Good morning, Mr. Chairman, committee members.
Thank you for providing me and agency counsel with the opportunity to speak before the committee on this very interesting topic--government hopper cars. The agency has been involved with this file for a number of years.
I would like to preface my presentation with some preliminary remarks. As noted, I am acting director of the rail economics directorate of the Canadian Transportation Agency and have occupied this position since the beginning of April. However, I have been a manager within the directorate for a number of years, and while I have not directly worked on this file until very recently, I have participated on an ongoing basis.
Yesterday afternoon I was requested to provide a presentation to this committee, which provided me with only a short time to prepare. Having said that, I will endeavour to answer all questions within the purview of the agency, either at this time or as soon as possible after the conclusion of the meeting, while respecting the confidentiality of any information that is requested.
I trust this meets with your satisfaction, Mr. Chairman.
While I was invited to make a presentation about hopper cars, I am a little uncertain as to the committee's specific interest. If I may, I think it is important to understand the context of the hopper cars as it relates to the agency's statutory responsibilities. The agency is a quasi-judicial body whose decisions have the full authority of a court of law. This is important to note, as the agency's roles and actions are bound by the Canada Transportation Act as passed by the Parliament of Canada.
One of the agency's primary responsibilities is the determination of the maximum grain revenue entitlement as prescribed in subsection 151(1) of the Canada Transportation Act and ensuring that railways do not exceed this entitlement. The act directs the agency to determine the amount of the maximum revenue entitlement for Canadian National and Canadian Pacific Railways for the movement of regulated grain during each crop year. This started in crop year 2000-01. I would like to emphasize that the agency's responsibility is to determine revenues, not costs.
Determining the revenues is done by applying a price index, determined by the agency, to the base year revenues as prescribed by the act after adjusting for differences, the tonnes moved, and the average length of haul between the base year and the crop year under review. Further, the agency conducts detailed audits to ensure that neither Canadian National nor Canadian Pacific exceed their prescribed entitlements. In the event that a railway exceeds its entitlement, the railway is obligated to pay the excess plus a penalty to the Western Grain Research Foundation.
As I mentioned, the price index is determined by the agency. As part of its determination, the price index is further directed by subsection 151(4) of the act to adjust for any leasing cost arising from the sale, lease, or other disposal or withdrawal from service of the government hopper cars. This was applied for the first time by the agency in its current determination of the price index for the upcoming 2006-07 crop year. The additional leasing cost added approximately 1.2% to the price index.
It is important to note that the maximum revenue of grain entitlement is designed to compensate the railways for their operating costs for the movement of regulated grain. This includes the cost of maintenance of the hopper cars. There are approximately 12,000 government hopper cars, 3,400 Canadian Wheat Board cars, 2,000 provincial cars, and 8,000 railway cars, for a total of 26,000 hopper cars.
This concludes my presentation, and I would be pleased to answer any questions you may have.
Thank you.