Railway Association of Canada

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					 Railway Association of Canada


             “Rail Can Do More”


Presentation to the House of Commons Standing Committee
           on Industry, Science and Technology



                  “On Track for the Future”
                    November 1st, 2001
                        OUTLINE

•   About the RAC

•   September 11, 2001

•   How has rail been affected?

•   Railway Security Issues

•   Rail Related Border Initiatives

•   The Resurgence of Canadian Railways

•   Rail Can Do More

•   Conclusion
                      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
                SEPTEMBER 11, 2001
• A tragic day for humanity

• Today, the US is almost totally focused on security while
  Canada is focused on trade … they because their security is
  threatened, we because out trade is threatened

Outcomes
• Economic slow-down will be exacerbated
   – Significant negative impact on corporate profits, especially
     airline, tourism and financial sectors
• Careful control and processing of individuals crossing borders

• Need for new spending by governments
       SEPTEMBER 11, 2001(cont’d)

• Long term implications

   – Potential for significant tightening of US security
     posture at Canadian border (ex. check-in, check-out)

      • Long term Canadian economic performance closely tied
        to border efficiency

      • Potential for loss of investment in Canada
            SEPTEMBER 11, 2001(cont’d)
• Other important considerations:


   – US economic expansion fueled by record levels of consumer
     confidence … post Sept 11th have experienced major drop to levels
     not seen since 1994

   – Weakness prevalent in the economy before events of September
     11th … especially corporate earnings

   – Canada’s economic performance over last few years almost
     exclusively driven by exports to the US
       • Most trade dependent nation in the G-7 (over 40% of GDP)
       • About 85% of exports go to the US
    HOW HAS RAIL BEEN AFFECTED?
• Third quarter 2001 Class 1 (CN & CPR) revenues flat
   – Rail traffic flows have not been severely affected by September 11th tragic
     events
   – Impact less than other modes because of previous investment and best
     practices

• Concern about length and severity of economic downturn;
  potential lag effect on rail

• Class 1 (CN & CPR) companies focused on reducing costs in
  line with the slowdown

• Impact of economic slowdown on short line sector still unknown
  but could be significant

• Intercity passenger traffic up by approximately 10%
  RAIL HAS SECURITY ADVANTAGES

• Dedicated, private and controlled corridors

• Large railways have their own police forces

• Railway security measures in place since 1997
  Memorandum Of Understanding (MOU) between
  RAC and Government of Canada

• Rail engages in large movements of high-volume
  goods with a small number of highly-trained,
  professional employees
      WHAT ELSE IS RAIL DOING TO
        INCREASE SECURITY ?

• In regular contact with Transport Canada security
  officials in Ottawa

• Have taken numerous voluntary steps such as:
   – Linking into the North American 24-hour security control centre

   – Increased vigilance at tunnels, bridges and other critical
     facilities

   – Working with the Association of American Railroads to
     ensure coordination on a continental basis
              CONSIDERATIONS

• Must ensure that any government measures adopted
  are collaborative (Canada and U.S.), reasoned and
  effective

• U.S. Government being proactive in identifying
  funding to support new border and security measures

• Canadian Government must take lead on ensuring
  that the flow of goods between the two countries is
  not compromised
    CN AND CPR HAVE BECOME TRULY NORTH AMERICAN
                     COMPANIES




          Truck – Rail Surface Export Share to the US
                         Volume 1999



                     Truck           Rail
                     56 %            44 %




Source: Transport Canada
                                                                                                                                                                                                                                                       18
                                   NAFTA CORRIDORS – HIGHWAY vs RAIL
                               Vancouver
               Blaine
                                Huntingdon                       Calgary                    Moose Jaw

                                     Kingsgate                                                                                      Winnipeg
                                                                        Coutts
                                                                                                          Portal                    Emerson
                      5
                                                                                                                                                         Duluth Jct.
                                                                                                                                                                                                                         Montreal
                                                                   15                                                                                                                                                                  CN
                                                                                                                                                                                               Sault.Ste-Marie




                                                                                                                                         CP
                     Portland
                                                                                                                                                                                                                    Massena
                                                                                                                                                                           CN (WC)
                                                                                                                                                                                                                     CN
                                                                                                                                                                                                                                        Rouses
                                                                                 25                                                                                                                                                     Point / East
                                                                                                                                                   Minneapolis                                                               87         Alburgh
                                                                                                                                                                                                     Niagara
                                                           15                         25                                            29                                               Sarnia          Falls
                                                                                                                                                                                                                 Buffalo
           5
                                                                                                                                                                                                  Detroit/                  New York
                                                                Salt Lake                                                                                                                 90      Windsor
                                                                City                                                           81
                   Sacramento                                                                                                                                               Chicago                                               78

                                                                                                                                                                      55                                                     83
                                                                                                Denver                                                                                                Washington DC
                                                                                                                     Kansas City
               5                                 15                                                                                                                                                            81

                          Colton                                                                                                                        44
                                                                                                                                                                 69
                                   Barstow                                                                    Oklahoma                                                               40
                                                                                                                   City
                                                                                                                                                   40
                                                                            25
                                             8
                                                                                                                                                                 Memphis                          Rail lines are a parallel
                               Mexicali                                                                                   35
                                                      19                                                                                                                                          network to the highway
                                                                                                                   Dallas
                                                 Nogales                              El Paso                                                                                                     system
                                                                                                  Eagle              35                                        New                   10
                                                                                                  Pass                                                         Orleans
                                                                                                                                              10
                                                                                                                                                                                                                    95
                    Legend
    Railroad                                                                                         Laredo
                                                                                                                                                                                                                             Miami
    Highway

* Railroad lines represented here are examples of major railway connections; other routes may also offer similar connecting service
 RAIL RELATED BORDER INITIATIVES

• Pre-September 11th, railways were proactive in facilitating
  transborder movements

• Almost two million shipments a year cross the border


• Electronic commerce
    – Significant investment in information technology; North American
      railways have the best data systems in the world
    – Automated customs transactions and pre-filing systems in place for the
      vast majority of rail traffic … improved customer service and reduced
      train throughput time
 RAIL RELATED BORDER INTIATIVES
• Others ?
   – Better alignment of customs policies

   – Pre-qualify low risk freight and law-abiding people to focus
     resources where needed

   – Customs inspections at destination or origin where this
     practice is more efficient (i.e. yards)
       • single inspections to the standards of both countries for domestic and
         offshore shipments

   – Central database and common computer systems that all
     carriers, brokers, importers/exporters would use to file
     information pertinent to crossborder traffic for customs and
     immigration purposes
            THE RESURGENCE OF RAIL

• Tremendous progress made by Canadian freight railways since
  deregulation began in 1987:

   • Rates down over 35% since mid-1980s

   • Productivity improvements of over 200% since mid-1980s. Rail is the
     most productive mode.

   • Elimination of freight subsidies

   • Return to financial sustainability – almost $10 billion in new
     investment since 1994

   • New continental focus and a burgeoning short line sector
  THE RESURGENCE OF RAIL (cont’d)
• Passenger and commuter sectors have also seen
  significant increases in activity:
   • VIAs operating grants from 1990 to 2000 down from $442 mil to
     $170 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 five years
                    RAIL CAN DO MORE

•   Leaves a small environmental footprint
    – Rail is five times more fuel efficient than inter-city trucking and three to
      four times more fuel efficient than automobiles


•   Parallel network can lessen highway congestion (truck and
    auto) and land use consumption for highways

•   Dedicated corridors into the US which can lessen bottlenecks at
    border crossings 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)
•   How can Canada achieve increased modal balance ?

    – Tax harmonization/equity

    – Introduce innovative transportation policies to promote
      environmental sustainability and efficiency
        •   Commercial road user fees
        •   Green taxes
        • Incentives to use intermodal

    – Develop and implement a comprehensive national Surface
      Transportation Policy

    – Promote passenger rail by providing capital and regular
      operational funding for passenger/commuter rail
                  CONCLUSION
• Trade is critical to Canada’s economic performance

• Border security must be enhanced yet trade must
  continue to flow, more smoothly if possible

• Rail is an important component but can do more with
  some policy realignment

• Rail’s proposed initiatives can help accomplish this

				
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