Good morning. Thanks for having the Western Grain Elevator Association appear on this very important subject.

The WGEA is a national association of grain companies that handle over 95% of Canada's bulk grain exports. Grain shipments account for roughly 20% of railway revenue, meaning that Canada's major carriers make one dollar out of every five dollars they earn from the grain sector. Our members represent an even larger portion of total cargo volume in Canada's largest ports, including in Vancouver, Thunder Bay, Hamilton and Montreal.

Having cost-effective and efficient rail service is fundamental to the success of Canada's grain supply chain. Alongside many of our farmer and grain processor partners, the WGEA has for decades advocated for improvements in rail-related legislation. I personally have been employed by the WGEA for 27 years, and we've been working on rail legislation improvements that entire time.

There are a number of items we are advocating for and have been trying to get into the Canada Transportation Act. One is to see the railways pay reciprocal penalties when they fail to deliver shipments on time. Right now they charge grain companies for failing to load trains within a 24-hour period or some similar period, but there is no discipline on the railways for failure to bring a train or deliver a train when they say they're going to. We think reciprocity is required in that area.

The second area of advocacy is to retain the maximum revenue entitlement to prevent railway rates from falling on the shoulders of farms, essentially. The third is to turn the grain and winter plans into useful tools of accountability. I could expand on that later, if required. The fourth one is to end the practice of so-called contracting out, which is where the railways get shippers to sign away their rights under the Canada Transportation Act. That happens today. The fifth one is to improve on the cumbersome and ineffectual remedies through the Canadian Transportation Agency, among other policy ideas.

These are all very important concepts that deserve to be considered, but the sixth one, the one I'll talk about for the remainder of my time, is extended interswitching. Terry explained this. It's an ideal example of low-hanging fruit. It provides meaningful competition on rail rates and service for shippers that are captive to one of the two primary rail networks.

Extended interswitching is one of the only policy tools that actually caused Canada's two rail monopolies—we call them “dual monopolies” as opposed to “duopolies”, because if you're positioned on a rail line, you don't have a choice between one or the other—to compete with one another for shipper business. Not only does it offer an alternative service provider; it also encourages the originating carrier to offer better service or pricing than they otherwise would.

Canada had extended interswitching in place from 2014 to 2017, which was prompted by catastrophic railway failures in 2013. At that time, Canada's railways voiced strenuous objections to extended interswitching on the grounds that it would cause major operational challenges and economic hardships on their companies. Time would reveal that class I railway profitability in that four-year period, based on their operating ratios, was the best it had been over the previous decade. We know that the railways are very active right now in advocating against extending or renewing extended interswitching.

More recently, the pilot trial to increase the regulated interswitching limit in the Prairies was once again adopted under budget 2023. It's been in place since September 2023, but it was only granted a very short timeline of 18 months, which, for a variety of reasons that I can expand on, has made it very difficult to use.

At its core, extended interswitching gives shippers on a single line the option to call in another railway to get product to market within the extended distance, which is 160 kilometres under the pilot. Poor rail service is often the result of underinvestment by the railway companies. In order to compete with one another, though, they would have to deploy more resources, which means hiring more people. The fact is that extended interswitching will create more jobs in Canada.

The threat of loss of business causes the railways to sharpen their pencils on freight rates, which is factored into the cost of goods to Canadians and affects our competitiveness globally. The Canadian Transportation Agency ensures that railways are fully compensated for their actual costs plus a margin of profit under regulated interswitching. It also provides for other options. One of these options is to find quicker and more direct routes for the movement of goods. This reduces costs for shippers and therefore consumers. It also frees up rail capacity to help get product to customers in a timely way.

Extended interswitching essentially turns a monopoly market into a duopoly situation, which isn't fantastic, but at least it's not a monopoly. Even if an interswitch does not physically happen, the presence of another option changes railway behaviour. In fact, that's the real value of extended interswitching. It brings the primary carrier to the table.

The intent of extended interswitching is to give all captive shippers at least one competitive option. For that to happen in the grain sector, as Terry mentioned, the extended interswitching distance would need to be 500 kilometres to allow for the Peace River and Carrot River growing regions to participate.

It's a vital tool for Canadian shippers that has proven to increase competition while lowering costs to shippers and consumers. It should be a permanent right for all Canadian shippers.

Thank you.