[Recorded by Electronic Apparatus]
Wednesday, November 29, 1995
The Chairman: I call this meeting to order.
I first want to extend my apologies to the committee members and witnesses who did make it on time. The Prime Minister was speaking in the House on perhaps one of the most important issues of our time, so we were delayed.
From the National Transportation Agency of Canada, I'd like to welcome Marian Robson, the chair, and Neil Thurston, director of costing rates and payments. I believe you have a presentation, after which we'll go to questions. Thank you.
Ms Marian Robson (Chair, Pacific Region, National Transportation Agency of Canada): Thank you very much, Mr. Chairman. Ladies and gentlemen, I have a brief opening statement, and then we'd be happy to respond to questions from the committee.
On April 11, 1995, the chairman of the National Transportation Agency commissioned a prairie grain branch line review at the request of the Minister of Transport and authorized pursuant to sections 31 and 32 of the NTA, 1987.
The purpose of this review is to conduct an objective analysis of the full economic cost to the grain handling and transportation system of retaining or abandoning a number of light-steel and low-volume prairie grain branch lines in order to determine which lines should be identified for abandonment under a fast-track abandonment process.
The Minister of Transport requested that the agency complete its work by November 1, 1995, and submit a report with recommendations concerning a list of designated lines for a fast-track abandonment process. The report would assist the government in making decisions regarding removal of abandonment for prohibition orders and subsequent abandonment of the rail operation on the designated lines.
The review was led by me, as branch line adviser, and supported by a secretariat headed by Neil Thurston, who's with me today, of the NTA. We also had members of the Grain Transportation Agency as part of the team, as well as a consultant, Dr. John Heads, from the University of Manitoba.
Throughout the review, the team consulted with a group of stakeholders, the Branch Line Review Advisory Committee, whose membership included producer organizations, grain companies, railways, the trucking industry, municipal organizations, and provincial governments.
In general, the economic costs were determined by analysing four elements of the prairie grain handling and transportation system, including the rail, trucking, elevation, and road sectors, by identifying the delivery points and elevators on designated branch lines, estimating their current volume of grain traffic being trucked to those sites, identifying a set of viable alternative delivery points on adjacent rail lines, and quantifying the workload and cost differentials of road, rail, trucking, and elevation operations, which could be expected if farmers began to truck the equivalent volume of grain from farm gate to alternate elevators.
The aggregate benefit, in terms of the net decrease in combined grain handling and transportation system costs, is estimated to be in the order of $13.7 million annually. In each of the 17 cases, substantial savings would result if the line were abandoned. Of the 17 branch line segments totalling 535 miles submitted by CN and CP for this review, the agency recommends that all should be abandoned through the fast-track abandonment process.
At the commencement of this review, the federal government had proposed in the Budget Implementation Act 1995, Bill C-76, that a fast-track abandonment process would modify the abandonment process under the NTA, 1987 by the removal of the 90-day notice of intent provision and the conveyance provision under section 174.
In June 1995 the government tabled the Canada Transportation Act, Bill C-101, which includes a completely revised abandonment process in which the Governor in Council may designate lines to be abandoned, without an abandonment process, no later than March 31, 1996, or 10 days after the act comes into force. Bill C-101 is currently before Parliament, while the Budget Implementation Act has been passed.
The results of this review may now assist the federal government in making a decision regarding the removal of respective prohibition orders and the subsequent abandonment process to be followed for these lines.
Thank you for your attention.
The Chairman: Thank you, Marian.
Mr. Hoeppner (Lisgar - Marquette): I don't have many questions right now. I've been looking at these different lines. Where is Acme/Langdon? Is that in Saskatchewan?
Ms Robson: That's in Alberta.
Mr. Hoeppner: There's a Langdon just across the border from Manitoba, so it's nothing in that area.
Ms Robson: Mr. Hoeppner, I would refer you to the maps, which are between pages 5 and 6 in the main body of the report. That will show you all of the lines that have been -
Mr. Hoeppner: Okay, thanks.
I've been in Saskatchewan, and I think their north-south infrastructure is better than that in Manitoba. We had quite a few rail lines abandoned in the 1970s. We were promised infrastructure to replace those lines, but it never happened. Have you looked at that? We have some pretty poor infrastructure going north and south, although east and west isn't too bad. Has that been considered by your task force?
Ms Robson: The whole issue of agricultural infrastructure was not directly a part of our mandate, but that issue came up repeatedly, particularly from the provinces and municipalities faced with highway and municipal road infrastructure issues across the prairies.
As I say, we didn't look at it specifically. We looked only at the lines designated by the railways for this review process. We developed a methodology that would look at the road systems in that branch line area, and then did an analysis to see what would happen if these additional volumes of grain moved over roads to alternate delivery points. Our study was quite limited in that sense, but I believe the Minister of Agriculture has indicated that one of his goals is to assist in the whole issue of agricultural infrastructure through the transitional funding following the demise of the WGTA.
We've been advised through our branch line committee that substantial funding will be made available in some form for agricultural infrastructure support. The need for additional investment in each of the provinces is recognized.
Mr. Hoeppner: Was there any discussion on the Churchill line? In Manitoba we hear that the port could be shut down, but then we hear that we still need some line of communication to all the little places along that line. I think the Churchill line is going to be a real issue. Will it be looked at as a short line? I hear so many different versions of it. I hear that CN is not cooperating in certain instances. Will the government force them to cooperate? What is going to happen? Was it discussed at your level or not?
Ms Robson: The Churchill line was not included in the list of lines that was put forward by the railways for our review, so it was outside our mandate.
Mr. Hoeppner: Because it will be an issue, I thought some people may have brought it up, just like I do today.
Ms Robson: It was raised in a letter we received from the Hudson Bay Route Association. They were concerned about whether any of the lines, particularly in that Churchill catchment area in northern Saskatchewan.... They were concerned about some of the lines in northeast Saskatchewan, but I don't believe that any of the lines that we have recommended for abandonment would have any impact on Churchill.
Mr. Hoeppner: Wouldn't Neepawa-Rossburn be affected by that line going to Churchill?
Ms Robson: I can't answer that, Mr. Hoeppner. We're talking about such a small number of lines.
Mr. Hoeppner: Yes.
Ms Robson: There may be one or two around the Yorkton area and perhaps the Neepawa area, where there may be some grain that occasionally feeds into Churchill, but it would be so small as to be insignificant, I think.
Mr. Hoeppner: Thank you.
Mr. Collins (Souris - Moose Mountain): When I look at this phrase ``light-steel and low-volume'', would they all meet those two criteria?
Ms Robson: The 17 lines?
Mr. Collins: That's right.
Ms Robson: Yes, they would all be in that category.
Mr. Collins: They took out a piece of line between Arcola, Saskatchewan, and Stoughton, and I'm sure that if they looked back on it they would probably put the line back in. It doesn't fall into the area you're talking about, but some time ago they took out that piece of line, and now we have to back-track and back-haul. It's just incredible. For the life of me I couldn't figure out the raison d'être for that beauty.
Having said that, I commend you for having had the opportunity to look at these, and for being frank and open in what you've found.
Did you have an opportunity to talk to those communities? If somebody from Rhein, Saskatchewan, says they never talked to us, what would I say to that fellow? Or someone from MacNutt to Rhein? I know that area.
Ms Robson: The whole question of how the review was conducted was given a lot of thought. We had a lot of discussion about it. We also had a pretty tight timeframe. It was announced in April and our deadline was November 1. We concluded that the best approach in terms of getting a broad consultative process working would be to have this representative branch line advisory committee. It was made up of producer organizations, the railways, the grain companies, the four municipal associations from the three provinces, and the provinces.
At the beginning we asked the rural municipality organizations to act as a conduit to the affected municipalities on these lines, and act as an information flow back and forth. The Province of Saskatchewan did, however, do some direct consultations.
Initially, we did two sample lines in Saskatchewan. One was Rhein and the other was Dunelm, which is in the south. We worked very closely with the provincial department of highways and SARM. In the course of doing those two samples they did some direct consultations with producers. They wanted to test their assumptions, to test how much grain was likely to move to this point as opposed to that point. So some of that was done through that process, and then the producer organizations also did a lot of communications. So I think we covered the concerns from the various communities.
Mr. Collins: With that in mind, when you went through.... I was trying to quickly identify some of the elements. The elements were rail, trucking, elevator and road structure. Let us go to road structure, and I'll mention the one from Rhein to MacNutt. The people from Rhein - where were they going to move product? Was that part of the process? Was reflected in terms of the road structure kind of thing?
Ms Robson: The road side - in many ways this was the most complex part of the analysis, because nobody had done this before and we were kind of feeling our way. We had consultations with the grain companies that were located in those areas and with the railways themselves, but more particularly with the rural municipal organizations.
The provincial government, particularly in Saskatchewan, was very active in trying to determine where the grain would move and what impact that would have on the alternate route from a road perspective. We spent a lot of time on the road impact side, because it was quite complex.
Mr. Collins: When you see this process going through - I don't know whether you have it in there or not - what's the net effect on that community? Maybe you didn't review that. Maybe that wasn't in your mandate, but what happens to Rhein, which is not too far from Yorkton? Is that feature or does that part of the life of that community change? Did you think about that? Was that in the mandate? Was that necessary to review?
Ms Robson: We certainly thought about it, and it was raised throughout the review. Our mandate, however, was quite specific. It was focused on the economic impact of abandonment or retention of specific branch lines. We really weren't able to get into the more subjective issues with respect to rural communities and what happens and so on.
That may sound heartless, but we didn't have that ability. Our work was technically and economically oriented. However, it seems to me that if you can save almost $14 million, even from the abandonment of such a small number of lines, that money and those savings have to find their way back into the prairie economy in some way. Hopefully, a good part of it is for producers.
Mr. Collins: I'd like to commend the committee. Any time you're working within a limited timeframe and you set targets, some of which may be moving, and you have to deal with so many different agencies.... I think they've done an excellent job on the presentation they put forward, as well as the rationale behind it.
I think in many cases we go on record as having little research, and then a royal commission, and then we go back and study it for a few more years. I know we've talked a lot about it, and we're going to be into a lot of branch line abandonment, but I have the confidence that you people have done a very good job and I thank you.
Ms Robson: Thank you very much.
The Chairman: Mrs. Cowling.
Mrs. Cowling (Dauphin - Swan River): I have some questions, mainly because 25% of the miles up for fast-track abandonment are in my riding of Dauphin - Swan River. The Neepawa-Rossburn junction, which is 4.2, and the Rossburn-Russell, which is 104.3, and Russell-Binscarth-Inglis, which is 23.9....
I have been through the document. I understand and recognize the savings to the system, but it raises some questions for the people in my area, because they have been fast-tracked.
The question it raises in my mind - and I know it's going to be raised in the views of my constituents - is that they are already making a commitment of 25% of those miles up for fast-tracking of abandonment. They are going to be adjusting their lives and their lifestyles at the municipal level and at the provincial level.
I'm wondering, when we take a look at miles coming out of the system, how quickly we are going to be moving with branch lines and where in fact there will be other portions of those branch lines coming out of the system so that, when we start pulling in the efficiencies.... The efficiencies are fair to the producers in my area. Perhaps I'll leave it at that point.
So my question is how quickly are we moving to get rid of a lot of those inefficient branch lines that are out there to accommodate a faster, more efficient system in the country?
Ms Robson: I think the purpose of this particular review was to try to identify those lines that are the lightest density and lowest volume in the whole system. We actually left it to the railways to identify which ones were in that category, were losing the most money, and had the lowest volumes of grain moving through them.
Then our task was to try to assess what would be the net saving to the system if those lines were removed, recognizing that the savings come on the rail costs and the consolidation of grain handling. But we also recognized that in some cases and in some areas the trucking costs increased to the producers in that particular region, which is what you're talking about in Swan River and Neepawa areas, and further that there will be some additional, although modest, road impacts that will affect the provinces and municipalities.
The idea behind this group of lines is a bit confused in terms of the timing for abandonment, but the idea behind this particular group is to move as rapidly as possible to abandon those lines. Then once the new legislation, the Canada Transportation Act, is in place, there will be a new abandonment process that will allow the railways to either abandon or dispose of, through short line, additional trackage.
The railways will be required to submit a three-year plan of branch line rationalization. Then there'll be a process after that whereby they can offer those lines for sale or for disposal to either the private sector or any level of government. So there is a process after this one. This one was kind of a window that just looked at the very lightest density lines.
We certainly recognize there will be some additional costs to some producers in, I hope, the short term. What should flow from this, I guess, in an ideal world is the achievement of significant savings by the railways and the grain companies. One would expect, through a process of negotiation, that the producers would in fact see a good deal of those efficiencies in their rates.
That's certainly the notion here. I think you also may want to talk about the $10,000 per mile provision. There's also a provision in the legislation that gives the producer some further savings.
Mr. Neil Thurston (Director, Costing Rates and Payments, National Transportation Agency of Canada): Yes. I think Marian touched on it earlier.
The process in terms of how we move forward to see these lines abandoned is really subject to the railways bringing forward an application to abandon under the current legislation. They could also choose to wait until the Canada Transportation Act is in place. Then they can bring it forward under whatever process is available at that time.
As far as the efficiency gains that would be passed on to the producers in the form of lower rates are concerned, this is set out in Bill C-76 now. That's the $10,000 per mile calculation, whereby if you have 500 miles being abandoned, the cost base is reduced by 500 times $10,000 per mile - about $5 million before the next rate scale is calculated.
In terms of timing, that calculation has to be made for lines abandoned between April 1, 1995 and April 1, 1996 to be captured in the rate scale that's developed for the crop year of 1996-97. If they're not abandoned in that period of time, they're captured in the next rate scale calculation. We will be applying the new procedures and the new calculations in the development of the 1996-97 rate scale prior to April 30, 1996. That's the date by which the rate scale has to be approved by the Governor in Council. The calculation of $10,000 per mile takes place on lines abandoned between April 1 and the previous year's April 1.
It's a little bit convoluted and complex in that regard, but as Marian had indicated, I think the intent is to see the efficiency gains passed on in the form of lower rates. A portion of those efficiency gains will be passed on in the form of the calculation of $10,000 per mile.
The Chairman: Mrs. Cowling.
Mrs. Cowling: I think, though, the point needs to be made that if we talk about efficiencies being passed on, the efficiencies will in fact be passed on to the entire system.
I again raise the question. We've put a group of people in a position in which they're going to be picking up those additional costs. Communities in my area will be picking up the additional costs very quickly. But they will be in fact subsidizing the rest of the system until we have a catch-up. Is that not true? This will happen until the rest of the system catches up and we get the rest of those inefficient lines out of the system.
It's this whole adjustment factor and allowing those particular people in Manitoba who are going to be in fact picking up the highest freight rates from right across the country. On top of that, we'll be picking up additional costs for trucking and road maintenance very quickly to subsidize the rest of the system as they fall into the abandonment.
Ms Robson: I think the people in your area, like those across the prairies, are looking at lower-cost ways of doing all of this. Certainly, I think, most producers want to get these high-cost lines out of the system.
Mrs. Cowling: Certainly.
Ms Robson: I think that's a fair statement. As well, we certainly found in the trucking work that was done.... Look at the numbers in terms of cost per tonne between a farm truck and a B-train, for example. You've got enormous savings in larger trucks and contract trucking.
I think people are going to be looking at a whole range of options. They are already doing this. They're moving to larger trucks and more and more contract trucking through which they can reduce significantly their truck haul costs.
I don't think it's all bad news. That's what I'm trying to say. I think producers are adjusting to these cost issues.
Mrs. Cowling: I have a follow-up. I understand it's not all bad news, and I understand the savings that will come back to the system. However, when we talk about trucks and B-trains, we can't forget the fact that those municipal roads and bridges will not take the kinds of loads that we're going to try to put on them.
There are going to be additional costs for those farmers in Dauphin - Swan River for the time being that aren't built into the calculation at this point, because they are in fact going to be subsidizing the rest of the system.
I hope I'm getting my point across, because I think it's a valid one. We know that we have to make the system more efficient. We need to start somewhere.
But, on the other hand, we are putting the people who start first - they're in a geographic province that is very fine-tuned and in a system that doesn't have many of these branch lines - in a situation in which they're going to have to pick up those additional costs very quickly.
I don't think it's all bad news, but it needs to be looked at from the perspective of roads and bridges. We have to be sure that we address that as well. We know that maybe in some areas we can haul by truck.
Chair, I'd like to take a look at branch line abandonment. On our farm, we have always historically hauled 30 miles.
Ms Robson: So you're used to the long haul to start with.
Mrs. Cowling: So we're used to a long haul. It's 15 miles to the elevator and 15 miles back. So it's 30 miles over municipal roads.
What we are doing is trying to put people into that situation, I would hope, so that we're all picking up the fair costs and that there is fairness that comes to these particular people in the riding of Dauphin - Swan River, who in fact are losing 25% of those miles.
Ms Robson: Yes, I take your point.
Mrs. Cowling: I clearly understand a long haul, but maybe that isn't a long haul. Maybe you might want to -
Mr. Thurston: Yes, 30 miles is getting up there.
Perhaps, Mr. Chairman, I could provide a little bit of an explanation of what we did from a road impact point of view. We worked quite closely with the provincial governments in the development of the methodology and the type of information that would be submitted to the review.
What we've done from a road impact point of view is to look at the additional cost that would be incurred in handling the diverted tonnage over alternate roads. What we looked at were the additional maintenance and upgrading requirements of those roads that would be receiving the grain if it was being diverted to alternate points.
At the same point in time, the provinces looked at what their experience would be with respect to the existing roads that used to handle that traffic to the status quo elevators. So there was a netting out of some of this information.
In the end, we came up with a calculation of slightly less than $1 million in road impact in total for all of the 17 lines. I think the number was around $790,000, so that is a reflection of the additional maintenance and upgrading requirements for the roads that would be receiving the grain in light of the netting out of some of the benefits the provincial governments would incur by no longer having to maintain the status quo roads to their previous extent.
It doesn't sound like a lot of money, but it still is a lot of money. I think the provinces look closely at their infrastructure requirements, and that was the result of the analysis.
I think you raised some important questions from the point of view of how this system shares in the benefits and the way the former WGTA rate scale was developed, which was like a pooling of costs in which everybody shared on a per-mile basis in terms of the development of the rate. Some people now - you're getting specific in your area - will be suffering from additional truck hauling costs.
I think there is certainly a move with the new legislation coming to allow producers and the grain companies to try to negotiate rates that are lower than the maximum rate that would be put in place under the rate scale. So there's an effort to move more into the commercial environment in terms of rate negotiations.
So perhaps for the people who are affected in your area, if there are significant volumes being moved in that area, there might be opportunities to try to negotiate rates lower than what is set in that maximum. This is possibly to offset, to a certain extent, the additional trucking cost that might be incurred. But the system is moving toward more of a commercial-type environment under that maximum-rate regulated rate scale that the agency will continue.
From our point of view, I think we're seeing this situation develop whereby we will anticipate a little bit more commercial involvement in the development of rates.
The Chairman: I'll come back to you in another round, Marlene.
Basically, still on this line of questioning, we, as a subcommittee, recommended in our June report that the NTA cost-benefit review of grain-dependent branch lines take into account total transportation systems efficiencies. I think that's why there is so much concern over basically the process of how you do your review.
In your report on page 5 you indicate:
I spent many years in western Canada, and when a branch line closed down and an elevator closed down, the town died. It's as simple as that.
So there's a cost to that. We have yet to manage to get the ultimate decision-makers to go out there to the community to hear from people. I can remember, before the Canadian Transport Commission when it was around, where the community had input in terms of their future based on a branch line closing down. That's not the case today.
Do you have any idea how we can get at that issue so that at least the people who are affected feel they have some say, rather than just straight economics?
Ms Robson: Mr. Chairman, I have a couple of comments. One is that we were constrained by our mandate, so we didn't have a lot of room to get into what I would consider to be pretty subjective guesstimating about impacts of closures on communities. So, number one, we didn't have that freedom to start with.
But, number two, really I'm like you. We certainly have discussed this over and over again, and we have struggled with how does one try to get a handle on something that is basically a sociological and economic situation across the prairie region. I don't have an answer for it.
It isn't in this sort of evaluation, because you can't define it and measure it, I don't think. We talk about railway branch lines going and then towns dying, but equally, in many of these cases the producers had long since abandoned the railway. It's not as simple as saying take out the rail line and the town dies. I think it's quite a bit more complex than that.
I don't know how you can quantify it. There are so many factors affecting how people behave in the prairie communities. I don't think the rail line in itself is the only factor, and I don't know how you factor in other shopping patterns and other transportation patterns that people follow. The post offices are probably as important in many cases in communities as some of the lighter rail lines.
I don't think it's a simple matter. I don't have an answer for it.
The Chairman: Well, one option is certainly a short line. We made some recommendations on short lines - basically that there needs to be a consultant to review the possibility of lines having the potential for short lines prior to demarcating taking place. You talk about that as well in your report on page 29.
From our perspective, we were concerned that the railways may not be the problem in terms of going to a short line. In fact, the elevator companies may be, because the railways are going to get the traffic regardless, in terms of movement, at least into export. But if it's the objective of the grain companies to go to high-throughput elevators, then if elevators remain on a branch line and volume of grain goes through those smaller elevators, then it draws down on the volume of grain that could go through their bigger elevators. So they may in fact be the problem.
What was your analysis, in terms of getting at short lines or seeing that they do have potential, if any? I know you talk about it on page 29.
Ms Robson: This was another subject that we really struggled with. It came up repeatedly throughout the review. We struggled with how do we handle the issue of short lines in the context of these light-density grain lines. We discussed it with the branch line advisory committee, and we finally concluded that the only way we could approach this would be to first do the economic analysis of each of the lines in terms of a closure option and then look at the economics. If any of the lines came up through the analysis as being potentially economically viable, if you will, then it was agreed that the secretariat would then do some further work to assess its suitability for short line status.
In fact, none of these lines come close to being remotely viable under any circumstance, so we didn't proceed further in terms of the short line option. But it is certainly an area that is increasingly important, and I think probably more work needs to be done on the whole issue of short lines and what makes them viable and what is the experience to date and so on.
I don't think we know very much about short lines in Canada. I think they're much better advanced in the U.S. than here. So it's an issue that's going to continue up under the new legislation because there will be, of course, potential buyers for short lines across the country. So there's going to have to be some further analysis, I suspect, done on that subject.
The Chairman: I'll just point out for your information that we had several representatives from short lines before the committee last March, April, May. A representative from RailTex in the United States had given us a rule of thumb - I just forget what it was - in terms of volume of traffic needed to have any potential at all of survival. We can get that information for you. But his strong point was that the option for a short line must be made prior to, as I think he called it, the death spiral of the railway. That meant there had to be infrastructure - not just the lines and the rail bed, but there had to be infrastructure on the line in terms of elevators that could handle the grain and so on. So I think it's important that there be enough lead time in order for somebody to take up that option of a short line.
Ms Robson: If could comment on that, Mr. Chairman, I think the requirement under the new legislation will have the railways producing their three-year plans for abandonment, which will then give some good lead time for opportunities for potential short-line operators.
The Chairman: Yes, that's a possibility, but I think there are varying points of view as to whether it's a three-year plan or a ninety-day or sixty-day plan. You can have your three-year plan, but you're allowed to amend it, and then there's sixty or ninety days; I just forget how it goes there.
So the three years may not really be three years. We've known the railways before not to be exactly above board in terms of manipulations for their own interest. So I think we have to be careful on that one. Is the three-year plan really a three-year plan?
Anyway, one last question before I go to Mr. Althouse.
In terms of your report, you talked about 535 miles of branch lines. The review could see the 535 miles of branch lines and 35 elevators closed. In another report prepared by Andrew Elliott in March of this year for Transport Canada, it was indicated that light-steel branch lines that could be effectively closed would result in the closure of 846 miles of track and 82 elevators. This report differs from yours.
Why are there differences, and what are the implications? It wasn't in your mandate, I suppose.
Ms Robson: The railways were asked to put forward the light-steel or low-volume lines they wanted to have reviewed. I think the expectation originally by the government was that they would come forward with at least 800, perhaps 1,000, miles of branch lines for this review.
The railways were somewhat nervous about this whole review and the whole review process, because they felt we were introducing a whole new approach to branch line abandonment by looking at the road impact and the additional trucking costs and netting out the savings. None of us knew, going into this process, what the outcomes would be, but certainly one of the expectations was that the road impact side would be much higher than has been proven by the provinces themselves.
So there was concern that this would be kind of a semi-political process, whereby they would not be able to predict how the methodologies would come out and they could therefore be stuck with certain branch lines that, by some manipulation of data, were shown to be economic instead of not economic. So they had a lot of significant concerns about the review, and they were very nervous about putting up any more lines.
They were under tremendous pressure, interestingly enough, by pretty well the entire Branch Line Review Advisory Committee, which at every meeting started a discussion by asking where the rest of the lines were. And they never came. That's the reason for the difference in numbers. If you take all the light-steel and low-volume lines, you have roughly in the order of 850 miles.
The Chairman: Thank you.
Mr. Althouse, then back to Mr. Hoeppner, then Mrs. Cowling.
Mr. Althouse (Mackenzie): I'm trying to get a handle on the proportions of savings you're able to deal with. I think it was Daryl Kraft who posited after some study that the abandonment of all of the branch line system in western Canada would bring savings of something like $1.25 per tonne for the whole system.
I'm wondering whether you have looked at - since you looked at four elements in the lines: the total elevator costs; the total railway operating costs; the total trucking costs; and total road costs - what those numbers would be, either as a unit or in the four pieces, for the whole system in western Canada? What I'm trying to find out is whether we're talking about a savings of 20% or one-twentieth of 1%. Just how much of a savings is the $13.7 million you found here?
Ms Robson: That is a very good and a very difficult question to which I don't have an answer. Do you want to comment at all?
Mr. Thurston: In terms of the rail savings themselves, if you're looking at - I think it's $13.3 million in rail savings.... If you're moving roughly 30 million tonnes in the system that's for export, that's equivalent to about 16¢ per tonne.
Mr. Althouse: So it's not huge.
Mr. Thurston: It's not a lot in that regard, but it is a significant amount of money if you look at the extent of historical abandonment of western lines to date.
Mr. Althouse: But it's obvious that it's a fair chunk of money when you're talking about $14 million spread among.... Do you have any numbers or any estimate of how many producers are affected by these particular abandonments?
Mr. Thurston: We have some information from an old producer haul and elevator receipt model that was done by the CTC years ago. I could look at that information and get back to you.
Mr. Althouse: I am trying to find out how much $13.7 million falls on an individual producer on average. I notice on the Dunelm subdivision you say it's possible for a cost saving of $4.70 a tonne. Basically, I think you found that by switching from his hauling with his own farm truck to hiring a cheaper, lower-cost-per-unit B-train or something, a big semi-truck of some sort. It's the five-axle one. So it's not the absolute biggest.
I'm trying to find out what's in it for the farmer to have left. This occurred to me because you said upon abandonment under the new CTA, Canadian Transportation Agency, there would be room for negotiation.
If I'm a farmer sitting out at the end of the Dunelm subdivision and I have a choice of hauling 60 miles one way or 50 miles the other way and it's the same railway, I'm wondering what my negotiating position is. What do I have to negotiate with? I understand the formula will give the bulk of the advantage to the railroads because the saving is mostly theirs. To negotiate you have to have something to negotiate with, and dependence isn't a very good thing to negotiate with.
Ms Robson: I think in part you have the grain companies, who are certainly going to be negotiating with the railways and with trucking contracts and so on. So it's not just one individual producer against the railways, for example. I think you really have to look at it as part of a grain company negotiating positions.
It seems to me if you improve the efficiencies of the grain companies, some of that saving should fall back to the producers in their elevation costs or in their trucking contract.
Mr. Althouse: I think this was the point Marlene Cowling was trying to raise a while ago. Yes, the system will save the 16¢ a tonne. Every producer, even the one who lives on the main line, will get that 16¢ a tonne saving if it's passed through to him. It may be split. The railway may take some and the elevator company may take some and so on. So it's probably only going to be 3¢ or 4¢ a tonne. But the person at the end of the Dunelm subdivision is stuck with an extra cost. His 4¢ don't go very far. He's still going to have to keep his small truck to get the grain from the combine to his farm so the big truck can put it into a position near a road where a big truck can in fact move and pick it up.
We're still faced with the same dilemma we've always had with abandonments, even though we're trying to work out formulas to offset it in that the people who give the most just give the most. There's nothing in it for them except a few cents everybody else gets for doing nothing, so to speak.
That's the problem in negotiating with the official farm community, the farm organizations. They want to see everybody at the end of light steel gone because they, living on a main line, may get a teeny bit of an advantage from it. But nobody has come up with a counter-method at this point. I don't know if it was in your mandate or not to compensate some of those people who make the big sacrifice. I don't think it was.
Ms Robson: Yes, you're right.
Mr. Althouse: Their opportunity to even scream and yell about it is gone after the CTA comes in and Bill C-101 is finished. They either can raise a bunch of money and buy it or they shut up.
Ms Robson: That certainly is the direction towards a more commercialized system. I think you're right. I also think that at least the system is moving in a positive direction. You're getting some savings back to the producers. It seems modest, but at least you are getting costs out of the system that shouldn't be there. Also, the $10,000 a mile out of the rate base gives some guarantee of some of the efficiencies going back to the producer.
I think the direction is right. It would be nice if we had larger savings to show per producer. I think the system is making steps in the right direction in terms of getting unnecessary costs out of there.
Mr. Althouse: Has there been any discussion of implementing some sort of compensation package - a miniature Crow, so to speak? The people who lose a branch line do find their land values dropping to a certain degree. Have any of the people you met with recommended some sort of compensation package?
Ms Robson: No.
Mr. Althouse: In the old days there was a five-year interim program for trucking, or something, offered to some of the communities who lost their lines. Are those no longer discussed?
Ms Robson: There are no longer programs available. I think it may have come up. At one meeting there was some discussion of the trucking subsidy program, which has ended, apparently. But there was no discussion of compensation. What was discussed repeatedly was the transitional funding package that Mr. Goodale is putting forward.
Mr. Althouse: The $300 million or $400 million.
Ms Robson: It would be $300 million, with a significant portion of that going to what is being called agricultural infrastructure, which primarily means roads. I think there's some discussion with the municipalities and the provinces as to how best to allocate those funds.
There's certainly some recognition that this rationalization is not a painless exercise, that there are additional costs to some of the participants and that they do need some assistance.
Mr. Hoeppner: Mr. Chairman, I'm looking at some of these charts and wondering if you could explain something to me. There's probably some explanation further back. I'm looking at the Gretna line that has 7.2 miles. Then I add the other miles together that are left in the track that is going to be shut down.
Ms Robson: Could you give us your reference?
Mr. Hoeppner: I start with page 28. If you look at the Gretna line in there, it's 7.3 miles. I took the other ones - the Neepawa, the Rossburn and the Russell lines - that are going to be abandoned. There are roughly another 130 miles. If you divide 7 into 130, you get roughly 18 times the distance that is in those three lines compared to the Gretna line. Then I go back to page 19. I look at the Gretna line of extra trucking costs of $21,000 and add the other lines together. It is roughly $220,000 or $230,000, which is roughly 10 or 11 times the cost.
How can they truck twice the distance for half the cost? I know the Gretna area is very level and trucking is easy. When you get into the northern part, you get quite a bit of terrain. I would think they would have to truck greater distances to the next elevator than in the Gretna line.
Ms Robson: In the south.
Mr. Hoeppner: Then I look at page 27, where you have the savings. I look at the Gretna line of $199,000. I add the savings up for the other three lines and I get over $5 million, which is 25 times the Gretna line. Somehow these figures don't match. Why are the costs so different?
Ms Robson: I don't have a simple answer for that.
Mr. Hoeppner: You can't truck twice as far for half as much and then save 25 times as much on the rail lines abandonment. Something is a little wacky.
Mr. Thurston: I can assure you we looked at each individual case on its own merits. As much as one would like to try to work with the information that's presented to try to find relationships, it's difficult. There are so many inputs going into these things that are not always exactly the same with each individual line.
Mr. Hoeppner: You would think the input cost for trucking would be similar to the rail lines, that there would be some correlation.
Ms Robson: Not at all.
Mr. Hoeppner: Why not?
Ms Robson: The trucking work was done specifically as a unit of work and it was done in consultation with everybody. We looked at what would be the logical alternate delivery point in each case to the current delivery point. We got agreement that that was the alternate point. The distances in trucking on all these branch line cases varied erratically. They aren't all the same. They're all different if you look at the schematic maps. So you can't just transfer the trucking costs and apply them to the rail costs. It just doesn't work.
Mr. Hoeppner: That is why I'm trying to figure it out. I know the Gretna area and I know which are the closer elevators. I would say they probably have less distance to truck to get to the next elevator than any of the points up in the northern part of the region would have because it's more sparsely populated, and I think you would have to go further to an elevator to deliver. So how can the trucking cost be half per mile what they are in the south part?
Ms Robson: I can't answer that. I don't quite understand the question.
Mr. Hoeppner: In the south, on the Gretna line, I know the points where they'd have to take it to. It would be either to Winkler or to Rosenfeld.
Ms Robson: By Altona.
Mr. Hoeppner: It's not that far. But when you get up into the northern area, I think you'd have to travel quite a distance from some of those points. I'm not that familiar with it but I think I know what you call less sparsely populated areas than in the southern Manitoba area, because we an elevator pretty well in every little town.
Ms Robson: I think the simplest thing to do is look at the schematic map at the back. You'll see there's one that shows lines under review: number 12, Russell, Rossburn and Neepawa. Those distances vary considerably over the east-west line. In some cases they're very short distances, in others longer. Look at the Gretna, number 5. These are factual movement charts.
Mr. Hoeppner: I'm looking at that one. I see that if you aren't trucking to Gretna, the logical point is to go to Altona. It's very close. I don't know why you would truck to Letelier or to Plum Coolee except that you live somewhere halfway between Gretna and Letelier.
So if I look at the other maps, I would think you would have bigger distances to go to the next elevator or the town where you'd be hauling. I'll look at it tomorrow when I get home. To me it just doesn't quite make sense that in the northern part of the province you should be able to truck the grain for half the cost than in the south.
Ms Robson: You're trucking to a parallel rail line. The configuration of the rail line is very important. You've got two parallel rail lines here and you're trucking from one to the other. So the distances in fact aren't.... If you look at number 12, it schematically shows you.
Mr. Hoeppner: As I said, there may be an answer for it. But I'm just using simple arithmetic.
Ms Robson: I think you'll find the analysis in each of the sectors, in each of the elements, is correct. It's been analysed to death, believe me.
The Chairman: I'd like to interrupt for a second. In terms of trucking to the alternate rail line, did you take into consideration to which company a producer might want to ship? It's simplistic to say that if I'm a member of the Saskatchewan Wheat Pool and supposedly I get dividends as a result of being a member, or if I'm a director I absolutely have a ship to Saskatchewan Wheat Pool, and then you close down my branch line and my elevator, the alternate line has UGG or some other such elevator on it, technically as a director of Saskatchewan Wheat Pool I couldn't ship to it.
Now, where does that leave me? I guess that's never considered in term of your analysis. I mean, these are some of the other things that had to be considered.
Ms Robson: Oh, of course. But I guess, Mr. Chairman, what we had to do was construct an analytical model that was as close to reality as possible.
What we did is use a series of criteria that laid out what would be considered to be the best alternative delivery point. We used a whole series of criteria to determine that.
We couldn't possibly have started getting into a detailed analysis of a company-by-company...who will move to which company, because again it's pure speculation. We couldn't possibly work that into this analytical model.
What we tried to do is be realistic. We recognized, as some of the producers on our branch line advisory committee recognized, that a producer isn't even necessarily going to go to what would seem to be the logical next alternate point. He may have all sorts of good reasons for going to points beyond.
We recognize that this isn't absolutely exact for every producer in the prairie region; we couldn't possibly construct it to do that. So we tried to do, and had to do, the analysis on the best alternate point basis.
Mrs. Cowling: This somewhat leads me to my question. Clearly there will be some big winners and some losers when we take a look at branch line abandonment.
One of the things I can't understand - and maybe you can help me - is the difference between the long-route and the short-route estimates for the additional miles when we take a look at those particular closures. Could you explain that?
Mr. Thurston: Is that in terms of the trucking distances?
Mrs. Cowling: Yes.
Mr. Thurston: Let's talk about what we did in Saskatchewan; let's take Saskatchewan as an example. Saskatchewan had developed a very good model that would predict the delivery patterns of farmers, based on their current production, to both the status quo elevator and alternate elevator. In that instance we were able to determine the exact distance farmers would travel by truck from their farm gates to status quo elevators, and from farm gates to alternate elevators. The difference in distance between those two situations was called the short-route distance. It really does give you an exact additional distance that would have to be trucked if the status quo elevator closed.
We didn't have that ability in Manitoba and Alberta, because those two provinces did not develop similar models. They don't have a transportation model nearly as well defined as Saskatchewan.
So in the Manitoba situation we had to develop what was called a long-route distance. It was assuming the distance from the status quo elevator to the alternate elevator.
Of course, in the event of branch-line abandonment, the farmer is not going to truck to the status quo elevator and then drive all the way over to his alternate elevator.
We were faced with that situation in Manitoba and Alberta. We got around that situation by using the Saskatchewan model and applying some proportions, based on the Saskatchewan experience, to those long-route distances in Alberta and Manitoba.
So the trucking costs are based on a similar short-route distance calculation in all three provinces.
Mrs Cowling: So that would lead me to believe that there would be a uniform package on the estimates of the trucking costs right across the prairies.
Mr. Thurston: That's correct.
Ms Robson: That was extremely difficult, because we didn't have apples, apples and apples across the three provinces. So we had that problem both on the trucking side and on the road impact side.
We had similar problems because each of them have very different road systems, different cost elements and different approaches to how they allocate their maintenance. It was very tricky, but we kept massaging it until we were able to do some comparative work that would apply across each of the three jurisdictions.
Mrs. Cowling: If my figures are correct, that would probably leave us at an additional cost of $1.15 per tonne for moving that grain. Is that correct?
Mr. Thurston: Is that for trucking?
Mrs. Cowling: Yes, I would think it's for trucking.
Mr. Thurston: Well, it's $717,000 divided by the number of tonnes that were being looked at. I think it was around 600,000 tonnes on the 17 line. So yes, that is about a $1.20 additional trucking cost.
The Chairman: Just so I'm not entirely lost here, you're saying there is an added cost of $1.20? If the earlier figures were right, you save 16¢ a bushel? For the people affected there would then be an additional cost of $1.04?
Mr. Thurston: When I talked earlier about the $13 million rail savings translating into 40¢ or 50¢ a tonne, that was for all of the 30 million tonnes.
The Chairman: Okay, yes.
Mr. Thurston: If you just use the 600,000 tonnes, it's quite substantial in terms of rail savings compared with the additional trucking costs.
The Chairman: Mr. Althouse, did you have another question? I have one more, but go ahead.
Mr. Althouse: It has to do with confirming the methodology. I understand you used the actual rail cost for each of those lines as presented by the rail lines, the actual elevator costs as presented by the companies, but when it came to trucking costs you used the Trimac model, the Trimac estimate of the trucking cost?
Mr. Thurston: Mr. Chairman, for the rail costing we used the WGTA base-year costs that were developed in the last base years, that the agency approved. So they are exact -
Mr. Althouse: So those were their figures. Okay.
Mr. Thurston: - rail costs with respect to the rail operations.
For elevations we used an elevator costing model that was developed by the Canadian Grain Commission. An operating cost model was used.
As you mentioned, the trucking was based on a Trimac truck costing model the agency purchased; it's a 1995 model.
Mr. Althouse: Okay, did you -
Ms Robson: If I could just add to that, we had quite a bit of discussion on the trucking side of the equation at our July meeting. While it was acknowledged that the Trimac model was a good one, we had some good input from the Manitoba Trucking Association, from Unifarm, and from UGG, which runs some extensive trucking program. So we got more input from them, and we really did some additional market testing in terms of trucking costs, different configurations and so on. It was quite well developed with the committee as well as by the agency. I think it's been massaged pretty carefully.
Mr. Althouse: Just to offset what seems to be relatively low trucking costs for the very large operations, I wondered if you had tested the railway costs by using something like the....
Over in the transport committee we keep hearing from Central Western Railway. Their costs seem to be extremely minuscule compared with the regular railway cost for operating lines for the same distance.
Was there any effort to just test to see what the costs would have been if you'd been using the kind of costing formula that some of these short-line operators use? You'd then transpose that to see what the difference would be in the total cost base and whether there would have been a 50% or a 10% saving, or just how much saving there would have been from using a different method of operation that results from the kind of cost base he always presents to us.
Mr. Thurston: We didn't get into analysing the class 1 railway cost - CN and CP - in comparison with the short line. I think Marian had mentioned earlier that if we had seen that the numbers were not as extensive as what we're seeing with CN and CP, if the economic savings were not as great as what seems to be happening with the analysis that was done, we would have looked at the short line option as a secondary look. We did not do that, because we defined this analysis to show the extent of savings that would result from the abandonment of CN and CP lines.
You're talking about quite a lot of money. We felt that the cost-benefits were not such that it was close, that we should look at the short-line option.
But if you look at the short line option, just intuitively you would expect to see probably not as costly an operation as CN and CP can provide. They have different work rules, different labour rates, different requirements for maintenance, and that sort of thing.
One would assume that you would not have as much costs with an operation by the short lines, but if you did move to the short line option, we felt that the savings would not be as great as what you're seeing with the abandonment of the lines.
Mr. Althouse: It's just that your report was very meticulous in presenting the single-axle farm truck cost versus the five- and seven-axle trucking cost.
I would have appreciated knowing that you had taken the same kind of range of costs on the railway side, since that was most of the $13 million you found. It would have been nice to know the other options, since we did have that in most of the other aspects of the report.
The Chairman: I have just one last question. I'm also intrigued, wondering why the railways didn't put up more lines. In your analysis did you -
Mr. Althouse: The CTA is going to do better than the NTA, they hope.
The Chairman: Look, that is what they hope.
In your analysis, did you look at how well the railways do on those lines? What are their real costs in terms of...? I can see if there's a light-steel line that we think potentially could be up for abandonment, the railways.... But in terms of their bookkeeping, their accountants, they may be doing all right with it. Is there any possibility of that?
Maybe when you cost-base all the figures, is there a possibility they're doing all right in some of those lines, or not? There's not?
Ms Robson: Absolutely not. How could there be?
The Chairman: I'm surprised at that. Why wouldn't they?
Ms Robson: The report has indicated there would be cost savings of some $13.7 million.
The Chairman: That's to the system.
Ms Robson: And $13.2 million to the railway.
The Chairman: For CP, hauling on an individual line from point A to point B, do we really know how they're doing on that line?
Mr. Thurston: Well, in our analysis we did not look at how the railways may keep their books or their accounts. We based the analysis on the approved WGTA costs that were done by the agency for the 1992 costing year, just completed in March 1994. Those costs are based on the costing regulations and the costing methodologies that are approved.
That's what we've done. We haven't looked at any other way of doing costing, if you will, in terms of how the railways may approach costing from, say, a rate development point of view, when they're quoting a rate to a shipper and they want to cover their variable costs, or whatever.
We've done our analysis based on approved methodologies and standards, the costing regulations and the results of the costing work that was done for the last base year.
Ms Robson: But one would assume that the lines they put up for review would not be lines they would want to keep, or they wouldn't have submitted them. So they mustn't be profitable. I'm just making that assumption.
The Chairman: That's what I'm trying to get at.
Ms Robson: If they were, I'm not sure why they would do it.
The Chairman: Anyway, I guess we can't get into the books of the railway there as much we'd like to.
Are there any other questions? Marlene?
Mrs. Cowling: No.
The Chairman: On behalf of the committee, I'd certainly like to thank you for coming and for providing us with the information.
The meeting is adjourned.