Railway Association of Canada& Canadian Association of Railway Suppliers: Railway Association of Canada & Canadian Association of Railway Suppliers “Rail Can Do More” Rail Background Briefing Session for Members of Parliament and Senators “On Track for the Future” November 1st, 2001


OUTLINE: OUTLINE 1. September 11, 2001 2. Railway Security Issues 3. Rail Related Border Initiatives 4. The Resurgence of Canadian Railways 5. Rail’s Role in Today’s Economy 6. Blueprint Process 7. Rail Can Do More 8. Conclusion 1


ABOUT THE RAC : 56 members Represents virtually all Railways operating in Canada today Class 1s (CN and CPR) Short lines Inter-city Passenger (VIA) Commuter Tourist Together members carry 4.2 million carloads annually 1.7 million containers and trailers 51 million commuters, inter-city and tourist train travelers ABOUT THE RAC 2


SEPTEMBER 11, 2001 : A tragic day for humanity Short term implications Economic slow-down will be exacerbated Direct impact on Canada due to reliance on exports to US … consumer confidence Significant negative impact on airline, tourism and financial sectors Delays at border points … could reduce productivity and efficiency Careful control and processing of individuals crossing borders Additional fiscal pressure on federal government SEPTEMBER 11, 2001 3


SEPTEMBER 11, 2001: SEPTEMBER 11, 2001 Long term trade implications Long-term economic performance closely tied to border efficiency Potential for a loss of investment from Canada through facility relocations south of the border Need for increased government spending on security, defense, other? 4


Railway Security Issues: Dedicated, private and controlled corridors Large railways have their own police forces Increased vigilance at tunnels, bridges and other critical facilities Railways experienced and well-equipped to handle emergency situations (derailments, etc) Railway Security Issues 5


RAILWAY SECURITY ISSUES: RAILWAY SECURITY ISSUES Already have established partnerships with first responders and communities Railway security measures in place as prescribed by Memorandum Of Understanding (MOU) between the railways and the Government of Canada Canada’s Class 1s are linked into the North American 24-hour security control centre The rail industry has advanced several innovative ideas to create a more secure, efficient and smarter border 6


RAIL RELATED BORDER INTIATIVES : Railways have been proactive in facilitating cross-border movements Electronic commerce Significant investment in information technology Automated customs transactions and pre-filing systems in place for the vast majority of rail traffic … improved customer service and reduced train throughput time Also investment in strategic infrastructure RAIL RELATED BORDER INTIATIVES 7


RAIL RELATED BORDER INTIATIVES : Others ? Better alignment of customs policies Pre-qualify low risk freight and people for pre-processing Customs inspections of shipments at destination or origin, rather than at border points, where this practice is more efficient single inspections to the standards of both countries for domestic and off-shore shipments RAIL RELATED BORDER INTIATIVES 8


RAIL RELATED BORDER INTIATIVES: RAIL RELATED BORDER INTIATIVES Others ? (cont’d) Central database and common computer systems that all carriers, brokers, importers/exporters would use to file information pertinent to cross-border traffic (Access given to customs and other government agencies) 9


THE RESURGENCE OF CANADIAN RAILWAYS: THE RESURGENCE OF CANADIAN RAILWAYS New Members of Parliament may not be familiar with changes the industry has undergone over the past decade Returning MPs will find the next few slides a useful update on the sector’s current financial and operating profile 10


Slide12: Rail rates have been reduced by 35% since 87 11


Slide13: Federal subsidies to rail for grain transport have been eliminated 12


Slide14: 860 1101 1063 1528 1878 1734 1405 CN and CPR Combined Investment (Cdn $ mil) Almost $10 billion since 1994 94 95 96 97 98 99 2000 Major Investments by Class 1 railways since deregulation 13


Slide15: Productivity growth in the rail sector has outpaced all other modes 14


Slide16: Short lines now operate about 1/3 of rail network in Canada. Increase over last decade in percentage of overall traffic handled by short lines from 15% to 30% Over 40 new shortlines since 92 15


Slide17: Truck – Rail Surface Export Share to the US Volume 1999 Source: Transport Canada CN AND CPR HAVE TRULY BECOME NORTH AMERICAN COMPANIES 16


Slide18: Major investments made by Canadian carriers in locomotives, intermodal and bulk facilities and other equipment have improved rail competitiveness The introduction of new scheduled services have significantly improved customer service and are attracting new time-sensitive business from customers Along with autos, intermodal has been the fastest growing traffic segment over the past five years. Represents 16% (CN) and 23% (CPR) of traffic revenue Railways working hard to develop strategic trade corridors RAIL’S ROLE IN TODAY’S ECONOMY 17


Slide19: Portland Detroit/ Windsor Sarnia Chicago Kansas City Oklahoma City C P Dallas Laredo Eagle Pass Miami Washington DC El Paso Denver Nogales New York Barstow Colton Sacramento Salt Lake City Calgary Winnipeg Montreal Buffalo Minneapolis Moose Jaw Vancouver Mexicali NAFTA CORRIDORS – HIGHWAY vs RAIL * Railroad lines represented here are examples of major railway connections; other routes may also offer similar connecting service Railroad Legend Highway Kingsgate Huntingdon Coutts Portal N S C N New Orleans Emerson Duluth Jct. Memphis Rouses Point / East Alburgh BNSF Sault.Ste-Marie CN (WC) CN Niagara Falls CN Blaine Massena Rail lines are a parallel network to the highway system 18


RAIL’S ROLE:A) INTERMODAL ADVANTAGES : Encourages the most efficient transportation output through a combination of modes Greater use of existing rail capacity as an alternative to costly expansion of highways to deal with future growth Reduces shipping and travel costs Reduces the costs of goods transfer Addresses public objectives for environment, fuel conservation, safety and land use RAIL’S ROLE: A) INTERMODAL ADVANTAGES 19


RAIL’S ROLE:B) PASSENGER AND COMMUTER SECTOR: VIA’s operating grants from 1990 to 2000 down 62% to $170 mil (from $442 mil), ridership has increased by 20% over same period GO’s ridership has increased 40% in the last five years to 41 million riders annually West Coast Express’s ridership has increased 60% since 1996 to 8,000 rides per day AMT has also seen double digit increases in ridership over the last 5 years RAIL’S ROLE: B) PASSENGER AND COMMUTER SECTOR 20


TRANSPORT CANADA’S BLUEPRINT PROCESS: TRANSPORT CANADA’S BLUEPRINT PROCESS Rail welcomes the attempt to strengthen the link between the Canadian economy and the national transportation system. We endorse the views of the CTA Review Panel that the present regulatory regime for railways works effectively for the vast majority of shippers We urge the Government not to consider unnecessary reregulation…the system needs only minor revisions, not wholesale change The post September 11th environment suggests caution should be exercised within the context of Blueprint recommendations 21


BOTTOM LINE: PASSENGER SECTOR IS GROWING…ON THE FREIGHT SIDE, WE MUST PROTECT GAINS FROM DEREGULATION … RESIST TEMPTATION TO REREGULATE: BOTTOM LINE: PASSENGER SECTOR IS GROWING…ON THE FREIGHT SIDE, WE MUST PROTECT GAINS FROM DEREGULATION … RESIST TEMPTATION TO REREGULATE


HOWEVER…RAIL CAN DO MORE: HOWEVER…RAIL CAN DO MORE


RAIL CAN DO MORE : RAIL CAN DO MORE Surface transportation flows and modal balance are not optimal in Canada. Challenges: Environmental sustainability Ground transportation (principally road) is already the single largest contributor to GHG emissions in the overall transportation sector; GHG emissions are expected to double over the next 20 years; Politically, air quality is a real concern Quality of life is deteriorating Especially in major urban areas Transit times have increased considerably Competitiveness vis a vis the US Increased demand for scarce public funds for infrastructure Current highway infrastructure has deteriorated, unable to handle present and forecast rates of growth


RAIL CAN DO MORE : RAIL CAN DO MORE How rail can help ? Because it leaves a small environmental footprint Rail is 5 times more efficient than inter-city trucking. Rail is better for all types of emissions including smog creating emissions (NOx and VOC) Parallel network which can lessen highway congestion (truck and auto) and the consumption of land for use in highways Dedicated corridors into the US which can lessen congestion at the border and facilitate the most efficient moves for mid to long distance freight shipments Primarily privately funded and maintained network


RAIL CAN DO MORE (cont’d) : RAIL CAN DO MORE (cont’d) How can Canada achieve increased modal balance ? Tax harmonization/equity Eliminating the Federal Large Corporation Capital Tax Removal of federal excise fuel tax for transborder traffic Reduce the federal excise fuel tax to 1.7 cent/litre and match successive reductions in US fuel tax rates being proposed Increase the Capital Cost Allowance (CCA) rate for rail equipment to 30% (rail cars, locomotives, intermodal equipment)


RAIL CAN DO MORE (cont’d) : RAIL CAN DO MORE (cont’d) Introduce innovative transportation policies to promote environmental sustainability and efficiency Commercial road user fees Green taxes Incentives to use intermodal services Address jurisdictional issues related intra Provincial trucking and its regulation Promote passenger rail by Providing capital and regular operating funding for urban transit and passenger/commuter rail Make monthly transit/rail passes a tax deduction Selectively purchase discontinued urban rail corridors at fair market value and hold these assets for future commuter use as urban populations grow Develop an awareness/communications campaign to educate the public about environmental advantages of commuting by rail/transit


ONGOING GOVERNMENT INITIATIVES WITH TRANSPORTATION SECTOR IMPACTS : ONGOING GOVERNMENT INITIATIVES WITH TRANSPORTATION SECTOR IMPACTS Budget process Need for tax harmonization / relief for optimal modal balance Blueprint Process Need a comprehensive surface transportation policy in Canada Canada Transportation Act Review Panel Report Must resist pressure to reregulate rail sector


CONCLUSION : Trade is critical to economic performance especially between Canada/US Rail is an important component but can do more Intermodal key to medium/long haul traffic, improved border efficiency and meeting environmental goals Must continue to work toward increased alignment of Canada-U.S. border policies Rail offers important public policy benefits Must keep goods moving … the Canadian economy depends on it CONCLUSION