Railway Association of Canada

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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

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

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ABOUT THE RAC
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• 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

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SEPTEMBER 11, 2001
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• 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

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SEPTEMBER 11, 2001
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• 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?

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Railway Security Issues
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• 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)

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RAILWAY SECURITY ISSUES
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• 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
• Canadas 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

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RAIL RELATED BORDER INTIATIVES
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• 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

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RAIL RELATED BORDER INTIATIVES
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• 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

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RAIL RELATED BORDER INTIATIVES
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• Others ? (contd)
• 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)

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THE RESURGENCE OF CANADIAN RAILWAYS
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• 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 sectors current financial
  and operating profile

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Rail rates have been reduced by 35 since 87
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Federal subsidies to rail for grain transport
have been eliminated
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Major Investments by Class 1 railways since
deregulation
CN and CPR Combined Investment (Cdn mil)
1878
Almost 10 billion since 1994
1734
1528
1405
1101
1063
860
94
95
96
97
98
99
2000
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Productivity growth in the rail sector has
outpaced all other modes
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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
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Over 40 new shortlines since 92
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CN AND CPR HAVE TRULY BECOME NORTH
AMERICANCOMPANIES
Truck Rail Surface Export Share to the
US Volume 1999
Source Transport Canada
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RAILS ROLE IN TODAYS ECONOMY

• 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

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

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RAILS ROLEB) PASSENGER AND COMMUTER SECTOR
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• VIAs operating grants from 1990 to 2000 down 62
  to 170 mil (from 442 mil), ridership has
  increased by 20 over same period
• GOs ridership has increased 40 in the last five
  years to 41 million riders annually
• West Coast Expresss 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

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TRANSPORT CANADAS BLUEPRINT PROCESS
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• 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 reregulationthe system needs only
  minor revisions, not wholesale change
• The post September 11th environment suggests
  caution should be exercised within the context of
  Blueprint recommendations

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BOTTOM LINE PASSENGER SECTOR IS GROWINGON
THE FREIGHT SIDE, WE MUST PROTECT GAINS FROM
DEREGULATION RESIST TEMPTATION TO REREGULATE
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HOWEVERRAIL CAN DO MORE
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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

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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

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RAIL CAN DO MORE (contd)

• 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)

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RAIL CAN DO MORE (contd)

• 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

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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

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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