I call the meeting to order.
I apologize. We are running a little late. We had about an hour of votes and bells that interrupted our schedule a bit. I want to thank the staff for getting us back on track.
With that, we'll begin our next panel in terms of the study on Bill .
I want to welcome from the Western Barley Growers Association, Brian Otto, director, and Caitlan Schnitzler, public relations coordinator.
From the Mining Association of Canada, we welcome Pierre Gratton, president and chief executive officer, and Brendan Marshall, director of economic affairs.
By video conference from Moose Jaw, Saskatchewan, we welcome Mr. Ian McCreary, as an individual.
I think I will start with you, Mr. McCreary, just in case something happens; you're participating at a distance, via video conference.
Please begin, Mr. McCreary. You have eight minutes.
Mr. Chairman, honourable committee members, thank you for the opportunity to appear to discuss this critical issue facing the grain and oilseed industry in western Canada.
I've been involved in transportation issues throughout my adult life, and I thank the committee for providing me this opportunity to provide my perspective on a path toward the solution to this complex problem. I'd like to offer my assessment of the problem, suggest what is needed to find a solution, and identify the strength and weaknesses of this bill in moving us towards a solution.
First, the problem. Western Canada is a landlocked region that is further from tidewater than any other major exporting region. The transportation corridors to market are constrained. Further, the two main export channels are very different in total costs. The cost of movement from my delivery point in central Saskatchewan to the west coast is approximately $72 a tonne, while the cost of moving east is around $100 per tonne. Thus, in periods of relatively inexpensive ocean freight rates such as we have right now, it's less expensive to move grain to all offshore destinations from my farm through the west coast. However, the west coast can only handle approximately 21 million tonnes of grain per year. Western Canada regularly produces 35 million tonnes of exportable supply, and this year has produced more than 50 million tonnes of exportable supply. The result is that the price spread between what the price farmers are paid for the grain and west coast prices has risen dramatically.
Currently, farm prices for wheat have fallen to $170 per tonne, below west coast export values. Only $70 of this can be accounted for in the cost of movement and handling, so farmers are paying grain companies an extra $100 a tonne for the privilege of selling our grain. This extra cost to farmers has been there since mid-October, and if production stays at average to above average levels, this new grain robbery as it is being seen on the Prairies, will be there for the foreseeable future. Alternatively stated, current international prices are very strong, and western Canadian farmers are the only ones not to gain from this strong market.
The current problem has no solution under the current regulatory framework. Shippers are the only ones with standing with the agency. Shippers are the grain companies, which are making record profits from the current basis; thus a solution through the agency is unlikely.
To solve this transportation and marketing juggernaut requires action at a number of levels.
First, the industry needs a body that guarantees an aggregate level of service for grains and oilseed exports.
Second, there needs to be a way of apportioning the constrained capacity among competing users. Remember, every merchant will make the most money by shipping west, yet only 40% can go west.
Third, improvements are required in transparency, both in prices and in grain flow. Improved information improves the market function, and we can go some distance simply by getting better information out in public.
Fourth, the revenue cap needs review, but must be maintained. Producer cars and single-point shippers need to be protected.
Fifth, the competitive position of farmers depends on the existence of independents and alternate channels. The current regulatory framework puts both of those marketing channels at risk.
Sixth, we require improved rail competition. Done properly, this has the potential to improve service, increase capacity, and reduce rail costs.
Finally and perhaps more importantly, we need a long-term plan to develop an increase in capacity in both export corridors with a focus on fixing some of the issues at the west coast.
Moving specifically to the current bill, Bill provides one tool to deal with aggregate levels of service, and does wave a flag at rail competition through potential changes to interswitching. Both of these are positive; however, this bill will not solve the problem. The problem has many components, and the bill deals only with rail.
I would like to suggest additional pieces that I feel need to be part of a long-term solution for the western grain industry.
I'd like to start by suggesting reinventing the GTA or a GTA-like organization. In 1979, the then Conservative government pulled the responsibility for aggregate service levels from the Canadian Wheat Board and established the Grain Transportation Authority. This group was responsible for aggregate service, apportioning cars, long-term planning, and information flows. This worked well until it was ended in the 1995 federal budget.
The CTA level of service claims subsequently placed the Canadian Wheat Board back into the position of responsibility for aggregate service. When the government chose to end the Canadian Wheat Board, none of the transportation services were understood or replaced. The result is the current mess. Now is the time to re-establish the office of the Grain Transportation Authority to provide aggregate service, car apportioning, and the desperately needed long-term planning for the growth of our industry.
In addition, I think the long-term planning.... If we do move in the direction of establishing a body such as the agency, many of the functions can be dealt with directly through there, specifically the price transparency and the transparency on movement and flows. Some work has been done by the minister with the changes in the mandate of Quorum, which again is positive, but the price transparency component is a potential addition that could be done through the Canadian Grain Commission with additional amendments to the Canada Grain Act.
The rail competition on the interswitching side is unlikely to be aggressive enough to do what's required on the additional capacity and the long-term effects on prices.
Mr. Chairman, it's my hope that we can all pause and look to a solution that has the potential to be longer term. It is my view that if we have an average to above average crop, the bill that is before us will not change adequately to adjust basis levels in the foreseeable future. I think we still have more work to do, and I hope everyone can work together to find the solutions required.
Thank you, Mr. Chairman.
Thank you, Mr. Chairman.
Good evening to everybody. I appreciate your taking the time to listen to us this evening. I know it's been a long day, so I'll try to be as brief as I can.
Thank you for inviting me here today to discuss the rail transportation issues on behalf of the Barley Council of Canada and the Western Barley Growers Association.
My name is Brian Otto. I'm the chairman of the Barley Council of Canada. I have sat on numerous boards, I have been a director with Alberta Barley, the Western Grains Research Foundation, and I am the past president of the Western Barley Growers Association. I have a mixed farming operation at Warner, Alberta, which is just north of the Montana-Alberta border. I am chairman of the Barley Council of Canada, which represents farmers from across Canada, as well as the entire supply chain for barley from the malting and brewing industry to the livestock industry.
At the Barley Council of Canada we believe the government's initiative to address the rail transportation issues is a good first step in addressing a larger problem within the system. This problem is that the rail system is simply not working efficiently for Canadian shippers. While we respect the work that's being done to make railway work, at the end of the day it's the smaller businesses, such as malt companies, that will buy smaller volumes of barley that aren't able to do business effectively under the current conditions. These businesses provide a diversity to our economy that brings significant value to all Canadians.
Our transportation issues at home are affecting our international reputation. In the coming months we need to take the united approach being suggested by the government to ensure that all commodities are represented. Canada is pro-trade. We are on the verge of signing two major international trade agreements, but we have to prove that we are reliable trading partners.
We are not here today to pit farmers against anyone. Farming is an economic driver, and we simply want to help drive the economy forward. The stakes could not be higher. The barley industry is ready for growth and prosperity. We formed a national organization across the supply chain. We brought partners together. We have buy-in from our value chain. We have the supply and the quality, but there are hurdles restricting our ability to conduct good business. Hurdles such as market access issues, falling behind our competitors on trade agreements, lack of transportation efficiencies and logistics are holding us back from maximizing our potential.
We want the grain industry to have fair and equal access under a transparent system and we want our industry to grow in conjunction with other commodities. In particular, we recognize the challenges faced by our colleagues in the forestry, potash, mining, coal, and other sectors. This is why we want a solution for transportation in Canada that's focused on a collaborative effort involving everyone in the value chain. We believe it is in Canada's national economic security interest that a competitive rail system is developed for all commodities. We also believe that the work we do for agriculture now is just as important as the ongoing debates over oil pipelines and other economic priorities.
The good news is that we never hear any complaints when we have full grain trains. But we do know that we need a more transparent system, and that we need better communication throughout the system for it to operate efficiently. Canada's national economic security depends on our ability to respond to a growing demand for our quality products. Canada's international reputation was built over time and has required significant investment from a cross-sector of stakeholders. There is mounting evidence that Canada's reputation as a reliable shipper is in jeopardy as many of our customers have started to source product from our competitors.
At least one General Mills facility in the United States is turning to Scandinavia as a result of the challenge they experienced accessing oats from our traditional suppliers in Saskatchewan and Manitoba. Japanese buyers who have purchased Canadian wheat for years are now turning to the United States after one of our ships sat waiting in Port Metro Vancouver for three weeks.
In addition to these issues, I'd like to focus a little bit more on what's happening to our small businesses that are affected by the rail transportation issues. Encouraging east-west access means more grain is moving along the major routes at the expense of the smaller shippers, like our malt companies that move product north and south.
Remembering the importance of our largest trading partner to the south is paramount as transportation corridors are being affected by the new legislation. It's important to encourage all shipping to all ports, not just Vancouver, Prince Rupert, and Thunder Bay. Our transportation difficulties could be more manageable when we involve our shipping partners to the south.
Some of our niche shippers, malt barley shippers in particular, aren't able to get any cars to ship south. This affects our ability to do business and impacts our reputation as a country with our international customers. It's not the way to do business.
Following the example of the Barley Council of Canada, we believe everyone needs to be at the table to fix transportation in Canada, the entire value chain. By working together, I believe we can fix the problem, and by taking the time to fix the system now, we are better able to ensure our national economic security for the future for our children and grandchildren.
The Barley Council of Canada supports the proposed changes in Bill and looks forward to a more secure future for our value chain. We see the government's recent efforts as a good first step, while looking forward to a time when the system will function better for all in the future.
Thank you, Mr. Chair, members of the committee, clerk, and fellow attendees. I appreciate this opportunity. I didn't think I'd have an opportunity to speak to the agriculture committee in this role of mine.
The Canadian mining industry is a major economic driver contributing over $52 billion to gross domestic product in 2012, employing some 400,000 people, and accounting for $92 billion, or over 20% of the value, of Canada's total exports.
As a consequence of this international reach, mining is one of the largest users of Canada's transportation sector. We represent the single largest industrial customer group of Canadian railways, and consistently account for over half of the total rail freight revenue and the largest share of total volume carried.
Having recently polled our membership, I can report that poor rail service has been causing a range of challenges for miners since the fall of 2013, including unacceptable ratios, with some 50% to 60% of cars ordered versus cars delivered, resulting in some instances in the downscaling of production and operations. Just today I learned that CP Rail verbally communicated that it will no longer transport uranium, a decision contrary to the common carrier obligation that could adversely affect investment in Canada's world-class uranium resources and undermine all of the excellent work and leadership that the government has undertaken to secure access to Asian markets for uranium.
There is a cost to the Canadian economy resulting from poor rail service. Railways do not produce the goods for exports that allow trade to grow, our economy to expand, and employment to increase. Rather, they are an essential conduit for Canadian industry to receive crucial inputs and get its goods to market. Without a healthy and reliable railway network, Canada's reputation and success as a trading nation are seriously hampered.
With respect to this bill, MAC is sympathetic to the grain growers' difficult circumstances and to the government's motivation in assisting them. We also appreciate the sincere effort at reform. However, we are concerned about the unintended consequences that will befall other Canadian sectors reliant on rail service, including mining, as a result of the measures contained in Bill .
Specifically, we have three areas of concern.
The first area of concern is the grain volume commitments. Enacting grain sector specific volume commitments will exacerbate existing rail capacity constraints to the detriment of all the other shipping sectors, including ours. Mining companies are also concerned that enacting grain sector specific volume commitments will undermine the legal remedies available to shippers in the Canada Transportation Act. How can mining companies forced to operate outside the provisions of Bill upon enactment make a service case against a railway that is legally obligated, through pain of penalty, to serve grain companies? A railway's unwillingness to break the law requiring it to move grain is a defence against the legal remedies available to other rail customers seeking to address their service challenges.
Our second area of concern is the limited extension of interswitching provisions to the Prairies. We are concerned the new interswitching provisions will result in the railways being forced to do more short-hauls, which are operationally more expensive than longer ones. A consequence of this is a reduction in rail freight revenue due to the interswitching rate being federally regulated, which will leave the railways to make up for lost revenue by either reducing service to better optimize their assets and/or increasing rates for shippers who are captive, or have uncompetitive options. While MAC is not opposed to interswitching regulations in principle, we would encourage appropriate consultation on their potential positive and negative impacts on the effectiveness of Canada's rail network as a whole before implementing them.
Our third area of concern has to do with regulating improvements to the service level agreement mechanism. Bill proposes amendments that would give the Canadian Transportation Agency the authority to regulate prescribed elements in arbitrated service level agreements, the details of which would be determined through a consultation process. While this measure may seem promising, we do not believe it will be effective. The service level agreement provisions in the act mandate that an arbitrator take a rail company's service obligations to other shippers into account before rendering a decision. If Bill passes, an arbitrator will be bound to consider the railway's legal obligation to transport grain against the elements of service that a non-grain shipper is seeking, superseding any regulation designed to enhance a non-grain shipper's position in an arbitrated service level agreement.
In summary, we do not think the legislation will address the challenges faced by all shippers, and it could make the situation worse for some. I am also very concerned by an approach to rail reform that attempts to address rail issues piecemeal, one commodity at a time.
We support a collaborative approach to addressing rail service challenges in Canada and strongly advise against government or Parliament picking winners and losers. Exacerbating the rail service challenges that miners already experience is not the right way to go. As I mentioned earlier, we are responsible for over 50% of rail revenues. If those decline because mines aren't able to operate, the costs of the overall transportation system will go up for everyone.
We need to take a step back and look at the whole supply chain and the kind of transportation Canada needs to succeed as an export-driven country rich in natural resources. We need solutions that are based on commercial market-based principles. A long-standing MAC recommendation to ameliorate the commercial balance between railways and their customers, for example, would be to insert a new stand-alone section in the act that would define “adequate and suitable accommodation” and “service obligations”. This would not regulate the railways; it would merely define an existing measure available to shippers to pursue in their contract negotiations with the railways.
Second, we need policies informed by accurate data. The president and CEO of CN appeared before this committee last night and emphasized in his presentation the need for better alignment across the supply chain and accountability for performance. MAC supports the spirit of these remarks and recommends that the government require railways to provide both regular monthly public rail performance data on a sector basis and confidential company-specific performance data upon request.
Such a measure as is already being undertaken in the grain sector will provide all parties with the tools to quantitatively understand the nature of rail service challenges and causally identify why service failures occur and where the capacity choke points are forming, and based on such analysis, determine what can be done to fix the problems.
Increased transparency should improve the relationship between railways and shippers, as both parties, in possession of the same facts, will be more motivated to find solutions that are mutually beneficial and that provide the government with better information to guide its own actions.
While MAC remains sympathetic to the agriculture sector's difficult circumstances and acknowledges that the government's motivation is to try to ameliorate the situation, we would be remiss if we did not raise concern about the unintended consequences that will befall other Canadian sectors that rely on rail service, including mining, if the measures currently contained in Bill become law.
Essentially what the GTA did was define and make transparent the aggregate service that would be available to the agriculture sector. Then it apportioned those cars first between the Wheat Board for the movement of board grains and the various non-board players that required service.
I think it's interesting that Mr. Otto mentioned the plight of some of the smaller players with regard to this particular bill. One of the pieces that has to be considered as we move forward in a regulatory framework is to make sure that all of the niche players in this system get access to their share of cars. That was something the Grain Transportation Authority used to be accountable for, to make sure that all the players got a piece.
The bill that's before us provides a bit of a perverse incentive to the railways to service only, or primarily, fast-turnaround large-block movers. As Brian Otto mentioned, it's really important to our sector that all of the other pieces get done.
In terms of the Canadian Wheat Board, the big piece that was different is that a portion of grain that could not be moved was essentially not contracted with farmers, so it didn't overhang the market and it did not drive basis levels to the current levels. The Canadian Wheat Board system would have resulted in perhaps modestly more grain movement, or perhaps modestly less. That is immaterial. What's material is the fact that the cost of movement—the difference between the international values and the farm values—would not have been anything other than the cost of movement. So, this current situation would not have resulted in $4 billion or $5 billion of transfer from farmers to grain companies.
No, I believe in a commercial system, as little regulation as possible. I believe a commercial system will work. What we need right now, in my opinion, is transparency in the transportation system.
Mr. Pierre Lemieux: Right.
Mr. Brian Otto: We have to have a tracking system so that we know where our cars are, and what grain has to be moved. We need good communication between the railroads and the shippers so that we can work this out.
I firmly believe that we need to get all the players to sit around the table and work this out.
The Barley Council of Canada is an example. We've put all the players at the table in the barley industry, from the producer right through to the end users, the processors, the feeders. If we have a problem in barley, we have all the people in the value chain together to sit there and work out a solution.
That's what has to happen in this transportation system. We need to get everybody that's involved in it to sit down and work this thing out. I truly believe that if we have everybody at the table, there are solutions to this. But we don't know the challenges of each sector. Until we understand those challenges across the value chain, it's going to be very difficult to arrive at a solution.
It gets back, Mr. Easter, to the core problem that there is an absolute capacity constraint at the west coast. We can point fingers at the railways, and I have some sympathy for what the Mining Association of Canada has said. I've sat in and talked to the people in both the mining and the lumber industries somewhat over the last two weeks on this question, and everyone did experience the same difficulties in that west coast move.
One of the difficulties with a market-only solution is that if you have a constraint, and there is only so much west coast movement, 21 million tonnes, but let's be generous and say everybody does perfectly and we go to 22 million, there are 50 million tonnes of product that have to go out. If you have a market solution, every tonne is going to bid for that west coast capacity, so we need some mechanism.
In terms of the monitoring piece, we in agriculture failed the railways in the sense that we need a better way of pegging that export number earlier. Frankly, with the cuts in Statistics Canada and everything else, those numbers were not very well refined until October. In all reasonableness, it would take them six or eight weeks to gear up even if they actually tried, yet an agronomist could have pegged that crop in August. We could have invested as a country and done some forward planning to do the head counts, and we would have known where we were with those types of volumes.
That was the role the Canadian Wheat Board played. We fed that information consistently in communication with the railways. We built that west coast export plan based on the assumption the other crops were going to move, and then we figured out how much of the rest of the crop could go east, and we accepted that much grain. Now, granted, the new solution will not be that administrative in nature, but it does have to find a way of defining how much export capacity there is, how much grain is going to want to go, and apportioning that so all the potential users have a reasonable probability of getting their share of that capacity constraint.
As you said in your opening remarks, we have learned what the absolute market solution gave us. It gave us a $100 a tonne excess basis. That's a $4.8 billion transfer from farmers to grain companies. That's not a very attractive solution.
We need to be a bit more creative in finding that solution.
I'll give you a little story about interswitching.
As a grain producer I do have friends in the elevator system, so I asked them about the interswitching. I think it's what I call a good threat to use to get the railways to consider giving better service, but in this particular instance, the person whom I talked to said they already have the ability for interswitching on certain loading sites. He said they can get that grain moving off that site by the competing railroad, but good luck getting cars back to that site the next time to load.
That's the unintended consequence of it. If we're going to allow interswitching, we have to be very aware of what some of the backlash can be on that. I think it's important in the interswitching that it does create the opportunity for that north-south movement. We do have BNSF that would possibly start moving.
We have to be aware that there are four major elevator construction sites on the other side of the 49th parallel in the U.S. that are in place and being built right now and they are certainly not being built for U.S. grain. They have an eye on starting to move Canadian products.
We have to establish.... We have the east-west movement and we do have constraints, as we've heard, on the west coast. Certainly if we can start accessing that movement south, that certainly will help to take the pressure off the system that we have here in Canada.
Thank you to all of our witnesses.
Mr. Gratton, I'm sure you're familiar with the part of the country that I come from, northern Manitoba, which depends a great deal on mining, forestry, and in a smaller part, agriculture.
You've talked about the way the industry is losing out. The way I see it is that the same people, the same communities, the same families that either work in the mines or have some agricultural production or have a relative working in the mill, are losing out tenfold and their livelihoods are at risk.
We've seen a reduction in production in forestry in particular in my area, as well as the movement of agricultural product as a result of the backlog.
Given that this issue is not going away anytime soon, how important do you think it is to have some federal championing of this issue, not only in terms of the short-term solution but also as a longer-term coordinated commitment? How important is that kind of federal championing in this case?
You make a good point. Whenever people say that we need more west coast capacity, I always say that we need more capacity, period. The additional marginal cost of more export capacity at the west coast has the potential to be very high. The cost of using Churchill, at the margin, is relatively low, and potentially the cost of growing the east coast system will also be relatively lower than potentially having to add all the surplus capacity out to the west coast.
There is no way that Canada wants to build a transportation network that will move 60 million tonnes out to the west coast. The cost would be so prohibitive that no one could afford to be in the business. So, those other corridors are important, and it is the case that in order to use those, it requires planning. As the short-term incentive, the market is going to say to every individual operating separately to look specifically to the west coast.
I think Churchill needs to be considered as another potential victim on simply requiring a certain number of cars per week because the railways are going to say that Churchill has a longer car cycle time that will tie their cars up for more days than a 100-car spot to the west coast or a 100-car spot from southern Manitoba to Thunder Bay will.
It's the same difficulty that Brian Otto pointed out with a malt barley shipper. You can't have a general aggregate number without also having a way of dividing up who has access to that capacity based on some sort of economic priority. In order to make that work, you need an authority.
Larry, with regard to the movement of grain, I think there has to be some identified formula that will allow the railways and the grain companies to identify what they want to ship. As I understand it right now, there's a breakdown in how they calculate the allocation of cars and what's being moved, how they're tracking that. They use different formulas.
We need the railways to ask how much grain do you move, where is it coming from, what ships do you have coming in, where do you want to move it from, and how many cars are available? The elevators have to be able to give that information to the railways and coordinate this information so when cars arrive at an elevator, they arrive on time, and when they are filled, they are moved out, and moved to port on time, and put into the terminal.
The other side of this is the terminal side. We're hearing about congestion at the terminal. Right now, quite frankly, the last figure I heard, and it might be a little old, is the terminals were running at about 20% capacity. Obviously we have a lot of terminal capacity right now, and we're not using it.
Why is that happening? Because we haven't had good communication between the railways and the elevator companies on how to move the right product into port. Let's get that correct too, because you don't want to be moving out spring wheat to load a ship that's there to load with durum or canola.
We have to get all this coordinated. I'm a producer, and it happened to me the other day. I was in Regina at a meeting, and I got a phone call. They needed durum, an emergency situation. Could I get it there? You bet. As a producer, I said I'd get my trucker lined up, and we moved eight super Bs of durum the next day.
That's what has to happen. You have to have that coordination, but people have to know what's expected.
Thank you very much for the opportunity. I appreciate the invitation.
My name is Mark Hemmes. I represent Quorum Corporation. Our company has been under contract with the federal government for the last 13 years as the grain monitor. In that capacity, we are charged with monitoring the performance of the grain handling and transportation system in western Canada. We report to the Minister of Agriculture and the Minister of Transport. We report quarterly, but we also report ad hoc on a regular basis when times are tough, as they are today.
I think what I will do in my presentation today is talk about the current status of the grain handling and transportation system and describe basically how we got here.
I would start by pretty much describing a historical perspective. If you go back to June 2013 and look at the situation that was facing us, you will see that we had a late harvest. We had lots of moisture in the soil. We thought we were going to end up with a crop that was going to be, at best, average and possibly even worse, but by the time we got through July and into August, it was obvious that things were much better. The growing conditions were exceptional, and as we got towards the end of August, it was becoming obvious that there was going to be a bumper crop.
As we moved into September, that became far more real. Actually, Stats Canada came out with a preliminary forecast for the crop of 65 million tonnes. At that point, we had been talking to the grain companies, and the grain companies had been talking to the railways advising them that they were going to see a higher than normal crop and that they would be looking to ship more.
At that time, I think the railways said they had actually planned to do about the same as they had done in the preceding year; they would attempt to do 5,000 cars a week. They had signaled that to us as well.
By the time we got into November, of course, the full impact of the size of the crop had become apparent. That's when Stats Canada came out with the final number of more than 75 million tonnes.
Here is a little bit about how things have performed within the grain handling and transportation system. By the time we got to about week seven of this crop year, which was early in October, the country elevator system had pretty much filled up. Since that point in time, we have seen the working capacity of the elevator system not fall below about 95% utilization. For all intents and purposes, that is telling us that the elevator system has been full ever since about week seven, back in October.
Conversely, with the port terminals we have seen exactly the opposite: the port terminal inventories have held at a historically low level. As a result, they've had difficulty in filling the vessels that have been arriving at the port. In the Vancouver corridor, what we found when looking at railcar allocation and at what the railways have both planned, is that what they have actually delivered has averaged since about week 10 about 22% below plan. In the Prince Rupert corridor, they've been falling between 8% and 10% below the planned allocation.
The bottom line is that they have committed to the grain companies a certain level and have fallen below it. As a consequence, we have seen this dreadful falling down of the ability to load vessels at the ports of both Vancouver and Prince Rupert.
Consequently, we've seen vessel lineups that have gone as high as 38 vessels in Vancouver and in excess of 17 at one point in time up in Prince Rupert. Thankfully, that has fallen. I'll talk about that in a minute.
As of late, total unloads on the west coast have fallen, year to date, about 1% below what the normal average is and about 1% below last year. Prince Rupert is holding it at about even to where they were last year. Total western Canada unloads are at about 5% below where we were last year, and about even with what the five-year average would be.
From about week 12 through to only about two weeks ago, we've found that the average unload counts have fallen far below both the five-year average and what we did last year. That has contributed to the problem.
That said, I would point to the fact that in the last two or three weeks we've seen an about-face in that the railways have been delivering to both the west coast ports. I would say in terms of a comparison to last year, they are about 23% above in Vancouver, about 51% above what they were in Prince Rupert at this time in these last weeks, and on a four-week rolling average, 4% ahead in Vancouver and 13% in Prince Rupert.
We haven't seen Thunder Bay gear up yet, although I know in the last five days they've done over 500 unloads. It's starting to turn around there as well.
I mentioned the highs in the vessel lineups that we've seen. In this last week, which is week 34, as measured on Friday, the vessel count in Vancouver was 29 and we're down to eight in Prince Rupert, which is a very positive situation. We're looking to have that come down quite a bit more.
In terms of exports so far this year, to the end of week 33, Vancouver is roughly 3% behind last year, and Prince Rupert is 7% behind, although they're starting to catch up with the high level of unloads. I would point out, too, that about last week, Prince Rupert Grain set a record, and I think it was an all-time record, of 1,870 cars unloaded in a seven-day period. That really helped move out a couple more ships from the port of Prince Rupert. Overall, shipments or exports from western Canadian ports, year to date, were about 6% behind.
In summary, I would point to a couple of things. First of all, I don't think there is any one event that you can point to that would contribute to the problems we've seen this year, but these are some of the ones you should consider. We did have an unforeseen higher demand for railway capacity. There is the issue of an overcommitment by the railways to the grain companies, which led them to make sales and order vessels that we weren't capable of loading and that still continue to sit out on the west coast. The railways had significant operational challenges through the month of December especially. There was a combination of a couple of derailments that they had to work their way through, as well as the cold weather. They also had an inability to recover from that. It was a long time before they actually got back up on their feet.
I would also point out that this year's bumper crop has not yet been one of the fundamental problems we've seen in the grain handling and transportation system. It will only start to challenge the system as we near the next harvest and the year-end carry-out starts to push the capability of both our storage and logistical resources. Right now we're basically working on a premise that we're trying to keep up to where we were last year and start to move out that carry-out in the next few weeks.
I think I'll—
Thank you very much, Mr. Chair.
I appreciate the honourable members giving the port the opportunity to provide comment. I'll try not to duplicate Mr. Hemmes' comments.
As members may be aware, Port Metro Vancouver is Canada's largest and busiest port. We serve as a vital strategic gateway for domestic and international trade and as a significant economic force in Canada.
We're a diversified port, and that's very relevant to the discussion around rail service, facilitating trade with 160 economies and about 130 million tonnes of cargo in the most recent calendar year. We handle that cargo at 28 major marine terminals. We have three class I railways and a full range of other facilities to support our role in international shipping.
The port is also a cornerstone, as you can imagine, of the economic activity of British Columbia's Lower Mainland, with about 80,000 folks earning their livelihood from port- and transportation-related activity.
With regard to handling of grains, special crops and feed, it's a significant part of the port's activities. In 2013 approximately 19 million tonnes were handled through the various facilities outbound to markets, including Japan, China, India, Indonesia, Italy, Colombia, and others. Those numbers for 2013 represent about a 5% increase in overall volume of these crops.
As with any commodity, the port's primary interest in the handling of agricultural commodities is to ensure their efficient flow through our gateway, maximizing available capacity at our terminals without creating backlogs or extending wait times. At present for grain loading, the port has available terminal capacity, berth capacity, and rail unloading capacity at the five separate grain terminals that operate within our jurisdiction.
As Mark has indicated, we've had a significant backlog of vessels. We operate 32 anchorages, 23 of which are available at any given time. The remainder are dedicated for emergencies or short-term use.
As of this morning, there are currently six grain vessels alongside terminals in Vancouver and 16 grain vessels at anchor in English Bay and the inner harbour. There are another 15 grain vessels currently anchored at designated Vancouver Island anchorage locations that serve as an overflow for port activity, although Port Metro Vancouver does not have direct control.
To put these numbers in context, the average grain vessel time in port is greater than 18 days today, while the other bulk commodity vessels average around six days in port. It's also important to remember that anchorages are a finite asset that require logistical rigour and proper management in order to keep the port fluid. We will be undertaking a review of our anchorage policies because of this particular situation that is ongoing in Port Metro Vancouver.
To ensure we're able to handle Canada's grain year over year and support growth in the agriculture commodity export sector, the port has worked in close cooperation with municipal, provincial, and federal governments, industry, shippers, and railways to develop and fund more than $6 billion in related off-terminal infrastructure, essentially to provide the capacity for the gateway to continue to grow across all sectors. The effect of this has been to reduce landside conflicts around the Lower Mainland, where there were points of intersection between road and rail crossings, so a tremendous increase in our capacity.
Examples of this collaboration include the 800-metre elevated roadway on the south shore of Burrard Inlet near three of our grain facilities, which went into service in December of last year. The roadway allows unimpeded rail switching across what were formerly 10 level crossings. Now, unrestricted access to those facilities can be gained by virtue of this investment. The Low Level Road project in the north shore trade area in North Vancouver is enhancing rail and port operations, as international trade continues to grow in this area as well.
One year ago, in April 2013, Port Metro Vancouver granted a project permit for Richardson International's expansion of their facility in that jurisdiction. This $200-million project involves construction of two 40,000 metric tonne concrete silos. We're also encouraging increased capacity on port lands in other parts of our jurisdiction and are working to advance specific initiatives in collaboration with industry to deal with things like inclement weather loading, where there has been significant progress made.
Other initiatives include efforts that will drive labour stability, rail collaboration, trucking and gate initiatives, and as mentioned, anchor management and availability.
Crucial to the success of these endeavours is collaboration and transparency in the supply chain. The better informed we are, the more efficiently we can plan and work.
In this context we have a profound appreciation for the importance of our role as a data collection and reporting point for industry and for government. We will continue to focus on monitoring, measurement, and reporting of data with as much transparency as possible across each of our business sectors for the purpose of informing initiatives and government decisions.
Port Metro Vancouver understands the provisions in the act under review here that will enhance the Canadian Transportation Agency's ability to prescribe elements in arbitrated service level agreements between shippers and railways, as well as provide for the collection by the agency of more data from railways.
We would further recommend requiring data collection from other supply chain partners, such as marine terminals and terminal elevators. This would allow for greater transparency into supply chain performance on an ongoing basis.
Acknowledging that market forces should be the primary drivers of capacity allocation and the need to address the current situation of significant increase in overall agricultural product volume, it is important that this type of legislation include a sunset clause, as this bill does. It's our understanding it does.
Governments and transportation sector partners, including the railways and Port Metro Vancouver, have made significant market-based investments in the Asia-Pacific gateway. Certainty of the regulatory regime is a precursor for capital investment, be it at the port or in the prairie provinces.
Anticipating the impacts that certain provisions of the bill will have on other sectors and commodities trading through Port Metro Vancouver is a significant challenge. As such, we ask the committee members, as you navigate this bill forward, to consider the long-term implications of future capital investments needed to support the growing demands of the supply chain.
In closing, the port clearly understands our role as a vital transit point for Canada's agricultural exports and in that context appreciates how our actions, performance, and the performance of the supply chain can have a dramatic effect on Canadians seeking to deliver their goods to market. It's with this responsibility in mind that we continuously review our operations in collaboration with supply chain partners to make sure that this happens.
I thank you for the opportunity to present to you today and I'm happy to take any questions that you might have.
Mr. Chairman, thanks for the opportunity to present to the committee tonight.
The Freight Management Association, formerly the Canadian Industrial Transportation Association, has been representing the freight transportation concerns of Canadian industry since 1916. I was not at the first meeting.
Voices: Oh, oh!
Mr. Robert Ballantyne: The 100-plus members of the association spend approximately $6 billion annually on transportation services by all modes. We advocate for our member companies' interests with regard to air freight, trucking, marine, and rail. FMA will only comment on the sections of that would amend the Canada Transportation Act, and also on the government's related announcements that relate to the transportation elements in Bill C-30.
I will attempt to provide some context on how we arrived at this point with regard to rail service, provide some comments on Bill , and more importantly, look at what needs to be done to ensure that the rail system and other parts of the supply chain system have the capacity to meet the future needs of rail shippers.
During the run-up to Bill which amended the Canada Transportation Act in 2008, there were widespread complaints about rail service from across the country. When Bill C-8 was passed in June 2008, the government agreed to undertake an independent review of rail service. The review panel published their final report on January 2011.
One of the panel's consultants, NRG Research Group, found in its independent survey of 262 shippers that only 17% of their respondents rated their satisfaction at a six or seven on a scale of one to seven, where seven was the most satisfied. NRG also reported that 62% of shippers reported they had suffered financial consequences as a result of poor service performance. The rail freight service review panel recognized the fundamental problem, and said in its final report, “This railway market power results in an imbalance in the commercial relationships between the railways and other stakeholders.” Canadian railway law has acknowledged for over a century that rail freight is not a normally functioning competitive market.
Part of the government's response to the rail freight service review was to introduce , the Fair Rail Freight Service Act, which became law in June 2013. Bill C-52 breaks new ground by providing for the first time in Canadian law the right of all rail shippers to a service level agreement, and if it can't be negotiated directly with the railway, it can be achieved through arbitration. The shipper community, through the Coalition of Rail Shippers—and there are a number of our associations, some of which you've already heard from, that are members of Coalition of Rail Shippers—identified several areas where Bill C-52 could be strengthened in a way that would minimize uncertainty and give better guidance to our arbitrators. Also, some of the most significant recommendations of the rail service panel did not find their way into Bill C-52, particularly the review panel's list of elements that should be included in service level agreements at the option of the shipper.
The Coalition of Rail Shippers' proposed amendments to were designed to strengthen it and make it more likely to effectively rebalance the commercial relationship and meet the government's stated objectives for the bill. The government declined to accept any of the six recommendations proposed by the Coalition of Rail Shippers. Consequently, to my knowledge at least, there have been no shipper attempts to achieve a service level agreement using the provisions of Bill C-52.
provides another opportunity to revisit the shortcomings of the Fair Rail Freight Service Act. Clause 7 of Bill C-30, for example, provides the authority for the agency to extend interswitching limits “for the regions or goods that it specifies”. This amendment to the interswitching regulations will allow the agency to give effect to the government's policy announcement to extend the maximum interswitching on the prairie provinces from 30 kilometres to 160 kilometres. The interswitching regulations have been useful to shippers over many decades and are an effective surrogate for real competition. Given the current backlog of grain, this temporary provision may give grain shippers more flexibility in arranging service, and it will be available to all shippers who may have facilities located within the 160-kilometre zones that will be established.
Once a more general review of the Canada Transportation Act is undertaken, the maximum interswitching limit across the entire country should be investigated to determine if the current 30-kilometre limit should be extended.
The other significant provision of Bill that's relevant to all shippers is clause 8, which authorizes the agency to “make regulations specifying what constitutes operational terms” to be included in a service level agreement through arbitration. While it's unclear how the agency and the government will use this provision, it could be a vehicle for achieving some of the shipper amendments that were rejected during the Bill debates. FMA will certainly engage with the agency as these regulations evolve.
I'm not going to comment on the provisions related to potential fines for the railways for missing targets, or the provision that allows the Governor in Council to set targets in the next two crop years. It is acknowledged that the current backlog of grain is an unusual situation, and clearly the government felt compelled to intervene at an unprecedented level of detail.
As you've heard and you probably will continue to hear, there is concern among some of the shipper community that singling out one industry group in such a manner could cause service problems for other shippers. FMA includes among its members grain companies but also many shippers in many other industries. We've informed our membership that the targets set in the order in council and in Bill originated with CN and CPR, and we have to start from the premise that the railways would have offered those targets only if they felt they could maintain the current level of service for their other shippers.
Intervention such as that in Bill needs to be applied very carefully and only under the most extraordinary circumstances.
With regard to the future, a welcome announcement in Bill is that the statutory review of the Canada Transportation Act will be moved to an earlier date rather than its mandatory latest start date of June 2015.
Two basic issues that the statutory review should address are: one, the need to provide appropriate rail capacity for the needs of Canadian industry over the coming decades, and Mark Hemmes made some comments about the growth that is expected to take place in at least some of the agricultural commodities; two, the need to improve the relationship and trust between the railways and significantly large segments of their customers.
With regard to capacity, this will require significant investment by the railway companies, by other supply chain partners as Peter mentioned in his remarks, and possibly by several levels of government. The statutory review will provide an opportunity for an in-depth analysis of the capacity needs going forward and the role the various stakeholders should play. How this is addressed will have a significant impact on the national economy and our global competitiveness.
Last, with regard to shipper-railway relationships, it will be difficult to overcome the distrust, and to some extent, the acrimony that currently exists. In this connection, there have been informal discussions under the academic umbrella of Carleton University School of Public Policy and Administration. They run a process called critical conversation, which involves direct and confidential discussions within an academic environment among stakeholders to start a dialogue to overcome distrust. While arrangements have not yet been confirmed for critical conversations involving the railways and shippers, the planning discussions with the various stakeholders continue.
Rail service is vital to the Canadian economy, and the members of the Freight Management Association are ready to work in a constructive way with the government and the railways to improve Canadian supply chains for the benefit of the railways, their customers, and the Canadian economy.
Once again, I'll offer up a view from the port's perspective.
We track vessels coming in of all varieties, and consistently with the previous system under the Wheat Board and even today, the average duration of port call for grain vessels is higher. A number of reasons for that relate to the number of terminals they might go to, etc., but under normal circumstances, the average stay at port for grain vessels is typically higher than for other commodities.
It has become exceptionally high in recent months and over the years there are periods when it has become problematic. As port volumes grow, we have not been able to identify as many additional anchorages as might be necessary to support that. In the future, it's going to become much more critical that we manage those available anchorages with increasing discipline.
The current backlog and imbalance in the supply chain is at the root, I believe, of the delays. Clearly, there are vessels available to take cargo and terminals available for that cargo, and the priority needs to be to rebalance our supply chain.
Mark, I don't know if you want to add something to that.
Thank you to all our witnesses.
I was at the port of Vancouver at the end of January. Let me give my thanks to Marko for showing me around. It was an excellent tour. It turned out to be very fortuitous and extremely well timed, given where this legislation is. Certainly, when we went around the port, we were looking at grain terminals and rail into grain terminals. We were looking at the overpasses as well to minimize blockages and slow traffic and congestion. At the time most of the terminals were, and I don't remember the number, but they were definitely under capacity in terms of were they full or were they not full.
Certainly Monsieur Mongeau, from CN said yesterday that they're ramping up right now, of course, to meet the targets we have set. He commented that the port is filling up. He didn't say there were any red flags yet, but certainly he tabled a concern about other players in the supply chain not being able to keep up with the delivery capacity of rail.
I wrote down some of your numbers and some of the numbers that Quorum gave us during this presentation. Do you foresee a possible choke point at the port—not now, not in the next two weeks, but I'm talking months, maybe in six or eight months—and what sort of forward planning would you do to mitigate that type of situation, should you see it starting to present itself?
Presently what we report on is everything from the farm gate to the time that it gets loaded on the vessel, which includes the volumes in each section of the supply chain at the country elevator, on the railway, at the port, and with the vessel loading.
We report on the performance of the country elevator network, their loading capabilities, and the time the grain spends in the system. We follow railway performance in terms of what the cycle times are and what the transit times are. One of the things we do not presently report on but will be reporting on in the future is order fulfillment. Basically that's how many cars are ordered, how many cars are actually committed to by the railway, and how many are actually placed in the country, and then we'll follow that on with how many cars are actually unloaded.
We track at the port terminal when trains arrive, when cars arrive, and when grains are delivered to the terminal. We track the terminal performance, how long grain stays in the terminal, and what the dwell time is in how long terminals are taking to unload cars. We track how long vessels have been in the port. We do that in conjunction with the port of Vancouver and the other ports. We track how many times vessels berth. We also track how long they've been staying in the port and when they leave. We do track that on the railway side on a car-by-car basis, and on the vessel side on a vessel-by-vessel basis.
That's a highlight, but essentially in the grain monitoring program, there are about 240 separate measures, so I hit the top end of it.
Or less than eight minutes, I hope.
Mr. Chairman, thank you very much for your introduction and your invitation to appear before the Standing Committee on Agriculture and Agri-Food on this important issue, Bill . Good evening, members of the committee, and thank you for staying so late.
My name is Roger Larson. I'm president of the Canadian Fertilizer Institute. CFI represents the manufacturers of nitrogen, phosphate, potash, and sulphur fertilizers, as well as the major wholesale and retail distribution companies in Canada. Our members produce over 25 million tonnes of fertilizers annually, over 75% of which is exported to more than 60 countries around the world. Canada accounts for about a third of world potash production and 45% of world potash trade. Canadian farmers purchase $3.5 billion of fertilizer annually.
The Canadian fertilizer industry understands the urgent demands for prompt action to alleviate the current backlog of grain through Bill . However, our position has been that government-mandated allocation is not an effective solution. Without an expansion of rail capacity it is a zero-sum game. Our industry supports commercial solutions through clear service level agreements negotiated between the railways and their customers.
In addition, there are three other critical points that I would like to make.
Policy commitments announced in conjunction with the tabling of Bill , with the additional enhancements, could be a robust solution to the current challenges which exist for all rail shippers.
We do not believe that this winter's backlog of grain and other rail shipments, including fertilizers, is a blip. Canada's commodity transportation system is hitting the limits of its capacity, both domestically and for exports. Only a strategic partnership of governments, railways, and shippers can ensure that Canada's place as an export powerhouse will be realized.
Regarding Bill , our industry understands that the government is moving to rapidly pass this legislation; however, there are important issues which need to be addressed before this bill becomes law.
First, expanding interswitching distance beyond 160 kilometres would allow our members' fertilizer facilities to have access to multiple railway companies, improving service and competitiveness.
Second, enhance service level agreements or SLA policy commitments to include the following provisions: the collection, reporting and measurement of performance metrics; the performance standards applicable to the railways' obligations; the charges, penalties or fees that a railway should pay upon a breach of its service contract; and a mechanism for the resolution of disputes under SLA.
I want to emphasize that this winter's backlog of grain and other rail shipments is part of a trend. Canada's commodity transportation system is hitting the limits of capacity domestically and for exports. The crisis in rail shipments is not just a perfect storm of bad weather, record grain harvest, and lack of customer focus by the railways; rather, it is a wake-up call for everyone in the transportation and logistics community.
The frustration of shippers who simply cannot get their goods to markets has been boiling for years. This is not, and should not become, a power struggle with the railways. It's about farmers, miners, and manufacturers who are losing money because of inadequate rail service.
With the Canadian government looking to aggressively grow Canada's trade with key markets, the clock is ticking on the readiness of the Canadian logistics and supply chain to accommodate a huge surge in traffic.
We need to act now to optimize our existing framework so that we can achieve this economic opportunity. Addressing one sector's concerns without considering the broader supply chain will result in a patchwork of policies that do not solve any fundamental issues. Shippers, railways, and the government need to take a holistic look at the challenges facing Canada's transportation system and develop sustainable commercial solutions that are good for all sectors, the railways, and the Canadian economy.
In closing, I'd like to thank the members of the committee for this opportunity to present our views. A good dialogue between government and the private sector is important as industrial policies are contemplated, ensuring a good understanding of the opportunities and challenges that businesses face, as well as opening the door for partnerships that strengthen Canada's economic competitiveness.
We welcome the opportunity to continue this dialogue. I am pleased to answer any of your questions.
The bill talks about making sure that we have access to all corridors. Access to all corridors has to include the producer car shippers. They're not a corridor; they're not a specific spot. The corridors speak to areas in Saskatchewan. I think we have to work with the legislation to add producer car spots.
The short line I am a member of and on which I ship grain sent me some numbers the other day. They have shipped 531 cars this year, which is good. They are another 500 cars behind, and they have to get to 2,000 cars for the annual year by the end of the year. We're in week 32 of our shipping year; we have 20 weeks left. That's an awful lot of cars. They have to ship another 1,500 cars. That's what they have committed to people such as Garnet.
In the last little while, this is where producers have been going to move their grain, because these are the guys who have said they can move the grain. Their prices have been better, because the basis on the producer cars has not changed nearly as dramatically as that of the elevator system. The producer cars have been returning us better returns for the last three or four months.
I think it's critical, when we talk about the access to corridors, that you have access to shippers within some of those corridors, to make sure the producer cars are there.
We're shipping 50 cars out of our line at a time. The railways aren't really keen to meet that 11,000-car target. It's very difficult for them to pick up these small numbers of cars.
Thank you for coming to the committee tonight.
I'll start with Roger.
From some of your comments, I think we think completely alike. You said you want a market-driven solution to the problem. You said that it's an overall infrastructure shortage that is the issue; yet within a few minutes you said that as an organization you don't have an answer as to what a solution would be for this infrastructure problem.
Here we are. We're asking for a solution to the infrastructure shortages and an answer as to how we can fix this thing. We're looking at Bill . Yes, it's more short-term as a solution, but long term.... So we come back and ask you what your solution is. Your answer is that you don't even really get along yourselves to provide us with such a solution.
I guess that's where we're stuck. If you want a market-driven solution, then you need to give us a market-driven solution. If you want our solution, we'll give it to you, but.... Do you know what I'm saying?
We want you to give us that solution.
I'll go to Humphrey and Garnet. I would say to Garnet, too, that a bit of the overlooked problem here is that we talk about exports, but we haven't been talking a whole lot about domestic supply and the shortages there. I'm from B.C. I lived in the Lower Mainland when I went to school. I lived in Abbotsford and your area, so I know how turkey farms operate. You need a lot of feed for those turkeys.
I mean real turkeys, not—
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Mr. Bob Zimmer: —whatever people might want to reference there.
We heard testimony from Mr. Mongeau from CN, and I'll focus on Mr. Mongeau because it is CN that operates in my riding exclusively. We had almost presumed that a car shortage was something of an anomaly this year only, but I have heard comments about problems since I became a member of Parliament. I heard of previous problems of shortage of railcars. I heard about the shortage of railcars at pulp mills, and I've heard about it in other commodity areas too.
Humphrey and Garnet, please tell me what the situation has been in the last number of years and when the shortages occurred. How has it been going? Has it been getting worse or better? Perhaps you could give us an overview.
Let's start with Humphrey, please.
Shortage of cars.... I think sometimes there is a terrible shortage of logistics. In conversations we've had with the railroads, they have said that putting more cars on the railroads may be like adding more cars to a freeway like the 401 in rush hour. Are you going to get anywhere faster?
Yes, we're not getting the cars on time. I believe the biggest factor missing is coordination within the policy. As we've heard in talk about the ports tonight, the railways bring cars in on Friday afternoon because they know the ports aren't going to work on the weekend, and then they say that the ports are congested.
The terminal elevator that I deliver to phoned me. I talked to them on Friday afternoon; they had said to phone on Friday. “Can you deliver on Monday?” I want to deliver next week. There's a call on Friday morning that all deliveries are off. The railway isn't spotting this week. Okay, so I had to change all my plans to go back. On Friday afternoon, they got a call from CN saying that they're going to have cars there Saturday morning.
Somehow we have to fix that spot of it. How do the shippers, how do the receivers...? We have to fix that side of it.
Is there a shortage of cars, a shortage of things in the middle? There may very well be; we'll find that out. I think the biggest most critical thing is to have the coordination there to say that when CN says it will have cars at the terminal, they arrive on time and they are taken on time.
CN will bring cars into this facility, but if there are fertilizer cars in the way, they just park the grain cars out on the line where they can't get to them. Then they have to wait for CN to come back and move the cars again. How do you load this 110-car spot?
This is a great part of the logistics within that system and of managing it. Those are the things that come back to haunt the system. Is there a shortage of cars and capacity? I think it's as much to do with the logistics. Manage those logistics.
Whether it comes down to service level agreements under which, if the railways say they're going to be there at four o'clock on Saturday afternoon and they're not there at four o'clock on Saturday afternoon.... The companies are bringing people in to load those cars. There's a 24-hour spot. There's a premium to load them in 24 hours. They want that premium. Every terminal I deal with will bring people in to load those cars. Do you want to be that guy who says, “Yes, I'll work the weekend”, “No I won't work the weekend”, “Yes, I'll work the weekend”?
Those are the issues that we have. We need logistics control.
Thank you very much for being here this evening.
Mr. Larson, I'd like to go to you first of all.
The 11,000 cars per week that have been mentioned, and we've talked about this before, were numbers in various corridors that CN and CP said they would be able to handle without affecting other shippers. Of course, we've heard stories where that doesn't seem to be the message that is going to the other shippers, so it brings up this issue about one group fighting against the other, and that's going to affect everybody's approach to this.
Somebody mentioned the rancour that exists. I know that Mr. Payne spoke earlier of some of the concerns. As you say, this is not something that has just happened in the last couple of years. This has been ongoing for quite some time.
The way I'm looking at it is that there are other things that CN and CP have spoken of. One of those things was that they were also against interswitching, yet you were saying that perhaps we should be taking a look at expanding that.
The first question I had when I heard you speak was what would that number be, or what kind of flexibility do you think a person might have to have in order to at least help those in your industry?
Yes, on producer car numbers, when we had the Wheat Board before the change in the marketing status, until producers found a different way to use the producer cars, we were doing between 11,000 and 13,000 producer cars per year.
In the following year, until we find— First, to ship a producer car we have to have a buyer at the coast, so those relationships had to be built. The line we deal with deals with two grain companies, P & H grain, and Lansing. It took a while to develop those things.
As I said, our line this year is looking at doing 2,000 cars out of there, so I think that producer cars have an opportunity to grow in this atmosphere.
Producer cars need sidings. In the last number of years we've seen CN and CP close sidings. There are sidings out there that they don't have registered to load as producer cars.
We have to be able to allow the option for these producer cars because they're our only outlet when we want to have some options against the big four grain companies. They're that other outlet we have to produce.
Number two was to call for a moratorium on railway siding abandonments and make sure that the ones that are there are re-listed for producer car loading sites. We have a large number of producer car loading sites that have been delisted by the railways and they said they would not spot railcars on those sites. We need to go backwards. I understand there is a cost to maintaining these lines, but there's also a cost to western Canadian grain producers when we lose that competition.
Before I get to any questions, it's probably appropriate to take a step back for a second.
The government's approach with respect to what is happening in the west first of all was an immediate solution to ramp up the cars available, if you will. That was the order in council.
Bill is not a long-term structural change. It's intended to address near-term issues in a more comprehensive way than the order in council allows us to do. Through that we're proposing, among many things, a flexible regulatory approach to some of the service level issues that have been raised, as opposed to putting in force a legislated framework, and trying to be prescriptive about it in that approach for a short duration.
The third aspect is that we are proposing to accelerate the review of the Canada Transportation Act. It's important because of some of the bigger structural questions. Earlier we heard from witnesses about the establishment of a transportation authority and some other things like that. These are major structural things and we don't necessarily know what the interrelationships will be. I don't even know if they'll exceed the scope of the bill as it currently exists. But some of these issues related to major structural changes to the legislative framework of the Canada Transportation Act are probably dealt with better in that earlier review, so we can take a look at that.
I think Bill has to be looked at with a view of not trying to solve all the issues, if you will, in a structural fashion. That being said, it doesn't mean there aren't opportunities. There'll be consultation, obviously, on the regulations. I think we've heard a number of witnesses who think that will achieve at least some of the important objectives related to operational terms of service level agreements.
Is that a fair understanding of that approach in that regard? Do we understand that we're not trying to solve all of the issues, if you will, structurally with this particular bill? Are you comfortable with that approach, knowing that the bigger questions will be dealt with in an accelerated fashion?