TRAN Committee Meeting

Meeting No. 65

Thursday, June 8, 2000

The Standing Committee on Transport met at 8:10 p.m. this day, in Room 253-D, Centre Block, the Chair, Stan Keyes, presiding.

Members of the Committee present: Roy Bailey, Murray Calder, Joe Comuzzi, Stan Dromisky, Joe Fontana, Ovid Jackson, Stan Keyes, Lou Sekora.

Acting Members present: Dick Proctor for Bev Desjarlais; Rick Borotsik for Bill Casey; Bob Kilger for Claude Drouin; Wayne Easter for Charles Hubbard; Lee Morrison for Dale Johnston; Leon Benoit for Val Meredith; Serge Cardin for Michel Guimond.

In attendance: From the Legislative Services: Richard Dupuis and Jacques Lahaie. From the Library of Parliament: John Christopher; June Dewetering, Researchers.

Witnesses: From Transport Canada: Guylaine Roy, Director General, Surface Policy; John Dobson, Senior Policy Advisor; Ian MacKay, Counsel, Legal Services. From Natural Resources Canada: Howard Migie. From Justice Canada: David Byer, Legal Counsel.

Pursuant to its Order of Reference of Thursday, June 1st, 2000, the Committee resumed consideration of Bill C-34, An Act to amend the Canada Transportation Act (See Minutes of Proceedings, Monday, June 5, 2000 , Meeting No. 59).

The Committee proceeded to Clause-by-Clause consideration of the Bill.

On Clause 1,

Roy Bailey moved, -- That Bill C-34, in Clause 1, be amended by replacing lines 15 to 18 on page 1 with the following:

"subsection 126(1) to the extent that
(a) the information is required for the purpose of monitoring the grain transportation and handling system;
(b) the Minister is the only person who is authorized to communicate the information; and
(c) any person responsible for monitoring the system is authorized to communicate the information only to the Minister."

By unanimous consent, the motion was withdrawn.

Roy Bailey moved, -- That Bill C-34, in Clause 1, be amended by adding after line 18 on page 1 the following:

"(3.2) The Minister must prepare, within three months after the end of each crop year, a report on the monitoring of the grain transportation and handling system and cause the report to be tabled in each House of Parliament on any of the first fifteen days on which that House is sitting after the Minister prepares it, if the Minister
(a) makes a regulation under paragraph 50(1)(e.1), and
(b) uses or communicates the information provided under the regulation for the purpose of monitoring the grain transportation and handling system."

Joe Fontana moved the following sub-amendment: That the words "three months" be replaced by "six months".

After debate, the question being put on the sub-amendment, it was agreed to.

The question being put on the amendment, as amended, it was agreed to.

Joe Fontana moved, -- That Bill C-34, in Clause 1, be amended by replacing line 18 on page 1 with the following:

"dling system, provided that any such information is confidential and neither it nor any non-aggregated information derived from it shall be disclosed or communicated to any person without the prior written consent of the parties to the contract."

After debate, the question being put on the amendment, it was negatived by a show of hands.

By unanimous consent, Clause 1 was allowed to stand.

On Clause 2,

Rick Borotsik moved, -- That Bill C-34, in Clause 2, be amended by adding after line 27 on page 1 the following:

"(d) If the Minister wishes to communicate information for the purpose of monitoring the grain transportation and handling system,
(i) the Minister must call tenders by public advertisement for the execution of the monitoring work,
(ii) the Minister must provide to the appropriate committee of the House of Commons a copy of the contract for the monitoring work, and
(iii) the person to whom the contract is awarded must appear before the committee to answer all questions on
(A) the terms of reference of the contract, and
(B) any monitoring reports that they have given to the Minister, except that they need not reveal confidential information about an identifiable person."

After debate and by unanimous consent, the motion was withdrawn.

Joe Fontana moved, -- That Bill C-34, in Clause 2, be amended by replacing line 27 on page 1 with the following:

"tem, unless the information is confidential."

The question being put on the amendment, it was negatived by a show of hands.

Clause 2 carried on division.

Clause 3 carried on division.

Clause 4 carried on division.

Clause 5 carried on division.

Clause 6 carried on division.

On Clause 7,

Dick Proctor moved, -- That Bill C-34, in Clause 7, be amended by adding after line 12 on page 4 the following:

"(3.2) The Agency may, on application by a party to a negotiation, determine the amount that the Government of Canada paid to improve a portion of a grain-dependent branch line listed in Schedule I.
(3.3) The amount determined under subsection (3.2) is to be excluded from the amount that the federal government, a provincial, municipal or district government or a community-based group pays to buy that portion of the line."

After debate, the question being put on the amendment, it was negatived by a show of hands.

Lee Morrison moved, -- That Bill C-34, in Clause 7, be amended by adding after line 43 on page 4 the following:

"(8) The Agency may, by regulation, provide guidelines concerning the meaning of "good faith" during negotiations under this section."

After debate, the question being put on the amendment, it was negatived by a show of hands.

Clause 7 carried on division.

Clause 8 carried on division.

On Clause 9,

Roy Bailey moved, -- That Bill C-34, in Clause 9, be amended by adding after line 26 on page 5 the following:

""shipper" means a person who holds a grain dealer's licence under the Canada Grain Act or is a producer of grain;"

After debate, the question being put on the amendment, it was negatived by a show of hands.

Rick Borotsik moved, -- That Bill C-34, in Clause 9, be amended by adding after line 26 on page 5 the following:

""shipper", in respect of a contract with a carrier for the movement of grain, means the person who is identified as the shipper on the bill of lading"

After debate, the question being put on the amendment, it was negatived by a show of hands.

Clause 9 carried on division.

On Clause 10,

Dick Proctor moved, -- That Bill C-34, in Clause 10, be amended by adding after line 6 on page 6 the following:

"(3) No prescribed railway shall establish a rate in a tariff in respect of single car or multiple car movement, or for any other differentiated service, so that the difference in the rates is more than the difference in the cost, as determined by the Agency, of the different types of service."

After debate, the question being put on the amendment, it was negatived by a show of hands.

Dick Proctor moved, -- That Bill C-34, in Clause 10, be amended by replacing line 25 on page 6 with the following:

"be reduced by"

The question being put on the amendment, it was negatived by a show of hands.

Dick Proctor moved, -- That Bill C-34, in Clause 10, be amended by deleting lines 1 to 11 on page 7.

After debate, the question being put on the amendment, it was negatived by a show of hands.

Dick Proctor moved, -- That Bill C-34, in Clause 10, be amended by adding after line 16 on page 9 the following:

"153. (1) Within three months after the end of each crop year, the Minister shall, in consultation with shippers, railway companies and any other persons that the Minister considers appropriate, conduct and complete a review of the effect of this Act, and in particular this Division, on the sharing of efficiency gains as between shippers and railway companies.

(2) The Agency shall incorporate the results of the review into its determination of a prescribed railway's revenues."

After debate, the question being put on the amendment, it was negatived by a show of hands.

Roy Bailey moved, -- That Bill C-34, in Clause 10, be amended by adding after line 16 on page 9 the following:

"153. (1) The Memorandum of Understanding between the Canadian Wheat Board and the Minister responsible for the Canadian Wheat Board, as set out in Schedule III, governs the transportation and handling system for grain.
(2) In order to encourage the commercialization of the transportation and handling system for grain, any contracts to be tendered in accordance with the Memorandum of Understanding for the movement of grain are to be between a shipper and a prescribed railway company. The Canadian Wheat Board is not to be involved in the negotiation of these contracts.

154. (1) On or before July 31, 2005, the commercialization of the transportation and handling system is to be complete and all contracts for the movement of grain are to be tendered in accordance with the Memorandum of Understanding.
(2) The provisions of this Act that apply solely to the transportation and handling system for grain cease to have effect on June 30, 2005, unless the Minister demonstrates that these provisions prevent irreparable harm to the transportation and handling system.

155. In case of any inconsistency or conflict between
(a) this Act or any regulations made under this Act, and
(b) any other Act that applies to the transportation and handling system for grain or any regulations made under that Act,
this Act and the regulations made under this Act take precedence."

After debate and by unanimous consent, the motion was withdrawn.

Rick Borotsik moved, -- That Bill C-34, in Clause 10, be amended by adding after line 16 on page 9 the following:

"153. (1) During the crop years 2000-2001 through 2004-2005, there shall be paid out of the Consolidated Revenue Fund at least $175 million for the maintenance or repair of rural roads in the Western Division.
(2) Within one month after the end of each crop year, the Minister shall
(a) determine how much has been paid out during the crop year, and
(b) prepare a report and submit it to the appropriate committee of the House of Commons containing
(i) that amount, and
(ii) the amount that is to be paid out during each of the remaining crop years.

154. (1) If the maximum revenue entitlements of all of the prescribed railway companies in the base year do not exceed the entitlements in a crop year by at least $178 million, there shall be paid out of the Consolidated Revenue Fund to the Agency the amount determined by the Agency in accordance with the following formula:
$178 million - (A - B)
where
A is the sum of the maximum revenue entitlements in the base year of all of the prescribed railways; and
B is the sum of the maximum revenue entitlements in the crop year of all of the prescribed railways.

(2) If a payment is to be made under subsection (1), the Agency shall, by regulation, establish a mechanism to distribute the payment to producers."

The question being put on the amendment, it was negatived by a show of hands.

Joe Fontana moved, -- That Bill C-34, in Clause 10, be amended by adding after line 16 on page 9 the following:

"153. (1) Notwithstanding anything contained in the Canadian Wheat Board Act, nothing done by the board with respect to transportation by rail shall interfere with the rights and obligations of a railway company pursuant to sections 113 and 114 of the Act or a decision of the Agency pursuant to section 116 thereof.
(2) In the exercise of its powers, the board must ensure that the arrangements are commercially fair and reasonable to all parties and shall not unjustly discriminate among service suppliers or classes of service suppliers, give an undue or unreasonable preference to any service supplier or class of service supplier, or subject any service supplier or class of service supplier to an undue or unreasonable disadvantage.
(3) A contractor that is awarded by the board a logistics services contract shall be given power of attorney to act on its behalf in respect of any and all matters governed by Part III and IV of the Act, and is deemed to be the shipper.
(4) For the purposes of this section,
"Agency"
« Office »
"Agency" means the Canadian Transportation Agency continued by subsection 7(1) of the Canada Transportation Act; and
"board"
« conseil »
"board" means the board of directors of the Corporation referred to in section 3.01 of the Canadian Wheat Board Act."

The Chairperson ruled the amendment out of order pursuant to Beauchesne's 6^th Edition, Citation 698(2).

Clause 10 carried on division.

By unanimous consent, the Committee agreed to revert to Clause 1.

Rick Borotsik moved, -- That Bill C-34, in Clause 1, be amended by adding after line 18 on page 1 the following:

"(3.2) The Minister may not make a regulation under paragraph (1)(e.1) unless the Minister has first laid the proposed regulation before the House of Commons.

(3.3) A proposed regulation that is laid before the House of Commons is deemed to be automatically referred to the appropriate committee of the House, as determined by the rules of the House, and the committee may conduct inquiries or public hearings with respect to the proposed regulation and report its findings to the House.

(3.4) The Minister may make a regulation under paragraph (1)(e.1) only if
(a) the House of Commons has not concurred in any report from a committee respecting the proposed regulation within the thirty sitting days following the day on which the proposed regulation was laid before the House, in which case the regulation may only be made in the form laid; or
(b) the House of Commons has concurred in a report from a committee approving the proposed regulation or an amended version of it, in which case the Minister may make the regulation only in the form concurred in.

(3.5) For the purpose of this section, "sitting day" means a day on which the House of Commons sits."

After debate, the question being put on the amendment, it was negatived by a show of hands.

Clause 1, as amended, carried on division.

Clause 11 carried on division.

Clause 12 carried on division.

Clause 13 carried on division.

Clause 14 carried on division.

Clause 15 carried on division.

Clause 16 carried on division.

Clause 17 carried on division.

Clause 18 carried on division.

On Clause 19,

Roy Bailey moved, -- That Bill C-34, in Clause 19, be amended by replacing line 4 on page 13 with the following:

"replaced by the following:

Memorandum of Understanding
With respect to improvements in the
Western Grain Handling and Transportation System

This Memorandum of Understanding (MOU) is entered into on the _________ day of ______________, in the year 2000, between:

The Canadian Wheat Board
(hereinafter referred to as the "Corporation" or the "CWB"),

and

Her Majesty, in right of Canada, As represented by
The Minister responsible for the Canadian Wheat Board
(hereinafter referred to as the "Minister").

Background

1. The CWB is a shared-governance organization, established under The Canadian Wheat Board Act, as duly enacted by the Parliament of Canada and by which all of the Powers of the CWB are vested in its Board of Directors, two-thirds of whom are directly elected by prairie grain farmers.

2. The CWB is a major Canadian wheat and barley marketing organization conducting a multi-billion dollar business, on behalf of prairie farmers, in some 70 different markets worldwide in which prairie grain enjoys a strong reputation for superior intrinsic quality and in which the CWB is respected for its contract execution, consistency, dependability and before-market and after-market customer service.

3. It is in the interests of prairie grain farmers, their ultimate final customers and Canada to achieve and maintain a grain handling and transportation system (GHTS) which is more reliable, timely, efficient, transparent and accountable, generating productivity gains and cost-savings which are fairly shared among system participants, including farmers.

4. A more commercial, competitive and contract-based approach to the management of business relationships between and among system participants offers the potential to achieve GHTS improvements.

5. All system participants must work together in a constructive and professional manner to contribute to an operating atmosphere characterized by greater trust and stronger performance, recognizing that all system costs are ultimately deducted from the value of the grain being shipped.

6. The matters addressed in this MOU are part of an integrated package of GHTS reforms, which were announced in a Transport Canada News Release (No. H034/00) and an accompanying Backgrounder, dated May 10, 2000, and which include (in addition to this MOU) concurrent polity and Legislative measures:

a) to repeal the maximum grain freight rates that the railways can charge at each prairie delivery point;

b) to implement an annual cap on the grain-related revenues which can be derived by the railways;

c) to improve the Final Offer Arbitration process provided under The Canada Transportation Act;

d) to enhance the provisions of The Canada Transportation Act dealing with the sale or abandonment of branch lines;

e) to include in the statutory review of The Canada Transportation Act, which is required to begin by July 1, 2000, an expedited examination of effective ways to enhance railway competition

f) to alleviate some of the pressures on prairie grain roads due to greater movement of grain by truck; and

g) to provide through a professional, independent third-party for continuous monitoring, measuring and reporting with respect to the impacts of GHTS changes, in order to determine whether farmers are benefiting, whether the CWB's marketing mandate is adversely affected, the effects on railway efficiency, grain handling efficiency, port efficiency, and on the overall performance of the GHTS. To this end, all system participants are expected to satisfy the requests of the third-party for information and assistance, and the reports of the third-party will include an assessment of all participants' compliance in this regard. All reports from the third-party (which shall include a least annual reports) shall be submitted to the Minister of Transport, the Minister responsible for the Canadian Wheat Board and the Minister of Agriculture and Agri-Food for their consideration and appropriate action, if required. These Ministers shall determine the pubic availability of such reports.

7. The elements of these GHTS reforms are not intended to amend the object, powers or statutory obligations of the CWB, as provided in The Canadian Wheat Board Act.

In the context of the foregoing, the Minister and the Corporation agree and undertake to each other, as follows:

Overall Railway Capacity

8. The Corporation has the full ability to negotiate contractual arrangements with the railways to assure itself of a sufficient supply of railway capacity to move its entire volume of business, subject only to Clause 11, below.

9. The Corporation's contractual arrangements with the railways for such sufficient capacity may include penalties for the railways if the agreed capacity is not supplied, and penalties for the CWB if the agreed capacity is not used, together with such steps as each party might take to mitigate its liability. Such contractual arrangements may also include incentives and/or bonuses for performance which is better than that specified.

Tendering for Logistical Services

10. For logistical services to deliver CWB grain to the ports of Vancouver, Prince Rupert, Thunder Bay and Churchill, the Corporation will seek tenders, consider offers and award contracts through a public tendering process. Such contracts, in the aggregate, shall comprise:

(a) not less than 25 percent of the Corporation's total volume of business through these four ports combined, in each of the 2000-01 and 2001-02 crop years; and

(b) not less than 50 percent of the Corporation's total volume of business through these four ports combined, no later than the 2002-03 crop year.

11. In respect of that portion of the CWB's business to the ports of Vancouver, Prince Rupert, Thunder Bay and Churchill for which logistical services are obtained by public tender, the Corporation shall limit its contractual arrangements with the railways to matters related to assuring itself of a sufficient supply of railway capacity, including freight rates for single car movements, with all other terms and conditions to be arranged between the logistics suppliers and the railways on a commercial, competitive, contractual basis. It is acknowledge that the Corporation will continue to negotiate freight rate rebates for the movement of grain to Prince Rupert.

12. For greater certainty, Clause 11, above, does not limit the contractual arrangements which the CWB may make with the railways in relation to its other business, not referred to in Clause 11.

13. Unless the terms of the tender specifically state that securing an adequate supply of railway cars is the responsibility of the logistics supplier, the Corporation shall ensure that the necessary car supply is available to each logistics supplier who is successful in winning a tender.

14. Each call for tenders shall, among other things:

(a) set out the quantities of each quality or grade of wheat or barley required;

(b) specify the port destination and a delivery time period;

(c) allow for delivery in-store or at-spout at the discretion of the CWB;

(d) permit bidders to originate the tendered quantities of wheat or barley from any location within the CWB "designated area", to select the railway to be used, to select the terminal to be used at the specified port, and to make all other arrangements to satisfy the tender; and

(e) specify any penalties applicable to under-performance and any bonuses or incentives applicable to performance that is better than that tendered.

15. Where it awards a tendered contract for logistical services, the Corporation shall make public the name(s) of the successful bidder(s), a summary of the principal elements of the awarded contracts and, at least on an annual basis, the cost of the supplied services, subject to the requirements of The Privacy Act and to such confidentiality as may be commercially reasonable to ensure the true competitiveness of the tendering process.

16. Where it does not award a contract to fill the full quantity of any tender call, the Corporation shall report publicly its reasons for not doing so.

Specific Railway Car Allocation

17. When using its power under subsection 28(k) of The Canadian Wheat Board Act, the Corporation agrees that it will do so only as follows:

(a) with respect to the grain that it markets (i.e. wheat and/or barley);

(b) in situations where the use of such power is necessary to fulfil the CWB's statutory obligations;

(c) after providing reasonable prior notice to the Minster and to the public of not less than five (5) business days; and

(d) with the concurrent publication of an impact analysis which specifies the justification for the use of the power.

Good Faith Business Relationships

18. It is in the best interests of prairie grain farmers and their ultimate customers for the Corporation, the railways and the grain companies to have effective and positive business relationships in respect of the contractual arrangements which this MOU contemplates being negotiated, and in respect of the other ways in which the Corporation, railways and grain companies must necessarily interact with each other to improve the GHTS. In this connection, it is acknowledged that:

(a) The CWB has statutory obligations to discharge and customer requirements to satisfy, to maximize its financial returns to farmers;

(b) the railways and the grain companies have expertise in the provision of grain handling and transportation services to the CWB and to others, and have large investments in physical assets for that purpose which they properly seek to utilize efficiently and cost-effectively;

(c) an imposed GHTS must meet not only the requirements of the CWB, but also those who handle, transport and market the significant and increasing volume of non-CWB grains produced by prairie farmers; and

(d) commercial negotiations in a competitive environment are intended to be the primary means by which all system participants will function.

19. In all negotiations to establish contractual arrangements defining business relationships and operating procedures for an improved GHTS, the Corporation will conduct itself on a Good Faith basis, and it will expect the railways, the grain companies and others ()as the case may be) to conduct themselves on a Good Faith basis, meaning:

(a) fully and fairly taking into account the factors in Clause 18, above; and

(b) observing commercially reasonable standards of business behaviour, not abusing market position or market power, nor acting in an arbitrary, capricious or discriminatory manner.

20. In its negotiations and contractual arrangements with railways, grain companies and other parties, the Corporation will attempt to reach mutual agreement on fair and efficient methods of resolving commercial disputes between contracting parties, including the possibility of independent arbitration and other alternative dispute settlement mechanisms.

Continuous Monitoring, Measuring and Reporting

21. To facilitate the continuous monitoring, measuring and reporting described in Clause 6(g), above, the Corporation shall provide all necessary information and assistance as may be requested by such independent, professional third-party as shall be designated for this purpose by the Government of Canada. In so doing, the CWB may require that third-party to maintain such confidentiality of the supplied information as may be commercially reasonable or as required under The Privacy Act.

Coming Into Effect

22. This MOU shall come into effect upon the coming into force of the legislative amendments mentioned in Clause 6, above, pertaining to a railway Revenue Cap, and once executed, below, this MOU shall be made public by the Minister.


Executed on the date shown on page 1, as follows:

For the Canadian Wheat Board)

____________________________________)
Ken Ritter, Chairman )
) ____________________________________
____________________________________) Witness
Greg Arason, president & CEO)

For Her Majesty: )
) _____________________________________
___________________________________ ) Witness
Ralph Goodale, Minister

The Chairperson ruled the amendment out of order pursuant to Beauchesne's 6^th Edition, Citation 698(2).

Clause 19 carried on division.

Clause 20 carried on division.

Clause 21 carried on division.

Schedule I carried on division.

The Title carried on division.

The Bill, as amended, carried.

ORDERED, -- That Bill C-34, An Act to amend the Canada Transportation Act, as amended, be reprinted for the use of the House of Commons at Report Stage.

ORDERED, -- That the Chair report Bill C-34, as amended, to the House as the Third Report of the Committee.

At 10:12 p.m., the Committee adjourned to the call of the Chair.

Guyanne L. Desforges
Richard Dupuis
Jacques Lahaie
Clerks of the Committee