Honourable senators, I rise today to speak in support of Bill C-52, the fair rail freight service act, which proposes amendments to the Canada Transportation Act concerning rail freight service. I will first begin with some background.
Bill C-52 emerged from the Rail Freight Service Review, which our Conservative government launched in 2008 to conduct a comprehensive study of the entire rail freight supply chain. The government launched the review in response to years of complaints from shippers about poor, unreliable and unpredictable service from the railways, which was negatively affecting their businesses. The review panel delivered its report to the government in 2011, and its recommendations have been incorporated into the proposed legislation.
The bill has two key features. First, it creates a strong incentive for shippers and railways to work together to find common agreement on rail freight/service issues. As Conservatives, we believe that commercial solutions are the best outcome for everyone.
Second, in recognition of the fact that shippers and railways are sometimes unable to reach agreement on service issues commercially, the bill would create a mechanism to resolve service disputes on a timely basis. Bill C-52 aims to establish more predictable rail freight service, which will help shippers grow their businesses and get more Canadian goods to global markets. It strives to provide greater confidence in the reliability of rail freight service.
By ensuring predictable and reliable service for all shippers, this proposed legislation contributes to the growth of Canadian trade and, in turn, the growth of the entire Canadian economy. Briefly put, the act would give shippers the statutory right to a service level agreement with railways. This would give shippers more leverage to negotiate service level agreements commercially. These agreements bring more predictability and reliability to the relationship between shippers and railways.
The proposed legislation would also ensure that if commercial negotiations fail, shippers could ask the Canadian Transportation Agency to impose a service level agreement through arbitration. In establishing an agreement, the arbitrator would have to consider both the shipper’s transportation needs and the railway’s responsibility to manage an efficient network that benefits all users. The arbitrator would then render a decision that is fair and reasonable to both parties based on the particular circumstances of each case.
As well, Bill C-52 proposes a new enforcement mechanism by allowing the Canadian Transportation Agency to assess a penalty of up to $100,000 against a railway for each and every confirmed breach of an arbitrated service level agreement. This creates a strong incentive for railways to meet their service obligations.
Shippers support the proposals in Bill C-52 and have welcomed the legislation as a tool to help them meet their sales commitments. This support comes from many shippers but, in particular, those in three crucial areas that feed Canada’s trade: agriculture, forestry and natural resources.
For example, Doug Chorney, President of Keystone Agricultural Producers, calls the proposed new law “a real breakthrough for farmers.” Mr. Chorney notes that because rail service is such a major concern for grain growers, “the sooner this passes, the better.”
Indeed, shippers have acknowledged that this bill meets their fundamental requests for commercial agreements and supports continued collaboration with the railways. It is worth noting the importance of these sectors to Canada’s economy.
Honourable senators, agricultural and forestry products are vital to Canada’s prosperity. In fact, in 2011, nearly 42 per cent of our gross domestic product was from bulk commodities, including grain and forest products. In agriculture, Canada is a major contributor to the world’s food supply. We produce some of the best food in the world and are experiencing a growing demand for our wheat, durum, canola, pulse crops and other products. Thousands of individuals and agricultural companies rely on our ability to produce and market our great products to the world.
Agriculture needs rail shipping. In fact, Grain Growers of Canada estimates that we export some 35 million tons of grain annually and grain shippers spend approximately $1.4 billion on rail freight.
Forestry products produce a similar picture. There is a global demand for products such as pulp and lumber. In 2011, Canada’s lumber exports exceeded $2.8 billion to the U.S. and $2.1 billion to Asia. These products rely on rail transportation. In 2011, railways in Canada moved nearly $8 billion in agricultural products and $9 billion in forest products. For grain and forest product shippers to take full advantage of trade opportunities, they need a reliable and predictable rail freight system that can move products from farms and mills to ports and foreign markets.
Another valuable sector of Canada’s economy on which we rely to fuel our prosperity is natural resources. That sector, which also includes energy, mining and minerals, employs almost 800,000 Canadians directly and the same number in related industries and services. The natural resource sector represents about 15 per cent of Canada’s nominal gross domestic product. An additional 4 per cent in GDP comes from indirect economic activity linked to the purchase of goods and services by the resource industries. As a result, the resources sector contributes almost one fifth of Canada’s GDP.
Entire communities throughout Canada were founded on our natural resources and continue to depend upon them. In addition, natural resource projects provide federal and provincial governments with substantial revenues in the form of taxes and royalties associated with major developments. The energy sector alone contributes some $22 billion annually.
Honourable senators, looking to the future, the potential to increase these revenues is significant. Over the next 10 years, more than $650 billion worth of capital investment in Canada’s natural resource sector is planned or already in development.
Natural resource industries are the largest users of rail freight services in Canada. In fact, Canada’s resource industries account for almost two thirds of the country’s rail shipments, and the energy sector’s use of rail, particularly the oil industry, is growing, as oil companies increasingly ship oil by rail to get around pipeline bottlenecks. Industry analysts note that North American rail shipments of crude oil have grown by about 360,000 barrels a day over the past year. These shipments have reached nearly half a million barrels per day, which is equal to the volume of a new pipeline. For these sectors’ projects to continue their success, they must be able to ship their bulk resources and finished products reliably and efficiently to manufacturers and markets, whether on this continent or elsewhere.
Therefore, to support these businesses and industries, Canada’s rail freight system plays a vital role. No matter what their product is or how complex it is to transport to market, all shippers need clear, predictable and reliable rail service. They need to know that their products will get to where they need to be and on time. That is why shippers want railways to ensure they get the rail service needed to deliver goods to their customers, as planned.
Service level agreements between railways and shippers help to achieve this. They give shippers more clarity on the rail service they can expect to receive, and they improve our supply chains by demonstrating a strategic approach that encourages all parties to work together to support Canada’s trade agenda.
I would like to stress to all honourable senators that to promote trade as a way to build Canada’s economic prosperity, we will need to support and develop partnerships. Such partnerships are essential to Canada’s economic success. Various industries and transportation providers are partners across many different transport modes in order to move goods seamlessly from producer to market.
The government’s proposed changes in this legislation would further strengthen such partnerships, while improving our transportation supply chains.
As I noted earlier, shippers rely on railways in order to get goods to market on time and to seize opportunities in increasingly competitive global markets. For railways, cooperation with shippers means more predictable rail traffic, which helps them manage their networks more efficiently. Rail supply chains are complex and feature many different players. Partnerships between shippers and railways contribute to the fluidity and efficiency of Canada’s broader transportation networks.
We must remember that outside factors can affect our trade and that Canadian transportation networks must compete against others on this continent. The delay of a shipment to a port in Canada could prompt shippers to choose other transportation providers or ports in the United States or in Mexico. This reinforces the need for reliable rail shipping between product origins and ports in Canada. This is crucial to the competitiveness of our ports and our entire supply chain.
That is why this new legislation supports partnerships that allow shippers and railways to work together and develop negotiated agreements. This legislation demonstrates the importance of predictable and efficient rail freight, which complements the government’s many gateway initiatives, which are also designed to strengthen Canada’s supply chains.
Efficient supply chains in Canada are integral to the international trade that fuels our economic growth. These chains consist of many players, including ports, transportation providers, shippers and governments. All have an interest to ensure that our transportation networks are connected, efficient and fluid.
In the past, Canada has experienced bottlenecks in the transportation system. These slowdowns have threatened our ability to move goods efficiently between our ports and global markets. To address this, our Conservative government has worked with other levels of government, as well as the private sector, to implement a national framework for strategic gateways and trade corridors.
During the discussion of this bill, let us remember that it was this government that identified and focused on three gateways for international trade: the Asia-Pacific Gateway on our West Coast; the Atlantic Gateway on our East Coast; and the Continental Gateway, linking Central Canada to the North American heartland.
As supply chains do not rest entirely on one ship, port, air terminal or highway, this gateway framework takes a comprehensive, systems-based approach to improving transportation networks and supporting transportation infrastructure in Canada.
In support of this, the government’s Economic Action Plan 2013 includes infrastructure funding worth some $53 billion over 10 years, starting next year. This is the largest long-term federal commitment to Canadian infrastructure in our nation’s history.
Developing gateways and investing in infrastructure make up only part of the action we are taking to strengthen the supply chains that transport Canadian trade. By contributing to more predictable, reliable and efficient supply chains and networks, Bill C-52 would build upon the many partnerships developed through the gateway initiatives. It would also improve transportation fluidity through ports and terminals and enable our supply chains to further Canada’s competitiveness in global markets.
By addressing the need for shippers to maintain and grow their businesses and the need for railways to manage an efficient rail shipping network that benefits everyone, this legislation would foster the kind of partnership that has helped our gateway efforts succeed.
In concluding, I would like to note that all parties involved in trade, in both the public and the private sectors, are important to strengthen Canada’s competitiveness in global markets and, in turn, our future prosperity. Those who produce commodities, such as grain and forest products, grow our economy as global demand for their goods increases. Shippers, by delivering products and expanding their market share, also help strengthen the Canadian economy.
However, for all this to happen, we need a strong rail system that can adapt to the market’s needs. That adaptation can happen only if we can ensure a reliable and predictable partnership between shippers and rail companies.
Given the importance of rail to our economy, including to the grain and forestry sectors, we must take proactive steps to enhance the effectiveness, efficiency and reliability of our rail shipping system. Therefore, by passing Bill C-52, the Fair Rail Freight Service Bill, this Parliament would strengthen Canada’s supply chains, promote our trading capabilities and foster our future prosperity.
I would also like to note the broad support this bill received from all parties in the other place: It was passed by a vote of 255 to 0. The unanimous support this bill received demonstrates the extent to which it is vital to enhancing Canada’s economic future by helping to foster job creation and economic growth.
Accordingly, I encourage all members of the Senate to vote to support passage of Bill C-52.