Transition book for the Chair and CEO 2021 - Industry trends

Economics Division, ARAD, AOB
Canadian Transportation Agency

This presentation will discuss:

• 2020 Industry Trends
• Potential recovery and next steps
• Revised Regulatory Impact

CATSA daily passengers screened at top 15 airports in Canada compared to daily reported COVID cases

15 Airports list

• Toronto-Pearson International Airport
• Ottawa International Airport
• Calgary International Airport
• Montréal-Pierre Elliott Trudeau
• Halifax Stanfield International Airport
• Winnipeg International Airport
• Edmonton International Airport
• Vancouver International Airport
• Kelowna International Airport
• Québec City Jean Lesage International Airport
• Regina International Airport
• Billy Bishop Toronto City Airport
• Saskatoon John G. Diefenbaker International Airport
• Victoria International Airport
• St. John’s International Airport

Provinces lifted lockdown between

• QC-May 4
• BC-May 19
• Ontario-June 12
• AB-June 12
• MB-June 21

Maritime Bubble

• NL-June 25
• PEI-June 1
• NS-June 5
• NB-May 22

• Major Canadian Airlines is defined as every Canadian air carrier that, in the calendar year before the year in which information is provided, transported at least 2 million revenue passengers or at least 400 thousand tonnes of cargo.
• This includes: Air Canada, Air Transat, Porter, Sunwing, Swoop and WestJet
• Average 31% YoY decrease since January, and 42% YoY decrease since March

Source: Statistics Canada Table: 23-10-0079-01 (formerly CANSIM 401-0001)

Large carriers

• Sunwing resumed flights early November
• Porter now expected to return February 11^th
• All carriers have reduced or stopped scheduled flights to certain destinations
• Air Canada reported a net loss of $685 million in Q3 of 2020
• Previously Sunwing suspended all southbound flights until August 31^st
• AC reported 88 percent decline in revenue passengers
• AC has or is planning to suspend around 125 routes to manage losses, WestJet has reduced routes and stopped all service to Eastern Canada
• AC has suspended service

Northern carriers

• Northern Indigenous groups have historically invested more than $100 million in the airlines that serve their communities
• Canadian government has pledged up to $174 million to maintain essential air services for 1.5 years
• Air North reported $17 million decline in business between March and August 2020
• 41 million of that was given in august, in addition to the 8 million in May
• Air North also expects a decline in traffic during the winter months, potentially costing jobs
• Northern carriers fly to communities that mainline carriers have no interest in serving and we provide a suite of products that mainline carriers don’t offer.
• In a pre-pandemic economy, northern air carriers together employed almost 2,000 people, many of them northerners.
• Even today, northern airlines account for a major proportion of private sector territorial employment and more than $100 million of Indigenous investment.

Airline industry quarterly cash burn forecast

(Alternative text for graph: original data not available from source)

• Updated IATA forecast, has vaccines deployed by 2nd half of 2021. Recovery will be different for emerging and development markets.
• IATA projects the median airline has 8.5 months left of cash to burn. Projecting $75 billion cash burn between Q4 2020- Q3 2021
• AC reported to be burning 13 million dollars a day
• Globally, airlines have received over 173 billion dollars in government funding through various means
• Canadian Airlines including AC,WJ and Porter have taken advantage of the CEWS program
• Northern air carriers have also used CEWS.
• Air North stated that it reduced from 375 FTE in August 2019 to 228 FTE. Would have been 196 FTE without government aid.

Examples include:

• Modifying fleet to offer cargo services
• Decreasing the size of workforce through layoffs
• Cancelling or deferring aircraft deliveries
• Raise capital through market offerings
• Reduction of Capital Expenditures
• Savings from lower jet fuel price
• AC recorded its 3000th cargo only flight in October
• WJ and AC alone have laid off more than 25 000 employees
• AC has raised over 6 billion dollars in capital since March
• Sources: IATA, AC Quarterly Reports, Airline Press Releases

IATA Passenger Surveys - When will you return to air travel?

(Alternative text for graph: original data not available from source)

This survey was done pre announcement of potential vaccines

Large percentages of consumers indicated that they would wait to travel

Graph of CATSA daily passengers screened at top 15 airports in Canada 2020 vs 2019

15 Airports list

• Toronto-Pearson International Airport
• Ottawa International Airport
• Calgary International Airport
• Montréal-Pierre Elliott Trudeau
• Halifax Stanfield International Airport
• Winnipeg International Airport
• Edmonton International Airport
• Vancouver International Airport
• Kelowna International Airport
• Québec City Jean Lesage International Airport
• Regina International Airport
• Billy Bishop Toronto City Airport
• Saskatoon John G. Diefenbaker International Airport
• Victoria International Airport
• St. John’s International Airport

Provinces lifted lockdown between

• QC-May 4
• BC-May 19
• Ontario-June 12
• AB-June 12
• MB-June 21

Maritime Bubble

• NL-June 25
• PEI-June 1
• NS-June 5
• NB-May 22

Industry incentives

Examples include:

• Complementary travel insurance for international travel
• Discounted tickets/vacation packages
• Unlimited Flight Pass
• Elimination of Change Fees
• Countries offered direct subsidies to tourists
• WJ, AC, AT, WG,WO provide 21 days of travel insurance
• AC/Flair/China Southern offered unlimited travel pass in the summer
• AC Jetz, new luxury travel package with smaller aircraft
• Alaska Air/Ryan Air had 2 for 1 tickets
• Airline was offering entire row of seats
• Swoop introduced "Trusted Travel Getaway" for some south bound destinations, guaranteed negative test of everyone in flight

• Safety measures introduced globally include physical distancing, increased sanitization, plexiglass barriers, mandatory masks and temperature checks
• European and Asian airports restricted terminals to passengers only
• Mandatory requirement for travelers arriving in Canada to use ArriveCAN to provide some information
• Calgary International Airport part of a pilot program with potential to reduce quarantine time from 14 days to 1-2 days
• With all these increased measures and decline in passenger volume, it is reasonable to expect increases in airport fees imposed on passengers
• All travellers are required to provide contact and quarantine information upon and after entry into Canada.
• ArriveCAN keeps track of contact and quarantine information, and verifies quarantine compliance. It has to be filled out before boarding a flight
• Several international destinations now require pre travel negative covid tests. In Hawaii, no need to quarantine if negative test.
• Pilot program already had 2000 participants within 2 weeks
  Nearly 2,000 travellers enrolled Alberta's COVID-19 border testing pilot project that can shorten quarantine

2021 ATPDR & APPR Carrier Impacts – Updated Staff Projection

Large carriers projected to be subject to ATPDR and APPR in 2021 if no pandemic:

• Air Canada, Air Transat, Porter, Sunwing, WestJet

Large carriers forecasted to become small carriers in APPR in 2021 due to pandemic volumes

• Air Transat, Porter, Sunwing

Large carriers forecasted to no longer be subject to ATPDR in 2021 due to pandemic volumes

• Porter

ATPDR 2021 Airport Impacts – Updated Staff Projection

Canadian Airports Council projects 2020 passenger traffic to decrease by 72%.

0% reduction in airport passenger traffic:

• 42 airports subject to ATPDR

70% reduction in airport passenger traffic:

• 24 airports subject to ATPDR

80% reduction in airport passenger traffic:

• 20 airports subject to ATPDR

Industry Future

• Aviation sector projected to recover to 2019 levels by 2024
• Canadian Government initiated negotiation of a bailout package for airlines in November
• Potential COVID-19s vaccine will have positive impacts for airlines
• Transport minister indicated that airlines will have to provide refunds to passengers before being eligible for bailout
• Vaccine will increase travel as well as increase cargo demand of airlines to transport vaccine in an efficient manner to remote areas. So it could recover faster than 2024
• IATA originally projected recovery to be 2023

Domestic air travel improved but international slowed - 2nd waves COVID damage international with renewed travel restrictions

(Alternative text for graph: original data not available from source)

Analysis & Regulatory Affairs Directorate, AOB
Canadian Transportation Agency

The presentation will summarize:

• 2021 Class I volume results for Q1
• April 2021 Canadian rail volumes
• Recent Canadian industry news and trends

• Canadian carload traffic is up 2.8% on a year-over-year (YoY) basis, as of May 8th
• Significant YoY growth for:
  • Grain (28.5%)
  • Coal (4.8%)
  • Motor Vehicles and Parts (29.7%)
• Modest YoY declines for:
  • Metallic Ores and Metals (-1.7%)
  • Farm products (-1.8%)
• Significant YoY declines for:
  • Petroleum products (-12.7%)

• Intermodal traffic is up 13.1% YoY (compared to a softer Q1 in 2020)
• This equate to a return to the historically high intermodal results of 2019
• Inbound traffic continues to move at a record pace, however the percentage of containers backfilled (filled for the outbound trip) remains historically low
• This has led to some slow downs as carloads sent to "stuffers" cannot be serviced without empty containers
• These issues are forecast to persist into Q3, or possibly Q4 2021 based on the extraordinarily high level of inbound container demand, and marine supply issues.

• CN's 2021 rail volumes across North American rail networks are up 9.9%, as of May 9th, including :
  • 1.9% increase for carload traffic
  • 20.5% increase for intermodal traffic
• The carload increase was driven by increases in the shipments of:
  • Grain products (15.9%)
  • Motor Vehicles (18.9%)
  • Coal (3.5%)
• These gains are offset by:
  • Forest products ( - 1.5%)
  • Petroleum and Chemicals ( - 1.7%)
  • Metals and Minerals (- 0.4%)

• CP's 2021 YTD rail volumes across its North American rail network were up 4.3% as of May 10th, including:
  • A increase of 7.0% for carload traffic
  • An increase of 0.1% for intermodal traffic
• Carload shortfalls were exhibited in the shipments of:
  • Energy and Chemicals (-7.7%)
  • Potash (-8.2%)
  • Forest Products (-3.8%)
• Carload growth was driven by:
  • Grain (12.1%)
  • Coal (17.7%)
  • Automotive (51.1%)

• 2021 YTD (May 8, 2021) rail volumes across all North American rail networks were up 10.1%, including increases of:
  • 3.9% for carload traffic
  • 16.3 % for intermodal
• Percentage change differed across jurisdictions:

• Mexican rail volumes are finally recovering, largely based on bulk carloads unlike in the United States and Canada where Intermodal demand is dominating.

• In Q1 2021:
  • CP revenues fell 4%
  • CP expenses fell 2%
  • Quarterly operating ratio increased slightly to 58.5%
  • March volume set a new record for GTMs and RTMs (any month)
  • CP Q1 volumes set a new all-time high for that quarter
• This follows 2020 annual results for CP, including:
  • Revenues declined 1%
  • Expenditures declined 6%
  • Operating ratio decreased to record low 57.1%
• 2021 guidance suggests strong growth:
  • double-digit growth in Earnings Per Share
  • high single digit growth in Revenue Ton Miles (RTMs).

• In Q1 2021:
  • CN revenues fell less than 1%
  • CN expenses fell 5%
  • Quarterly operating ratio decreased slightly to 62.5%
  • Q1 volume set a new record for grain and intermodal traffic
  • Industry leading 5% increase in overall volumes (YoY)
• This follows 2020 annual results for CN, including:
  • Revenues declined 7%
  • Expenditures declined 3%
  • Operating ratio increased to 65.4%
• 2021 guidance suggests strong growth:
  • double-digit growth in Earnings Per Share
  • high single digit growth in Revenue Ton Miles (RTMs)

• In 2021 FCA 69, the Agency's interim treatment of General Purpose Debt (GPD) for CP cost of capital (CoC) purposes was quashed by the FCA
• The FCA order that the CTA apply its former approach, and remove all GPD from the CP 2020-2021 CoC, and VRCPI
• For 2021-2022, the Agency has maintained this approach for CP pending the completion of consultations on the various cost of capital issues, including the potential inclusion of GPD
• At the resolution of the consultation, a S.32 review will likely be necessary for one or both railways to ensure fairness between the regulated entities

• In 2020, the CTA consulted on certain proposed changes to the RIR. These included reducing the number of zones, increasing the number of block categories, and two other administrative changes.
• Having reviewed the comments received from stakeholders, and the updated data received in 2020, the CTA has determined it will not move forward with the proposed changes at this time.
• The CTA will continue to evaluate the benefits of these changes, and the overall functioning of the RIR, and look to promote awareness of the rights and responsibilities of all stakeholders.

• The TC led Ports Modernization Review is focused on updating the governance structures of Canadian ports.
• These updates are aimed at making Canada’s major ports among the most efficient and cleanest in the world.
• Some major stakeholders have focused on the need for Port governance reforms. They claim the current governance structure lacks proper checks and balances in terms of Board appointments, fee and rent setting; recourse to an adequate appeal mechanism; outside dispute resolution; and an independent complaint process.

• March 21, 2021: CP and KCS announced they have entered into a merger agreement. Subject to the STB's approval, CP will spend US$25 billion on this acquisition. CP aims to create the first single-owner rail network connecting the U.S, Mexico and Canada.
• March 22, 2021: Farm groups showed support for CP-KCS deal.
• April 20, 2021: CN stepped up with US$33 billion offer for KCS and started regulatory approval for KCS deal.
• April 26, 2021: CN filed 409 letters of support from rail customers with the Surface Transportation Board (STB).
• May 13, 2021: KCS endorsed CN’s takeover bid (over the offer from CP).

Additional Notes (Proposals to Purchase Kansas City Southern):

• Kansas City Southern (KCS) is a transportation holding company with railroad investments in the United States, Mexico, and Panama.
• The KCS rail network includes about 6,700 miles (10,800 km) of track in the U.S. and Mexico.
• After KCS's endorsement on CN's deal, CP will have five business days to make a new offer. If CP were to table a new offer, a bidding war could ensue.

References (Proposals to Purchase Kansas City Southern):

• https://www.infomedia.gc.ca/cta-otc/en/2021/03/21/235820713
• https://www.globalrailwayreview.com/news/119846/canadian-pacific-kansas-city-southern-merger/
• https://www.infomedia.gc.ca/cta-otc/en/2021/4/26/236733620
• https://www.infomedia.gc.ca/cta-otc/en/2021/4/3/236147270
• https://ca.finance.yahoo.com/news/timeline-unfolding-kansas-city-southern

• Feb 2020: CN temporarily shutdown its Eastern Canadian network, and laid off approx. 6,000 staff, due to Indigenous blockades
• March 2020: Effects of COVID-19 pandemic set in & business slowed
  • 3,500 workers furloughed
  • Proportional to reduction in # of active cars now in storage (approx. 21,000)
  • More than 20% (i.e., 720 engines) of CN’s locomotive fleet also off tracks indefinitely
• Oct 2020: Operating metrics showed improvement from initial impact of pandemic on freight service – many furloughed employees returned
• Early 2021: Aiming to provide annual guidance to markets for 2021 after withdrawing its full-year guidance in October 2020

Additional Notes (CN Service Issues and Recovery):

• 2020 had some unexpected challenges for CN, including the Indigenous blockades protesting the pipeline project, which effectively shut down entire sections of network, which had an effect on the transport of food and consumer items, grain, de-icing fluid for airports, construction materials, propane supplies for Quebec and Atlantic Canada, and natural resources like lumber, aluminum and coal.
• Moving on to the COVID-related challenges faced by CN, business started to slow in March and as a result, about 3,500 workers were furloughed and about 720 engines were taken off the tracks (20% of their fleet).
• Slowdown started to let up in October, and many furloughed employees returned to work, and the Guidance to markets was withdrawn as certain markets recovered quickly and others stalled (As Ryan covered, there was a significant decline in crude and significant increase in Canadian grain). CN is aiming to have their new guidance released late winter.
• CN's order fulfillment is still quite low. (e.g. in the week of Jan 9, 2021, among 5014 orders placed, 1179 orders are 1 to 10 days past due and 226 orders are 11 or more days past due).
• Recovery is slow but trending upwards.

CN Service (CN Service Issues and Recovery):

• The order fulfillment performance has been discussed in the bi-weekly meetings between Quorum and the CTA's econ team.
• Statistic Canada also confirmed that CN's order fulfillment is quite low. (e.g. in the week of Jan 9, 2021, among 5014 orders placed, 1179 orders are 1 to 10 days past due and 226 orders are 11 or more days past due).

References (CN Service Issues and Recovery):

• https://www.cbc.ca/news/politics/cn-rail-shutdown-1.5463266
• https://montrealgazette.com/business/cn-boss-sees-silver-lining-as-governments-gear-up-to-reopen-economy
• https://ofa.on.ca/resources/letter-from-ontario-agriculture-regarding-cn-rail-interruption/
• https://www.cbc.ca/news/politics/cn-rail-shutdown-1.5463266
• http://www.wssa.com/blog/major-cn-rail-service-interruptions-Canada
• https://www.bnnbloomberg.ca/cn-rail-earnings-slide-18-as-record-grain-shipments-fail-to-offset-covid-1.1510780
• https://globalnews.ca/news/7000569/cn-rail-coronavirus-pandemic/

• Aug 2020: Shippers reported they started experiencing delays up to two weeks in Prince Rupert
• Operations have been complicated by port congestion due to
  • Extended peak season in Canada’s supply chain
  • Container shortages and weather issues at Asian load ports throwing East-bound trans-pacific vessels off schedule
  • Deployment of extra-loader vessels in the trans-Pacific, which significantly increased import cargo volumes
  • CN and CP recovery from dockworker strike at the Port of Montreal
• Recent shipper updates suggests issues are slowly improving

Additional Notes (Prince Rupert Service Concerns):

• Vessels calling at Prince Rupert have been delayed by as much as two weeks in order to match inbound volume with terminal capacity and rail car supply
• Operations at Prince Rupert have been impacted by a number of factors including:
  • An extended peak season in Canada's supply chain, well beyond November, when peak season volumes normally subside.
  • East-bound trans-pacific vessels thrown off schedule due to container shortages; and vessel departures from Asia have been set back by severe weather in Busan, South Korea;
  • Deployment of extra-loader vessels (i.e., those deployed on an ad hoc basis, rather than as part of a regularly scheduled liner service) in the trans-Pacific, which significantly increase cargo volumes; and
  • And finally CN and CP recovery from network disruptions due to August dockworker strike at the Port of Montreal, which created a backlog of containers in Montreal and Halifax and tied up rail cars in eastern Canada.
• Some days, all of the anchorages were full as cargo ships wait to unload and/or load cargo, with other ships anchored at overflow spots up and down the coast.
• Dec 2020: CN provided additional capacity to accommodate the volume surge, so railcar dwell times have returned to the normal two to three days.
• Recent shipper updates suggest that volumes are finally beginning to moderate and the container system is balancing out.

References (Prince Rupert Service Concerns):

• https://www.joc.com/port-news/international-ports/%E2%80%98near-record%E2%80%99-import-volumes-slow-bc-port-flow_20201029.html
• https://www.ciffa.com/wp-content/uploads/2020/11/11022020-eBulletin.pdf
• https://www.omnitrans.com/canadian-ports-continue-to-focus-on-clearing-out-congestion/

• December 2, 2020: CP announced plans to build a new logistics park at Pitt Meadows in Vancouver
  • Multi-modal, multi-commodity transload and logistics facility on strategic land holdings adjacent to existing intermodal rail facility
  • 3 major components: agriculture hub, auto lot and liquid energy transload and rail facility
  • Size: 41 hectare/101 acre facility
• Public & Indigenous consultation as well as environmental studies have been initiated
• Subject to regulatory approvals, new facility targeted to be operational in late 2027/early 2028

Additional Notes:

• CP is proposing to to expand its Vancouver Intermodal Facility (VIF) in Pitt Meadows. The proposed expansion will add a 101-acre CP Logistics Park adjacent to the VIF.
• The new logistics park will include 3 components:
  1. an agricultural hub where Canadian agricultural products could be received by rail and transloaded into shipping containers for export;
  2. an auto lot to receive by rail North American-made automobiles for local distribution, including designs that could accommodate electric vehicles;
  3. and a liquid energy transload and rail facility that would serve the transportation fuels and ethanol needs for metro Vancouver.
• The first round of CP's public consultation ended on January 15, 2021. More engagement will occur in 2021. Environmental studies are also underway.
• The Pitt Meadows council and residents are strongly opposed to this proposal as they see the project poses numerous and significant health, safety and environmental risks to the community.
• The project is subject to regulatory approval by the Canadian Transportation Authority and if approved, would be operational in late 2027/early 2028.
• The proposed CP Logistics Park is separate from the Pitt Meadows Road and Rail Project. For the past three years, Council has worked collaboratively with the Vancouver Fraser Port Authority, CP and the Government of Canada to advance the $141 million project that includes an underpass at Harris Road, an overpass at Kennedy Road and associated yard and track expansion. 

References:

• https://www.mapleridgenews.com/news/pitt-meadows-city-hall-and-residents-oppose-new-cp-rail-operation/
• https://vancouverlogisticspark.ca/
• https://www.freightwaves.com/news/canadian-pacific-seeks-to-build-vancouver-area-transload-and-logistics-facility

• Dec 22,2020: CP completed its purchase of the DRT from OMERS for approx. $312 M USD
• DRT is the second infrastructure re-acquisition for CP in less than a year.
• DRT represents key link in its route connecting Chicago with Toronto, Montreal, and Eastern Canada, via Windsor-Detroit tunnel

Additional notes (Detroit River Tunnel (DRT) Project - CP acquisition):

• CP's acquisition of the Detroit River Tunnel was finalized on Dec 22, 2020.
• CP previously owned a 16.5% stake of the tunnel in partnership with OMERS (Ontario Municipal Employees Retirement System), defined benefit pension plan for municipal employees in the province of Ontario, and purchased the remaining 83.5%.
• Acquisition represents the second time in less than a year that CP has reacquired infrastructure sold off by previous management. In June 2020 CP officially acquired regional Central Maine & Quebec Railway, which formed part of its shortcut linking Montreal and Saint John, New Brunswick, via northern Maine.
• DRT represents key link in CP's route connecting Chicago with Toronto, Montreal, and Eastern Canada, via Windsor-Detroit tunnel.
• The purchase will reduce operating costs for CP and boost profit margins on the route. Before the acquisition, CP was paying the tunnel’s majority owner, Borealis Transportation Infrastructure Trust, more than $14 million in tolls annually.

References (Detroit River Tunnel (DRT) Project - CP acquisition):

• https://www.newswire.ca/news-releases/cp-completes-acquisition-of-detroit-river-rail-tunnel-843672626.html
• https://investor.cpr.ca/news/press-release-details/2020/CP-completes-acquisition-of-Detroit-River-Rail-Tunnel/default.aspx
• https://www.railwayage.com/freight/class-i/cp-wraps-up-detroit-river-rail-tunnel-deal/
• https://trn.trains.com/news/news-wire/2020/10/20-cp-sought-to-control-its-own-destiny-with-detroit-tunnel-purchase

• November 2014: Grade Crossing Regulations (GCR) came into force; however pre-existing crossings not required to comply until November 2021
• January 4, 2021: TC launched a consultation given stakeholder concerns about timelines and requirements
• TC proposing a tiered, risk-based approach to changing the regulations:
  • Low-risk crossings will not need to meet all requirements – exemptions also possible
  • Deadline is proposed to be extended by
    • One year for high-risk grade crossings
    • Two years for medium risk
    • Three years for all other crossings

Additional notes (Grade Crossing Regulations):

• The Grade Crossing Regulations came into force on November 28, 2014, at which date railway companies and road authorities were required to meet a number of conditions, including surface condition design and railway signage requirements, test and inspect warning systems, meet new construction requirements for new crossings, respect new provisions for preventing blocked crossings, apply new and existing protection measures and keep the prescribed records.
• New crossings must comply with all the requirements contained in the GCR
• Pre-existing crossings not required to comply with the GCR until November 28, 2021

Latest updates (Grade Crossing Regulations):

• About 1.5 years ago, TC started hearing from railways about difficulties of complying with regulations.
• TC Consultation was launched between Jan 4, 2021 and Feb 3, 2021 to address stakeholders' concerns of not able to meet the Nov 28, 2021 timeline.
• TC is considering a tiered, risk-based approach to amending the regulations in light of the ongoing pandemic.
• In summary, any low-risk crossings would not need to meet all requirements, and the deadline will be extended, using a risk-based approach for all grade crossings. This would allow parties to prioritize work and resources to focus on compliance for the highest-risk crossings as quickly as possible. TC is proposing to extend the deadline by
  • one year for high-risk grade crossings;
  • Two years for medium-risk crossings; and
  • three years for all other crossings
• Current target for amendments to be in place is Nov 2021
• TC is seeking input on 2 questions:
  1. Do you support helping public and private grade crossing owners by changing the Grade Crossings Regulations so that very low-risk crossings regulations don’t need to meet some of the requirements of the GCR?
  2. Given the amount of work left to do on grade crossings, do you support helping public and private grade crossing owners by extending the deadline to comply with the requirements of the Grade Crossings Regulations? These extensions would use a risk-based approach.
• 80% of crossings would not be compliant by 2021; however three-quarters of those only require minor upgrades (e.g. brush clearing to improve site lines, surfacing/road issues)
• Proceeding with regulations as-is not feasible
• TC has 3 prong approach to address issue with current regulations:
  1. No mechanism to help road authorities and railways prioritize which railway to tackle first
     • Apply risk-based approach to extend deadline; up to 3 years depending on risk factors (e.g. train speed, number of cars)
     • Public and private crossing would be subject to same risk assessment
     • If high risk would still have another 12 months to meet deadline
     • Some upgrades may still cost $300-500k:  with Covid-19, finances are hurting, combined with a lost construction season
  2. Adding exemption criteria to regulations for crossings with "low to no risk" (i.e. field crossings, rail lines scheduled for discontinuance – sunk cost)
     • Exempting from scope for construction/maintenance
     • Note that not all private crossings are field crossings
     • Some crossings are only used 1x week or 1x month
  3. Improved educational component
     • More proactive use of exemptions to alleviate compliance burden

Background (Grade Crossing Regulations):

• A grade crossing is an intersection where a road, sidewalk, path or trail crosses railway tracks. Grade crossings are also known as level crossings, railway crossings or train crossings.
• There are about 14,000 public and 9,000 private grade crossings along more than 40,000 kilometres of federally-regulated railway tracks in Canada.
• The regulations aim to improve safety at grade crossings by:
  • using engineering best practices to make sure all crossing users can have a safe crossing experience
  • putting in place clear and enforceable safety standards for both new and existing crossings
  • defining the roles and responsibilities of road authorities and railway companies
  • if railway tracks cross a public road, this crossing must meet the regulations.

References (Grade Crossing Regulations):

• https://www.tc.gc.ca/en/services/rail/grade-crossings/grade-crossing-regulations/public-grade-crossings.html
• https://laws-lois.justice.gc.ca/eng/regulations/SOR-2014-275/
• https://www.tc.gc.ca/en/services/rail/grade-crossings/grade-crossing-regulations.html
• BN prepared by legal
• https://www.railcan.ca/101/grade-crossing-regulations/
• https://letstalktransportation.ca/gcr?tool=forum_topic