can detect overloaded cars or unbalanced loads. We have detectors that can tell us if a wheel is too hot or too cold—in other words, if the brakes are being applied too hard or the brakes aren't functioning as they should on any particular axle. We measure impacts of wheels on multiple locations across the property. Those give us early warning signs of potentially damaged wheels. We can measure wheel wear at track speed. We can measure brake shoe wear.
Of course, we have always been able to measure whether bearings are getting hot and potentially going to fail, but now we're a lot smarter about that, because we network these together. We have prediction algorithms that allow us to predict when an incident might occur. It gives us lots of time for planned maintenance.
These real-time data streams together in our network management centres and in our maintenance depots give us what we call a “digital railway”, where data flows continually to guide preventive maintenance and fluid railway operations.
The second technology I am going to talk about is distributed power. Distributed power means our ability to put locomotives in two to four positions within a train. It gives us much better control on that train, much better overall control of forces, the longitudinal forces that go back and forth between the train, and also reduces the stress state in general of the railway.
We find this is a very important technology for us, particularly in the Pacific gateway, because we need to lift trains through three mountain ranges to get down to the port, whereas some of our global competitors have a much gentler time of it. They release the brakes and away they go. But because of that, by necessity, we have become experts in the world in the use of distributed power remotely controlled from the lead locomotive.
It means our trains are more productive and less destructive. It gives us enhanced locomotive and labour productivity. Very important for Canada is that it enables cold weather operation, because locomotives at different points in the train help us to recharge our brakes, thereby reducing the likelihood of sticking brakes and potential broken wheels. It also improves fuel efficiency and creates capacity for us.
A final one I won't have time to talk to is ECP braking. That's the instantaneous application of brakes throughout the train. That technology is very promising. It gives us shorter stopping distances, it can help us in capacity, and it has a fuel consumption lift.
Now over to Dwight Tays of CN.
:
Thanks, Mike. I appreciate that.
Mike mentioned his 30-plus years with CP. I have to say that with 34 years with CN, I'm a career railroader as well, and I certainly share his passion for the industry.
Regarding environment and sustainability, from a modal perspective, the rail industry is well recognized as a leader in environmental responsibility. As Mike mentioned, steel wheels running on steel rails experience very low resistance. This, in combination with lower grades, enables railways to achieve outstanding fuel use. A locomotive can transport one tonne of freight 180 kilometres on one litre of fuel. In addition, 280 truckloads can fit on the average train, which reduces overall greenhouse gas emissions by 75% and significantly reduces wear and tear on the nation's highways.
In spite of these already impressive numbers, railways continue to invest in research and technology to improve fuel economy and reduce emissions. The rail industry recognizes its responsibility to the environment. In addition, we realize that a greener railway makes good business sense.
Fuel is a major expense for the rail industry, and we work very hard every day to reduce consumption and maximize the value we realize from every litre burned.
From this slide you see that we continue to invest in newer, more fuel-efficient locomotives, and that we have reduced greenhouse gas emissions by 31% since 1995.
I'll talk a little about sustainability. The railways are actively investigating alternative fuel sources, and to date we have done some preliminary testing with diesel biofuel alternatives. I believe some winter testing was done by CP between Calgary and Edmonton to validate the operability of this fuel in our harsh winter conditions.
In addition, we're also actively pursuing a test to validate the feasibility of using liquefied natural gas as an alternative to diesel fuel. This evaluation is in the early stages, but if the testing proves successful, it could be a major step forward for the rail industry. We anticipate that use of liquefied natural gas would enable an approximate 20% reduction in emissions, as well as a significant reduction in particulate matter, and all at lower cost to the railways.
In addition, by using a dedicated tender tank car, we would be able to operate trains from Toronto all the way to Vancouver without refuelling, thereby delivering significant operating benefits.
These are only two examples of some of the innovative work that's ongoing as part of our sustainability drive. We believe sustainability and efficiency are not exclusive, and in many cases the more sustainable solution can also generate operating cost efficiencies.
Sustainability requires that we review and in some cases realign our entire supply chain, as well as all the processes and procedures we use to service our customers. This is a significant commitment on the part of the rail industry, but we believe this is the right path for us, and the path that best ensures a viable and sustainable future.
In addition to the many other technologically related research items we've already talked about, I want to talk a little about the collaborative railway research initiative ongoing at this time. The recent Railway Safety Act review identified a number of recommendations directed at rail research and development activities in Canada. As a result of these recommendations, the Railway Research Advisory Board, which had been in place for a number of years, was reorganized to create a separate management and technical committee.
Mike Roney chairs the technical committee and I'm co-chair of the management committee. Both committees have representation from industry, government, suppliers, and academia. The technical committee's task is identifying and prioritizing research opportunities, while the management committee assumes responsibility for setting general research priorities and ensuring adequate resources are available from both industry and government to enable the required research to happen.
Since this reorganization, considerable progress has been made in developing streamlined research, evaluation, and prioritization processes. In addition, there has been an improvement in the coordination of research activities and consolidation of funding from industry and government.
I'd like to close with one quick comment on what I think is one of our major successes. Recently we've opened a new railway research centre at the University of Alberta in Edmonton. It is jointly funded by Transport Canada, CN, CP, and the AAR, and has recently been granted an NSERC industrial research chair in railway geomechanics.
We have a number of research programs ramping up at this new facility, and I believe this is a major step forward for rail research in Canada. It will also prove to be a key venue for educating and training the next generation of railway engineers and researchers.
With that, I'll turn it back to you, Mike.
Mr. Chairman, I'm mindful of the time, so maybe what I'll do is just skip to our last slide, which is a conclusion.
I again thank the committee for taking the time to look at innovation and technology. This has been a very quick snapshot of the kinds of investments our industry is making. We are very engaged in information technology for a range of uses. We're collaborating with government, and we want to continue to work with government in a collaborative way. The other point I would highlight is the fact that we're making these investments in a voluntary way as part of our own striving for sustainability and efficiency. In many cases, we're enhancing the use of rail, which prevents further traffic from travelling on public highways and public infrastructure. We'd remind the committee that the rail sector is a privately funded sector that pays for all of its own track and maintenance, and even policing, which is obviously a lot less of a burden on government.
Thank you very much, Mr. Chairman. We'd be happy to entertain questions.
:
Yes, it's a nice problem to have. I think it shows the support for rail.
But just to answer your question specifically, I believe there's a lot more scope for electrifying commuter rail first, but of course those things require public investments. Part of the importance of looking at the rail industry and at the innovation and the technologies available, certainly from a public policy standpoint, is for people to understand that when we make those investments as a society, there are benefits that flow to all of society.
First of all, people will use the trains when they're built. If you talk to the general manager of GO Transit, he'll tell you that when he puts a new car on, within two weeks it's full, and the complaints start up again that there's no room. He has gone, in 10 years, from a capital budget of about $100 million to over a billion dollars in capital budget.
So when you build it, they will come. I think where you want to look for electrification to the extent possible, there are also a lot of challenges there with interchange and everything else, but that's probably the place to start.
I actually really appreciate that question. I'll say again that I'm relatively new to the rail sector. There's a tremendous safety culture within the rail business and our safety record is fantastic, but where our safety record is not great is really in those crossings and in trespassing, where the public intersects with rail. It's very difficult for us to control. I think the simple answer to your question is that we need a lot more closings of crossings in this country.
In the old days.... Part of it is our own understanding of rail and the way we think of it, and what it used to be like when you were using a piece of paper to go from one place to the next. It's no longer a back road. It is a highway. It is a superhighway. We need to get people to think that they shouldn't cross the tracks nonchalantly any more than they would walk across the Queensway.
So if we can close more crossings, then we can invest in the crossings that are open and make sure that they're properly signalled, that they have good visibility, and that people are aware of them. If we do that, we're going to see a significant decrease in accidents.
:
That is a very good question. I will begin and then I will ask my colleagues to answer your question as well.
[English]
I think in terms of fatigue, probably the most significant thing we could do to monitor what's going on with our workers, especially the drivers of trains, is to introduce video technology into the trains.
The one thing that's preventing us from doing that has been a debate about whether that is by unions or in legislation. It's something we're working on. In fact, I had a meeting with the Transportation Safety Board yesterday to talk about this. We'd like to work collaboratively with them to introduce it, but like anything else, it's complex.
To me, it's something that's going to have to happen. The technology, obviously, is a lot less expensive than it used to be. I think the public would have an expectation that in terms of safety, we need to know what's going on, and we need to use that technology to prevent accidents. Whether it's monitoring fatigue or it's determining whether drivers are getting bored and starting to text or to use iPads or any of the myriad of technologies we have today, I think we would see significant benefits from the introduction of that technology.
:
Fatigue and fatigue management are significant issues in any industry that operates on a 7/24 basis, and certainly that's the definition of the railroad.
One of the best things the railway can do—and we strive very hard to do this—is to make sure our trains run on schedule and they run on time. When our trains are on schedule and on time, we know when the trains are going to depart. It makes it much easier for us to forecast crew times, when we're going to call our crews, and when the crews have to be ready for work. If we can tell a crew 8 or 10 or 12 hours out that they're likely to be called in a certain window, it makes it much easier for them to plan their rest. We strive to do that whenever we can.
In a lot of places we do have defined call periods for our crews, when the crews will be called and when they won't. That's not one hundred per cent. That certainly seems to be of benefit as well.
But I'll go back and say that the key for us is to be able to schedule our trains, to know when the trains are leaving, and to manage our crews based on when the crews are going to be leaving the terminals so they have adequate time to get their rest.
I can mention one now, because it came up earlier, if it's okay with the chair. I did leave the slide, but I thought we could maybe deal with some of these issues in the questions and answers, so I appreciate the question.
Right now we are working with the government on crossings regulations. The regulations were written before input was sought from the rail sector. There are provisions within those regulations that are absolutely unacceptable to the rail industry. I'll give you two examples, and I'd ask the committee to keep in mind that we're working with the government in a collaborative fashion; we're making some headway on these issues. I'm not leading with these kinds of things, and we are working on them, but they're still of concern to us and they are not 100% resolved.
The first issue was snowplowing. In the first draft of the regulations that we saw, which went out for consultation to the broader public, the requirement was for the rail industry to plow the roads on crossings. There are some 30,000 crossings in this country. Many of those are private crossings. Traditionally, the users of those crossings plow them, because they're the ones who use them. Of course, we will plow using the train itself to keep the tracks clear. But in many cases we're not very concerned whether a car can drive over that private crossing in a day. That's one example, and they've since said that was a mistake.
The second example was a rule that required that we not stay in a crossing longer than 10 minutes. As you've heard, we are running longer trains. The reason for running longer trains is that we are moving more goods and it is a more efficient and sustainable way to move cargo. If you pull out of the Vancouver port and you have rules governing the speed that you can come out and you have a long train, if you do the math, length times speed, we're going to be in some crossings longer than 10 minutes. So it's unacceptable to us to have a regulator that will introduce a regulation that we cannot meet. It's not the way to introduce a regulation.
We were quite unhappy with the way those regulations were put forward without our input. We're happy that they are spending some time now getting our input, but we could have resolved a number of those issues before they were written.
I'll leave those.
This is an absolutely fascinating discussion. I want to first of all commend our chair for his great wisdom in thinking of inviting the railways to appear before our committee.
Thank you for that, Chair.
To begin, I was very intrigued by your statement at the outset that the railway is experiencing a renaissance. I agree with you on that. There's really nothing more Canadian than the image of the Mountie in red serge on horseback with the train behind them racing through the mountains.
You were dead on when you said this country was not built by revolution but by the railroad. We are the only country in the world that was not created out of revolution or rebellion. The history of the railroad holds a very special place in the hearts of all Canadians.
I want to talk a bit about the railway industry as an economic generator in this country. You mentioned the industry employs 35,000 people directly and that you contribute $12 billion annually in tax dollars to various levels of government in the country.
:
There have been a number of significant changes. First of all, I would mention that 17 years ago CN was a crown corporation, and it was certainly not enjoying the level of productivity and efficiency it is now.
What's come out of that are a number of investments. If you look at their network, as an example, their reach into the United States, they purchased a railroad that essentially has a ring road around Chicago; 23% of all railroad traffic in the United States touches Chicago. It's a little bit like all roads lead to Rome; almost a quarter of all railroad tracks lead to Chicago. If you look at our map, you can see that both of our major companies travel through there.
CN was able to purchase a railroad that goes around Chicago, which allows them to transport freight to that critical area but also to not get caught in the traffic. Those kinds of investments have been possible because of deregulation, because of private sector investments they've been able to make.
In terms of the impact we have on the economy, I don't even like to use the $12 billion figure. Although it's a matter of public record, and it's an important figure, it belies the importance we play in the economy in terms of moving all of the goods for all of the customers and the different kinds of customers we have in this country.
If you look at the growth in Canada, the mining sector is the number one growing sector in Canada. Most operations would not be able to sell their product without rail, whether it's agriculture, potash, forestry, chemicals, or petroleum products now. Petroleum and chemicals account for more than 20% of rail traffic. It's an incredible story. Five years ago people would not have imagined we'd be moving so much product by rail, something that traditionally moves by pipeline. But we've had the flexibility. Companies like CP have done a great job of identifying opportunities, such as the Bakken, where they're moving shale oil.
Really, the story about freight rail today is about the future growth of this country in terms of our manufactured goods and our natural resources.
If I could take one more moment to tie it to one other thing—
Because time is of the essence, I will be splitting my time with my colleagues.
I want to start by reassuring our guests. If natural resource extraction in Canada leads to more secondary processing, they are going to have even more clients. They can rest easy.
In your introduction, you talked about rail renewal. Perhaps I was mistaken but I had imagined it could also be a source of development. When you look at the rail map included in your presentation, it gives a pretty clear picture of development in the southern part of the country. However, I would have liked to have seen a dotted line indicating routes to the north, particularly in Quebec. In the context of the development of the proposed Plan Nord, we will be needing your services.
Will private companies be responsible for building their own rail lines to connect to your network or are there development plans in place for the Canadian north?
:
Thank you very much. I am pleased that you mentioned the Plan Nord. Canadian National has already announced that it is prepared to build a rail line to support mines in the north. This is indeed a private sector investment, with financial support from the Government of Quebec.
[English]
I also want to touch on your question of value-added, because I come from the chemical industry, and the chemical industry feels very strongly that we need to add value to our natural resources. I think if you look at the success of Canada, we have always had a combination of resource extraction, development, and manufacturing, in terms of the supply chain, to the extent that we can invest in an integrated, advanced supply chain infrastructure—that's going to help us move goods, whether they are canned lentils going to a specific market halfway across the world or they're in a very large container in their rawest form.
In fact, there are many stories—I mentioned this at the outset—of our 40-plus short-line members, and each one of them represents.... If you look at this network, you see predominantly my colleagues in CN and CP represented, but in fact there are a number of short-line operators who link to customers in the north, in the prairies, all across this country, who provide valuable service to customers, whether it's manufactured goods or other resources.
I appreciate you all being here today.
My first question is for Mr. Roney from CP.
Often, the railways are criticized a lot. It's only because, of course, you are such a huge part of the shipping in this country, and you serve many industries. So to use an example from my riding, when the green cars don't show up on time, the railways are criticized. Given the fact that you are so critical to the economy in terms of the shipping you provide, you are criticized from time to time. Sometimes it's deserved.
But today I would like to focus on our topic here, which is transportation technologies, and I want to give some credit where it's due as well. Certainly, the railways do a lot of important work and do a lot of great things. One of those things is very important in my riding.
I noticed the slide with the mountain scene, and I believe it was one of your trains going through my beautiful riding in Banff National Park. Something people, both residents and tourists alike, are concerned about there is collisions with wildlife, and in particular with bears. I know that CP has done a lot of great work to try to mitigate those collisions. I know, for example, that there are the vacuum cars, and there is also the partnership with Parks Canada, for which I believe millions of dollars have been spent to look at technologies that can be utilized in such ways that we can mitigate those collisions. I just wanted to give you an opportunity to highlight and share with us some of the details of that, because I think it would be useful for the committee to know about those technologies being advanced.
:
Thank you for that question. We'd be very pleased to talk about it, and yes, we do get it. We can't be doing this. That is why we're putting the money forward now; we started about a year ago. Of course, it started by fact-finding, as every good project does. So we started tracking bears that had transponders on their collars. We instituted a procedure whereby any train crew who mad a bear sighting had to report where that sighting was, because the first thing was to determine why the bears are on our tracks and the second thing was to determine where they are entering the tracks.
So yes, we do have, as you said, a vacuum truck working continuously to clean up any spilled grain, but more recently we determined, based on these studies, that bears find the track is a neat way to get from A to B. It's the path of least resistance, so they use it as transportation, and we have to stop that.
We've now mapped all the locations where bears tend to access the tracks. First, we make sure there's fencing, but also, where they are able to get on the tracks, we are now putting down studded mats around the tracks that are uncomfortable for them to step on to access the tracks at that location. We have also been experimenting with a device on locomotives that gives them an advance warning that something is coming at them. We've had to do quite a bit of research on that because they have to feel it's a scary thing. If it's just a threat, they just get their hackles up, but if they feel something scary is coming at them, there's a chance they will stay away from the tracks.
We're also looking at sending drone aircraft ahead of trains, or possibly our track inspectors having a device that produces a signal that scares the bears.
So lots of things are going on. As I've said, we're one year into a very serious attempt at solving this problem.
:
Thank you very much, Mr. Chair.
I would like to get back to the issue of level crossings. In my riding, there are a lot of trains, both CP and CN, which is important for employment and transportation. We are quite pleased about that.
A commuter train travels through Montreal West. There is a rather complex level crossing there, and a school nearby. That is why almost every morning and every afternoon, the municipal police are on the scene to ensure there are no problems.
At downtown railway crossings, where there are a lot of vehicles, traffic is stopped for several minutes. At what point could you consider building a tunnel, which would be safer? We know there are costs related to that, but when could you begin to consider that type of project?
:
Thank you for the question. I'd like to talk a little about crossing safety.
My previous role at CN was as chief signal engineer. I'm intimately familiar with crossings, and they are one of the areas where we have substantial opportunity to improve safety, so I appreciate the opportunity to talk about it.
Your question is when would we build a grade separation, either a tunnel or an overpass. Certainly there are significant economic considerations there, especially when you try to build infrastructure in an urban environment; the costs become prohibitive very quickly.
On the crossing side, there are a number of alternatives. Eliminating a crossing is always the safest way to prevent crossing accidents. The Railway Research Advisory Board has done a lot of work and has sponsored a lot of research on crossing protection and improving crossing safety, considering whether cheaper crossing technology exists, not for urban areas but for rural areas. Driver behaviour is certainly one of the key considerations, as is pedestrian behaviour. Device conspicuity—how easy is it to see the crossing devices?
In addition, on that same CN line we installed some second train warning signs to see if that would be an effective warning to people that a second train is coming. We've had incidents when the first train goes by and people make the assumption that they're okay to go. It's a multi-track territory and there could be a train coming on the second track.
So I think there are a number of things we can do to improve crossing safety before we take the fundamental step of investing the significant dollars to do a crossing elimination, although speaking as a railway person, the safest crossing is the one that's not there.
:
I'll just add a short piece to that, Mr. Chairman.
During the passing of the Railway Safety Act we had asked for a small amendment to the act that would have required municipalities to provide notification to the railways if there was going to be construction within 300 metres of the rail line. We asked for that because we've got a number of case studies from across the country where development is taking place. For example, like the one that you've given where there's a school close to the tracks and a development on the other side of the tracks—a fast-food restaurant or some other attraction for kids—we're seeing a lot of trespassing there, with holes cut in the fence and those kinds of things.
Even if there isn't a crossing, it's a simple case of urban planning, where if we had notification we'd be able to work with municipalities to prevent those instances. What we're instead having to do, at tremendous cost to the railway, is to work with individual provinces and municipalities. It's almost like the reverse of eliminating red tape: it's creating a whole bunch of red tape for us in having to negotiate agreements with specific municipalities and provinces to have that kind of notification in place.
Thank you to our witnesses for appearing here.
Mr. Roney, you will probably appreciate a tragic, fatal collision that occurred at a crossing in Lakeshore, in Ontario, in my riding, very recently. Two young girls are dead, three were injured, two critically injured. I know that CP is cooperating with the OPP and TSB in an investigation. Our thoughts and prayers obviously go out to that family.
If I can switch tracks to the study at hand, which is about innovative technologies, there is a good news story out of Essex County. Born in Colchester in the mid-19th century, Elijah McCoy invented the automatic graphite lubricator for steam engines in a home-based machine shop, without a government program. This technology literally transformed the economy because it allowed for the on-time departure and arrival of trains. We get our expression “the real McCoy” from this, because there were many imitators of the graphite lubricator but there was only one real McCoy.
I tell this story because it's not only about rail innovation but it also points to a different time. This was a home-based shop; there was no government program around. It is about an inventor with an idea that transformed an industry.
Moving to the current scenario today, I want to ask how much CN and CP each invests privately in their research and development. What, if any, government programs do they use? If they don't, why? Let's start there, and I'll get a couple of others on the record because I may not have a lot of time.
How many technology patents do you have? You can provide this to the committee later if you don't have it now.
How would you characterize research and development in the rail sector? Is it incremental or transformational?
What drives your innovation, as a percentage? Is it business as usual or the regulatory environment?
I'll leave those questions for the record, but could you first talk about your investment in R and D and the government programs.
:
I can speak to that. The biggest investment we make in R and D really is in supporting the R and D done by our suppliers, by buying their new products. For example, when you spend $3 million on a locomotive to get a more fuel-efficient, lower-maintenance, more powerful locomotive, that is our biggest investment in the R and D, because we are of course supporting what our suppliers are doing. I think that's number one.
In terms of internal R and D, I can only speak for Canadian Pacific here. We contribute to a research program with the Association of American Railroads, and we are in that for about $1 million a year. We probably spend around $5 million to $10 million on other types of research projects. For example, Mr. Richards mentioned the $1 million a year on the bear research program. We support the University of Alberta Canadian Rail Research Lab. It's in that range.
It's a smaller bucket that we do collaboratively with the government, and that tends to be when we're aligned with Transport Canada on common goals. So through the Railway Research Advisory Board—that's about a $3 million program, and we're probably in that for $500,000. We support their railway ground hazard research program cooperatively with the government. It's a smaller contribution that is done collaboratively, and we'd like to see that grow. I'll use the example of Australia. They also have a collaborative research program in Australia, with suppliers with government and with industry, and they're spending $100 million over seven years—a seven-year commitment—and we're only paying, cooperatively, about 14% of that.
We have a good framework right now. There's an opportunity to develop that further through the framework of the Railway Research Advisory Board.
One of the things—
:
We're back for the second part of today's committee meeting.
Joining us today, from National Steel Car Limited, is Mr. Greg Aziz, chairman and chief executive officer; Michael Nicholson, executive vice-president of marketing, sales, and quality; and Peter Scott, regional vice-president of marketing and sales.
I know you've been brought up to date as to the presentation. Then we'll move right to questions.
I'm sorry for the delay. We did start a few minutes late, and I knew there were questions for the other group that members wanted to ask.
I'll ask you to please proceed.
Mr. Chairman and members of the committee, good morning. I'm Greg Aziz, chairman and CEO of National Steel Car.
I'll whip through this as quickly as I can.
National Steel Car—I have up here a picture of our factory, located in Hamilton, Ontario—is the last remaining railcar manufacturer in Canada. We're also one of the largest in North America. That factory you're looking at is over two million square feet on 75 acres.
National Steel Car was founded in 1912 in Hamilton. We're celebrating our 100th anniversary this year. We employ 2,000 people. We've hired over 1,200 people in the last 18 months. We are the largest single-site railcar manufacturer in the western hemisphere. We're the only Canadian car builder. We have five production lines at this factory. We've invested over $350 million over the last 15 years in plant automation and advanced manufacturing technologies.
We're here to talk about the renewal of the Canadian grain car fleet. As Canadian farmers sell their grains into a competitive global market, one of the biggest impediments to their success is the inefficiency of our current railcar fleet for carrying grains. We believe the most effective way to enhance Canadian grain farmers' competitive position in world markets is to replace this current Canadian grain car fleet, which is obsolete. It's past its useful life. It is inefficient from a variety of standpoints. The design is outdated. Most of these cars were built in the early 1970s. At the time, the gross rail load allowed on North American rails was 263,000 pounds. That was raised in 1995 to 286,000 pounds. The gross rail load is the combined weight of the empty piece of equipment and what it's carrying. Some 20,000 pounds of additional grain can be carried in new modern equipment.
So the design is outdated. The carrying capacity is much lower than what is currently available in the marketplace. There are loading and unloading inefficiencies in the old fleet compared to what's available today. The dimensional envelope is outdated. There is a high cost of repairs and maintenance due to obsolete replacement parts.
I couldn't help but notice that your previous fellow who was testifying on behalf of CP Rail.... The reason the bears are getting killed is that the grain is leaking out of these old cars. That's how inefficient they are.
What National Steel Car is proposing is the new car that you see up on the screen, which is far more efficient.
One of my colleagues here will go through and talk about the efficiencies of the new equipment we're proposing, which was designed and patented by National Steel Car.
:
Again, on a train-start basis, on an 8,000-foot train, we're looking at a 20% increase in capacity. So again, there is more loading efficiency. This is good news for all the stakeholders. As Greg mentioned, there are nine additional cars in that 8,000-foot train.
There are three discharge gates on the next-generation cars, which provides a 25% reduction in the handling of the cars. The current fleet is, on average, more than 35 years old. The newly constructed cars will be designed for a 50-year life, whereas their predecessors had a 40-year life. Again, there's a 25% increase in the design life of a modern and efficient fleet.
As the railroads continue to increase train length, these improvements will only improve. On a tonnage basis, there will be an additional 16,000-plus tonnes of grain per train start. There will be more than 145,000 cubic feet of additional grain, which is, again, a 23% increase. These are significant benefits.
Our summary of the economic assessment, assuming a replacement program over three years, shows that this would result in 2,600 direct jobs. That would translate, conservatively, into more than 10,000 induced jobs.
Steel tonnage would be 285,000 tonnes of steel. The Canadian content would be 75%.
The supply chain for this project reaches right across Canada. I won't read out the details, but these are suppliers who can provide components in the assembly of the rail cars.
One thing that struck me when you spoke about the bears is that if the railcars are obsolete and there's a situation vis-à-vis their safety, I think we have to take a look at that.
Again, you want a made-in-Canada solution. I guess if we're promoting renewal, it's going to be an open bid.
I have two questions. What is the safety status of that? And secondly, if we're going to a bid and the government says, “Okay, we should renew,” you won't be the only one who can bid on that. What is the competition?
:
I'm talking about safety in general, not bear safety. If there is a situation that provokes a derailment, it can become an issue.
I'm just trying to understand this. I have nothing against renewal if it's good for sustainability, and then we can talk about the role of government in this and who are the players in all of this, but I think we first need a portrait of the situation right now.
If they are obsolete because they leak, that might have an impact on safety. I just want to know. If there's no problem vis-à-vis their safety, then there is no problem.
I like bears, but that's not my question.
:
I once sat on that side of the table myself. I understand what happens when ministers or junior ministers meet with you.
Essentially, you are here with a business proposition. You are asking politicians to commit, you say the government should take the initiative of renewing the Canadian grain car fleet. Is that the government's role? Do you want incentives? Do you want us to place an order? I am trying to understand.
Otherwise, it is simply a self-serving presentation. It may be of value but is this really the place to be making that kind of recommendation?
I am all for helping farmers be more efficient and for having an overall impact, including on the environment. Basically, you are asking the government to come up with a program. Is that really the role of government?
If it is done for the entire country, it will not just be your company. It will be all companies, and then there are free trade agreements to consider. I am simply trying to understand so that, in the context of our program on technological alternatives, we need to understand how to include this recommendation. It seems as though it is a bit of a one-off presentation, compared to the big picture. I just want to understand.
:
Could I put in a quick point?
The government is heavily invested in this right now. This Canada fleet we put up in the presentation is owned by the government. It's provided to the railroads free to transport grain for Canadian farmers. This has gone on for quite a while. The government has already invested in this sector, and because of that investment, the railroads over a period of time have not had to invest in this equipment.
Now you're asking the railroads to fix this problem because the government hasn't kept up. Number one, it's our view that it's too big a problem for the railroads to fix immediately. They won't have the capital to invest in this. Number two, they'll take an awfully long time to get this done, and number three, with all the changes that are happening in agriculture in western Canada and right across the country, we don't have the time to waste, because we're going to blow our opportunity in international markets. I don't think any Canadian wants to see that happen.
I'd like to thank our guests for coming in today. It's rather interesting. When I heard the presentation, it felt pretty much like a sales presentation, and now that we're at the end of it, I'm convinced that it has been. Well done, by the way, because I think what you've done is expose some of the challenges associated with the existing situation, the existing fleet versus the potential for the vehicles that you recommend.
When I look at several of the pages that you showed on the slides, I see the dirty red freight car, which kind of reminds me of Mr. Coderre's tie, versus the very nice new vehicles with the lovely blue on the top. It's very nice. I like that quite a lot.
Mr. Denis Coderre: Your yellow tie doesn't....
Mr. Ed Holder: No, it just doesn't cut it.
The first thing we have to say is congratulations on 100 years. I think that to have survived, grown, and prospered over 100 years makes a great statement about your firm.
I noted in your presentation, Mr. Aziz, that you talked about what I consider the dramatic hiring that you've had over the last short while. That would suggest to me, if I interpret it correctly, that business is growing for you. I hope that to be the case. Would you confirm that or not?
I'm just trying to understand a little bit better the percentage breakdown of customers between, say, Canada and the United States, presuming that the U.S. is your alternative customer.
:
That's fairly clear. From your standpoint, your direction is rock solid. I know exactly where you're coming from. There's no confusion about what you're looking to accomplish, and as an entrepreneur I salute that.
You've given me some information, though, which I've found helpful, on the issue of who owns these cars. I think Mr. Poilievre asked whose responsibility it will be ultimately. Will it be government's? Will it be the railcar companies'? Frankly, I don't have a sense of that. I didn't realize we were in the grain car business to the extent we are. Being an Ontario boy, I didn't appreciate that so much.
Mr. Scott you indicated that ultimately if someone were going to pay, the costs are going to go downstream versus upstream. I presume that means to the taxpayer versus the customer.
I think you've already answered the question, Mr. Aziz, as to how that works, because it's private industry. That brought us to this capital cost allowance.
I know one of the things our government did a few years ago, at least with locomotives, was to accelerate the capital cost allowance depreciation to allow acquisition of locomotives to be depreciated to ultimately let the customer more effectively write down the acquisition cost.
Mr. Scott, do you have any recommendations related to capital cost allowance that would be useful for this committee to consider? I would frankly be more comfortable recommending a capital cost allowance kind of suggestion, rather than opening up the recommendation that the Government of Canada.... I'm not sure that's our spot. I want to think about that more.
Do you have any recommendations? I will ask you, Mr. Scott, or Mr. Aziz, about what recommendation you might make for capital cost allowance.