Thank you very much, Mr. Chairman and members of the committee.
I'm going to give about half of this presentation, and then Fiona Cook will continue. She is our director of business and economics and has been involved in this issue for too many years.
We represent 45 chemical-producing companies across the country. It's a $47 billion industry. The reason we're here today and the reason this issue is so important to us is that 80% of our products are shipped by our very fine railways, CP and CN. So we have a very huge interest in this bill. We're also a member of the Coalition of Rail Shippers, and have been for the last seven years.
Why is rail so important to our industry? In a recent meeting with members of Parliament like yourselves, one of our members, a large petrochemical producer, was talking about investment and growth and job creation in this country. He said basically there are only two major issues that affect a big investment: you have to have feedstock, which in our case is natural gas liquids, and you have to have rail service—rail service that's not only available, but is price-competitive, because most of our product goes to the U.S. on very long-haul rail shipping. If we can't ship it efficiently and at a good price through Canada and to the United States, we can't build and we can't even maintain our plants. This is really important to our industry.
Our members do appreciate that we have two large and very good North American railways in this country. We do appreciate the efforts that have been made to improve the service of our railways. It's something that is very important to us, and it's the reason we support this bill.
We do believe, however, that the fundamental requirements for a good partnership between railways and our sector and shippers is to have service agreements that are clear and reciprocal, where both parties work together to achieve the best possible performance. We don't really want a system that is heavily regulated, nor do we want a system that requires a steady stream of appeals.
Our associations and members really appreciate the fact that this bill is a significant step forward in providing for those service agreements, something we've been looking for, for a long time, and we believe this will be a better foundation for our companies to work with railways, which do have market power that is not always equivalent to a fully competitive economy.
We also believe that a well-crafted act will benefit the railways in their working relationship with customers, such as our industry. Our association supports this bill, but we also believe that in order to make a difference and to achieve the objective of providing service agreements that are workable, the legislation needs to be improved. In fact, we believe there is a substantial risk that without a clearer definition of service agreements in the draft act, both our companies and the railways will be mired in some confusion as to what a service agreement is, and we'll end up with an endless number of appeals that will not be in the interest of our companies or of the railways.
To conclude, we will support this act, but we believe it could be made more workable with modest amendments that will define service agreements better and that will in turn help the government and Parliament achieve the aims of this act.
Fiona Cook will provide you with an example of the amendments we would like to see.
As you noted, the key objective here is greater partnership between the railways and its customers. Close working relationships between our member companies and Canada's railways are not only key to our present-day competitiveness in international markets, but they are also crucial to future investment, jobs, and growth in our sector here in Canada.
We need more conversations and planning around demand and supply of rail. CIAC believes that with some key amendments the legislation we're contemplating here today will enable the building of those relationships.
I was here on Tuesday, and I believe members of the committee have received copies of the list of amendments that the CRS has put forward and that we stand behind.
Ultimately, the success of this legislation will be if arbitration is used only as a last resort. That's something we fundamentally believe in. There are two amendments that we believe are critical to setting the stage for that, and I will focus my comments on these.
Amendment 1, which sets out the basic elements that need to be discussed in a negotiation, is fundamental to the spirit of this bill. As members here today know, in its report the panel identified this type of framework as a key prerequisite to better commercial relationships, and frankly, we are a little surprised to see that the core elements of what a service-level agreement should contain are not set out in the bill.
This absolutely needs to be done to achieve the intent of the bill and to ensure that it works as an effective backstop. Without this definition and clarity, both parties will not be able to identify problems and workable solutions. Agreeing on the elements means more commercial settlements and less time before the agency, and I think we all want that. Again, setting out the framework for discussion and partnership is fundamental if successful agreements are to be achieved commercially—and that is the desired result.
Next, and in the same spirit of setting the table for greater collaboration and commercial agreements, we believe that removing the word “operational”, as specified in amendment 2, is critical; otherwise, you limit the conversation and end up with half measures and ineffective agreements that do not include standard clauses, such as dispute resolution—very key—and force majeure, which are found in most commercial agreements.
Removing the word “operational” will broaden the scope of discussion between railway and customers, and it will increase the workability of agreements. It will reduce the need to bring issues to an arbitrator or the courts that could be dealt with through standard and prearranged dispute resolution mechanisms—again, more commercial settlements and fewer occasions before the agency.
To summarize, as Richard stated in his earlier comments, we are pleased to see this bill. It represents many years of hard work, but it needs to be amended to be effective.
Even with the amendments, will it solve all the problems that shippers and railways currently face? No. Does it address all the issues that we identified as key in the service review process? No. Specifically, for our sector, it does not address cross-border service requirements and commitments. This is an important issue for our industry, as 80% of our shipments are destined for the U.S.
However, that being said, we are hopeful that with the amendments that have been tabled, this bill will provide the balance that is needed to work with our railway partners and develop service-level agreements that incorporate the entirety of what a railway offers to its customers, regardless of borders, such as we see in the marine, air, and trucking modes.
Bill is a necessary first step to greater understanding and partnership between Canada's railways and the multitude of industries that provide food, products, and jobs, and that support communities across Canada. The amendments that we propose will ensure that it delivers on that promise. At the end of the day, this is all about working together.
Thank you, Mr. Chair, members of the committee, and fellow attendees.
I am Pierre Gratton, president and CEO of the Mining Association of Canada. MAC is the national voice of Canada's mining and mineral processing industry. We represent both large shippers, such as Teck, CP's largest customer by far, and smaller shippers as well.
Accompanying me is François Tougas, our counsel in this matter. Thank you for the opportunity to appear today and to share our perspective on this important piece of legislation.
In 2011 the mining industry contributed $35.6 billion to Canada's GDP, employed 320,000 workers, paid $9 billion in taxes and royalties to federal and provincial governments, and accounted for 23% of Canada's overall export value. I would add, too, that our exports actually reached a record level in 2011, the most recent year for which we have statistics.
Operating from coast to coast to coast, the industry is very important to remote communities and generates prosperity in our major cities, notably, Toronto, Vancouver, Montreal, Edmonton, Calgary, and Saskatoon, each of which serves as a centre for global mining excellence for various types of mining.
Looking forward, proposed, planned, and in-place mining projects in Canada amount to upwards of $140 billion of investment over the next 5 to 10 years. Across the country, major projects are seen in mined oil sands, coal, copper, gold, iron ore, and diamonds, among other sectors, with large investments also occurring in environmental and processing areas.
To enable the industry to become an even stronger contributor to Canadian prosperity, industry needs government policy support to meet anticipated long-term demand for Canadian minerals. The efficiency of the logistical supply chain is a major determinant of industry's contribution to the economy, and rail freight service is a major determinant of the effectiveness of the logistics supply chain.
Although MAC appreciates the government's initiative through Bill , it is our view that the bill, unless amended, will not deliver on the government's promise “...to enhance the effectiveness, efficiency and reliability of the entire rail freight supply chain.”
The Canadian mining industry is the single largest industrial customer group of Canada's railways by far. We consistently account for over half of total rail freight revenue in Canada and the majority of total volume carried by Canadian railways annually. In 2011 the mining industry accounted for 54% of rail freight revenue and 48% of volume. As such, transportation legislation is, obviously, very important to us.
I'll give you another, more specific example. Consider one miner's economic input and the impact that the quality of rail freight service has on the success of the business model. This miner ships 24 million tonnes of coal to ports each year. At about 105 tonnes per rail car, that amounts to 225,000 rail cars annually. At 152 cars per unit train, that equates to 1,500 unit trains per year, or five unit trains per day. At, say, $150 per tonne, that translates to $15,750 per car, or $2.4 million per unit train, for a total of $12 million in coal shipped daily. When placed in context, it becomes clear how much rail freight service failures can cost miners, and, in turn, the Canadian economy as a whole. It becomes very difficult to ship other products if the mining industry is not able to ship theirs.
The biggest issue rail customers have is that they do not know what they are getting for the rail rates they pay. The remote locations of many mining operations often leave miners captive to one of the two railways and frequently stranded without alternative modes of transportation. Their captivity, coupled with railways' power to unilaterally impose rates, enables the railways to influence prices and reduce service quality without the risk of losing customers.
Shippers had anticipated that Bill would follow on the recommendations of the final report of the rail freight service review panel so that when contracting or otherwise dealing with railway companies for rail freight service, the playing field would become balanced. Although a number of the review's final recommendations are found in Bill C-52, it is the recommendations absent from the bill that present shippers with the greatest challenge.
Currently a railway is not required by the Canada Transportation Act to provide any particular elements of service to a shipper unless the railway so chooses. Furthermore, in instances where a carrier does choose to offer service elements to a shipper, the railway is not required to provide any particular level of service.
Despite the recommendation of the review to include elements of service in service agreements, and the broader shipping community's request for the same to be included in Bill , the legislation before us today remains silent on this crucial issue.
Giving shippers a statutory right to a service-level agreement, as Bill has done, only goes halfway: it gives shippers a right to service without defining that service. Without including the specific elements of service a shipper needs, the bill, at best, subjects the quality of a shipper's rail service to the discretion of an arbitrator in a process that, unless amended, weighs heavily in the railway's favour.
The provisions on service in the act are sufficiently weak and vague that they have been unable to address the service failures that gave rise to the review in the first place. Given that these provisions remain unaddressed in the bill, it is our view that shippers will remain disproportionately and unreasonably subject to railway market power, and the service failures will continue into the future.
In the legislative consultation, shippers sought amendments that would establish, first, a base level of service by requiring the railways to provide specific elements of service; and second, a way to guide the Canadian Transportation Agency or an appointed arbitrator in its interpretation of the adequacy and suitability of the level of service provided by a railway company.
Bill falls short because these critical components of service remain absent. Consequently, neither the agency nor an arbitrator has guidance regarding the adequacy and suitability of a particular level of service, or even of whether an element of service must be provided by a rail carrier.
The government still has an opportunity to get this right and to achieve Bill 's stated objectives of economic growth, job creation, and expanded trade opportunities. The amendments we seek correspond to those of the broader shipping community as determined in consultation with the Coalition of Rail Shippers. Specifically, MAC endorses the six amendments detailed in the document tabled before the committee today, with a specific focus on recommendations one, two, and six, as described in our brief.
There is an opportunity to fix this problem. By implementing these recommendations, the government can allow for commercial negotiations, maintain Canada's export success, and deliver revenues and jobs across the country without incurring any cost. Miners want to be able to work in partnership with the railways in the movement of their products. To do so, however, requires a level playing field.
Thank you very much.
Thank you, Mr. Miller and members of the committee.
I'm the president of the Canadian Fertilizer Institute. With me today is Ian MacKay, our transportation legal counsel.
CFI represents the basic manufacturers of nitrogen, phosphate, potash, and sulphur fertilizers in Canada. Our members produce over 25 million metric tonnes of fertilizer annually. We export over 75% of this production to the United States and offshore to over 60 countries.
We are a resource-based industry heavily dependent on the railways to move our goods to domestic and offshore markets. Our ultimate customers are farmers. Delivering fertilizer products to them in a timely and effective manner is critical to the world's food supply.
I am pleased to see my colleagues from the railways here today. We have a partnership, one that is critical to the success of fertilizer companies and to the success of the railways.
Our growth in exports offshore and to the U.S. depends on our members' competitiveness. Our companies are investing in Canada's economic growth, with some $15 billion in potash expansions and about $3 billion to date in nitrogen fertilizer expansion. These investments will require the railways to invest in new rail infrastructure and stronger commitments to their customers.
Our member companies have invested in their transportation partnerships with the railways. One of our member companies has 5,500 railcars. It's the second largest railcar fleet in North America. Our other members have invested in tens of thousands of railcar long-term leases to move their potash and nitrogen fertilizers to the United States.
We are participating in research to build a new and safer rail tank car for the transportation of anhydrous ammonia. Our companies are spending hundreds of millions of dollars to build new port facilities in Vancouver and on proposals for Prince Rupert. At our manufacturing plants and mines, CFI members have built sophisticated load-out facilities with the capacity to load 80 to 140 railcars at a time. That's a train two and a half miles long.
The railways have not always met their service commitments, and it's not always just due to bad weather. While there have been significant improvements in service since the problems we experienced in 2007 and 2008, we need to recognize that recent capacity constraints have not been there due to the economic slowdown. What happens when the economy recovers to full level?
Our industry is investing in dramatic growth. Another 10 million to 15 million tonnes of potash and nitrogen fertilizer will need to be moved to our customers, and virtually 100% of this new product will need to be exported by rail.
Today, our members require sophisticated commercial service terms and agreements to meet their individual business needs. Specifically, they need to negotiate new railway commitments on the service obligations, over what I would categorize as the “generic”: a one-size-fits-all provision of adequate and suitable service as currently set out in the Canada Transportation Act. Today, generic, simply stated, will not work.
CFI is encouraged by Bill , the . We commend the government for bringing forward this important piece of legislation. We at CFI view this as a crucial step towards a better commercial balance between the railways and their freight customers.
That said, CFI has found areas in the bill that give us some cause for concern. The backstop requiring railways to commercially negotiate and deliver on service commitments with their customers, and enabling arbitrators to establish those agreements if negotiations fail to do so, is provided to some extent in Bill , but it is incomplete. We can strengthen the backstop by ensuring that rail customers can ask for service agreements backstopped by commercial dispute resolution provisions.
Our members believe that railway service problems should be resolved by commercial processes. CFI has been a leading advocate of commercial dispute resolution since the beginning, since the federal debate regarding railway service started around 2006.
We were the first to develop and present a timely, effective, low-cost mediation and arbitration process to the rail freight service review panel. CFI supports commercial negotiations backstopped by mediation and arbitration. This panel cited CFI's efforts in their final report. We are pleased that the arbitration process contained in the bill mirrors many aspects of CFI's proposals.
The CFI supports all of the recommendations for changes made by the CRS earlier this week. However, today I want to emphasize two of the six recommendations that are of particular concern to the fertilizer industry.
We start with operational terms in the CRS document. This is known as recommended amendment number two. The scope of the service agreements should be extended beyond operational terms to cover all aspects of the commercial relationship between a railway and a customer. Limiting service agreements to operational terms excludes from consideration by the arbitrator a number of important terms and conditions that one routinely sees in commercial agreements. This makes little sense in practical terms and will result in shippers only being able to arbitrate some of the issues they might otherwise choose to negotiate on. The separation of operational terms from non-operational terms does not exist in commercial agreements, so we propose to the committee that the legislation be amended to strike the word “operational” from operational terms. This will allow the arbitrator to include clauses such as force majeure, dispute resolution, and other standard contractual terms found in commercial agreements.
Secondly, the bill needs to make it clear that service agreements may include dispute resolution terms to deal with service failures. This is CRS's recommended amendment number three. Shippers do not wish to undertake costly litigation to deal with a service failure or to wait for the CTA to conduct hearings. In our view, the most effective way to deal with service problems that arise after an agreement is established between a railway and their customer is under dispute resolution terms proposed by the parties themselves and settled by the arbitrator if need be. As presently drafted, the bill would not allow the arbitrator to include dispute resolution terms, meaning the bill is only treating half of the ailment.
In conclusion, the CFI notes that in Minister Lebel's testimony before this committee on February 12, service disputes relating to the Canadian portion of cross-border shipments will be subjected to arbitration under Bill . Almost 50% of the fertilizer manufactured by our members is shipped to the United States. The transportation service challenges and the service issues that our members face on our exports on cross-border rail movements are the same as those faced on traffic movements within Canada domestically or to ports of export in Vancouver. Our policy and regulatory authorities need to work closely with their U.S. counterparts in an effort to establish and harmonize a commercial dispute resolution model that addresses the total shipment on cross-border moves.
It is imperative that this legislation support the new investment our industry is making in the growth, jobs, and future prosperity of our country.
Thank you for your attention, and I look forward to your questions.
I'll talk a little bit about the industry in Canada and our involvement in the rail freight service review process, which was extensive. I'll also briefly touch on our views on the act.
The association has over 350 members across Canada. Our membership covers the entire spectrum of the industry—producers; wholesalers; retailers; transporters; manufacturers of appliances, cylinders, and equipment; and associate members of applied services.
Annually the propane industry contributes about $10 billion a year in terms of impact on the Canadian economy. It generates over $900 million in taxes and royalties and employs more than 30,000 Canadians. More than half of the propane in Canada is shipped to the United States. Approximately 3.5 billion litres of propane are shipped using Canada's railways.
Just to give you a little bit of insight—this slide is not in your deck—one propane railcar holds about 30,000 gallons of propane. That's 113,700 litres, to be exact. It takes about three trucks to unload a railcar. Again, about 3.5 billion to 4 billion litres a year find their way onto Canada's railways.
We have railways here in Ontario, with unloading racks in Sarnia. A new rack was just put in there; Sarnia was most recently affected by some work. Primarily in Canada the propane finds its way out of western Canada, comes into Sarnia, is offloaded onto trucks or rail, and finds its way east. It also finds its way on CN's lines out of the west, straight into the Toronto area, and then goes east from there.
We've been an active participant in this process since 2008. Recently, towards the end, we had a representative on Mr. Dinning's rail freight service process facilitation group.
Our stated positions were these. We support commercially based legislation that contains the right to a level of service agreement as a way to address the market imbalance between the railways and the shipping community. We support the right to access an appeal mechanism if a service-level agreement cannot be achieved. And legislation should provide for the rights of shippers to levy penalties in the same way as against the shippers.
We believe this piece of legislation hits all three marks. It provides a very good balance between railways and shippers. We're not coming today with any changes at all. Finding a balance is very, very difficult.
It provides a tool to improve freight service in Canada and it makes the level of services more predictable. It respects the commercial nature of the relationship between the railway and the shipper. We have members that use level of service agreements and we have some that do not. It strikes a balance. It's their choice.
This legislation, in our view, is an option to be exercised if you think the need is there. For us, it contains all the mechanisms and measures we requested some years ago: a right to a level of service agreement, an arbitration process, and administrative monetary penalties.
Mr. Chairman, we'll leave it right there. We'll stop and allow time for others.
I run CN, which is the largest Canadian railroad, and I believe it is the true backbone of the Canadian economy. I believe the rail industry is absolutely essential to our country's prosperity. We have long distances in Canada to cover and rail is a very important part of the economic fabric of this country.
In fact, CN alone touches about $250 billion worth of goods every year. We helped Mr. Gratton this year hit a new record in terms of exports in the mining industry. Our potash movements are surging at 155%. As we speak, we are moving more propane to more markets than at any other time in our history.
If I look at 2012, every month in 2012 was a record in our history. We are well above any volume of shipping we've ever had in the history of the rail industry. That's because we are not only doing what we are supposed to do in terms of serving the Canadian economy, but we're also gaining market share against other modes of transportation at a very fast pace, which is indicative of pretty good service and a well-functioning rail industry.
It was not always like this. Twenty-five years ago, the railroad industry in North America was in dire straits. CN and CP were not different. We had two carriers in Canada that were heavily subsidized by taxpayers. We had railroads that were not profitable enough to reinvest in their equipment and infrastructure. We were lagging in safety and in innovation and service. In fact, CN was worse than CP in this regard at the time. We were a crown corporation, a heavy burden to the Canadian taxpayer, and not particularly innovative in any aspect of our operations. That was 25 years ago.
Fortunately, through successive good government policies, started under a Conservative government and continued with Liberal governments over many different leaders, we had a slow but gradual deregulation of the rail industry that allowed for a remarkable transformation of the industry, which leaves us in an enviable position today. I believe that Canada has one of the best rail systems in the world. We clearly have the lowest rates of any OECD country in terms of freight rail, which is important for Canadian shippers given the distances. We have, overall, very good service, and I will come back to that.
CP is the leader in the entire rail industry for safety. CN is the most profitable railroad of any rail carrier in North America. Both CN and CP are serving their customers and shareholders very well.
It took 25 years of good public policy and a lot of hard work by the two rail carriers, in partnership with their customers, to get to where we are. It would be very important for this government to give a lot of attention to maintaining the condition of that success and not turn the clock backward in the direction of re-regulation.
Personally, I believe that good public policy starts with evidence. I do regret that many of my colleagues and partners, customers and associations, are letting their advocacy get ahead of them and are not always following the facts.
I would ask you to turn to page 3 in the short document I submitted in both languages, and I will tell you a little about CN's service record.
We can measure this in many ways, but if you look at it in a few very important ways, perhaps the most important dimension of service in the rail industry is order fulfillment. I'm talking here about order fulfillment for merchandise traffic such as propane, chemicals, forest products, the concentrate or metal sector in the mining industry—things that move in one car. Our order fulfillment, which is measured in terms of unconstrained demand, has gone, over the last couple of years, from 88% to 95% on average.
The rail sector is not as flexible as trucking. To achieve 95% of unconstrained demand is world-scale performance. There is no question that we can always do better, but the hard facts, which I have for any of my customers in any one of the sectors in any one of the geographies, are that we achieve, on average, in excess of a 90% order fulfillment.
Meeting an order is one thing; bringing the car at the right time of the day is another important dimension, which is something we did not even measure three years ago. Today we actually measure it. We call it switch window performance or timely placement of cars. We were at 84% in placing the cars in the window we promised to customers last year.
Spotting, which is for the grain sector...in the countryside we are at 82% to the day. A few years ago, we were measuring ourselves to the week. Today, we have a scheduled grain plan and we actually have a fixed service every week. We come in every week at the same time during the day, and we meet that threshold within the day 82% of the time.
Some have said, and I heard some say yesterday in front of this committee, that our cars are not of good quality, that as much as 20% to 50%, depending on the day when they quote the statistics, of our cars are not functioning well. The reality is that our car reject last week was 2.1%. We had 64 cars in our entire network last week that were rejected by customers. We don't agree that every one of those cars needed to be rejected, but the total, if we take it at face value, is 2.1% of our cars that are rejected.
Mr. Chairman, the important point is that we have good service. It's not perfect. As we speak, we are going through a very difficult winter, and our service is very difficult. But service matters, because if we don't have good service we lose the business. The hard reality—and that's been another key element of the advocacy of the association, trying to portray railroads as monopolies or somehow that the market for rail services is not balanced. The reality does not at all follow those statements. Railroads in fact for decades have lost market share. I will give you one statistic. Forest products were a very prominent group advocating that railroads have an unfair advantage or abuse their position. More than half of forest products in this country don't even move by rail; 55% don't move by rail. Of the 45% that move by rail, about 40% are dual-served by two carriers. For the rest, which is less than 20% of all movement of forest products, you could argue whether it actually has a competitive option or not.
In fertilizer, close to 100% of potash shipments are served by two carriers. In chemicals, more than 65%, unlike in the U.S., actually have dual access, two railroads serving them. In coal, in distant mines where we are lucky to have one railroad, of course, there is one railroad, but it is a bit of an irony to say that when you're lucky to have a railroad serving your line, you are somehow becoming a captive shipper. We have mines all over this country at the moment that would like us to build rail lines to serve them. I sometimes tell them, how ironic would it be if I agreed to build a rail line and the next day you said “I am captive to you”?
The reality is, there are competitive options. When we serve Teck out of Quintette next year, or out of their mines in southern B.C., we're competing with Australia; we're competing with other countries. If we don't have a good mining product and a good service product with railroads, we simply don't ship the coal.
We are competing every day, Mr. Chairman. We have a well-functioning rail industry, and we have 25 years of gradual and slow deregulation that has made an industry in this country that should be the envy of the world.
You should beware of regulation, because it is a very fine balance. I would prefer that we protect the commercial framework. I would prefer that we avoid regulating and that we keep a watchful eye on the railroads and make sure they continue to improve. But if we are going to need a new regulation, I would ask you to be very wise, to follow the evidence, not the advocacy, to be mindful of unintended consequences, and to protect the network nature of the business.
I'll finish by saying that I was appalled yesterday to hear the Coalition of Rail Shippers say that we should exclude the word “network” from this legislation. Railroads are not a taxi service. We cannot switch every customer who is first on the rail line. If we don't take into account the operational and the network nature of our business, we might just create a very slippery slope that will not be good for Canada.
You should focus on those customers who actually have no choice. If a customer has no choice, maybe there's a need for regulation. If he or she already has choices, you should let the market play. You should start with mediation, and you should make sure that the arbitration is done by the CTA because they are the only ones who have the experience to do it right.
Thank you very much, Mr. Chairman. I appreciate the opportunity to have another panel of witnesses before us on a very important topic.
When you listen to the testimony, particularly as we've heard today from some of the shipper organizations and from one of the railways, it's really a case of black versus white. You often wonder if the ships are just passing in the night.
The government obviously conducted a rail review process. The result of that process a couple of years ago was to agree largely with the shipper perspective that there was an imbalance, and that imbalance needed to be corrected. So we have before us Bill , and we have six amendments to Bill proposed by the Coalition of Rail Shippers.
I have three questions in particular that I'd like to ask the shippers, perhaps the Mining Association, the fertilizer people, and the chemical people.
The coalition amendment number one talks about a better, clearer, more specific definition of what adequate and suitable accommodation and service obligations really mean in the language of the law. Those phrases, “adequate and suitable accommodation” and “service obligations”, have been in the legislation for a long time. There's still a great deal of ambiguity about what they mean, even after years and years of usage, so the shippers are suggesting an amendment to bring some precision to the use of that language.
If the amendment is adopted by the committee and by the government and by Parliament, you'll get the precision you're suggesting. What if the amendment is not adopted? Will the legislation fix the problem or will the ambiguity continue and the problem will not be solved? That's question number one. How vital is this amendment in providing greater definition of service obligations?
Secondly, what are the service levels you are experiencing now? When the rail review process was conducted a few years ago, they reported a pretty difficult situation. The information provided by Mr. Mongeau would suggest that some of those performance levels have improved, at least in the last two or three years. What is your experience right now with service from the railways? And when I say “right now”, I want to include specifically the period of time since the legislation was tabled. Have you noticed any change in the level of service that is being experienced right now?
My final question is on this issue of administrative monetary penalties versus liquidated damages. The legislation obviously provides for AMPs. It doesn't provide for an expedited way to proceed with actual practical damages.
If you have only the monetary penalties in the legislation and no access to liquidated damages, does that really fix the problem from the shippers' point of view? The AMPs money goes to the government; it doesn't go to you. So what's your preference in terms of remedy?
On the first question, which I took to mean the six issues raised in the final report of the service review panel, those are the provisions that we were surprised not to see in the bill. They were very clear, stark recommendations.
Again, I'm not even sure the railways disagree with this point, and I would be interested to hear about that, but the definition in the act to address what is the suitability of the service provided for particular traffic has been there for a very long time. It is the same suite of provisions we had during the entire service failure period that gave rise to the service review in the first place.
That isn't being addressed either by the amendments to this bill or by any other change proposed to the act. You have a market structure that is not changing. It's no different today than it was then. You have no change to the statutory provisions that allowed those service failures to occur.
That's why we say if you can provide definition to “service obligations” and to what the phrase “adequate and suitable accommodation” for traffic means, we think you could alleviate the burden of having a bunch of processes appear in front of the agency. At least the parties would know when they're negotiating what is a legitimate point of commercial contracting and what is not.
Frankly, I'm in the business of disputes.
Hon. Ralph Goodale: Some would say so are we.
Voices: Oh, oh!
Mr. François Tougas: Right.
I foresee no shortage of business coming my way as a result of any purported change in service levels. Anything that's looked at episodically like that, such as talking about what's happened in the last two months, to me is not really an indication of what the larger problem is. We had a very long service failure period. The economy changes, so service levels change within that economic structure we have, and we can go back to a congestion period during which we had a lot of service failures. Any number of things can happen, as they do frequently in winter.
If we have these proposed changes to the act, our pretty strongly held view is that we could avoid a lot of disputes over what is a legitimate level of service and element of service that should be offered by the railways.
I tried to grab both your questions in that answer.
Could I maybe just shed light on the issue? Parties in a commercial agreement are free to come to terms on all aspects of an agreement. The same way that all the shippers cannot have an arbitrated solution with trucking, or an arbitrated solution with airlines, or an arbitrated solution by the government with shipping, there shouldn't be an arbitrated solution for railroads.
We tend to refuse liquidated damages in commercial contracts for good reason. The railroad is a very network-based business: 55% of our traffic finishes or starts on another railroad, and more than another 30% finishes or touches a terminal.
You asked a question about our service, Mr. Goodale. Our service for the last six weeks has been very, very subpar. We have had tremendous difficulty, and a difficult winter.
In coal, for instance, for Teck and other coal miners in northern Alberta and northern B.C., we've had a lot of difficulty meeting shipping schedules. Part of the reason is that RTI, which is a government-owned unloading facility at the terminal, has had difficulty having the unloading performance it's supposed to have. They were targeting 400 unloads a day. They've achieved 260 unloads a day. If the terminal does 260 unloads a day, no railroad in the world can achieve the service that's required to meet the ship.
So if you get into a dispute where there are liquidated damages, and there's an arbitrator that can ding the railroad without due regard to what's happening to the network or what happened at the terminal, you just get into a rat's nest of problems. It's not conducive to mutual cooperation, visibility, and the things that commercially always work best.
I will answer in English.
I have a couple of points. One is a point that I think has already been raised, which is that to look at the very short term is not helpful to the exercise before us today. This is a bill that is going to stay in the act for a long time, so we need to be able to go through the cycle and all the changes in the economy in order to deal with problems as they arise over time, and to try to stay out of dispute resolution processes that are managed by the agency and thus allow parties to deal with one another commercially within a framework that is guided by the legislation.
The second part is that now we have a situation where I think many shippers feel that their relations with the railways are much improved over what they were during the service failure period that lasted so long, which Monsieur Mongeau talked about. We don't want to go back to those days. I'm sure he doesn't want to go back to those days. The reality is, though, that nothing has really changed in the market structure we have. We still have two railways servicing the companies we have in Canada that use rail to transport goods.
In the mining industry, for example, almost all of them are in remote locations, so that's not going to change. As Monsieur Mongeau said, it's very unlikely that you're going to see a second line built into some mine.
All we're talking about is trying to have a mechanism to allow the parties, when conflicts arise, to be able to address matters that either the railway is unwilling to give or.... If the shipper is asking for too much, the arbitrator is going to be able to settle that, but right now there's an inability for many shippers to even have a commercial negotiation. That's the thing that I think we're trying to overcome.