I just want to note that we're starting exactly one minute early, which is a good thing today.
Good afternoon, Mr. Chair and honourable committee members.
I am very pleased to be here with you today to talk about Bill , which, as you well know, is unquestionably a very important piece of legislation that aims to amend both the Canada Transportation Act and the Railway Safety Act.
I'm going to begin with the proposed amendments to the Canada Transportation Act, or CTA.
The tragic Lac-Mégantic derailment has shown us that our liability and compensation regime for rail must be strengthened. The Montreal, Maine and Atlantic Railway carried only $25 million in third party liability insurance, which we now know is not nearly enough to cover the incredible magnitude of the resulting damage to and loss of both life and property that night.
In the 2013 Speech from the Throne, our government committed to holding railways and shippers more accountable. Bill does that by ensuring that sufficient compensation will be available to pay for damages and compensate victims in the event of a railway accident.
With this bill, railways will be required to hold a mandatory level of insurance based on the type and volume of dangerous goods that they carry. These levels will range from $25 million for short lines carrying limited or no dangerous goods to $1 billion for railways carrying significant amounts of dangerous goods, namely, CN and CP.
These mandatory insurance requirements have been set based on analyses of historical accident costs, taking into account the severity of past accidents involving certain goods. These requirements make certain that a railway's insurance directly reflects the risk associated with its operations. These insurance levels were determined to be adequate to cover the cost of the vast majority of potential accidents.
While a scenario of the magnitude of Lac-Mégantic is thankfully an extremely rare occurrence, we want to be certain that all costs in such a case would be covered. That is why a supplementary shipper-financed fund was created to provide compensation above the railway's insurance for accidents involving crude oil, and any other goods added through regulation.
In the event of a rail accident involving crude oil, railways will be held automatically liable, without the need to prove fault or negligence, up to their insurance level, and that will happen immediately. There will be certain defences to this strict liability. For example, a railway would not be held liable if the accident was a result of war, hostilities, or civil insurrection such as a terrorist act, as these occurrences are outside of the railway's control. If accident costs reach beyond the railway's mandatory insurance level, the supplementary fund covers the remaining damages.
For the supplementary fund, we have included a broad definition of crude oil in recognition of the serious damage that all crude can cause if released. Even a less volatile crude can have a grave impact on the environment and result in very high remediation costs. The fund will be financed through a levy on shippers of $1.65 per tonne of crude oil transported by federally regulated railways, indexed to inflation.
The aim is to capitalize the fund to $250 million. That amount would provide substantial additional coverage for crude oil accidents above the insurance levels. Based on a reasonable projection of oil-by-rail traffic growth in the coming years, we have determined that with a $1.65 per tonne levy, we would reach that target in approximately five years. That said, however, it is important to emphasize at this point that the $250-million capitalization is a target. It is not a cap.
The bill allows the Minister of Transport to discontinue or reimpose the levy as necessary. It could be put in place indefinitely or for any specified time period. This means that the levy could continue for longer than five years should oil-by-rail traffic grow at lower than expected rates. It also means that the fund could be capitalized to a different amount should that be considered appropriate.
Just to be clear, Mr. Chair, the fund will cover all costs above the railway's insurance and will not be capped. In the unlikely event that damages from an accident surpass both the railway's insurance level and the amount in the supplementary fund, the government's consolidated revenue fund will back up the fund but then be repaid through the levy.
By creating mandatory insurance levels for railways and providing an additional pool of available funds, Bill makes certain that, in the event of a rail accident, there will be sufficient resources to cover all damages.
Following the tragic Lac-Mégantic derailment, and to address the recommendations in the Auditor General of Canada's fall 2013 report, the proposed amendments to the RSA will further strengthen the oversight of federally regulated railways and Canada's railway safety regime in certain areas.
These include the following: a new power for the minister to order a company to take corrective measures should a company's implementation of its safety management system risk compromising safety; a new authority to regulate the sharing of information, records, and documents from one party to another, other than the department, and an example here, of course, is from a railway company to a municipality; broader railway safety inspectors' powers to intervene in a more effective way with any person or entity, including companies, road authorities, and municipalities, to mitigate threats to safety; a broader power for the minister to require a railway to stop any activity that might constitute a risk to safe railway operations, or to follow any procedures or to take any corrective measures specified; and, a cost reimbursement scheme for provinces and municipalities that respond to fires believed to be caused by a railway company's operation.
Part of Transport Canada's prevention strategy has been to ensure the department has an effective oversight regime. This means both ensuring that industry is in compliance with the various regulations that govern it and responding to changes in the risk environment. Transport Canada continuously examines and monitors its resource levels to adjust and reallocate as needed to address emerging issues, trends, and higher-risk issues.
I announced, as part of the department's response to the Transportation Safety Board report on Lac-Mégantic, increased resources dedicated to the rail safety program. Rail safety had approximately 100 inspectors at the time of the Lac-Mégantic accident. As of March 2015, Transport Canada employed 122 rail safety oversight personnel.
Furthermore, I do want to assure the committee that the safety management systems are not self-regulation—far from it. Safety management systems complement a robust railway safety regulatory regime that includes requirements of the Railway Safety Act and the associated regulations, rules, and engineering standards. The new railway safety management regulations of 2015, which came into force on April 1 of this year, are more prescriptive than the 2001 regulations and really will further strengthen railway safety operations across Canada.
Mr. Chair, I would be pleased to answer any questions you may have.
This concludes my remarks.
Sure. As we indicated, the objective of our reviewing of the liability and compensation regime first was to make sure that we have “polluter pay”. That's where we started with this whole piece. We also wanted to make sure that there would be adequate resources available for potential victims or for cleanup costs to make sure that taxpayers were going to be protected in the event of an accident.
But we had to make sure that it was a fair sharing; it's not just railways that are involved. Shippers are to be involved as well. That's how we ended up coming up with the bill that's before you and the insurance requirements.
On the first side, with respect to the railways, it was to determine the appropriate level of insurance, because what happened in the case of Lac-Mégantic was that there was only $25 million available, and to review what are the appropriate levels of insurance, which was done. Second was to take a look from the other side as well, at a second source of compensation, which would be this fund for railway accidents involving designated goods. We determined to start this with crude for various reasons, including the fact that it is an increasing source, but the initial focus is not just for that. It's because we know exactly what happened in the Lac-Mégantic derailment and we saw what costs were associated with it. As crude is not the only product that could cause damage in the case of a rail accident, it is left open, and there is flexibility there to provide, by regulation, other dangerous goods in the future.
The administration would require establishment of a body, but we've been doing that already, as I've said, in the shipper finance fund, the ship-source oil pollution fund under the Marine Liability Act, and there are a lot of similarities. We've mirrored those responsibilities with regard to both fund management and accountability.
We're going to start with crude oil. Railways are going to be required to pay compensation to the limit of their insurance level without the need to prove fault or negligence. We are also making sure that we take into consideration the things that are beyond their ability. I've listed those already previously in answer to a question. As well, regulatory authority is there to include things other than crude oil with respect to the railway. To make sure there's continuity, damages covered by the fund would mirror those for which railways would be held liable, for all loss or damage.
We've indicated how we would go ahead and capitalize the fund. We figured that the best way to do that would be a per tonne levy. It was, as Mr. Tupper pointed out, a straightforward exercise in determining what that level of levy would be. We said that the shippers would be required to pay the levy to the railways and then the railways would remit it to the government for a deposit in a special account as part of the CRF. As we've gone through already, the fund will be the payer of last resort, because most accidents will be covered by those mandatory insurance levels. There will be a few.... God willing, we won't have any accidents, but there may be a few that would end up tapping into the fund. If that fund is depleted by that accident, then the CRF would be called upon as a backstop.
That's basically a longer version of what I said in the speech and how I've answered with respect to these questions in the past. We want to make sure that the fund is transparent in its management, so the administrator would report on the management of the fund to Parliament through the Minister of Transport. There would be provision for a special examination of the fund at least once every five years as well.
That's it in a nutshell.
Thank you very much for the question.
Mr. Chair, the fund has been based upon and mirrored on very successful funds that we have had in the past. That would be the ship-source oil pollution fund, where, simply put, you put a levy on the shipper, collect that levy, and maintain a fund to be utilized in the event that other sources to do the cleanup or to compensate are exhausted. In this case, we say that there will be a minimum insurance level. After that, the fund is available.
We discussed at length a minute ago the importance of ensuring that we took a look at the historical information on quantum associated with accidents. I'm comfortable that the department did a thorough analysis, and that is why the target for this initial capitalization is $250 million.
To give you an example, in the case of CN or CP, if there were to be an accident that did indicate there would be compensation to victims or an environmental cleanup for crude oil, then, first and foremost, victims would turn to the rail company, because it has strict liability to the limit of its insurance. It caused it. They would turn to it and produce their receipts, and they would be paid through the insurance company.
One of the important parts of this bill is that before this bill, and currently as it stands, there would be a process through which CN or CP, if they disagreed that the cause of the accident was theirs, could make the individual take them to court. We wanted to cut out the expense and uncertainty associated with that, to ensure that compensation would flow quickly. As such, the individuals would be able to claim first to the insurance company.
If that first billion dollars, in the case of CN or CP, were to be exhausted, then they could turn to this fund and go through our administrator here in the government to ensure that they would be paid quickly and to ensure that they are held whole. That fund is solely funded by shippers. It is not a railway fund; it is a shipper fund. The process by which that fund is accumulated is that the railways charge the shippers and the railways remit to the administrator of the fund, and that is held in a separate account as part of the consolidated revenue fund. That is the scheme that has worked in the past and that we have put together.
We have to abide by the Constitution and we have to make sure we are doing things legally, and that is the best process in order to ensure that the taxpayer is not on the hook for cleanups and that the polluter who caused it, either the rail or the shipper—because by nature these goods are dangerous to move—is adequately fulfilling its respective liabilities.
—so you do keep that in mind as you're figuring out what the quantification is.
Mr. Chair, the important part with this as well is to make sure you balance it against the reasonableness of that happening again. Everything we've done since July 2013 is to prevent that from happening: preventing derailments from happening, and mitigating, should a derailment happen, to ensure the cleanup can be done quickly, with the third principle being that the polluter pays. That's been the focus for us since then.
This is part of it. Part of it is the lowering of the speed in urban areas, as we talked about. Part of it, too, is developing the new tank car standard. Part of it is saying that you have to phase out the older legacy DOT-111s, which we've done as well, and creating a schedule upon which everything has to be converted to the brand new car that's coming out soon.
It's a work in progress. We'll continue to work on it. We continue to monitor. You had CN officials appear before you as witnesses. They gave good information. They have a responsibility for safe operation as well. It's not just about what we do here in creating laws. They have to operate safely on a day-to-day basis, and they need to invest in their infrastructure, and we'll be here to hold them accountable.
It's a good question. One of the things that did come up in a number of conversations is that kind of issue.
One of the things the minister announced last spring was an emergency response task force. The purpose of that was to bring together the broad community of people who are involved in this, from municipal firefighters, to aboriginal firefighter groups, to the companies that respond to these spills on behalf of the shippers, etc.
There are about 35 members of that task force. It has been meeting on a monthly basis and has developed a number of recommendations in response. It has developed new training curricula, which are nearly complete, to be put out for recommendation to those who do training in order to be able to improve the ability of firefighters to respond to—so they have the background to respond—oil pool fires, etc.
In terms of resources, that's something that hasn't been the key focus at this point, but certainly as the people work through the ways in which we can improve the system as a set of jurisdictions and responsible authorities, those questions will come up.
Thank you, Mr. Chairman.
Thanks to all of you for allowing us to speak today.
My name is Jim Beardsley, and I am the chairman of Marsh’s Global Rail practice. I am here with Ms. Lois Gardiner, senior vice-president with Aon Global Risk Consulting. We represent the two largest rail insurance brokers in Canada.
We appreciate the opportunity to offer our collective view on some of the potential ramifications in the railway insurance market if Bill is passed into law in its current form. We believe these potential ramifications could hinder the railways in their effort to comply with the bill and perhaps create unintended and negative repercussions in the delivery of these essential services that the railways provide for the Canadian economy and in the wider economic benefits for all organizations in the supply chain.
The general insurance market today is one where the insurance buyers are enjoying an abundant supply of insurance. However, it is important to note that the railroad liability is not a general insurance market, but a global specialty market. Specialty markets are more limited than the general market when it comes to the number of insurers available and the amount of insurance or capacity. In addition, due to varying appetites for risk among those same specialty insurers capacity is not interchangeable throughout a program tower.
If you review the program tower graph that we had submitted, you can see that the insurers that write the risk at the top of the tower are usually different from those that write at the bottom or in the middle. The point is that if capacity is lost from one part of the placement, there is no guarantee their vacancies can be filled from the other existing insurers.
In 2008, for the first time in Canada, the railways were able to construct a liability tower to over $1 billion, suggesting now that market disruption might jeopardize the ability for the most active railways, through insurance, to meet the $1-billion minimum limit that the bill requires. For short lines, this level of coverage is theoretically available; however, it would not be financially viable, nor would it be likely to be self-insured.
Insurance underwriters manage their exposure through the use of familiar data that adds security to their underwriting process. A major concern is that in a fluid, cyclical market, some of the proposed wording in Bill and some of the coverage extensions could create enough uncertainty in the underwriting community to undermine the railways’ ability to comply with the bill.
Uncertainty in insurance underwriting historically has manifested in reduced limits, coverage constraints, and increased pricing. Our wish today is to encourage the committee to reduce some of the underwriting uncertainty with clarifying amendments to the bill, which will assist in stabilizing available capacity.
The example of strict liability in lieu of at-fault or negligence-based liability as outlined in proposed section 152.8 is a major change that could be problematic for underwriters. While we understand that strict liability is a feature of the new legislation, it is unclear in the bill which “involved” railways would be subject to strict liability as the term “involved” is not specifically described or defined in the bill, as you can see in proposed section 152.7. Underwriters in this market are likely to write multiple companies that could be “involved”, while not physically involved in the goods movement causing the loss.
Under the proposed strict liability wording, insurers might think they could be paying out far more limit than they might have paid under a fault-based regime. This change could create uncertainty and encourage insurers to pull back on capacity, protecting themselves from the unfamiliar. Similarly, the use of phrases like “any action or measures” and “all loss of non-use”, instead of something like “reasonably incurred”, all referred to in proposed section 153, leaves an underwriter with a sense of limitlessness, which could be met with a similar overreaction. It is possible that this uncertainty could severely limit the capacity available in the rail insurance market that is global.
Additionally, further clarity is required in describing that the minimum limit also acts as a per-accident cap on liability, as alluded to in proposed section 152.7. We feel that this will add to loss forecasting certainty for the underwriters. We also recommend clarifying the role of approved self-insurance as noted in proposed paragraph 92.1(b), as a potential substitute for third-party liability insurance. This feature adds flexibility to the railways’ ability to comply with the bill.
According to proposed section 94.2 of the bill, “The agency shall suspend or cancel a certificate of fitness” of a non-compliant railway. We would recommend substituting more flexible wording so that the agency might be able to make a decision that benefits all stakeholders. As an example, substituting the word “may” versus “shall” could allow for greater flexibility.
Another concern is that we can imagine that stacking limits under strict liability might actually discourage cooperation among the railways, especially if they suspect that direct cause of a loss could be the responsibility of a railway not covered by the act. The economy does depends on this inter-rail cooperation.
Good afternoon, Mr. Chairman and committee members.
My name is Robert Taylor, and I'm the AVP for North American advocacy at CP. We operate a 22,000-kilometre network throughout Canada and the United States. In 2014, we moved over 2.7 million carloads of traffic.
I am proud to say that CP is the safest railway in North America. We have achieved the lowest frequency of train accidents in each of the last eight years. In 2014, we had 1.2 train accidents for every million train miles. Our performance in 2014 was a 30% improvement over the previous year, which is a new record.
Rail safety is critically important, as is modernizing the liability and insurance regime for Canada. Our journey is not yet complete, but continuous improvement in safety is evident.
It’s important to recognize that North America's rail network moves 99.998% of hazardous materials, including crude, without incident. Because even one accident is one too many, we are continuously working to eliminate the last 0.002% of risk from our operations. We can safely and securely move dangerous goods.
Now I will talk about the bill.
We support the intent of Bill , which is to better define and make accountable all those involved in the production, manufacture, transportation, and distribution of dangerous goods. We need to strengthen the safety and security of the rail supply chain so we can maintain a world-class transportation system, one that is accountable and responsive and works to prevent incidents from occurring as well as to provide compensation and liability in the event of an incident.
Several elements of this bill are items that CP has been calling for over the last number of years, and we welcome action. We do think, however, that in a few important areas the bill lacks policy clarity, and we urge the committee to consider this as you perform your review of this bill. The most important of these are as follows.
One, in proposed section 152.7, is the wording “involved in a railway accident”, especially in instances where traffic is interchanged or passed between railways. The second is proposed section 152.9, which references other acts that could negate the railways strict liability cap. The third is how how the shipper fund is to be recapitalized if depleted. Fourth, we also question why the shipper fund is only initially capitalized to $250 million while the railway has a strict liability of $1 billion.
These are important items that need to be clarified in your consideration of this bill.
Thank you, Mr. Chair. I'm very grateful to have this opportunity to speak about how Bill may have some unintended consequences that will affect my company and the community in which we operate.
I will start by saying first that while all men are created equal, all railways are not. That's especially true in the case of the Essex Terminal Railway Company. One hundred per cent of our revenue is from interswitching. It's from servicing the industries that are located on our line and taking those goods to and from the main-line carriers that we connect with. I believe that we are unique in that aspect. The CTA recognized that when they exempted us from the interswitching regulations due to the fact that 90% of our revenue is from interswitching operations.
We're unique in other ways. We operate totally within yard limits. We do not have main-line track. Our main track is only 19 kilometres in length. Although we don't handle crude oil, we do handle dangerous commodities in excess of 40,000 tonnes. Seventy per cent of those commodities travel only 4.4 kilometres on our railroad at speeds of 10 kilometres per hour or less during daylight hours, on very flat geography where there are no hills. We have an incredible safety record.
I have been with the company for 34 years. We have a very strong safety culture. Never in the 34 years has our insurer had to pay a claim due to damages to third party property or rail.
But because of Bill , we will be forced to increase our insurance four times. That will come with very significant costs, and they are costs that we cannot pass on to our customers. We are operating in a very competitive environment in a very depressed local economy. We have the highest unemployment in Canada. We have lost 50% of our business in the last 10 years. We've lost that business because plants have closed. They've moved their operations to other areas where operating is more economical. Anything we do to increase the cost of our customers' business will undoubtedly result in lost business for them and lost jobs for the 850 or so people who work for the industries we serve.
I was glad to hear the minister say that the railway liability limits should be equal to the risk of the company. The risk of our operations obviously is not the same as that of MM and A. We operate at very slow speeds. As I said before, we have an impeccable safety culture.
This is really two bills, the first dealing with insurance. We called for the creation of these types of funds. We are supportive of them. After inquiries, we were informed that the money deposited to the fund would go to a special purpose account. Our question is, is that in a CPP lockbox or in an EI cash till? We would recommend that it go into a lockbox, as all special purpose accounts should.
The second issue, of course, is the sufficiency of the fund. We do understand that risk assessments were made. However, after Lac-Mégantic, we're hearing costs of $800 million to a billion dollars. We thought that perhaps to be consistent with marine, a billion dollars in the fund or some higher amount may be required, but I'll leave it to the committee to deal with.
The second part of the bill is where we want to focus. These are the Railway Safety Act portions of it. Just as a note, sometimes when bills are reviewed and amended, parties know what has to be done but they just don't get done at the time. I suggest that this is what happened in 2011 when we reviewed the act, but post-Lac-Mégantic, the landscape has changed. Overall, we welcome the powers this act gives to the minister and department to oversee rail operations, but we do have a few concerns we would consider that you address.
We ask again, where's our 1-800 number? The answer is, it's locked up in the safety management system regulations, where it doesn't really belong. When this idea was included as an amendment to the Railway Safety Act, it was understood that it really should be more like a rule. That's why we're asking you to amend section 18 of the Railway Safety Act to give the minister the power to move forward with the implementation of non-punitive internal reporting and confidential reporting to Transport Canada employees of contradictions of the act, etc.
Clause 17(1) of the bill we are dealing with today deletes the definition of “fatigue science”. We think that should be read with changes made to fatigue management between the Gazette, part I and the Gazette, part II, in the new safety management systems regulations. Gazette I clearly spelled out the running trades—the locomotive engineers, conductors, etc.—to which the regs must apply, which disappeared in Gazette II, coupled with what we think is rather vague language.
We asked, “Why the deletion?” First, it was an outright mistaken belief we were given that the definition came from this committee. It didn't. It was demanded by Justice as a requirement. Second, they said, as you heard earlier, that the definition caused drafting problems. Curious, we said, that it wasn't picked up in Gazette I. Finally, we were told the definition would require the industry to use scientific and peer-reviewed studies and in dealing with fatigue science it would be difficult. Really? That's exactly what happens in air and road when we deal with these issues. We're asking you to strike out clause 17(1), put the definition back in, and, if Ms. Kinney was correct, amend it appropriately.
At the same time, let's rectify another item that was left out of the review. Fatigue management should definitely be in the safety management system, but the rules should be set industry-wide. Without this change, each railway could create its own concept of fatigue management, resulting in each trying to gain competitive advantage through manipulation of a safety issue. We propose a further amendment to Railway Safety Act section 18 giving the minister the power to—quote—create safety management systems including the principle of fatigue science applicable to scheduling.
We think it might be time to look at anachronism in this act, the Railway Safety Act's section 20. I won't go through the whole thing. I'll paraphrase it: “A company shall file with the Minister for approval any rules” with respect to “subsection 18(1) or (2.1) that it proposes to formulate or revise” of its own accord. Further, in section 20.1, the act permits the Railway Association of Canada, a lobby group, to act on behalf of the companies.
It's unique. I can't think of anywhere else in transportation this occurs. This is a section that resulted in a retiring ADM of Transport signing off on rule changes on December 26, rules that we opposed and objected to because we believed they weakened the ministerial directive on rail safety post-Lac-Mégantic, changes that were less about public safety and more about a corporate bottom line—business as usual.
Let's be serious. Does the public believe the RAC rail companies will put the public interest before the bottom line?
We think this act, if you look at the section on rail safety, could be renamed the “we don't trust the companies act”. The powers to inspect or the powers to the minister are all very good things, things that probably should have been included in 2011 but weren't. Let's get rid of sections 20 and 21. Let's put an end to the perception—the reality, we think—of the industry's self-governance and self-regulation.
We think rule changes should be consistent with other sectors, where rule changes are brought, for example, to the CCMTA or the advisory council for TDG, and we have set up the advisory council on rail safety. Let's make the act modern. If we're going to get into it, let's get into it.
I welcome any questions you have.
Yes, it's precisely the point. His company is very different.
But there are other consequences for other short-line railways. I think the important point that was made was that not all short lines are created equal. They're all different. For that reason, there are some unintended impacts that result from the legislation.
I'll give you one example. Let's say a short line takes out $25 million in insurance, which it's required to do because it typically doesn't move any crude or any toxic inhalants, really, but it might move the odd carload of diesel or something else. Let's say that then one day it's asked to move a carload of crude oil. Under its common carrier obligation, it must move that one carload of crude, and it must go from $25 million in insurance to $100 million in insurance.
The profile of that company may be such that it is a very safe company, operating on very flat land, with an extremely good safety record, modern infrastructure, and so on. Yet it must purchase $75 million in additional insurance or it has to violate its licence and its common carrier obligation to say no to the customer.
These are the kinds of unintended consequences that I think warrant language that is a little bit more nuanced, so that each short-line railway can be examined on its own merits. Perhaps that's something that could be done by regulation, something that could be done by the agency, but clearly, in stark terms, it causes significant unintended consequences.
I must say, Mr. Chair, that the minister was here an hour ago or less, and I think she repeated three times that there was extensive stakeholder outreach on this bill. It's really hard to square her claim of extensive stakeholder outreach when we have senior labour and a large railway company represented, along with the insurance sector, a short-line railway, and the Railway Association of Canada, all saying that there are serious problems with this bill.
I'm not sure where the minister was consulting, or with whom, but it's a little bit rich to come to this committee now, Mr. Chair, when we have very few meetings scheduled to deal with the bill, and to hear the depth of concern on this bill. I think what it's telling us is that this thing was cobbled together on an urgent basis, pre-election and post-budget, even though there was an 11% cut to the department of $202 million. They have come here to the committee and have brought us this bill, speeding it through, and we have the industry sector telling us, with labour, there are serious flaws in this bill.
Each of you said that there are unintended consequences, that there are distributive effects, and that it's about reducing underwriting uncertainty. It went on and on. Maybe I will ask you this: were any of you consulted on this bill? Did any of you sit down with the drafters inside Transport Canada and actually get asked what your core concerns were before this was cobbled together?
Mr. Benson, very quickly, please, and then we'll just go down the line.
No. I think you've explained it well. The only addition I would provide is that this goes even beyond just the limitation of liability that you could have on the goods themselves. If you damage the goods, you could have an agreement with your shipper on how you're going to share the risk, but this is third party risk. For example, in Lac-Mégantic, it's the risk of the victims and the environment and all that. That typically would not be part of your shipper relationship. It would be a liability-based or fault-based regime that we would have. This establishes a strict liability. You cannot say, “I'm not paying because I'm not at fault.” You pay, and you do have recourse. The bill provides recourse against third parties who may have been involved.
We always use this example. Let's assume that there's a truck that hits your railroad at a crossing and it causes a dramatic accident. We can sue the truck company, but chances are that it won't have a billion dollars of insurance, so that's a major difference. We are the first ones to whom they will turn for compensation. We're okay with that. We can accept that, but there has to be something other than that, like the cap. We want to make sure that this is a solid cap. It's $1 billion and not more than $1 billion.
We think that the word “involved”, for example, or the fact that there's stacking.... For example, if we're operating on CN and we have an accident of a billion dollars, fine, we're stuck with it. But if we happen to have the same accident operating on CP with the same causes, all of a sudden the cap becomes $2 billion, because with both companies a limitation is involved. These are adjustments that we were looking at, especially on the word “involved”.
I'm sorry for the length of my answer.
Obviously, I hear that at least CP and CN carry insurance pretty much in line with the cap amount here, and of course the new fund is there for any excess coverage. My question is probably going to relate most to the short lines, because there seems to be a greater degree of consternation about the amount of insurance there.
Mr. Beardsley, I think I heard you say that theoretically the insurance is available but it might not be “viable”. I think that's the word you used.
There is no question that short lines carrying dangerous goods—crude oil—can be involved in an accident, and I think the general public would expect that there would be some insurance coverage by short lines and, of course, a pool to draw from beyond that. As I understand it, that coverage is either $50 million or $125 million, is coming into effect a year after the act comes into being, and is then doubled in the two years.
First, from the insurance perspective, is there any reason why that amount couldn't be made available to short lines?