Chair and CEO Scott Streiner addresses the Canadian Association of Railway Suppliers' National Railway Day Conference on November 9, 2017
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From Last Spike to First in Class: Creativity, Collaboration, and Determination in the Pursuit of Leadership
I want to wish you a happy National Railway Day. As we all know, the choice of November 7 for this annual event was deliberate, since this is the date on which the last spike was driven into the ground at Craigellachie, BC, back in 1885.
Join me, if you will, in a brief visit to that chilly morning, when a group of CPR officials and labourers gathered for the ceremony. There was, no doubt, a feeling of anticipation in the air, a recognition that something important was about to happen – though the participants never could have anticipated just how symbolically significant the moment would become in Canada's collective memory.
If you listen closely, you can hear the sound of the birds in the surrounding trees, the steam coming from the locomotive that would soon blow a celebratory whistle, the quiet chatter among the men standing there in their top hats and tails.
And if you listen more closely still, you might hear one of those men say, "Gadzooks, Sanford, it's a miracle this is happening at all, what with all the problems!"
That's right: the famous Last Spike ceremony was beset with many unexpected twists and turns.
CPR's President was in England and unable to return in time for the event – giving one of his directors, Donald Smith, a chance to star in one of the most commemorated events in Canadian history.
The Governor General, the Marquess of Lansdowne, was also supposed to attend, but he too failed to make it – and so, the silver spike he had with him stayed in Ottawa (and can still be seen in the Canadian Museum of History). This meant Smith had to drive an iron spike – identical to the 30 million used to build the railway over four and a half years – into the ground.
But this didn't go so well either: Smith's aim was off the first time he tried, and the spike bent. His second effort hit the mark.
Even the photographer who took the iconic photo just happened to be in the vicinity and was pressed into service after the scheduled photographer didn't arrive from Toronto.
What lessons can we draw from this story? Well, one might be that if you wanted busy people to show up for an event in late 19th century Canada, it was better not to schedule it in a small mountain town as winter winds were beginning to blow. But another lesson – and the one I want to focus on today – is that for a century and a half, creativity, collaboration, and determination have played a major role in the achievements of Canada's railway sector – including its suppliers – and will continue to be essential as new challenges and opportunities emerge. And that lesson is not only applicable to industry, but also to the organization that is responsible for its economic and accessibility-related regulation – the organization I am privileged to head – the Canadian Transportation Agency.
The importance of rail to Canada
It's hard to over-state the importance of rail transportation in a country as vast and trade-dependent as Canada. Indeed, two of our founding documents – the British North America Act and the Terms of Union with British Columbia – actually contained specific commitments to build railway links.
Railways were a foundation upon which Canada was built, and 150 years after Confederation, they remain essential to the country's prosperity:
- Over 45,000 route-kilometres of rail track stretch across Canada, connecting grain elevators to ports, mines to processing plants, manufacturers to distributers, and suburbs to downtown cores. This makes our rail network the fifth largest in the world.
- Each year, Canadian rail companies move almost 300 million tonnes of goods –70 per cent of all inter-city freight – and over 80 million passengers.
- 93,000 people are employed in the rail industry – two-thirds of them in supply companies like the ones represented by CARS – earning about $9 billion annually.
Of course, the success of railway transportation isn't an inevitable function of geographic and economic realities. It depends on a willingness to re-think and re‑engineer. Whether it's precision railroading, distributed power, unit trains of unprecedented length, increased digitalization, remote monitoring, predictive diagnostics, the development of low-carbon fuels, or the use of composites, railway companies and their suppliers are continuing to find new ways of delivering value to customers and investors.
The roles of the Canadian Transportation Agency
A vibrant rail sector is also a result of an effective regulatory environment – and that's where the CTA comes in. The CTA was born as the Board of Railway Commissioners in 1904. It is Canada's longest-standing independent, expert tribunal and regulator.
The CTA advances Canadians' economic and social well-being in part by helping to foster an efficient, smoothly-running national rail system. This means:
- Establishing and applying a rules framework that allows for market entry and competition on a level playing field.
- Resolving disputes between, on the one hand, railways companies and, on the one hand, shippers, passengers, or communities.
- Gathering and disseminating information to support transparency, well-functioning markets, and stakeholders' understanding of their rights and responsibilities.
The specific activities that we undertake to accomplish these goals in the rail sector include licencing railway companies; approving the construction of new rail lines and overseeing the discontinuance or transfer of operations of old ones; determining CN's and CP's Maximum Revenue Entitlement for the movement of Western grain; setting interswitching rates; arbitrating rates and service levels when freight rail companies and shippers agree; and mediating and adjudicating a wide variety of matters.
This is a long and diverse set of responsibilities, some of which date back to the original mandate of the Board of Railway Commissioners. Like the rail sector itself, the CTA's effectiveness in delivering its services depends on keeping pace with evolving conditions. We live in an era of acceleration, and modern regulators know that we have to complement our traditional – and still-essential – qualities of independence, expertise, and impartiality with engagement, agility, and innovation.
Let me talk about some of the key changes afoot to help us do so.
The first is not one the CTA is leading, but it will have significant impacts for the rail sector, shippers, and us: the legislative amendments proposed in Bill C-49.
The Bill was tabled in the House of Commons last May and recently passed third reading in the House and first reading in the Senate. If adopted in its current form, its rail-related provisions will:
- require railway companies to submit more data and the CTA to publish performance information online;
- allow for freight rail rates established through final offer arbitration to apply for two years, rather than just one, at a shipper's request;
- raise the threshold for expedited, summary final offer arbitrations from $750,000 in total freight charges to $2 million;
- confirm the CTA's previously temporary authority to make regulations on the operational terms that will be considered during freight rail service level arbitrations;
- allow for reciprocal penalties to be included in arbitrated freight rail service terms;
- reduce the timeframe for a service level adjudication from 120 to 90 days;
- create a list of factors the CTA should consider when determining if service provided by a railway company meets the long-standing "adequate and suitable" standard; and
- provide for the CTA to issue annual decisions setting interswitching rates.
The Bill's most significant rail-related element is replacement of the long-standing and rarely-used competitive line rate provisions with a new option, called long-haul interswitching. Under this option, a shipper served by only one Class 1 railway company will be able to request interswitching to the nearest interchange, which can be up to 1200 km away, or as far away as 50 per cent of the total haul distance in Canada, whichever is greater. The CTA's role will be to order that the requested service be provided, if certain conditions are met, and to establish the rate for that service, based on the rates for comparable traffic.
The Bill gives us 30 business days to receive pleadings from the parties and make these determinations. This is a very tight timeline, and we're already taking steps to make sure we're ready for implementation of this and all other new legislative provisions on the day they come into force.We know people will be watching our decisions on long-haul interswitching closely. Those decisions will be based on the criteria Parliament ultimately adopts and the CTA's analysis of the facts before us – because as a quasi-judicial tribunal and regulator, what guides us is nothing more, and nothing less, than the law and the evidence.
This brings me to regulatory modernization, the second major change I want to discuss.
In May 2016, the CTA launched the Regulatory Modernization Initiative, or RMI, the most sweeping review in its history of the regulations it administers. Many of these regulations date back 25 years or more, and need to be updated to reflect changes in business models, user expectations, and best practices in the regulatory field.
Three goals anchor the RMI:
- Ensuring that industry’s obligations are clear, predictable, and relevant to a range of existing and emerging business practices.
- Ensuring that the demands associated with compliance are only as high as necessary to achieve the regulations’ purposes.
- Facilitating the efficient and effective identification and correction of instances of non-compliance.
These goals are in the interests of transportation companies, shippers and travellers, and the national economy as a whole.
The RMI has four consultation phases. The first dealt with Accessible Transportation Regulations and has been completed. Its results will have implications for passenger rail companies, notably VIA, and for firms that provide equipment to such companies. Based on what we heard during the consultations, we expect the results to include a comprehensive set of accessibility regulations to replace the current patchwork of regulations and voluntary codes; a requirement that service providers plan for accessibility and train their personnel accordingly; and clear and enforceable standards that still leave scope for innovation.
The second phase of RMI consultations, also now concluded, focused on the licensing of air carriers and approvals for air charters.
The RMI's third and fourth phases will deal with consumer protection for air passengers and rail-related regulations, and will begin if and when Bill C-49 comes into force. A discussion paper on rail issues will be released soon after Royal Assent, and meetings with interested stakeholders will be arranged. The paper will confirm the CTA's intent to integrate the existing six rail-related regulations into a single Rail Transportation Regulation – in the interests of streamlining and clarity – and to fix outdated references to laws and programs that no longer exist. The paper will also ask for input on issues such as:
- whether the regulations should set out clear requirements with respect to the provision of insurance-related information to the CTA;
- what factors the CTA should consider when making a determination on whether a fire is the result of railway operations when municipalities seek reimbursement for fire-fighting costs;
- what legislative and regulatory provisions should be subject to administrative monetary penalties; and
- what sort of guidance material would be helpful to stakeholders in the context of Bill C-49's new provisions.
The RMI is an ambitious effort to ensure that the regulatory framework reflects the realities of a transportation system that is faster, more automated, more complex, and more cost-sensitive than ever. Our target is to complete all consultations, get the regulations drafted, and secure the required dual approvals of the CTA and Cabinet before the end of 2018.
Staying current isn't just about updating legislation and regulations, important as that is. It's also about ensuring that the way we deliver our services is nimble, efficient, and responsive. This is the third area where important changes are underway. Let's start with mediation, which is typically faster and cheaper than more formal dispute resolution options, and less likely to strain the relationship between railway companies and complainants.
To ensure the effectiveness of our mediation program, we've established a separate unit to focus on rail and marine issues, sent 21 CTA Members and staff on learning tours to rail, shipper, and port operations, and worked to raise stakeholder awareness of our services. We hope that as word gets out, more parties will realize that we can be of assistance before positions are entrenched.
When railway companies and shippers can't come to a negotiated agreement on service levels or rates and ask us to initiate an arbitration, our job is to ensure that arbitrators are well-supported. To this end, we’ve issued Rules of Procedure for Rail Level of Service Arbitration, to help ensure that they get done quickly and that parties have clarity on how the process will unfold; provided specialized arbitration training to Agency Members and staff; and made it clear that where arbitrators require technical assistance from experts in the Agency's ranks, that assistance will be provided.
While arbitrations look to future service or rate terms, adjudications deal with complaints that legal obligations have been violated in the past or present.
Of all our adjudications, those on rail issues tend to involve particularly copious and complicated evidence and arguments. To try to make these adjudications as straightforward and predictable as possible, we're organizing case management calls with lawyers for both sides soon after applications are received, to establish clear timelines and agreed limits on the size of submissions. In addition, after a nine-year hiatus, we've returned to holding oral hearings for selected cases. Oral hearings can be a comparatively efficient way of receiving, comparing, and weighing large amounts of conflicting evidence and argument, and they give interested parties an opportunity to observe – and sometimes make their views known during – a quasi-judicial proceeding.
Two of our recent oral hearings have dealt with rail matters: one involved a dispute between CP and a shipper, and the other, between CN and a municipal government. In both cases, the oral hearing was extremely valuable, and underscored the CTA's commitment to delivering its services in ways that ensure fairness, and address the needs and expectations of stakeholders and the public.
Let me conclude by taking us back to Craigellachie on that cool and damp November 7 morning.
The man standing immediately to Donald Smith's right as Smith drove in the last spike was William Van Horne, the CPR's General Manager. When the ceremony was over, Van Horne sent a telegraph to Prime Minister John A. Macdonald that read: “Thanks to your far seeing policy and unwavering support the Canadian Pacific Railway is completed. The last rail was laid this (Saturday) morning at 9:22.”
That disarmingly simple message belied the enormous boldness and fortitude required to build the world's first trans-continental railway across Canada's rocky shield, endless forests, great prairies, and soaring mountains. When Macdonald was urged, in the face of these challenges, to send the railway route into the United States, his response was unequivocal: "No, I will not have it! The railway will be built our way. We will build our kind of railway".
Creativity, collaboration, and determination got Canada the railway that bound the nation together and hastened development in the West. Creativity, collaboration, and determination have allowed the railway industry, its suppliers, and its customers to thrive in the intervening 132 years – and will be essential if Canada is to be a leader in the global rail revolution. And creativity, collaboration, and determination will allow the Canadian Transportation Agency to play its part as a regulatory tribunal that sets and applies clear and reasonable rules, and efficiently and impartially resolves disputes.
Before wrapping up, I would like to take a moment to welcome a special guest: Molly McCullough, Assistant Curator with Ingenium – Canada's Museums of Science and Innovation. Molly, in turn, has brought along her own special guest: the actual "first last spike" – the one Donald Smith bent and then kept as a souvenir. A century after the ceremony, Smith's great grandson donated it to the museum, whose staff generously agreed to bring it here today. So this is it – a piece of Canada's heritage that symbolizes the significance of rail to our history and prosperity, and how far we can go when we look to distant horizons.
Many thanks to you and the museum, Molly, and to the entire audience for your attention.