RAILWAYS AND THE ENVIRONMENT WORKSHOP

PROCEEDINGS Proceedings of the 2nd Railways and the Environment Workshop Held in Winnipeg, MB October 6-8, 2003

ISBN Number 1-894218-35-3

Transport Institute, University of Manitoba www.umti.ca

Proceedings available in French upon request

Railways and the Environment Workshop / L’Industrie Ferroviaire et L’Environnement

TABLE OF CONTENTS Table of Contents Acknowledgements Conference Overview

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CONFERENCE CHAIR WELCOME Bill Rowat, President and CEO, Railway Association of Canada

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WELCOME TO WINNIPEG AND OPENING ADDRESS Tim Sale, Minister of Energy, Science & Technology, Province of Manitoba

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SESSION 1: CANADA’S RAILWAYS TODAY AND TOMORROW Session Chair – Russ Robinson, Environment Canada John Dobson, Transport Canada Robert Lyman, Transport Canada Gord Owen, Environment Canada Robert Taylor, Railway Association of Canada Lee Jebb, Cando Contracting

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ADDRESS ON BEHALF ON ENVIRONMENT MINISTER DAVID ANDERSON Tim Hibbard, Director, Departmental Affairs, Environment Canada 44 SESSION 2: RAIL IN OTHER JURISTICTIONS Session Chair – Lionel King, Transport Canada Robert Fronczak, Association of American Railroads Terry Judge, Kim Hotstart Manufacturing Company Chuck Moulis, U.S. Environmental Protection Agency Harry Gow, Transport 2000 Canada

44 45 53 60 69

SESSION 3: TECHNOLOGICAL ADVANCES AND BEST PRACTICES Session Chair – Grete Bridgewater, CPR Martha Lenz, GM Electro-Motive Eric Panet-Raymond, Bombardier Transportation Arnold Miller, Vehicle Project LLC Erika Akkerman, CN Don Eadie, Kelsan Technologies Corp. Steve Easun, ZTR Control Systems

80 80 86 92 101 106 116

SESSION 4: MODAL SHIFT AND INTERMODAL TRANSPORTATION Session Chair – Richard Gilbert, Centre for Sustainable Transportation Barry Craven, Canada Post Gord Peters, Cando Contracting Sabina Strautman, IKEA John Spacek, Manitoba Transportation and Government Services Jim Vena, CN

123 123 130 136 144 149

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SESSION 5: ALTERNATIVE DIRECTIONS FOR MOTIVE POWER Session Chair – John Spacek, Manitoba Transportation and Government Services Frank Donnelly, RailPower Technologies Corp. Robert Dunn, Consultant Anthony Perl, University of Calgary

155 155 163 169

SESSION 6 PANEL: CANADIAN EMISSION STRATEGIES: ARE WE ON TRACK? Session Chair – Barry Prentice, University of Manitoba Transport Institute Robert Taylor, Railway Association of Canada Russ Robinson, Environment Canada Robert Lyman, Transport Canada Peter Eggleton, TELLIGENCE Group

179 179 181 187 189

CLOSING REMARKS Bill Rowat, President and CEO, Railway Association of Canada Russ Robinson, Advisor, Sustainable Transportation, Environment Canada

201 202

List of Speakers and Participants

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Speaker Biographies

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ACKNOWLEDGEMENTS This Workshop was made possible by the combined efforts and goodwill of people from the railway industry, academia, associated organizations, the Province of Manitoba and the federal government. Environment Canada offers its thanks to all concerned and wishes to acknowledge the particular assistance of the following individuals and organizations: The Workshop Steering Committee Joanna Bellamy – Environment Canada Roger Cameron – Railway Association of Canada Nicole Charron – Transport Canada Doug Duncan - University of Manitoba Transport Institute Harry Gow – Transport 2000 Lionel King – Transport Canada Mike Lowenger – Railway Association of Canada Anthony Perl – University of Calgary John Spacek – Manitoba Transportation and Government Services Terry Zdan – Manitoba Transportation and Government Services Workshop Chair Bill Rowat – President Railway Association of Canada Session Chairs and Speakers Identified in the proceedings Proceedings Prepared by The University of Manitoba Transport Institute

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CONFERENCE OVERVIEW The second Railways and the Environment Workshop highlighted the fact that the rail industry provides the most fuel efficient and emissions friendly environment for moving freight in North America. Significant progress has been made by the railways over the past decade in traffic growth, productivity improvements and emissions reductions. The locomotive manufacturers have met the challenge of developing Tier 2 compliant locomotives. GM Electro-Motive is currently testing their SD70ACe Tier 2 compliant locomotive. The federal government has initiated programs to help the industry develop new technologies. Companies providing technical support to the rail industry have developed new technologies or refined existing technologies that offer tremendous potential for further fuel efficiency gains and emissions reductions. The rail industry has indicated that it is “On Track” in its efforts to reduce emissions. Overall, the rail industry has been successful in reducing CO2 emissions by 16% compared to 1980. However, as rail freight movement is likely to continue to grow over the next few years, this may place a strain on the energy efficiency gains the rail industry has already made. Observations made by industry representatives suggest that even greater gains could be achieved with the implementation of policies designed to further assist the industry. Industry representatives and others have suggested that what may be missing is a cohesive policy framework that maximizes the emission reduction opportunities that appear to be there. Canada’s Railways Today and Tomorrow The workshop opened with a review of “Straight Ahead – a vision for transportation in Canada.” Straight Ahead provides a policy framework for the continued success and balance of Canada’s transportation system. Overall, the transportation system in Canada is on track, is generally working well and not in need of major overhaul. Productivity growth in the transportation sector has been almost double that of the economy as a whole over the past ten years. Rail productivity has increased by up to 81% since 1981 with 75% of these gains transferred to shippers in the form of reduced rates. The system is fundamentally competitive and efficient. Market abuse is not systemic or widespread and most shippers are well served. One change that will be made is to enshrine respect for the environment in the National Transportation Policy statement of the Canada Transportation Act. Transportation represents 25% of Canada’s GHG emissions. The modal split is as follows: Road Vehicles - 71%, Off Road Vehicles - 13%, Aviation - 7%, Rail Freight 4%, Marine - 4%, and Bus 1%. GHG’s for all transportation sectors are up 21% from 1990 to 1999. Emissions from the whole transportation industry are definitely not on track. However, about 63% of the increase can be attributed to road freight, while rail’s GHG emissions are down 1%. The Railway Association of Canada presented data on the growth in railway freight traffic over the last 15 years. There has been an explosion in for-hire truck traffic from 1991-2001, 112% (on a tonne-kilometre basis), much of it NAFTA related, while rail

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activity grew by 38%. Over the past 20 years the rail industry has experienced a continuous increase in activity. Total tonne-kilometres have increased 29% from 240 billion in 1980 to 310 billion in 2000. CO2 emissions are down 16% compared to 1980 and fuel efficiency has improved 38%. By 2000 rail moved about 66% of total freight tonne-kilometres in Canada and produced only 4% of transportation GHG emissions, with truck moving 34% of total freight tonne-kilometres and producing about 32% of GHG emissions. The rail industry has a key role to play in improving the overall environmental performance of the transport sector. Despite the efficiency improvements of the rail industry, rail is facing challenges to continue to reduce its GHG emissions and improve its efficiency while pursuing increased activities. Transport Canada, through the Federal government’s climate change initiatives, has put two programs in place to help the industry in this regard. The first is the Freight Efficiency and Technology Initiative, a program managed by Transport Canada. It is a $14 million 5-year initiative launched under Action Plan 2000 on Climate Change. The three main components include voluntary performance agreements, training and awareness initiatives and the Freight Sustainability Demonstration Program. The second is the Commercial Transportation, Energy Efficiency and Fuels Initiative, which is a four-year, $32 million program that will complement existing FETI. Environment Canada is responsible for Canada’s Clean Air Agenda. The Agenda was launched in May of 2000 and includes a focus on the transportation sector as part of Canada’s Agenda on Vehicles, Engines and Fuels. Generally, the intent is to align fairly closely to U.S. toxic emissions standards for vehicles, engines and fuels. Environment Canada is putting in place regulations for new on-road vehicles and engines and off-road engines and setting new standards for fuel quality. The approach is very much regulatory-based. Environment Canada and the Railway Association of Canada have an agreement on locomotive air emissions that takes effect from 1995 to 2005. The agreement sets a NOx cap of 115 kilotonnes per year. The Memorandum of Understanding includes reporting requirements for total fuel consumption, gross and net ton-miles, composition of the Canadian locomotive fleet, changes in fleet emission factors, and emission reduction initiatives. NOx emissions were exceeded in 1995, 1997 and 2001 as traffic has grown but generally are staying relatively flat. In the U.S. locomotive emission standards for NOx, HC, CO, Particulate Matter and smoke capacity have been set and are being phased in between 2000 and 2007. These standards include in-use maintenance requirements, inuse testing of locomotives and record keeping. Canadian railways have become more continental in scope. CPR has taken an approach to continental linkages using alliances with U.S. roads, whereas, CN has acquired American railroads to build their network. In the case of CN, 57% of revenue comes from U.S. domestic and trans-border movements versus 45% for CPR. In terms of the U.S. EPA, this is very, very relevant for Canadian rail. Canadian locomotives represent about 15% of the North American fleet, in 2002 there were 3,129 locomotives in Canada

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(21,000 in the U.S.). The fleet size and continental aspect of Canadian railway traffic suggests that the Canadian fleet should be harmonized to meet U.S. operating regulations. Several fundamental differences between Canadian and U.S. regulatory policy were highlighted by Robert Taylor. Firstly, a major difference in CCA rates exists. In Canada it takes 20 years to write-off a locomotive while in the U.S. it only takes 8 years. This places a tremendous burden on Canadian railways and has significant implications for fleet replacement policies. The average age of Canadian locomotives is 11% higher than the U.S. fleet. Secondly, a difference exists between U.S. versus Canadian philosophy on modal shift. The U.S. regulations and U.S. policy makers have endorsed the concept of modal shift and they recognize that if they bring in undue, highly prescriptive regulations to rail, that it would have an undesired effect on overall emissions levels. From the Railway Association of Canada’s perspective, modal shift is a cornerstone of the RAC’s Policy Platform. They have completed an analysis that indicates that a modal shift in the range of 15-20% could have a huge impact on GHG emissions. It has been suggested that the overzealous regulation of rail will increase emissions due to a negative modal shift. Canada’s shortline railways are thriving. They are meeting the needs of shippers on lines that have not been commercially viable for the Class 1 railroads. Shortlines are a key link between industry and the North American rail network. They can optimize loading opportunities, logistical controls, and customer service requirements. As well, they can do the things that make the total rail industry effective and efficient. However, the fundamental drivers are not in place for rail to be successful compared to trucking for certain types of moves. Getting some of these drivers right would be the best way to address many of the environmental issues that are the subject of this workshop. Rail in Other Jurisdictions In the United States, Congress has established the Clean Air Act, which requires the EPA to reduce emissions and meet certain air quality standards. The EPA was directed to set emission standards for locomotives and for other non-road engines. By basic design, locomotive engines tend to be very high in NOx and relatively low in PM. Before control, locomotives emitted approximately a million tonnes of NOx each year, which amounts to about 5% of the total NOx in the U.S. For that reason the primary focus of EPA rulemaking is in controlling NOx. PM and HC became more of a secondary issue. The EPA did not regulate fuel consumption or CO2. The U.S. standards that were set apply very broadly to locomotives. A unique feature of the rule is that the standards apply both to the original manufacture of the locomotive and also when each locomotive is remanufactured. It requires that the remanufactured locomotive be certified as meeting the emissions standards and that somebody take responsibility for the process. This is accomplished by certifying the remanufacturing system. Also established was an in-use testing program, a two-phased approach, one for the manufacturers, one for the railroads, to make sure that these locomotives are meeting the standards in use. The final unique feature was a mandatory requirement for railroads

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to perform the emission-related maintenance. Under this program the manufacturer specifies what emissions-related maintenance is needed to keep it in compliance, and the railroads are then required to do that. EPA indicated that it expects these programs to get very large emissions reductions, but as there is pressure for tighter and tighter air quality standards, EPA will be asked to find further ways to reduce emissions. EPA recently established very low emission standards for on-road highway diesel vehicles and are proposing to introduce similar standards for off-road. The starting point would be to consider standards equivalent to the highway engines or to the other off-road engines that are currently being considered. The open question right now is: can these technologies be retrofitted to existing fleets? Other options being considered are implementation of on-board diagnostic systems to see if they can be used for better emissions control and perhaps mandating automatic shutdown systems. Technological Advances and Best Practices Among the most significant technological advances presented at the workshop was the advance in GM Electro-Motive’s SD70ACe Engine. On emissions performance, this engine has demonstrated significantly better than the Tier 2 standard. The fuel efficiency projections for this locomotive are near Tier 1 levels. The key to making the engine Tier 2 compliant was that no brand new technology was required. The solutions were the normal options available to a manufacturer for addressing fuel efficiency or emissions. On the passenger side, Bombardier Transportation has developed the JetTrain to address North America’s needs for high-speed rail. The turbine-powered locomotive meets the FRA noise requirements as well as all of the EPA requirements at the power requirements that are typical for the application. The main advantage of the JetTrain is that it can run on existing infrastructure, while that infrastructure is gradually upgraded. Bombardier believes that, from an emissions perspective, as the attraction for high speed rail becomes imbedded in the marketplace and passengers move from their vehicles to the rail system, significant reductions in emissions can be achieved. The workshop addressed a number of technological advances across the rail spectrum that suggests that significant improvements in operating efficiency and emissions reduction will become available in the future. Notable in these developments are: • • • • •

The Fuelcell Locomotive Project, Top of Rail Friction Control, Locomotive Idle Reduction Technologies, Green Goat and Green Kid Hybrid Switchers, Operating Practices o Locomotive fleet renewal, o Train handling, or locomotive operations, o Rail gauge face lubrication, o Freight car productivity,

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o Train length versus locomotive power. Modal Shift and Intermodal Transportation The session on modal shift presented five very different cases where modal shift has or should take place. In each case the situations and the drivers of change are radically different. The first case looked at the shifts between the modes for Canada Post. In a direct quote from the Canada Post Web site, Barry Craven stated that, “The pivotal turning points of postal history generally follow soon after the appearance of new modes of transportation.” In the mid 1800’s the railways started, and many post offices opened along rail lines. The 1950’s saw improved road systems, the growth of trucking and airmail. By 1971 rail mail was abolished, and by 1987 Canada Post completely stopped using rail. The past five years have seen the shift from air to road for premium and core products and a shift from road to rail for some products. The road to rail shift is enabled by the growth of intermodal products on the rail systems. The Athabasca Northern shortline railway and Alberta Pacific Forest Industries contract to move logs by rail is a tremendous example of the benefits of modal shift. 500,000 tonnes of logs were moved from the road to the rail line with a GHG reduction forecast at 50,000 tonnes over ten years. This shift highlights the ability of the shortline industry to improve customer service, as well as the efficiency of the total transportation system. Sabina Strautman of IKEA presented a fascinating case study of how corporate environmental policy is driving improvements in all aspects of IKEA’s business dealings, particularly in its logistics operations. Carriers are being asked to meet environmental targets and IKEA is looking at its logistics system with a mind to improving emissions in its movement of product. Notable in the presentation was the statement that “we want to continuously reduce the environmental impact of the transportation of our goods.” IKEA has set a 2005 goal of reducing CO2 in transport by 15% per cubic metre. In Europe, IKEA has acquired a railway to operate between Sweden and Germany to allow a modal shift from road to rail that removes 60 trucks per day from the highways. The Province of Manitoba highlighted the problems that they face with continuing service to remote communities when the rail lines are abandoned and the costs of replacement roads are uneconomical. This case is still under review and yet to be resolved. The final presentation dealt with the relocation of Winnipeg’s Intermodal Terminal from its original location in the City to within CN’s operations at Symington Yards. The driver of this change was the opportunity to significantly improve rail operations. Intermodal traffic was losing a day in the city due to the additional switching requirements of the old facility. The improved operations have resulted in better throughput in Winnipeg, reduced fuel costs and corresponding emissions reductions.

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Canadian Emission Strategies: Are We On Track The workshop wrapped up with a final panel discussion that assessed the rail industries performance to date and highlighted a number of critical issues. Robert Taylor – Railway Association of Canada Robert indicated that from the RAC’s perspective, the simple answer is – YES! Today in Canada we have an emissions problem. It is not rail-related. In the case of rail, we have seen declining or flat levels of overall emissions and declining emissions on a tonne per kilometre basis. Rail has an intrinsic fuel efficiency advantage and it is improving. Considerable reductions in truck emissions on a per unit basis, in the order of a magnitude of 3-5 times will have to be gained before the situation changes. This is in the context of the exciting developments that are being implemented and are coming in the future. However, meeting current and future EPA standards without changes to the tax policy, particularly CCA, will put Canadian continental railways at a competitive disadvantage with their U.S. counterparts and North American trucking companies. In addition to CCA, Canada must look at other policy levers such as fuel tax, infrastructure spending, and truck size and weight. Russ Robinson – Environment Canada The good news reported during this workshop is that the Tier 2 standards are achievable. They are not only achievable, but achievable with readily available technology and know-how. The fact that engine manufacturers would be really happy to see regulations in Canada harmonized with those in the U.S. is another positive signal. Environment Canada favours harmonized mandatory emission standards in Canada. It is certainly Environment Canada’s wish that we do not come up with a uniquely Canadian solution for anything. Russ expressed concern about the potential for allocation of the new cleaner engines to international service rather than general service in Canada and that the shortlines could become the dumping ground for the worst of the dirtiest of the engines. On the tax policy perspective, Russ noted that this is a finance issue and one that Environment Canada cannot help the industry with. On the shortline issue, clearly, the government is going to have to be very sensitive to the nature of the shortlines and the fact that they just cannot afford to deal with the kind of regulations being contemplated. The final concern raised by Russ was related to the NOx rail projections, which suggests that total NOx from rail will, in fact, be higher than all on-road heavy duty vehicles. Given these projections, if there are no further improvements on rail NOx emissions in the future, Environment Canada would have to carefully examine the extent to which it could support new climate change programs that could potentially promote intermodality or a shift from truck to rail. Such programs, while of benefit for GHG purposes, could lead to more smog forming emissions. Robert Lyman – Transport Canada

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Robert highlighted that rail as a transportation mode offers considerable advantages in terms of air emissions, congestion relief and inter-city movement, and land use, from an environmental perspective. In many ways, the industry is on track and should be recognized for that. There are a couple of key messages that Robert left to the rail industry. One is that the opportunities for the rail industry to continue to have a very good level of environmental performance in the future is not just dependent upon one strategy. There are many options and strategies available, many of which came out in this workshop. As we heard from IKEA, there will be shippers who will demand increasing levels of environmental performance from the rail industry. To a great extent, corporate culture will influence how these demands are met and the industry’s response to environmental challenges. Does the rail industry, and rail companies in particular, see the environment as a value, as something that is really worth pursuing and reflects that in the business plan. Robert noted that the rail industry is in a bit of a defensive mode on environmental issues and is quite concerned about the possibility of tighter, too rigorous regulations, unrealistic approaches to meeting the Kyoto target. It seemed to Mr. Lyman that the rail industry will not do more unless the federal government provides incentives. While Robert recognized the importance of the rail industry’s taxation concerns, he suggested that strategically, to hold forward movement on environmental performance hostage to resolution of those other difficult issues is not going to serve the industry well in the long term. He concluded by suggesting to the rail industry that it needs to engage simultaneously on the environmental front and the tax front, and to take advantage of those within government who want to be your partners. Peter Eggleton – TELLIGENCE Group Peter Eggleton made reference to Jim Vena’s (CN) statement about getting infrastructure dollars, “You really have got to have a good story to get the money.” This is a key fact in encouraging industry to invest in a concept. Unfortunately, we do not find the situation clear in Canada with respect to emissions. “It goes without saying that the unclear situation at present, regarding locomotive emissions regulations in Canada does not facilitate things and compromises obtaining the collateral to obtain resources to develop and deploy emissions reductions technology in practices in Canada. Right now I would say we are “On Track” but we are not quite sure where it is leading and what the objective is and what the measurable goal, what the final station destination is.” Peter believes that the train is a bit stalled and that the signaling system has to be upgraded. Transport Canada should be asked to provide a policy statement on the issue. Barry Prentice – University of Manitoba Transport Institute Barry Prentice summarized the workshop by making several critical observations. Firstly, “you can change what comes out of the tailpipe or the smokestack as it were, and you can change the number of tailpipes.” We heard a lot about what we can do to change what comes out of the tailpipe. But perhaps the biggest opportunity in terms of the environment is the ability to reduce the number of tailpipes in total. The comment about putting 200 containers on a double-stacked train and removing 200 trucks from the

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highway is a very significant change. Secondly, we have to look at the net contribution that can be made, as opposed to the contribution that will be made for each particular mode. Even though rail emissions are not going down, as a whole Canada is significantly gaining. Thirdly, we must address where the emissions are occurring, where is the concentration, and how do we reduce it to the critical point? We did not hear any comments about this aspect in the workshop. Emissions problems are clearly focused in a small number of geographic areas in Canada. Therefore, emissions reductions must also be strategically planned to address these geographic areas. Dr. prentice concluded by posing two questions for the audience to consider: • •

Are the incentives adequate to permit the players to make the changes that have to be made to reach Kyoto goals? Is there sufficient time that really allows that to happen?

Barry noted that, as was suggested by Peter Eggleton, allocation of scarce capital dollars is driven by the highest returns and a very good story. The real question seems to be, have we set the framework in Canada to maximize the potential for emission reductions in the transportation sector.

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CONFERENCE CHAIR WELCOME Bill Rowat President Railway Association of Canada Good morning, welcome to the second ‘Railways and the Environment Workshop’ here in Winnipeg. Over the weekend, I, as many of you probably did, saw the report from the Conference Board of Canada and its latest assessment of various indicators right across the board as to how well our country is doing. The Board looked at 100 economic, social and environmental indicators for 24 countries and compared Canada within that. They grouped these 100 indicators into 6 broad categories: the economy, innovation, education, skills, health, society and the environment. In terms of the environment, you will have seen that Canada slid to 16th out of the 24 countries involved. What the Conference Board said, and I will just quote them in their press release, “Air quality is not only poor but declining, with a rate of sulphur dioxide emissions that is three times higher than the 12th ranked country.” In two other emission categories – nitrogen oxide and carbon dioxide, Canada ranks 23rd and 24th out of 24 countries. Their bottom line conclusion: there is an urgent need to make strategic policy choices. That is very clear. The question in the context of this report, and many other reports that we have seen over the last couple of years is ‘How can rail make a contribution?’ That should be the central focus for our discussions over the next three days. Turning very quickly to some of the things that we should be looking at, watching for, as guiding principles over the next three days: 1. I think that we should consider all emissions as a package. Let’s not focus on simply solutions to one at the expense of another. Let’s remember there are NOx, VOx, SOx, PM, GHG’s, and so on, and make sure that we understand the interlinkage amongst all of them. 2. Let’s focus on a standard of comparison. I noticed in reading a number of the background documents for this workshop, that as a group, we tend to focus on emissions per ton-mile or tonne-kilometre. That happens to be a good indicator, for number one - it’s simple, number two - you can show the progress within any one sector, any one mode, like rail or trucking, and so on, and it also has a certain simplicity of being able to be compared among different modes. 3. Let’s consider all public policy approaches – solutions. Let’s not just focus on regulation. Let’s look at tax policy; let’s look at capital cost allowances; let’s look at pricing policies; let’s look at congestion charge, like the city of London has put into place; let’s look at infrastructure investments, and so on. 4. And I notice that it is very clear on our agenda, let’s look at modal shift and solutions through intermodalism.

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5. Let’s look at what works in other jurisdictions. And, again, there is a very clear section on our agenda that focuses on that. 6. Let’s look at new technologies; let’s look at best practices. And, again, some very clear lessons to be learned. And, again, a section in our agenda on that. Finally, I would say – and this is something I have noticed in reading the background documentation – we need data. We need fundamental data. We need basic data. We need more data on origin destinations through all of the modes, so we can do the kind of analysis, good public policy analysis, to come up with the right solution, not just any solution. So, let’s keep these six or seven points in mind as the workshop progresses over the next 3 days.

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WELCOME TO WINNIPEG AND OPENING ADDRESS The Honourable Tim Sale Minister of Energy, Science & Technology Province of Manitoba Bienvenue à tous. It is a lovely fall day in Winnipeg and we want to welcome you here to our province. I know some of you are from our province but many of you are ‘from away,’ as they say in Newfoundland, and we’re glad that you’re ‘from away’—wherever you’re ‘from away’ from—and you’re here. It is my pleasure to welcome you on behalf of Premier Gary Doer and Scott Smith, our Minister of Transportation and Government Services, who is in his home of Brandon today and not able to be with you. I also bring greetings on behalf of Steve Ashton who is, of course, our Minister of Conservation and has environmental responsibilities; and Dave Chomiak, our Minister of Health, who is often the proud inheritor of environmental difficulties in his health care system. So we have an understanding that what you do has broad impacts on our economy, on our health care system, on our environment and we wish you very good work over the next few days. I think that those of you who are not from Manitoba probably know a bit about our city. We are home to three of Canada’s ten largest employers in the for-hire trucking industry, obviously a hub that goes easily east-west, north and south, all the way down I-94 to Texas and beyond. We are certainly, both an historic and a current home to both of our Class 1 Railways and both have major infrastructure investments and total employment of over 4,000 Manitobans in our province – so, a major employer, a major infrastructure, investor and supporter. Anybody live south of Wilkes down Kenaston – anybody here? Ah, one person at the back. Are you glad to see the end of the intermodal yards there and all the trains that backed up along the main line? They are now out in the east end of the city. We are glad to see the opening of CN’s new intermodal yard that has, I think, a great opportunity for the future for intermodal integration in our Province and, I think, relieves one area in which perhaps wasn’t the most optimal choice to build it in the first place. We look forward to the kind of integrated work that you are attempting to do over the next few days. We are thinking, as your chair said, about the bigger picture and thinking in an integrated way about that picture – finding common measures, common ways of thinking about environment, transportation, and our economy. As well, we are thinking about the obvious spin-off benefits in the health care system, which all of us have a great deal of difficulty figuring out how to control costs in. We are also, as you probably may know, North America’s leading bus manufacturer. We have a very significant component of North America’s total bus production. And we are well into the stage of developing the hybrid hydrogen bus, which we hope will be on the road within a year. It is currently being fitted in California with some parts, and then it will go to Calgary, then Toronto for more parts. Having been built in the first place here, it will be a really interesting Canadian project that will be more efficient by a very

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significant margin than any hydrogen bus on the road. We are very proud of the work that Canada and New Flyer Industries, Kraus and ourselves have done through that project. In terms of the tasks that you face – probably you know this, but I just remind you that Manitoba was the first province to endorse the Kyoto Accord. Now that was not exactly the most popular choice in the world at the time, and there are those parts of our country where it still is not met with a ringing endorsement. However, most of the country, I think, has moved from fear and loathing of Kyoto to at least accommodation and recognizing that the first step of 6% below 1990 levels is a tiny, tiny step. We already have Germany and England making commitments to 30 and 40% below 1990 levels in the next Kyoto round and with plans on the books to achieve that. Many big companies – I think of BP for example, that have already significantly exceeded their companies’ benchmark requirement of 1990. As the Vice-President of BP said during the Kyoto debate in Canada, with a small smile on his face, “And we added $620 million to the bottom line in doing it.” So, the opportunities to provide a cleaner environment and a more efficient environment are also economically rewarding, if they are approached in an appropriate way. I know that your Chairman was challenging you this morning with some of the Conference Board findings around productivity. We view the Kyoto Accord and environmental challenges as not particularly negative things, but essentially an opportunity for innovation. Innovation is essentially what Canadian railways have done over more than a century. They have added new technology; they have become premier carriers in North America. And they have done that by constantly innovating on every front, whether it was the technology of hauling; the scale and components of a modern diesel/electric locomotive; whether it is the control of the traffic through, for example, the CN centre here in Winnipeg that essentially monitors the entire CN network throughout North America and is able to, hopefully at least, tell you where each piece of your cargo is at any given time of the day or night. Then to efficiently use that railway’s capacity to be as productive as it possibly can be. I think that we view the Kyoto challenge as an innovation challenge and I think that’s how we should view it, because every time you appropriately wed innovation to your economy, you become more efficient. By definition, efficiency is the reduction of the inputs that are required for a unit of output. So, I think that we should view this as a tremendous opportunity to look, as you are going to do, at best practices and to find the way forward using innovation in every conceivable way that we can. Because we can be and, in fact, by most international criteria, our railways are world leaders. I have to tell you that I grew up with Lionel Trains. I grew up with a great big Lionel train set up in my basement that I actually had a secret wiring switch that prevented my father from running my trains. My father and I had a wonderful relationship, but this was one of the ways, sort of covert ways, in which a ten-year-old works out some frustrations with his dad. But, railways and my growing up were one and the same. And I have to say, even though I know it’s innovation and I know it’s efficiency – the saddest sight I ever remember seeing was the bone yard in Stratford, Ontario with row upon row, siding upon siding, of steam locomotives waiting to be scrapped. Because, as any train

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aficionado knows, you build a diesel locomotive but you erect a steam locomotive. And it’s always seemed to me that there is so much more dignity in – perhaps this is something I should not say in polite company, but – in the erection of a steam locomotive than there is in simply the construction of a diesel locomotive. And I know, too, that the innovation of the diesel locomotive essentially ended the need for divisional points 80 or so kilometres or miles apart. That, in turn, was one of the great things that led to the end of the branch line system, because there was no longer the requirement for the nodes close together to support the technology of steam. So, when you bring along new technology, you also sometimes bring along unintended consequences. When we talk about the greenhouse gas issue, we are absolutely delighted and committed to the notion that you don’t just talk about greenhouse gases. When you use ethanol, for example, to power cars and trucks, you certainly significantly reduce particulate emission – NOx and SOx go down, and GHG’s only go down a small amount. When you use biodiesel, you get a great improvement in particulate emission and significant improvement in GHG’s. So, we are very interested and will shortly be announcing a BioFuels Act that will support the development of biodiesels and ethanol and other forms of bio-fuels under an umbrella of legislative and regulatory mechanisms that will, I think, be seen as best practice in Canada. I am looking forward to the reintroduction of that legislation very shortly in our legislature later in the fall. I think that some of our other initiatives that have been important – we have recently partnered with the City of Winnipeg to support the development of a light-rail transit system. We are not a very dense city, as you probably know, and so the whole issue of urban transportation using rail corridors is a tricky issue for us because of density and, therefore, the implied cost structure when you have a low-density environment. Nevertheless, we are working at that. We also recently were the first jurisdiction to sign a government-to-government MOU with Iceland on the future hydrogen economy which, I think, all of us know at some point will come. Our goal as a province is to position ourselves so that as it unfolds over the next couple of decades, we are there and that we are making a commitment to that – that new economy. I am glad we have been able to support your workshop financially. I welcome you all to Winnipeg and look forward to the results of your regulatory and transportation discussions. I will leave you with something that I think you probably heard before but something we always have to remember. That as we work in the public sector and with the private sector to move forward, we have to always be careful that the ‘perfect’ doesn’t get in the way of the ‘good.’ And while we search for the ‘perfect’ solution, we have to be open to the evolutionary ‘good’ solutions that are there and available for us to take. I would point in particular, to some of the debate that goes on in environmental regulation where I think very often, we are faced with situations where the ‘perfect’ is very much impeding the ‘good’ in its progress.

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I will leave you with the dilemma that I face as a Minister of Energy – when we talk about the coal plants in Ontario and the commitment to reduce the NOx and SOx and particulates from them. And the difficulty we have sometimes getting a license to cross a drainage ditch, because there might have been some fish that found their way up that drainage ditch in a flood a couple of years ago. And we have to have the kind of regulatory review that sometimes does not entirely make sense in order to achieve a very significant ‘good.’ We are stopped by the vision of the ‘perfect’ that is held by some who don’t see as clearly the children with asthma in Toronto, but see a potential ‘perfect’ solution which impedes the progress of, say, the shipping of electrical energy to eastern Canada while it remains easier to open a coal-fire generation plant in southern Alberta. Because it’s a provincial and very local issue until, of course, you count the NOx and SOx that come out of the stack and flow across the entire global climate. So, as you work, don’t let the ‘perfect’ get in the way of the ‘good.’ Bienvenue à tous.

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SESSION 1 – CANADA’S RAILWAYS TODAY AND TOMORROW Russ Robinson – Advisor, Sustainable Transportation Environment Canada Session Chair On behalf of Environment Canada – certainly, I would like to welcome you to our workshop, our Railways and the Environment workshop, and also welcome you to sunny Winnipeg. This is Session One – Canada’s Railways Today and Tomorrow. We will be presenting a very broad spectrum both from government and industry on our path forward as it relates to the environmental impact of the railway sector in Canada. John Dobson – Senior Policy Advisor, Rail Policy Branch Transport Canada Straight Ahead: Vision for the future of rail transportation The government’s intention to renew Canada’s national transportation policy was referenced in the last speech from the Throne. As many of you know, the Minister worked with stakeholders, industry and others for some time on a vision to serve the transportation system over the next few years. On February 25, 2003, the Minister tabled in Parliament a National Transportation Policy framework document entitled ‘Straight Ahead’, a vision for transportation in Canada. He also introduced amendments to the Canada Transportation Act and new legislation incorporating into law the existing framework of VIA Rail. Both are contained in Bill C-26. I would first like to take a brief moment to set the context. Overall the transportation system is on track. While the last decade has seen an enormous evolution in transportation, by and large, these changes have produced positive results. Productivity gains in the transportation sector have outpaced those of the economy as a whole, reducing the transportation costs to shippers and travelers by ten billion dollars annually. The system is generally working well and is not in need of major overhaul. This is not just Transport Canada’s conclusion, but the Canada Transportation Act Review Panel made this point strongly in its report released the summer of 2001. Having said this, however, many stakeholders have called on the Federal Government to invest more in transportation infrastructure. In addition, we are still responding to the security challenges that emerged since September 11th. Furthermore, priorities like cities, climate change and innovation have become central to our overall agenda with significant implications for the transportation sector. In short, we are on the right track but our policy framework needs to be adjusted to reflect these issues. Straight Ahead outlines a vision for Canadian transportation that will guide the actions of the Federal Government over the next decade and beyond. There are a number of fundamental principles that guide the overall vision. Many of these, such as safety and efficiency, are already embedded in the policy statement of the Act. However, new ones will be added, including one related to the environment. These principles underline the

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next generation of transportation policy development. Straight Ahead acknowledges that a vision for a sustainable national transportation system must be properly defined as one where economic and environmental considerations are fully integrated in decisionmaking. As you may know, in April 2001, the Minister launched the Transportation Blueprint Initiative to develop the vision being presented to you here today. Straight Ahead is the result of two years of consultations with Provinces, Territories, industry leaders and many other concerned stakeholders. Many of the rail policy issues were initially raised during the Estey and Krueger consultations on grain in 1998 and ’99. Straight Ahead also addresses the major conclusions and recommendations of the Canadian Transportation Act Review Panel, which was set up by the Minister back in the year 2000. This document offers a comprehensive strategic framework. While it is not a spending package, it is hoped it will serve to guide future transportation investments. The government’s actions and commitments are grouped into five broad direction areas: • • • • •

Setting and maintaining frameworks for an efficient transportation marketplace, Managing and pricing transportation infrastructure, Reducing the adverse environmental impact of transportation, Improving safety and security, and Encouraging innovations and skills development.

I will focus on the marketplace framework as it relates to rail transportation, but also touch briefly on a couple of the other areas. Straight Ahead proposes that we continue to pursue a market-based regime for the transportation industry. Experience has clearly demonstrated that this approach has stimulated performance in the transportation sector and contributed to Canada’s prosperity. Productivity growth in the transportation sector has been almost double that of the economy as a whole over the last ten years. We also need to provide for those cases where the market fails, or cannot of itself achieve the desired economic or social outcomes. In those instances, we should be prepared to intervene but with carefully targeted interventions. Straight Ahead identifies specific actions to strengthen the current framework. Rail shippers have access to a number of tools designed to constrain the market power of railways. Inter-switching and competitive line rates give shippers access to two railways by regulating rates to interchange points. Shippers can complain to the Canadian Transportation Agency if they are not satisfied with rail service. There is a Final Offer Arbitration (FOA) process that shippers can use if they do not like the rates offered by a railway. Confidential contract provisions allow shippers and railways to negotiate the best deals. The Revenue Cap on Western Grain replaced regulated maximum rates in the year 2000 and provides more flexibility to use price signals to encourage efficiencies. Running rights allow railways to operate trains on the tracks of another railway. I will have a bit more to say about running rights later on.

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Everything indicates that the policy framework has achieved a reasonable balance between shipper and carrier needs. Railway productivity has increased by up to 81% since 1981, which is good in itself. But, more importantly, 75% of these gains have been transferred to shippers in the form of reduced rates. A large part of the remaining gains have been reinvested in plant and equipment. We have also seen the development of the shortline rail industry in Canada. This is also good news to shippers. Without dwelling on it, we can all recall the times when railways not only were not reinvesting, but were also deferring maintenance of some of their assets, with the negative consequences for service to shippers. In assessing potential changes to the policy framework, the government agreed with the conclusions of the Canada Transportation Act Review Panel that the system works well. It is fundamentally competitive and efficient. Market abuse is not systemic or widespread and most shippers are well served. Furthermore, this success has been achieved with virtually no government subsidies for rail freight operations. The government concluded that the Policy Framework only required some fine-tuning, not major reforms. There have been substantial consultations involving shippers. The CTA Review Panel consulted extensively throughout its exercise, including the organization of a symposium, in Winnipeg, specifically dealing with shipper issues. As part of their series of blueprint stakeholder round tables, the Minister hosted a shipper session in Toronto in June 2001. All of this was in addition to the numerous one-on-one shipper meetings with Transport Canada officials and the Minister over the last two years. It is in light of this that the government has determined that there is not a need for a major overhaul of the system. However, we have heard from shippers and we are making changes in response to their specifically identified needs. We will make remedies more easily accessible for shippers by removing the requirement that the Canadian Transportation Agency must be convinced that shippers would suffer substantial commercial harm before relief can be granted. We will expand the availability of Final Offer Arbitration and we will improve the conditions under which a shipper can ask for traffic to be transferred to another railway. At the same time, we will maintain all of the other existing remedies. The government believes that this achieves the right balance. I would be remiss if I did not say a few words about running rights. It was clearly the most contentious rail freight issue that was discussed, dating back to the Estey and Krueger exercises. In recent decisions, the Canadian Transportation Agency concluded that the existing running rights provisions were of limited scope; for instance, they did not provide for the running rights railway to solicit traffic over the host railway’s lines. Many shipper groups supported expanding running rights to encourage more effective competition between railways. They are asking for three main things: that any competent railway be allowed to apply for running rights; that running rights railways have the opportunity to solicit traffic; and that there be a reverse onus, in other words, that the host railway must demonstrate that it is not in the public interest to grant the running rights.

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As already noted, the government felt that the current policy framework was working well and did not warrant major changes. It decided not to expand running rights because of a number of concerns. It was worried about the adverse impact on railway efficiencies from splitting traffic between two or more railways. It was also concerned about the potentially significant regulatory oversight required to ensure that the host railway did not abuse the rights of the guest railway. And, finally, it was concerned that expanded running rights would provide a disincentive to railway investment and to shortline creation. In other words, the government was satisfied that the system was not broken and did not need to be fixed by expanding running rights A few comments on passenger rail. A series of legislative amendments will strengthen publicly-funded passenger and commuter rail services, including: giving publicly-funded passenger rail service providers recourse to the Canadian Transportation Agency when commercial negotiations are unsuccessful with respect to the terms and conditions of operations on federal rail lines; making contracts of publicly-funded passenger rail services public to improve transparency; and maintaining the integrity of rail quarters for possible public transit needs by improving the rail line discontinuance process in urban areas. These legislative amendments support rail as a viable choice for passengers, thereby contributing to both the government’s climate change and city’s agenda. As mentioned earlier, VIA Rail’s existing mandate and powers will also be confirmed in new legislation. This follows on the government’s 2000 commitment of $400 million in capital funding to revitalize VIA services. Overall, these initiatives demonstrate the government’s continued support for passenger rail services. Railway noise can often be an environmental concern in urban areas. Bill C-26 contains a new provision to regulate railway noise. However, the preference will continue to be on voluntary solutions between railways and local communities. The railways are currently working with municipalities and municipal associations to develop appropriate guidelines. In the event that they are unsuccessful, there will be new provisions in the Act that allow the Agency to regulate noise disputes. Railways will be required to minimize noise, bearing in mind their operational requirements and community interests. A complainant must exhaust voluntary mechanisms before approaching the Agency and the Agency will have the authority to resolve disputes. Bill C-26 also includes amendments to deal with transportation sector mergers. The existing provisions on the airline industry will be extended to other modes, including railways. The existing review process under the Commissioner of Competition will continue. However, the Minister of Transport will have the authority to appoint someone to investigate public interest issues, if necessary. The Minister would receive the recommendations from the two bodies and put a proposal forward to Cabinet for consideration.

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Bill C-26 – Next Steps As indicated earlier, the Bill was tabled on February 25, 2003. It received a second reading and was referred to the Standing Committee on March 25. The Committee heard from some witnesses before the summer recess and the Bill remains with the committee right now for consideration. It is uncertain when and if it will go anywhere at this stage given the politics in Ottawa. A few brief words on the environment from the Straight Ahead document. I am sure Bob Lyman will get into some of the details about the department’s environmental initiatives, so this is just a very high-level overview. The environment is an issue for all Canadians. Transportation is the largest producer of greenhouse gas emissions in Canada, so progress on Kyoto commitments will require real gains in transportation. This year’s budget announced an additional funding of $1.7 billion over 5 years, to be made available for the measures that were announced as part of the government’s climate change plan and for the renewal of existing programs under Action Plan 2000. Transport Canada will provide leadership in our sector and encourage reliance on innovative solutions and will work with industry to better understand the environment and social costs of transportation. As I mentioned earlier, as a clear signal of our commitment to the environment, we will enshrine, for the first time, respect for the environment in the National Transportation Policy statement of the Canada Transportation Act. Straight Ahead directly supports and is closely aligned with the government’s approach on how best to address climate change. Innovation in the transportation sector, clean air, clean water, improved fuel efficiency standards, and increasing Canadians’ awareness are among the many elements of our strategy to contribute to the government wide environmental agenda. Finally, I have a few words to say about full-cost accounting for transportation. The objective of this initiative is to better understand the full cost implications of different transportation modes. This will help Transport Canada and the government in policy analysis and planning, investment decisions and assessing regulations. Eventually, information and analysis from this initiative could be considered in pricing policies for the various modes. Transport Canada officials will be working on this project with representatives from the Provinces and industry. Transport Canada has initiated Phase One of this project in-house and is assembling financial costs for all modes. Completion date for this is 2004. The Department is also contracting for review of methods of evaluating environmental and other social costs. A Federal/Provincial Committee of the Transportation Policy Assistant Deputy Ministers is considering a collaborative approach. The views of industry and other stakeholders will be sought on methods and processes. In conclusion, Straight Ahead provides a policy framework for the continued success and balance of Canada’s transportation system. Building upon a strong safety and security record in a sector that has out-performed the economy as a whole, Straight Ahead sets a bold strategic direction for a safe, secure, efficient and environmentally responsible transportation system. It is also a vision that recognizes the importance of emerging issues, such as the environment and climate change in infrastructure development. A

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solid economic framework will contribute to achieving Canada’s objectives, including those related to the environment. The key to the ultimate fruition of this vision, though, will be the constructive forging of strong working relationships with all our partners, including the Provincial and Territorial governments and industry. Thank-you. Robert Lyman – Director General Environmental Affairs Transport Canada Addressing Canada’s Kyoto Commitments – Canada’s Climate Change Plan Climate change presents for Canada and other countries, one of the most significant issues from an economic, political and environmental perspective that we have ever had to address. The majority of climate change scientists believe that the world is at risk of experiencing major and, perhaps, traumatic changes in climatic patterns, eco-systems, sea levels, and temperature, as a result of the progressive build-up of greenhouse gases in the atmosphere. Yet, mitigation of this danger will require us to reduce significantly the emissions from fossil fuels – oil, natural gas and coal, upon which the world relies for about 90% of its current energy resources. It is, indeed, a major challenge. My presentation today will deal in four parts. I am going to describe for you the climate change process that Canada has followed, what the challenge is for the rail industry, some initiatives that have been undertaken by the Government of Canada, and I will draw some conclusions. Let’s start with an overview of Canada’s climate change process. Figure 1.1 illustrates the magnitude of the so-called emissions gap. In December 1997, Canada signed the Kyoto Protocol, with a reduction of 6% below 1990 levels to be achieved between the 5year period of 2008 to 2012. The total reductions required to achieve that goal is 240 megatonnes, or almost 30% from project levels. Considerable work has been done by governments, industry and non-governmental groups to identify different measures that could cost-effectively reduce emissions to meet this challenge.

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Figure 1.1 Climate Change Background

In September 2000, the government announced an early contribution through Action Plan 2000 on Climate Change. This $500 million program outlines specific measures to reduce GHG emissions and it included five transportation measures. This was followed in November 2002 with the Climate Change Plan for Canada. The Plan is intended to provide a framework and propose a further range of initiatives for reducing GHG emissions. That plan will continue to evolve as time goes on. Following ratification of the Kyoto Protocol in December 2002, the Federal Government 2003 budget this February announced $2 billion in funding over 5 years to help implement the Climate Change Plan for Canada. It includes an investment of close to $283 million to help business and industry reduce emissions using available technologies in areas such as buildings and transportation sectors. For GHG emissions by sector in Canada, transportation is the largest single source of Canada’s greenhouse gas emissions, comprising 25% of the total. Figure 1.2 illustrates that 70% of all transport emissions come from road vehicles; 44% come from cars and light trucks, another quarter comes from commercial trucking. The next largest source of emissions is the off-road sector. This sector includes everything from farm tractors to logging skitters to personal equipment, such as lawn mowers. It is currently responsible for a larger portion of GHG emission than aviation and it is continuing to grow. Rail represents 4% of emissions.

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Figure 1.2 Relative Contributions of Modes to Transport GHG Emissions (1997)

Passenger car 27% Bus 1%

Passenger Light Trucks 17%

Aviation 7% Marine 4% Rail Freight 4% Off-road 13%

Commercial Trucks 27%

I must point out that no one has said that each sector of the economy must cut emissions by 6%. In fact, the Climate Change Plan for Canada estimates that roughly 21 megatonnes in reductions will come from transportation. Our goal and our challenge is to shrink total transportation emissions through a combination of measures that address behaviour, travel choices for passengers, and movement of goods, technology take-up and best practices. The target, however, is so ambitious that no sector of the economy and no transportation mode can be overlooked in our national search for effective means to reduce emissions. Note that you could completely eliminate passenger car emissions, or you could completely eliminate commercial trucking emissions and, if that were all you did, you would not achieve a 28% emissions reduction. Let’s talk a little bit about the challenges for rail. Over the past 20 years the rail industry has experienced a continuous increase in activity with accelerated growth occurring primarily in the 1990’s. Total tonne-kilometres for rail freight increased from 240 billion in 1980 to 310 billion in 2000, an increase of 29%. In context, it should be noted that there has been rapid increases in other modes as well, and particularly in trucking. The rail sector has maintained but not significantly increased its modal share of activity. Overall, the rail industry has been successful in reducing its CO2 emissions by 16% compared to 1980. Transport Canada recognizes that the spikes in fuel use that occurred in 1997 and 2000 are a reflection of the growth in traffic that has been very welcome to the industry after some sluggish years in the early ‘90’s. However, as rail freight

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movement is likely to grow over the next few years, continuing energy efficiency gains will be needed to compensate for the growth in volume. The rail industry fuel efficiency, measured in terms of litres consumed per tonnekilometre, has shown very strong improvement. Since 1980, efficiency has improved by 38%, with the highest gains coming before 1987. The graph in Figure 1.3 was developed based on Tri-Max estimates of trucking costs and illustrates why rail needs to be engaged in the climate change process to reduce GHG emissions. It also demonstrates why much of our focus, to date, has been on reducing emissions from the trucking sector. These lines represent comparative estimates of the average GHG per tonne-kilometre for each mode. A note of caution: the lines in the graph reflect average industry GHG intensities. They do not reflect the intensities of specific market segments. They show that, on average, trucks are considerably more emissions-intensive than rail or marine, although some truck configurations are much better than the for-hire truck average. Figure 1.3 Truck Configuration vs Other Modes Grammes CO2 per tonne-kilometre

For-hire Truck 2-Axle Gasoline Truck, General Cargo, load 6.1 t 2-Axle Gasoline Truck, Bulk Freight, load 9.2 t 2-Axle Diesel Truck, General Cargo, load 6.1 t 2-Axle Diesel Truck, Bulk Freight, load 9.0 t 5-Axle Semi, Van, load 19.0 t 5-Axle Bulk Dry Tanker, load 29.8 t 8-Axle Super B, Van, load 32.3 t 8-Axle Super B, Bulk Dry Tanker, load 43.8 t

Freight Train Marine (domestic) 0

50

100

150

200

For example, the new 8-axle super B vans with a total load of 43.8 tonnes are far more efficient than the industry average shown on the slide for for-hire trucks, and their emissions are in the range of 30 grams per tonne-kilometre. Similarly, the emissions intensities for shortline railways can be expected to be higher than that shown for the rail industry as a whole. We need technologies and operating practices that can improve both the energy efficiency of modes and help us achieve integrated transportation systems, so as to make the best use of each freight mode. From a public policy perspective, the rail industry must continue to improve its fuel efficiency in order to provide a more emissionsefficient alternative for freight transportation into the future.

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As I have demonstrated, the rail sector has clearly made major improvements in fuel efficiency over the past 20 years. There is a possibility that these efficiencies may be overtaken by the continued growth of the rail industry. So, how can the rail industry achieve its activity growth targets without increasing GHG emissions? To answer this question, we must look at the full range of opportunities, which include: operational improvements, technology improvements and better infrastructure. Let’s have a look at some of the initiatives that the Federal Government has put in place to help the industry in this regard. The first is the Freight Efficiency and Technology Initiative, a program managed by Transport Canada. It is a $14 million 5-year initiative, launched under Action Plan 2000 on Climate Change. It is, as I said, being led by Transport Canada, with cooperation from Natural Resources Canada. There are three main components: • •

•

First, voluntary performance agreements with industry associations, which will be discussed next. Training and awareness initiatives to assist industries in reducing their GHG emissions. For example, we organized in November 2002, in Ottawa, an aviation workshop on the best operational practices to reduce fuel use and emissions. We are also co-funding this rail workshop. Third, the Freight Sustainability Demonstration Program (FSDP), which funds demonstrations of efficient technologies and best practices in all freight modes plus intermodal transport.

Voluntary performance agreements are being developed between the Federal Government and industry associations within each mode of transportation: rail, marine, aviation and trucking. These agreements represent a unique promotional tool for participating associations to publicly promote their contribution towards Canada’s GHG reduction objectives. Under these agreements, each of the associations is asked to identify and commit to a target of GHG reduction or fuel efficiency; and to undertake voluntary actions set out in an action plan that will lead to measurable GHG emission reductions. Progress reports on the agreements will also be requested on a yearly basis from the participating associations. The agreements are intended to encourage continuous improvement within each mode and industry leadership on GHG reductions. We hope that the Railway Association of Canada will follow the example of the Association of American Railroads in the United States in signing a voluntary agreement with the Federal Government. The Freight Sustainability Demonstration Program (FSDP) is a $4.5 million program that provides funding to projects that can improve fuel efficiency through the take-up of technology or best practices. All demonstrations are selected through a competitive process that involves an independent selection committee. Projects can receive up to 50% of eligible costs to a maximum of $250,000 over a 2-year period. If funding from other departments is available, the ceiling on Federal Government funding is 50% of the projects. The eligible funding recipients are carriers and shippers, as well as non-profit organizations. A key element of the demonstration is its monitoring function, so that the

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energy efficiency impacts of the technology or best practice can be reliably assessed. This often involves having both a test group and a control group operating under similar conditions. There are two rounds of project submissions per year and, for those who will be interested, the next opportunities will be April 1st, 2004 and October 1st, 2004. So far, the Freight Sustainability Demonstration Program (FSDP) has funded a number of projects, including three rail projects. One of these is a project by Kelsan Technologies Corporation, which develops and manufactures friction management solutions for the railway industry. Through the FSDP, it is demonstrating a new Top of Rail friction control system that applies a thin film of Kelsan’s patented lubricant to the rail. This is expected to achieve a lower level of friction that reduces fuel consumption, wear and equipment failure, but does not significantly affect traction. You will hear more about this from Don Eadie tomorrow morning. The other rail project being funded by the FSDP is Athabasca Northern Railways’ demonstration of the Kim Hotstart diesel-driven heating system. Its purpose is to reduce idling time. Gord Peters of Athabasca Northern will be speaking to us tomorrow about their organization’s recent activities. Finally, the third rail project being funded by the FSDP involves Southern Railways of British Columbia. Through Southern’s project, the SmartStart automatic shutdown restart program will be demonstrated. The purpose of the technology, again, is to reduce idling. Steve Easun of ZTR Control Systems will be speaking tomorrow about this device. The Resco truck is a lightweight, steerable railway truck that has the potential to improve the economic performance of bulk commodity rail service. The Resco truck outperformed other designs in all technical measurements, including reductions in resistance and yielded fuel savings approaching 20%. Reduced resistance should also translate into lower rail and wheel wear, making the truck commercially very attractive for unit train operations. I would like to describe a new program that was just announced on August 12th as part of the implementation of the Climate Change Plan for Canada. The Commercial Transportation Energy Efficiency and Fuels Initiative is a four-year, $32 million program that will complement our existing programs in the area of freight and commercial transportation. It has two distinct components: a commercial road transportation program that will be delivered by Natural Resources Canada and a commercial non-road freight transportation program that will be delivered by Transport Canada. An important new component of this program will be to provide financial support to industry for the purchase and installation of energy efficiency enhancing equipment in all modes. This will complement the demonstration program that I referred to earlier. It will also introduce a new focus on shippers, to help improve their understanding and awareness of their transportation decisions. The details of this program will be announced by the Minister shortly.

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Transport Canada is also undertaking quite a lot of work on intermodal in support of rail. We are undertaking a major literature review, which should be completed in November of this year. And we have commenced a national consultation process with provinces and stakeholders to identify barriers, opportunities and partnerships in intermodal freight. The Department is currently exploring eight potential projects on intermodal freight, and I will provide some examples. There is the Westminster Rail Bridge and Corridor project for which Transport Canada has made a contribution of $100,000 to conduct a detailed assessment of the rail corridor extending from the Burrard inlet port complex which serves the commodity and container terminals to the U.S. border. There is also an intermodal freight terminal survey at marine freight terminals in Canada. Finally, we are working with the Railway Association of Canada, CN and CP as well as the major ports, to identify barriers and potential partnerships. Through this particular initiative, a profile of each terminal will be developed. Now, for the conclusion. The rail industry has a key role to play in improving the overall performance of Canada’s transportation sector. Rail will face a challenge to reduce its GHG emissions and improve its efficiency while pursuing increased activity. Will the industry be able to continue its efficiency gains at the same level as it has achieved in the past as we move into the next decade and beyond? The Federal Government is offering opportunities through existing and new programs to assist rail and other freight modes to reduce their GHG emissions. It is not suggesting regulation, but rather voluntary cooperative agreements based on the principle of continuous improvement. Our hope is that the rail industry will take advantage of this opportunity. Thank-you very much for your time. Gord Owen – Director General Air Pollution Prevention Environment Canada Canada’s Clean Air Agenda I would like to speak to you about the plan that Environment Canada has around clean air: the Clean Air agenda, our Federal Agenda for Vehicles, Engines and Fuels, Environment Canada’s forecast of criteria air contaminants, Environment Canada’s Memorandum of Understanding with RAC, and some of the other ongoing air priorities that we have. The Clean Air Agenda is distinct from climate change. When we say clean air, what we are really talking about for the most part are what are called criteria air contaminants. These are pollutants such as NOx, SOx, and particulate matter. Now, it is not to say that the two are not related – they are, of course. But they are a little bit different, and the approach to them has been a little bit different. In this case, I am going to talk to you about the clean air side.

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The Clean Air Agenda was launched in May of 2000. It was quite clear that there are health impacts related to these pollutants and that we needed to move ahead to be able to deal with these. We have five major components. The five are: •

• • • •

Reducing transboundary emissions – you can well appreciate that for most of Canada and most Canadians of whom the majority of us live very close to the U.S. border and especially in the East, there is a significant amount of pollution that comes North to Canada from the U.S. On the West coast as well, there is a certain amount that goes back and forth, and all along the Prairies, as well. So, that is an important part for us. Another sector of great importance is transportation, of which rail finds itself a part. Reducing major industrial emissions – for example, from the electricity sector and other sectors is another part. Advancing the science so that we have a clear understanding of how the pollutants get released, how they get dispersed, and how they get received by humans. Lastly, engaging the public. In some instances, it is the public who actually is making decisions about things that contribute to air.

Some of the things that we have done overall are, in December 2000, the Ozone Annex was signed, which is an annex to the 1991 Canada/U.S. Air Quality Agreement. That was quite a significant step for us. What it does is it commits Canada to certain actions to reduce ozone; as well it commits the U.S. to take actions. This is a very important piece for us and deals predominantly with the transboundary side. In February 2001, the Federal Agenda on Cleaner Vehicles, Engines and Fuels was released that outlines our intentions in these areas. Generally, our intent is to align fairly closely to U.S. standards, for vehicles, engines and fuels, and we will talk a little more about that later. More recently, in June, the government announced with then EPA Administrator Governor Whitman a border air quality project, under which we have specific projects related to southern Ontario that will focus on the air exchanges in that part of the continent, and on the west coast, where there is a significant amount of polluted air going back and forth in the Georgia Basin. Lastly, I would point out to you that we actually work quite closely with the Provinces on developing Canada-wide standards for PM and ozone and other air pollutants. We are working through the Canadian Council of the Ministers of the Environment. You can well imagine, for an issue as large as air, there is a Federal role but there is also a very significant Provincial role. One of the reasons we focus on air quality is because there are direct health links – it is clearly a health problem. There are deaths that are directly attributable to smog and its constituents. There are days off work, there are hospital days – there is a clear link. There is some debate around what the numbers are, but certainly the number of deaths is in the thousands. There is a real health driver to make sure that we, as a country, move

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ahead and deal with our air pollution. As our Conference Chair pointed out in his speech earlier, the Conference Board of Canada just released a report that indicates that we do have air problems. However, I will come back to that in a little bit. It is not all bad news in that respect. With respect to the actual Agenda on Cleaner Vehicles, Engines and Fuels, which was announced in Canada Gazette in February 2001, we are looking at regulations for new engines. And those drive the on-road vehicles and off-road engines, as well. We will come back to discuss what those mean a little bit later. We are also looking at fuel initiatives covering gasoline, diesel and fuel oil, and there are other related programs in which we engage ourselves. If we move specifically to actions that we have already taken prior to the announcement of our more comprehensive agenda, we have the current vehicle emission standards from 1997, which have now been changed. We have existing diesel fuel regulations, benzene and gasoline regulations, gasoline and dispensing flow rate regulations, Memoranda of Understanding (MOU) providing for the introduction of low emission vehicles and MOU’s respecting various off-road applications, such as handheld and non-handheld outboard engines. As you can see from this list, as distinct from some of the other initiatives of the Federal Government, this is very much a regulatory-based approach. It is very much an agreement-based approach rather than a financial approach. I would like to describe some of the processes related to developing new regulations. Once a regulation is published in Canada Gazette Part II, this means that it is becoming a regulation and will take effect on the date stated within. This is the case for the On-Road Vehicle and Engine Emission Regulations which were released in January 2003. If you look at the next group of proposed regulations, where we talk about Canada Gazette Part I, this is when the Government publishes its intent. It is predominantly a consultation period, but it is a very formal process, and after Canada Gazette Part I, then one moves to Canada Gazette Part II. The off-road, small-spark ignition engine regulations were published in Canada Gazette Part I in March 2003. As well, we are proposing further regulations which cover the off-road engines, including farm tractors, construction, recreational vehicles and marine engines in development. In addition, we are working on the large spark ignition engines. The general process is that we develop discussion papers that we release for public consultation. After that consultation, then we move to Canada Gazette Part I and, lastly, we end up in Canada Gazette Part II. In terms of fuel quality regulations, our general policy is to align with the U.S., taking into account the European Union standards, which are an important supplier of fuels to Canada, to ensure that we protect the health of Canadians. The Sulphur in Diesel Fuel Regulations were released in 2002, covering the on-road application, and Sulphur in Gasoline in 1999. In terms of sulphur content in diesel fuel for off-road applications, we are proposing to have a regulatory limit establishing the same time frame and approach that is being used in the U.S. The U.S. has proposed regulations as announced in April 2003, which would

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limit the sulphur content 500 parts per million in June 2007, including rail, and then would drop to 15 parts per million in June 2010. However, this latter requirement would not include diesel fuel used by rail. Environment Canada released a discussion document in August 2003, which basically proposes the same approach as the U.S. If we look at Figure 1.4, we see the projected decrease in NOx emissions from 2000 to 2020. As you can see, the data is broken down by sector, including aviation, marine, rail, off-road, off-road diesel, on-road heavy-duty, and on-road light-duty. The important thing to notice in this graph is that it does not include regulations that are not actually in place yet. So, evident in the graph is a significant drop in terms of the NOx emissions from on-road heavy-duty and on-road light-duty vehicles. That is because those regulations are through Canada Gazette Part II, meaning that they are now law. Therefore, we know that those changes will take place. Figure 1.4 NOx Emission Forecast - Transportation 1800

N O x (k ilo to n n e s /y e

1600 1400 1200 A V IA T IO N M A R IN E

1000

R A IL

80 0

O F F -R O A D G A S O L IN E

60 0 40 0

O F F -R O A D D IE S E L

20 0

O N -R O A D H E A V Y -D U T Y O N -R O A D L IG H T -D U T Y

0 20 00

20 05

2 0 10

2 015

2 02 0

Note: includes effect of current regulations (i.e., not off-road engines/fuels) If you look at the emissions from other sectors, there are no changes predicted in off-road gasoline and no change in off-road diesel, but as I said before, those sectors will be addressed through regulations currently in development. We released a discussion paper on off-road diesel in July of 2003, and we fully expect to see a significant drop in emissions from both off-road diesel and off-road gasoline sectors. The off-road gasoline regulations were published in Canada Gazette I in March 2003, as I said before, because they were only published in Canada Gazette I we do not reflect that change within this chart. If we were to do so, you would see a very significant drop. Another item to note is that the Conference Board of Canada report indicated that Canada ranks 23rd of 24 countries in the developed world, predominantly in terms of NOx

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emissions – that is the bad news. The good news is that the report does not take into account these coming changes, so we are certainly hopeful that as the changes begin to take effect we will move up the scale. If we look at particulate matter, it is a similar situation. We see some variation as well, but I would point out again that when the planned regulations come into effect we will see significant drops within those blocks. Looking at projections more closely by sector as shown in Figure 1.5, the top line shows what the situation would have been had we NOT introduced these regulations. Then, the next line shows the changes that have occurred, or that we project will occur as a result of having put in place these regulations. If you notice, heavy-duty on-road – we have broken that out from the on-road so that we could see it a little more clearly – projected NOx emissions drop quite significantly as the fleet turns over and as the regulations take effect. I will point out to you that the regulations cover new vehicles. If we look at the Environment Canada-RAC projection, based upon our Agreement, that line would stay roughly stable relative to the rest. So, what this means is that NOx emissions from rail, if they were to continue along these lines, would actually exceed, we believe, NOx emissions from all on-road heavy-duty vehicles by 2017. The bottom line, for rail, actually includes a very conservative growth rate of about 1%. Similarly for PM, it is basically the same pattern and the same trend. Figure 1.5 Forecast of NOx Emissions from On-Road Vehicles - Canada

Forecast of NOx Emissions from On-Road Vehicles - Canada Source: SENES & AIR Inc. October 2002

NOx (tonnes per year)

1,000,000 800,000

ALL ON-ROAD VEHICLES – BASE CASE

HEAVY DUTY ON-ROAD VEHICLES

600,000 400,000 200,000

)

LOCOMOTIVES (RAC/EC Projection

0 1995

2000

2005

ALL ON-ROAD VEHICLES – NEW REGULATIONS

2010

2015

2020

Year In terms of the agreement between Environment Canada and RAC, it is in effect from 1995 to 2005, and it sets a NOx cap of 115 kilotonnes per year. RAC provides to us

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annual locomotive emissions monitoring reports estimating the total emissions from the sector. Basically, these estimates are derived from fuel consumption, some assumptions and some emission factors. The MOU includes reporting requirements for total fuel consumption, gross and net ton-miles, composition of the fleet, changes in fleet emission factors, and emission reduction initiatives. It is quite clear that as the locomotive fleet turns over there will be significant changes, both in terms of efficiency and NOx, but of course, your rolling stock turnover is significantly slower than for the on-road fleet. Therefore, some of those changes will take a little longer to come into effect. The highlights of the 2001 LEM report is that the 115 NOx cap was marginally exceeded in 2001. You can compare that to 109 kilotonnes in 2000. Part of the increase is the normal growth, I would expect, but part of it is that the emission factors, of course, are changed as the vehicle fleet changes, and that is a better reflection of the number. The CO2 emissions were estimated at 5.46 megatonnes in 2001, and that reflects a steady increase in efficiency from 11.4 litres per thousand net ton-miles in 1990 to 8.7 in 2001. Now that is a pretty significant improvement. We estimate there are 2,792 locomotives, down from just over 3,000 in 2000. The distribution is: • • • • • •

CP CN BC Rail VIA GO Transit Other

41% 39% 4.4% 2.8% 1.6% 11%.

Additionally, this year, a number of new EPA Tier 0 locomotives have been purchased, and a certain number of upgrades have been done. I believe that the numbers are about 179 of the locomotives of this fleet now are Tier 0 and another 500 or so are to be rolled over. Figure 1.6 shows the NOx emissions again, in graphical form over the years. We note that it has tracked relatively closely to the target. A couple of exceedances have popped up in several years, recognizing that there has been a huge amount of growth within the sector itself.

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Figure 1.6 2001 LEM Report: NOx Emissions from Locomotives in Canada

NOx Emissions (kilotonnes)

140

new factor

Total Rail 115 Total Freight 90 1990 1991 1992

1993

1994

1995 1996

1997

1998

1999 2000

2001

Year

NOx cap exceeded in 1995, 1997 and 2001 Emission factor updated in 2001 to reflect fleet changes resulting in higher emissions level If we look at the projected NOx emissions from rail as shown in Figure 1.7, what we would expect on a pretty rough projection based upon trend by fuel is that there will be a growth in NOx emissions. As shown in the top line, we would expect to see an increase in total emissions. If one were to follow the cap set under the current MOU, that would give us a straight line at 115 kilotonnes per year. If we were to follow what the EPA has put forward and what is in place in the States, we would see a pretty significant drop in NOx, remembering that rail accounts for about 9% of the NOx in total. Figure 1.7 Future NOx Emissions from Rail in Canada - 3 Scenarios

200 150

Kilotonnes

NOX Cap Trend by fuel EPA Reductions Historical Data

Trend by fuel

100

EPA reductions

50

20 20

20 10

20 02

19 99

19 94

19 92

19 90

0

What the U.S. has put forward, of which I am sure most of you are well aware, sets locomotive exhaust emission standards for NOx, HC, CO, PM and others. These requirements will be phased in between 2000 and 2007. The U.S. standards include inuse maintenance requirements, in-use testing of locomotives and record keeping. I 24

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believe that we will hear more tomorrow on the EPA program. I understand that for locomotives manufactured between 1973 and 2001, they would move to Tier 0 when they are put in for refitting. Locomotives originally manufactured between 2002 and 2004 would be purchased at Tier 1 and locomotives manufactured in 2005 or later would then be at Tier 2. So, if we look at the expected results of the EPA regulations, NOx will be reduced significantly. There will also be a significant decrease in PM and HC emissions. So, I think we can say that we are certainly hopeful that Canadians and that Canada would be able to see the same sort of reductions in NOx from this sector in the end. But that is not to say that significant progress has not been made – it has – both within this sector and across the board. Reducing NOx and PM from rail remains a priority for us. Once the other Canadian regulations come into effect and the on-road and the off-road emissions decrease significantly, rail’s relative contribution will, of course, increase. Our overall policy is to maintain alignment with the United States. Addressing marine and aircraft is also a priority for us and we are working very closely with Transport on moving ahead on those sectors as well. So, our overall goal would be to match the requirements and the results that one would expect from the EPA’s locomotive emission standards. I would just add one last point. The Minister, when he was speaking, pointed out that one of his first connections with rail was when he owned a train and that he had the little kill switch on it so that he could prevent his father from using it. I wish I’d heard that many, many years ago, because in my house we also had a train set, but it belonged to my brother and I was not allowed to touch it. Had I known about the kill switch, I would have certainly put it on! Thank you all. Q: Chris Jones – Railway Association of Canada It is a question for Gord. Thanks for your presentation. I guess what was quite striking about your presentation was this very significant market reductions in diesel NOx emissions from trucks that you forecast taking place by about the beginning of 2010. And, I guess our question is, what kind of assumptions are you making about truck activity growth rates going forward between now and 2020? What we saw 1990-2000 was a virtual explosion in trucking activity which essentially grew by about 100%. Is it not possible, despite those engine-specific reductions that you are mandating, that the overall aggregate growth in trucking activity will probably erase those potential gains? A: Gord Owen, Environment Canada That is a good question. Projections are that – without having the graph up, of course it is a little bit hard to discuss – any projections are based upon numbers. They are based upon assumptions, which can of course, be wrong. When I finish, I will ask Russ if he knows or if there is another one of our staff here that could tell you the actual number that was used in terms of growth for trucking. But if you recall the graph, the reduction was in terms of

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magnitudes – I mean it is a huge drop. In other words, trucking would have to go up 1,000 times and I don’t think any of us believe that it would go quite that far. That’s my sense. Russ Robinson, Environment Canada Session Chair That data is also information that has been pulled from a Senes Consulting Report from a couple of years back, and we can certainly make that report available to anyone who is interested. It is a public report. Q: Barry Prentice – University of Manitoba Transport Institute My question has to do with the changeover to the more efficient locomotive technology and to compare us with the United States. This is laudable and, I guess, you could do it with a big stick. Doesn’t this put an exceptional burden on the Canadian railways, given that they have a slower depreciation rate? Or are there plans to put in some incentives so that the Canadian railways would be on an equal ground with the American railways in terms of replacing equipment faster? Or is that a concern? A: Gord Owen, Environment Canada This is an important question and it relates to both NOx and efficiency. When you ask about efficiency, generally that relates a little more to climate change, in terms of the clean air. Fundamentally I guess, it is a similar point and, if I understand your question correctly and interpret it correctly, it has to do with capital cost allowance and the changes in the tax structure. You are probably not going to like my response much – I appreciate it’s extremely important and, frankly, for achieving the objectives that we want to, both offroad and on-road and rail, the faster the fleet turns over in terms of NOx emissions, the better off we are. So, as a principle, that would be our view at Environment Canada. However, as you are probably aware, taxes don’t fall to the purvue of Environment Canada – they fall to the Department of Finance. As such, it is not possible for me to answer your question more than to say that anything that would expedite fleet turnover for us would be a good thing. Q: Malcolm Cairns – Canadian Pacific Railway This is another question for Gord. I would like to know where I can find the information that relates the volume of emissions in terms of tonnes of NOx, PM, and so forth. One always sees the analysis of where and how these figures are created, but one never seems to find – and I’ve not been able to find it in Canada – the link between the quantities of pollutants that are actually emitted and the actual cost in terms of human health. You pointed out on your chart that there is a link and everyone automatically just jumps to the link because you show us or point to where we could find the information that actually quantifies the link between the amount of pollutant and the actual cost to the economy.

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A: Gord Owen, Environment Canada I think that the best place I can suggest for that is the regulatory impact analysis statement that is required any time the government moves forward with a regulation. It has everything from the effect on the industry to the effect on the public. Within that has to be the economic consideration of the cost of moving forward with the initiative versus the savings from health costs. And there is quite an extensive calculation that has to go into that, involving ourselves, air modelers and Health Canada to come up with that number. The government weights the costs and benefits before making a decision to move forward with the regulation. Q: Bill Rowat – Railway Association of Canada I just wanted to follow up on Barry Prentice’s question. When I opened up with my remarks this morning, I talked about having available to us all of the public policy tools to deal with the Government of Canada priorities in these areas. And, probably for both Gord and Bob Lyman, the capital cost allowance is one of the key issues in terms of what you want to do. Gord, your very last point was to match requirements of the EPA’s locomotive exhaust emission standards. It takes 8 years to write off a locomotive in the U.S., it takes us 20 years in Canada. An intermodal comparison – it takes 8 years to write a truck off in Canada, and it takes us 20 years to write off a locomotive in Canada. The numbers are very big. The investment numbers are very big and if we want to turn around and introduce in rail the kind of technologies that will be required to achieve these Government of Canada objectives, and I stress Government of Canada objectives – these are not Department of Environment objectives or Department of Transport objectives, these are Government of Canada policy objectives – I think all of us, and certainly we will do our part, but I think even within Government, we have got to really work on our Department of Finance colleagues to say – there is one issue, one very big issue, that is blocking the achievement of a Government of Canada objective in this area. I think we should really do something about rectifying that 8% versus the 20%, so – that was more a statement rather than a question but I thought I’d clarify it. A: Robert Lyman, Transport Canada Well, Gord’s original response, of course, is exactly right. Having formerly, at one stage of my career, worked for the Department of Finance, I can assure you that anyone who does not work for the Department of Finance puts his life in severe danger by commenting on tax policy. But, the issue that you’re raising is clearly a matter of tax policy. Tax policy, generally speaking, as you know is essentially driven by economic policy objectives, but not exclusively by economic policy objectives. What is the appropriate capital cost allowance for any sector of investment is often a very hotly debated issue within the Department of Finance and there may very well from your industry’s perspective be very solid economic arguments for why you should have a difference capital cost allowance rate. To date, capital cost allowances have not been driven, primarily, by considerations of environmental policy. There is a very significant issue and just with respect to climate change across the economy as to whether one would

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have another look at capital cost allowances that promoted turnover of capital in areas where we expect that the technology improvements are such that accelerating them would have an important effect in terms of reducing emissions. If the issue is to be addressed properly, it will be addressed by Finance – first, in the context of tax policy and then, at least with respect to climate change, with respect to all of the different sectors of the Canadian economy. I guess my advice to you is to continue to make your argument, based first and foremost on the economic policy arguments that you can come forward with. Q: Peter Eggleton – TELLIGENCE Group In the very last statement where it said, ‘Federal goal – to match the requirements of the EPA’s locomotive exhaust emission standards’ – I’m trying to understand what that means. Does it mean that we will put in place in Canada, a sort of regulatory regime, that mirrors the EPA emission standards or does that mean something else? And how would it be implemented and what verification requirements would take place? A: Gord Owen, Environment Canada Our objective would be to move into alignment with the U.S. on the requirements and would be seeing environmental benefits equivalent to those. To suggest that we are talking about moving in a regulatory is quite far ahead. I think our preference is, at this point, to work towards a voluntary agreement, if possible. In many instances, in other sectors, we’ve worked with associations, we’ve worked with entire sectors and we’ve moved towards a voluntary arrangement and that has worked. The question is – will that work? Well, I don’t know. I don’t think we’ve sat down and discussed it enough about what we would, in fact, see as outcomes from a voluntary agreement. So, I guess an answer is our preference would be a voluntary approach. Q: Harry Gow – Transport 2000 Canada We have observed, with increasing frustration, the attempts of various ministries and non-governmental organizations to get a hearing from Finance for consideration such as those that have been discussed. I can think of other programs that have been suggested or asked for in the field of transit. One is always informed that anything that will improve transit efficiency, or use, is somehow not a level playing field with the automobile user. The sensitivity to this issue, at Finance, was illustrated by the Minister of Finance in response to David Jeans, our President, who asked for some kind of tax reduction for transit pass users – just an exemption from income tax payment if the employer provided a benefit or a credit as Quebec had proposed and then dropped for transit pass purchasers. The response from the Minister was, “Transit increases sprawl.” End of discussion. I think that going to Finance for changes is going to be a very long-term process; about the length of time it took to write the Bible, perhaps. That being the case, could I ask the gentlemen from the Ministry of Environment and Ministry of Transport whether alternative scenarios might be thought of to provide some kind of incentive for more fuel-

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efficient locomotive purchase other than simple improvements to the depreciation measures? A: Gord Owen, Environment Canada Well, from our perspective, we would like to be able to work broadly with as many of the tools that we can, to which we have access. There are a variety of tools that change actions, and voluntary agreements are one, planning is a whole other one. There are some levers over which Environment Canada has direct control, certainly in terms of voluntary agreements, certainly in terms of cooperative efforts. Those are the ones which reside within our authorities under our Act, and using the Acts some of the provisions which exist within Transport. It becomes much more difficult for me to suggest to you that there are other tools which I might not prefer to actually have access to. Some of these things, I guess, will need to be discussed as we move forward – as to how we can implement the environmental agenda, what some of the best levers are. I’m not sure if I can add more than that. Bob, do you want to add to that? A: Robert Lyman, Transport Canada Well, to some extent, the incentives are already there. As I mentioned earlier, we have our Freight Efficiency and Technology Initiative, which is a $14 million program that includes the $4.5 million Freight Sustainability Demonstration Program. I described a new program, which is $32.2 million. It is not all directed to the rail industry, but the rail industry is eligible, and in fact, we have been strongly encouraging rail companies to participate in these programs. Is a much higher level of incentive than that available? I think, as the Government develops its climate change agenda, going forward to 2010, there will be a number of new measures that will have to be considered because we have not yet identified the measures that will be necessary to achieve that 240 megatonne reduction, and we certainly will have to look at incentives where that’s required. The general issue with incentives, of course, whether they are delivered through the tax system or whether they are delivered through contributions, relates to their cost and visibility. The public, obviously, has a very elevated sense of wanting to have value for their money, and contributions to business get a lot of scrutiny. I mean, I don’t have to tell you that. So, when we look at it, we have to demonstrate to our Ministers that the funding is worthwhile and that it will serve a public policy purpose and that there is a good sense of accountability and performance associated with it. I think that there are broad issues of competitiveness. I mean, it would be difficult to design a program that was specific to one industry that was clearly in a highly competitive situation with another. If the goal is to achieve emissions reduction, then the incentives should be related to emissions reduction without focus on any one particular mode. I take the point very much, I assure you that, while there is always a lot of discussion about level playing fields, there are a lot of bumps in the playing field currently. It is a very difficult issue to come to a good understanding of how the current system of taxes

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and incentives and regulations, ultimately, place one industry relative to another. There was an earlier discussion, somewhat, about the extent to which the government is trying to get an understanding of full costs, because we would like the costs of the transport system to be reflected broadly in the prices that people pay, in order to promote a more efficient system. But getting to the point where you fully understand what those costs are and to what extent they are already currently reflected in the system is a tall order. I mean, there’s a tough analytical task there. And I think we are going to have to make a little bit more progress in that direction before we are going to have a really strong case for arguing that there should be balancing incentives, if you will. So, in summary, I would not say that it is impossible that there would be incentive programs and, in fact, as the Government looks for new measures on climate change, I would encourage the industry to come forward with proposals that it thinks would be quite appropriate. But I caution that there is a lot of scrutiny that would be put on such proposals and the departments would have to work very closely with you on that. Robert Taylor – Executive Director, Policy Development and Economic Analysis Railway Association of Canada The Role of Rail in Addressing Canada’s Kyoto Objectives I have got a fairly dense presentation here. I am going to run through it quite quickly and follow with a bit of a lighter video. I am going to talk about GHG’s, NOx, particulate matter, SOx and the continental nature of Canadian Rail, talk about U.S. EPA and our RAC-EC MOU, talk about some exciting new developments and conclude with some remarks. GHG’s First I will focus on Canadian GHG’s from 1990 to 1999. Transportation represents about ¼ of Canada’s GHG production. It is up 21% from 1990 to 1999. As we heard earlier today, our Kyoto commitment is 6% below 1990 levels by 2010. Transportation is definitely not on track, and I am going to tell you why. If we look at the share of change in transportation GHG emissions – if we look at the quantum of increase, it is about 26.4 megatonnes, using NRCan’s numbers. About 63% of that can be attributed to road freight, and that is heavy-duty trucking. Rail’s GHG emissions are actually down, so we have contributed -1% to the 26 megatonne growth in transportation emissions. Figure 1.8 really drives Canada’s transportation GHG emission problem. It shows the growth rate in for-hire truck traffic in Canada and, as you can see, we had an explosion of truck traffic in Canada in the 1990’s. This is remarkable. The American situation is different, the European situation is different, and a lot of it is NAFTA-related. If you look at the 1994 and 1999 bars on this chart, they coincide with peak GDP levels for that period. We had growth in for-hire trucking in Canada at rates of 20% in 1994 and 15%

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in 1999. Overall, I think we are up about 112% to 2000. So, a HUGE explosion in truck activity in Canada, and a lot of it related to NAFTA traffic. If you look at the breakdown between domestic and cross-border, the large proportion of this growth is cross-border truck activity. Figure 1.8 Growth Rate in For-Hire Truck Traffic

25

Percent Change

20 By 1999 truck traffic had grown by 104%

15 10 5 1991 0 1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

-5 -10 Source: Statistics Canada, Trucking in Canada, 2002

On emissions by Province, Manitoba has done very well and has a lower GHG intensity. I think it relates back to Manitoba being one of the first provinces to endorse Kyoto. A big part of the problem is Ontario, Quebec and Alberta. Ontario and Quebec alone represent about half of Canada’s GHG emissions. For Canadian activity, total freight activity in the decade from 1990 to 2000 increased by 56% on a tonne-kilometre basis. For-hire truck activity, as I said before, grew by 112%, which is more than double – it is an extreme growth rate. Revenue grew by 110%, so revenue more than doubled from $6.6 billion to $14 billion in the for-hire truck sector in Canada. For rail, our activity grew 38%, which is remarkable given the highly regulated state we came from. Our revenue grew by 24%, so you can see that a lot of productivity improvements have been passed on to shippers. If we look at the percentage kind of modal share on an activity basis – in 1990 about 75% of tonne-kilometres in Canada were moved by rail. That is remarkable from a freight perspective, much higher than any other jurisdiction I think in the world. By 2000 rail moved about 66% of tonne-kilometres, with truck moving the remaining 34%.

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If I compare this to U.S. activity you see quite a different story. Total freight activity in the U.S. grew by 43%, slightly lower than Canada, and for-hire truck activity grew by 50%. So, the U.S. had about half the growth rate of for-hire truck activity compared to Canada. Their revenue grew by 39%. If we look at U.S. rail, U.S. rail activity grew by 39% – 9% greater than Canadian rail activity, and revenue was up by 20%. So again, U.S. rail has passed on considerable productivity improvements to shippers. If we go back to modal share you see the U.S. is lower than Canada in terms of the importance of the rail sector, the truck sector is higher. I think it is probably about a 10-15% difference in terms of modal share. These numbers are going to make a difference when I get a little bit further into my presentation, in terms of relating the U.S. experience back to Canada. I have taken this information from the Centre for Sustainable Transportation, I find this very, very interesting. It shows that in Canada from 1990 to 1999, freight energy use has tracked GDP very closely, and passenger energy use has tracked population very closely. So, I think what it shows is that in Canada, we are still very much driven by a manufacturing sector and those goods need to be moved. If this trend continues I think we see further reinforcement of the freight side being the major component of Canada’s GHG problem and our Kyoto problem. We must break that link between freight use and economic activity to become sustainable in transportation. Figure 1.9 shows our GHG performance in terms of intensity between modes from 1990 to 1999, you see trucks improve their intensity by about 27%, and we improved our intensity by 24%. These are NRCan numbers and you are going to see some different numbers. The LEM Report is numbers which are a little bit different, but it shows that both modes have been very active in reducing GHG emissions per tonne-kilometre. It also shows that rail is still vastly superior to truck in terms of GHG intensity.

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Figure 1.9 GHG Emissions per Tonne-Kilometre Freight Transportation

Total

1999 1999 grams/t-km grams/t-km

1990 grams/t-km grams/t-km 1990

Marine

Rail

Truck 0

100

200

300

400

grams/tonne-kilometre

Source: Environment Canada, Fact Sheet #3, Jan 2002

If we look at overall emissions – something that we did not cover earlier this morning, this is really the situation in Canada right now, in terms of road diesel, rail diesel. The growth in road diesel GHG emissions or CO2 emissions are approaching about 40 megatonnes – we are at about 5.5 megatonnes right now. We have had a declining performance and truck has had a considerable increase in CO2 emissions. I think that many people in this room realize – I doubt if the population totally realizes – that GHG’s are a little bit different than the other emissions. If you burn a hydrocarbon, you have to produce a GHG; you cannot put anything in an engine which is going to cause CO2 not to be produced. So if you burn fuel, you have to produce a GHG. I think we look at production in terms of NOx and VOx, which show some really considerable improvements on the truck side. That does not relate to GHG’s. Those GHG’s would continue to increase if activity increases. Figure 1.10 is a DOE chart which shows rail and truck in terms of the baseline best – the best truck that is on the road today compared to the best locomotive, and looks at advancements for trucks and for locomotives. So you see something like a 70 compared to a 20 for a baseline best, and you see something like a 50 compared to a 12 for the advanced locomotive compared to the advanced truck. I come back to some numbers that were put out this morning, and John Lawson and I have had many discussions about these numbers. It shows a truck getting to an efficiency of something like 30 grams per

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tonne-kilometre. That is a double-B train, the 140,000 pound Canadian an truck. That is not the NAFTA truck. Truck size and weight limits are much lower in the U.S. – right now at 80,000 pounds for a U.S. interstate truck. All Canadian truck traffic that goes into the U.S. is at that standard. So, I think that NAFTA truck does not have a GHG intensity approaching the 30 grams per tonne level. I would think it would be much higher. Figure 1.10 Energy Use and Emissions for Trucks and Trains 80

grams/tonne-km

Truck

70

Rail

60 50 40 30 20 10 0

Baseline Best

Advanced

Source: Life cycle Analysis for Freight Transport, SE Technical Paper Series # 982206, December 1998 U.S. Department ofEnergy Report, Dec. 1998

In summary, just on the GHG side – rail carries about 65% of surface tonne-kilometres and produces only 4% of transportation GHG emissions. That is quite remarkable. That is not a function of engine technology; that is a function of steel-on-steel and no grades, very reduced friction. That is why we can have these mile-long trains with much less horse power than what you would have with rubber tires on asphalt with much more considerable grades. The truck comparisons – trucks carry about 35% of surface tonnekilometres and produce about 32% of GHG emissions. Both rail and trucks have decreased GHG intensities, although rail is still about 8 times lower than inter-city truck. So, I come back to look at Canada’s GHG problem and I see very much a modal silo approach. I think the way to really affect this problem is to look at transportation globally, and look at the modes that have the best profiles and the best intensity. As I said before, due to the explosion of truck activity, truck emissions are up about 50%, and rail emissions are down.

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NOx When I talk about NOx, I have added the smog precursor because NOx is a little bit more complicated in terms of its effect on the environment, and it comes back to GHG’s as well. I do not think you can look at NOx purely in isolation because ozone smog is formed at higher temperatures and climate change definitely has an impact on ambient air temperature, which has a significant impact on NOx formation. If we look at NOx in Canada for 1995 (this is the latest data that is available which looks at global emission standards) you see that rail produced about 5% of NOx emissions in Canada; I think it is tied for sixth place here. Electric power generation, which comprises a big chunk, is very relevant in Ontario. Industrial sources are 29%, that is the oil and gas industry. We have heavy-duty diesel vehicles at 17%, light-duty gasoline vehicles at 12%, off-road diesel at 9%. Then we come to rail, marine and light-duty gasoline trucks. I also have to add that these numbers exclude open sources of NOx, and sources of NOx that would come from forest fires and the like, so this just looks at man-made generated NOx emissions. About 57% of Canada’s NOx emissions are from transportation, and that is why NOx is very relevant for us here today. If I look at just the transportations forces – if I look at mobile sources only – in 1995, looking at the global data I see that rail contributed about 9% of those total NOx emissions, and that is in the context of 65% activity. We have road vehicles accounting for 60% of NOx transportation emissions. So if we look at 1995 - and I wish I could have for you today data which showed 2000 – you will see that even though we talk about projections which show considerable decrease in these emissions, that is not the case today. I hope those emissions come to fruition because it is very important for the quality of the air we breathe, obviously, but today we still have a problem. If we look at our overall level of NOx emissions on a kilotonne basis, as we have seen this morning, we are around the 115 kilotonne range, and I think in 2001 about 118 kilotonnes. Essentially, we have been flat over the last 12 years in terms of our overall NOx emissions. On a grams per tonne-kilometre basis, which I feel to be very relevant given that we want to minimize the overall emissions of NOx but continue to increase activity, given that it is core to our economic activity - we see numbers which show that a 23% decrease in our grams per tonne-kilometre emissions of NOx. So we are doing more, and producing less NOx when we are doing it. On a per unit of work basis, which I think is very relevant as I have said before, we have had a 23% reduction, and I am going to get into some of the reasons and how we have been able to do that. Now, what I have done here in Figure 1.11, I know it is a little bit crude, but given the unavailability of overall emissions data in Canada, I have had a look at the U.S. situation. I think it is pertinent from the perspective of similar engines, similar technologies and similar truck sizes in terms of our NAFTA traffic, which is really the driver for our exploding traffic. Based on U.S. data, truck NOx emissions have increased about 6% from 1990 to 2001. What has happened here is – yes, trucks have become cleaner, which is a very good thing, but the reductions in overall emissions has not made up for the increase in activity. This is in the context of about a 40-odd percent growth in activity as

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we have had 110% growth in activity in Canada. You can see U.S. Rail emissions, NOx emissions, are on that same chart. They have tracked very much our emissions. Figure 1.11 U.S. NOx Emissions 4,500

kt

4,000 5.9%

3,500 3,000

Heavy-duty diesel vehicles Railroads

2,500 2,000 1,500 1,000 500 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: Environmental Protection Agency

What I have done is taken the U.S. numbers and looked at U.S. overall fleet efficiency improvement. So, based on Canadian 1995 truck efficiency - which is 18% higher than the U.S. by the way, and that is because of bigger, heavier trucks in Canada – I have taken the Canadian number and then I have applied to it the assumed fleet improvement of 6.5% in terms of overall NOx emissions for U.S. trucks from 1995 to 1999. That would give me a number, in 1999, of 611 kilotonnes for heavy-duty diesel truck NOx emissions in Canada, which is an increase of about 35%. Just to be fair, I have made another assumption - 1999* - I have given them another 25% improvement. Saying that they have improved not 6.5%, but 8.5% or something very close to that, would show that NOx emissions in Canada from heavy-duty diesel trucks are about 24% higher in 1999 than they were in 1995. The bottom line here is – we have yet to see, I think, declining overall NOx emissions from heavy-duty diesel trucks. We are flat, declining on a gram per-tonne basis. I think if you spend time in Toronto these days you get some empirical evidence to kind of back this up. Figure 1.12 shows I have just charted the same numbers – 1999* and 1999 – so, you see Canadian rail versus truck NOx emissions – we have been flat where we still see increases in NOx emissions. I really look forward to the new numbers to see if I am close in my estimates here.

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Figure 1.12 Canadian Rail vs. Truck NOx Emissions (estimated) 700 kt Truck 1999

600

Truck 1999*

500 400 300 200 Rail

100 0

1999

1995 Source: RAC

There is a lack of recent data on NOx emissions by source in Canada, not for rail, but for other modes and other sources right across the board. Very likely, based on the U.S. experience that heavy-duty diesel vehicle NOx emissions have increased significantly in Canada because of an explosion of activity – rail NOx emissions are flat on a significant decline per unit of activity. New Tier 0, 1 and Tier 2 locomotives have significantly lower NOx emissions and we look forward to getting some of those in our fleet. We are challenged by the capital cost allowance situation and the current economic climate which is a little less robust than we would like. But we definitely have plans to incorporate these in our fleet. I would like to reinforce that there is a link between NOx and temperature in the creation of smog. Therefore, GHG emissions are very relevant from an air quality perspective back to NOx. PM Particulate matter is less of a transportation problem. If I look at particulate matter in 1995, excluding open sources, and open sources are huge for particulate matter, I think about 90% of particulate matter comes from open sources, dust being a significant component of that. But I have excluded open sources. Just looking at man-made industrial sources, you see that rail is about 3%, and as I said before, transportation accounts for 17%. Industrial sources are a large source of PM10 emissions and a lot of that is in the forest products, in pulp and paper production. Non-industrial fuel consumption – significant electric power generation. So, you see it is less of a transportation problem. However, it does not mean that it is not important to deal with these emissions, even though it is less relevant to transportation. In terms of our overall 37

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PM emissions, we produce about 2.5 kilotonnes of particulate matter emissions. Those have been flat from 1990 to 2001 and, on a gram per tonne basis, down about 22% in terms of our PM10 emissions. I looked at the U.S. experience, the U.S. fleet based on new U.S. numbers for PM10 and applied it back to the Canadian reality. You can see on the particulate matter side, U.S. trucks have improved considerably. Hopefully when the new PM10 numbers come out, they will show a reduction in overall emissions from heavy-duty trucks. About a 45% improvement in U.S. particulate, PM10 emissions from, I think, 1995 to 1999, which is remarkable. As like NOx, there is a lack of recent data on particulate matter emissions by source in Canada. I think we are going to get those numbers at the end of this year, and they will be very welcomed. In the case of heavy-duty diesel trucks, emission improvements may have outpaced activity, so they have shown decline in overall emissions. Rail, overall emissions are flat, a significant decline per unit of activity. Tier 2 locomotive emission standards cut PM emissions by 80%. I am going to talk a little bit more about that later, but we have got the new locomotives really targeting PM10, which is a good thing. SOx In terms of rail, sulphur dioxide emissions per tonne-kilometre, we have shown some significant improvement, down about 26% on an activity basis since 1990. We are using an average sulphur content now of about 1,500 parts per million, and we are committed to making best efforts to lower our sulphur diesel content. I think some new regulations are going to force us in that direction. Discussions have been initiated with fuel suppliers to guarantee a supply of lower sulphur fuel without a price premium. That is important and we hope we can get there. Sulphur dioxide emissions are also relevant from a particulate matter perspective, so to get sulphur out of the fuel would be a good thing. Canadian Railways are Continental I want to spend just a little bit of time talking about how continental Canadian railways have become. I do not think we really can do justice to the Canadian rail sector if we look at it just from a Canadian perspective. CPR has taken an approach to continental linkages using an alliance model. They have alliances with UP and other railways and are very continental. I will show some numbers to reinforce that. As you know CN acquired the Illinois Central and now CN is east-west across Canada and north-south right into the Gulf of Mexico. A core part of CN strategy was to become more continental in reach. If we look at overall data in terms of Canadian railways importance of trans-border activity, you see about half of Canadian rail is trans-border. CN is a little bit higher than CPR. In the case of CN, 57% of revenue comes from U.S. domestic and trans-border movements. In the case of CPR, 45% of revenue comes from U.S. domestic and transborder activity. So, in the context of the EPA, very very relevant for Canadian rail. If

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you look at our domestic activity compared to our trans-border activity, a large part of our growth, just as in the case of trucks, has been related to NAFTA and cross-border activity. You can even bring that up another level. I think the Canadian economic expansion in the 1990’s was NAFTA-related and being derived demand, transportation providers have definitely piggy-backed off that. Locomotives in service, and I think this is relevant from an EPA perspective – we have about 15% of the North American fleet here. In 2002, there were 3,129 locomotives in Canada, and almost 21,000 in the U.S. So we are a small part of the locomotive market. The average age of locomotives – and this comes back to the discussion that we had this morning about CCA rates – the average age of the Canadian locomotive is 11% higher than the U.S. locomotive. A lot of that is linked to lower CCA rates in Canada. It takes us about 20 years to write-off a locomotive, whereas it is fully written off in the U.S. in 8 years. That has a considerable impact on your capital budget, especially if you are in a taxable range and we are in that range now. EPA regulations Now before I get into the actual detail related to the EPA regulations, I just wanted to throw out a quote. This quote I got out of the preamble to the Act in 1997, and it shows a little different U.S. versus Canadian philosophy, and that goes right across the board. It is reflected in TEA 21 and it is reflected in regulation, as well. The U.S. regulators and U.S. policy makers have endorsed the concept of modal shift. That does not mean that there will be no trucks on the road and that does not mean that everything will be moved by rail, but there is a range and there is definitely activities that trucks can move than can be moved by rail. I am just going to read this quote: “Information currently available to the EPA shows that truck based movement generates more pollutants (NOx is what they are talking about) per tonne-kilometre of freight than current unregulated rail-based forms of freight movement. Estimates quantifying the difference indicate that locomotives are on the order of three times cleaner than trucks on an emissions per tonne-kilometre basis. Any freight carried by trucks instead of by rail would increase overall emissions, even at current levels.” Right in the preamble of the Act, they recognize that if they bring in undue, highly prescriptive regulations to rail, that it would have an undesired effect on overall emission levels. In terms of the detail related to EPA regulations, which came in January 2000. It is applied to newly manufactured and remanufactured locomotives. By 2005, that is the Tier 2 standard, it should be a 48% reduction in NOx and an 80% reduction in PM. I think the 28% just pertains to Tier 1 going to Tier 2, and does not apply to shortline railways. The initial target was NOx, and when you look at NOx being important from a transportation perspective, that is why the EPA initially focused on NOx. They left the more stringent PM criteria to be introduced later in Tier 2 locomotives.

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As I said, going from Tier 0 to Tier 2 in NOx is about a 48% reduction and going from Tier 0 to Tier 2 in PM is about an 80% reduction. So, these are considerable reductions in emissions. I look forward to hearing from the locomotive manufacturers tomorrow, in terms of how they got to these numbers. When I first joined the RAC, and it was I think around the time EPA came out, there was a view in the industry that these numbers might not even be attainable. I think with several hundreds of millions of dollars and some creativity, locomotive manufacturers managed to be able to get to these levels. They have also done it with a projected reduction in fuel consumption as well. Which is a challenge given that some of the ways you can reduce your overall NOx emissions will cause you to burn more fuel. To sum up, EPA regulations apply to Canadian locomotives using cross-border service, and I have just shown you how important cross-border service is to our industry. Class 1 railways need to have locomotives to be compliant for operational flexibility, given the high percentage of cross-border activity. So, we cannot have a bunch of these locomotives that are being used and being optimized – and we have done a lot to increase our overall asset utilization – that are not flexible for operation in the U.S. Both locomotive manufacturers have new locomotives, which meet stringent EPA Tier 1 and Tier 2 standards. More efficient, new and rebuilt, high horsepower locomotives are used in highly intense, dense main line operations, and that represents the vast majority of our fuel consumption, maybe as high as 90%. I just wanted to touch on something else, too. Passenger rail is important, definitely, from RAC’s perspective. I have not focused much on passenger rail in this presentation because I think passenger rail produces about 250 kilotonnes of GHG’s – it is very very small. So about 90% of our fuel consumption is on a highly intensive dense operation. Other ways we have reduced emissions and ways we have managed to keep our overall NOx and particulate matter flat are: • • • •

•

SmartStarts to reduce idling; Heavier car loadings – we are going to a 286,000 pound car loading in Canada; Track lubrication which lowers friction; Co-production and bi-directional running, which is being used out west. The video is going to get into this, in which the empty lighter trains go on the higher grade and the heavier trains go on the lower grade. CN and CPR share access to track which has, I think, taken a full locomotive out of service for a lot of CPR movements; and Increased asset utilization.

Just to talk a bit about the MOU, which has been a very good thing. It expires in 2005. It has some real benefits, and I think the lack of data for other sources and other modes is in contrast to what we have for rail today, because we have very good data. We collect and report data on annual traffic volumes, annual diesel fuel consumption for mainline,

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branchline, yard switching and passenger service. We include emissions in NOx, CO2, hydrocarbons, sulpur dioxides and carbon monoxide. We also calculate and report on fuel consumption in three Tropospheric Ozone Management Areas (TOMAs) and those are areas where smog is a bigger problem, such as: Quebec-Windsor corridor, Lower Fraser River Valley and the Saint John, New Brunswick area. The report also details locomotive fleets and measures being taken to reduce fuel consumption and emissions. There are many benefits of the MOU model versus other approaches. The target is overall emissions, which allows us to minimize emissions per unit of work. Our overall emissions, which is very important from an air quality perspective. Annual reporting and data, which is very valuable, allows us flexibility to meet our cap and our requirements in the best way possible, and the way which minimizes our overall economic impact. It is very simple from a regulatory perspective and is providing the desired results. Exciting New Developments We will hear more about the new GE evolution series locomotive – very remarkable, and the new GM locomotive, which is Tier 2 compliant. The JetTrain, which can offer some advantages, definitely, from a passenger perspective, and the Green Goat, a hybrid locomotive for rail switching operations. This is a hybrid locomotive (which shows some real promise) it is very similar to a hybrid car, which has a very small diesel engine which is used to charge a battery bank. This may be the intermediate step, as in automobiles, in hydrogen vehicles because hybrids are on the road today and they offer some real advantages. Conclusion Recent data on Canadian emissions are not available for other sectors and other modes, and I think that is really important. We cannot look at these things in silos. We cannot look at policy in a silo. Tax policy is very very relevant from an emissions perspective. The fact that government is not set up very well to deal with these over-arching issues should not be the problem – we have to deal with that. Also, before we look at regulation and negative impacts in modal shift, we need to look at the sources of overall emissions right across the board. For example, in Ontario, coal-fired generation is way more relevant from a NOx perspective than a rail NOx emission, that is for sure, and maybe not truck. Emissions from rail represent a small proportion of emissions at a given activity level and are flat or declining. Overall GHG emissions from heavy duty trucks are increasing with a corresponding increase in NOx. There is definitely a link between global warming and smog. Our MOU is providing desired results in reducing already low levels of emissions. EPA is setting the standard for the new locomotive fleet. New locomotives have significantly lower NOx and PM emissions. They are being brought to Canada and will be brought to Canada in the future, because we need to be EPA compliant for transborder activity. Lower CCA rates in Canada are a problem for us. It is a competitive disadvantage, not only with Canadian truck but also U.S. rail and is affecting our ability

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to have a solid capital budget. Overzealous treatment of rail will increase emissions due to a negative modal shift. Q: Chris Gotmalm – EcoTrans Technologies I am Chris Gotmalm, from Eco-Trans in Sioux Saint Marie. We have observed, both heard and seen the speakers talking about the flat NOx curve, and that it will be better in the future. We have about 2,000 APU’s which you will hear about later on. In places in the United States and there are very few up here. The driver in this development is, of course, the fuel savings and emission savings which are related to that, but even more so, the emissions trading, the emissions threat. So I want to ask a question here to the organizers – are we going to have any discussion about emissions trading during these two days? A: Robert Taylor, Railway Association of Canada The Government of Canada has not endorsed emissions trading for – I guess it depends on what emission you are talking about – it is definitely for GHG’s, so we are looking at a voluntary approach across industries. So I think that is one that is very relevant for the Government, and being part of the rail industry it is hard for me to answer that question. I think it is a public policy question and it is another tool which can be used to lower emissions – any emission – and it can be used very effectively if set up in the right way. It can minimize overall emissions per unit of work, which is the goal. The problem with emissions trading usually relates to its complexity and how you deal with different anomalies in the marketplace, but it is a public policy question, and it is another tool that has some real merit. Q: Peter Eggleton – TELLIGENCE Group Is one of the conclusions from your very well-presented series of explanations on the different emissions, relative to other modes and other sources, that we do not have to worry too much about the rail sector, or do too much about the rail sector? I am sort of concerned about that. A: Robert Taylor, Railway Association of Canada No, I think probably the choice of words – thank-you for the compliment – I think that we are on track, to use a pun that we use a lot in the rail sector. You can expect in the future for our emissions to come down, and on a gram per tonne-kilometre they are coming down now and I think the fact that we have increased activity and have not increased the overall level of emissions is very relevant. I think that we have got a good framework in place which could deal with some tinkering, maybe, in terms of our ECRAC MOU, then we have got essential compliance with EPA Tier 1, Tier 2. So, I am not saying it is not relevant. I am saying that we are on track, but I am also saying, “Be careful, because we are not the problem.” Unless you look at everything globally and

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know exactly that you are dealing with the right problem, do not do anything because you can affect overall emissions in a negative way if you look at it in just a silo approach. I think that is what I am saying. Q: Peter Eggleton – TELLIGENCE Group We were just involved in an American Society of Mechanical Engineers presentation in Erie a couple of weeks ago. One of the emphases in the sector session like this was how a very little change, a small increment in the railway sector, by modal transfer from the trucking sector, could make a significant reduction overall in the emissions. I am sort of wondering what the Railway Association of Canada is doing to promote this relative to, I mean – you can’t make some inferences of the iron highway and a few others, but one would think that you could promote this significantly in a contribution to reducing the overall transportation emissions issue. A: Robert Taylor, Railway Association of Canada Yeah, well, it is a cornerstone of, I guess, the RAC’s Policy Platform, and given that the Federal Government especially, and a number of the provinces have signed on to Kyoto and have committed to reducing – I will just take GHG emissions – that we use it as a cornerstone outcome for a number of our public policy desires. It is right to the core. We have completed analysis which shows – and I know John and I have had a number of discussions about it and we have presented in other circles – that a modal shift of something in the range of 15-20% can have a huge impact on GHG emissions. The NOx and particulate matter is a little bit more complicated, if you assume that trucks will be NOx-free by 2007. Then you get into fringe land but if you look at ratios of emissions right now, I would also suggest that you could reduce NOx and particulate matter emissions right now by shifting to rail, just because of our intrinsic fuel advantage. We have pushed hard with all levels of government to get that message out that some considerable savings in emissions can be had by moving to steel-on-steel from rubber-onasphalt. As I said earlier, the U.S. has been more receptive and it is part of TEA 21. They have also been more fulsome in infrastructure spending related to modal shift and again, like the EPA, I find many more examples in the U.S. I think in Canada, just to sum up, part of the problem is jurisdictional issues. Provinces are involved in trucking and the Federal Government is involved in rail. I think that is one of the major challenges we have at the RAC. You look at the proliferation of heavy trucks and large trucks, which have negatively impacted GHG emissions because they are still not as efficient as rail. They evolve at provincial decisions. So I think the jurisdictional issues are very relevant. Lee Jebb – Vice-President Manitoba/Saskatchewan Cando Contracting The Role of Shortline Railways in Canada Proceedings withheld at speaker’s request.

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SESSION 2 – RAIL IN OTHER JURISDICTIONS Lionel King – Senior Engineer, Environment, Rail Safety Transport Canada Session Chair As the first event for this afternoon – we are going to hear from Tim Hibbard, who will give us a few remarks and address on behalf of David Anderson, the Federal Minister of the Environment ADDRESS ON BEHALF ON ENVIRONMENT MINISTER DAVID ANDERSON Tim Hibbard Director, Departmental Affairs Environment Canada Thanks very much and welcome to Winnipeg. For those of you who aren’t from here, it is like this most of the time and days like today when it’s sunny and 25º in October, I am very pleased to be with Environment Canada. It looks like you are going to have more of this for the next couple of days for your field trip as well, so get out and enjoy. But attend the sessions, as well. Unfortunately the Minister is out of the country. He is in Helsinki today, still continuing his tour of Russia and Helsinki and so on at the World Conference on Climate Change. So, his regrets at not being able to be here today, but he did want to thank Conference Chair, Bill Rowat, for the invitation for him to attend this second workshop. Our department is very pleased to have been one of the sponsors of this event. We are expecting that the next 2 ½ days will allow for some stimulating exchange on some of the best practices, technological developments and other initiatives that can help to address air emissions from locomotives. It will be important for participants to hear about the contribution rail can make to reducing greenhouse gas emissions from transportation in Canada. Clean air and climate change are very very clear priorities for the Government of Canada, and we are excited about the potential for rail to contribute to our country’s Kyoto objectives. Equally, we believe that similar progress can be made in achieving Canada’s clean air objectives. We would like to commend the railway industry for the steps that it has taken towards reducing emissions and improving energy efficiency in its operations over the last decade. We know that reports submitted to our department by the Railway Association of Canada, under the MOU we have regarding locomotives, indicate that while railway traffic has increased nearly 28% in the last decade, fuel consumption by the locomotive fleet is down 2%. Clearly a very impressive achievement. Improved fuel efficiency is a key component to reducing greenhouse gas emissions, and we would like to encourage the industry to work for continuous improvement in this regard. Environment Canada also believes that more work needs to be done to reduce the pollutants that create smog. We know that the industry shares this belief and that it

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wishes to uphold its environmental achievements in the context of advances forthcoming from other modes. Projections carried out by our department, with input from the Railway Association, indicate that the existing rate of regulatory and technological progress will result in nitrogen oxide emissions generated by locomotives exceeding those of all on-road heavy-duty vehicles by 2020. We are looking to the Canadian railway industry to align with U.S. emission standards for individual locomotives. South of the border, these standards will achieve a 66% reduction in nitrogen oxide, and hydrocarbon and particulate emissions will be reduced by 50%. The Minister’s view is that Canadians deserve no less. The railways opened up this country and have been a part of our history and our culture for nearly 150 years. Clearly, the railways will also be a key part of our ongoing prosperity into the future. On behalf of the Minister, I encourage you to enjoy the next 2 ½ days and wish you a very productive workshop. Thank-you very much. Robert Fronczak – Assistance Vice-President Environment & Hazardous Materials Association of American Railroads (AAR) AAR Emissions Issues A few observations before I get started. One is that I came here from Washington, D.C., and in my geography, that is a lot further south than Winnipeg is. When I walked off the airplane, it was actually warmer in Winnipeg than it was in Washington when I left. Secondly, the one thing I did notice is that I am glad I am not any later in the agenda because all the good presentations this morning covered a lot of the material that I am going to be covering today, so hopefully that will make my presentation a little bit shorter and get us through the afternoon agenda. Third, we in the United States are still on that old English system of units and I did not convert my presentation to metric, I’m sorry. I looked for the PowerPoint feature to do an auto-conversion – I couldn’t find it. If anybody knows it, come up after my presentation and we’ll talk. The outline of my presentation: • • • • • •

I want to cover railroad fuel efficiency and some of the environmental benefits of rail that we have heard a lot about this morning already, What AAR has done to improve energy or fuel efficiency, as well as emissions in general, Some fuels regulation that is going on, and we have already heard a little bit about that, Something that we haven’t heard about, yet – the EPA Smartway Program – it is a voluntary program to facilitate energy efficiency in the U.S. Land Transportation industry, I will talk a little bit about a new locomotive emissions initiative that EPA has got going on, And then, finally, talk about a commitment that we have made to the White House Council on Environmental Quality to reduce our greenhouse gas intensity.

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You have heard some of this, this morning already. We have increased the amount of revenue ton-miles that we have transported since 1990 by 44%, and yet during that same time we have only increased the amount of fuel to make that happen by 19%. A lot of that has to do with our fuel efficiency; we have improved fuel efficiency in the U.S. by 71.4% since 1980. Figure 2.1 shows that there is a little steeper curve from 1980-1990 than there is after 1990. But we continued to improve our emissions and our fuel efficiency in the U.S. rail industry. Figure 2.1 Fuel Efficiency in Revenue Ton-Miles Per Gallon

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Rail double-stack transportation is approximately three times more fuel-efficient than truck transportation. That came out of an FRA report. If just 10% of freight moving by highway were diverted to rail, the nation could save 200 million gallons of fuel annually. That goes to the point that the gentleman made about ASME earlier today. One doublestack train can carry the equivalent of 280 truckloads, thereby reducing highway congestion as well as wear and tear, with approximately 20% of the horsepower. We have heard this morning, about the fact that the rail industry does maintain its own rightof-way, owns and maintains and pays taxes on its own right-of-way. So we do that without, actually, having to spend the government’s money to do it. Over the past three years, railroads have invested billions of dollars, several billions of dollars, to acquire 2,500 new, more energy-efficient locomotives that reduce emissions, and we do that on our own nickel. Here are some things that you are probably familiar with; this came out of an Environment Canada report done in 1994. It shows rail as being the number one choice from an environmental perspective, on NOx, VOx, carbon monoxide and carbon dioxide, and we were a very close second to air in particulate matter. If you look at it on a constituent-by-constituent basis, we were 4.5 times better than truck on carbon dioxide emissions; 6.6 times better than truck on NOx emissions; 9 times better than truck on

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carbon monoxide emissions; and 9 times better than truck on volatile organic compound emissions. EPA Regulations – and we heard this, this morning also – require a 60% reduction compared to 1990 levels on NOx emissions, starting in 2005. So I think, if you add up what Robert Taylor mentioned this morning, you are going to come up with about 60% improvement overall in the Tier 0, Tier 1, Tier 2 regulations. Perhaps Chuck will get into that a little bit more later. Railroads operating in the State of California have voluntarily agreed to accelerate the introduction of low-emission locomotives in the State of California. That is something that we have done on a voluntary basis to help California with some of their severe pollution problems that they have got. Robert Taylor mentioned this one already – that EPA has observed that locomotives are three times cleaner than trucks on an emissions per ton-mile basis. We talked about ASME (American Society of Mechanical Engineers) – they are saying that if 10% of intercity freight moved by highway were shifted to rail, 2.5 million fewer tonnes of carbon dioxide would be emitted to the air annually. We take up less space than highway, also. Currently, I am sure that you are all familiar with highway delays – nobody likes it. In the U.S., we exceed two billion hours annually, which cost tens of billions of dollars per year in lost wages, due to highway congestion. Building more highways is not always the answer. Each new highway claims more scarce land, invites even more punishing traffic, wastes additional fuel, increases air pollution, contributes to accidents, and exhausts publicly-funded road maintenance budgets. Concerning land use – we are far more efficient than highways. This statement again came out of the Environment Canada report where two railroads can carry the same number of people in an hour as 16 lanes of highway, demanding a right-of-way of only 59 feet wide versus 400 feet, which is required by highway transportation. We do not receive any federal money at all, so we are paying taxes on our property and we are also completely paying for the upkeep and maintenance in operation of the railroads. A single freight train operating on privately owned tracks can carry 200 trailers and containers that otherwise would be going on the highways; again causing the government to spend money to fix and build those highways. By shifting freight from truck to rail, highway congestion can be eased – and ease the pressure to build new highways. Now I am going to go into some of the AAR activities. We have worked fairly closely with the U.S. Department of Energy (DOE) over the last couple of years, on a multi-year research plan for improving locomotive fuel efficiency. DOE has established, or is in the process of establishing, a budget to help assist in that research. It is looked at as a public-private partnership, where we are looking at a 50% DOE contribution and a 50%

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railroad industry contribution. Right now, there is only about five or six hundred locomotives per year manufactured. If you compare that to the hundreds of thousands of automobiles and trucks that are produced each year, it does not give you a lot of units to distribute research over. So we are looking for some support from the federal government to help do some research to get to the next level in the railroad industry. We developed the railroad and locomotive technology road map that was published in December of 2002. That road map looks at: • • • •

Engine research – that is something that will be done primarily by locomotive manufacturers, and we will probably hear more about that tomorrow, when they talk. Locomotive systems – again, that would be things that take energy off of the locomotive engine, ways to improve the efficiency of that – again, the locomotive manufacturers will be primary on that. Train systems – and I will talk more about that, but things like aerodynamics, or just the way trains are operated. We will be looking at that. And then, finally – advanced power plants and fuels. Again, I think that we will hear more about that tomorrow when we talk about fuel cells and other technologies.

There are some EPA grants that have been awarded to improve railroad fuel efficiency. There has been some idling reduction technology that was introduced in Chicago and, I believe, Houston, also, where the EPA is funding some of the introduction on that technology. There is a voluntary emissions program in both Los Angeles and Houston, where the railroads have come together and agreed to do some things like introduce some of the newer locomotives or idling reduction technology in those areas to help those areas that are fairly – have some severe impacts. The one thing that is not up here, EPA is also looking to come up with some sort of emissions-trading program, a credit program. They have drafted a program, they have asked us to take a look at it, and it is in the fairly preliminary state. EPA is looking at our comments to that at the present time – something that has been done quite a bit for stationary sources, but has not been done a lot for mobile sources. You have heard about the “Green Goat” and its benefits and the evolution series locomotives and I know the other engine manufacturers are also working to improve fuel efficiency and reduce emissions. One of the things that we also have ongoing with the State of California is a program that BNSF and Union Pacific are funding – that is to look at particulate matter from Switcher locomotives. The Norfolk Southern Corporation actually donated a Switcher locomotive engine that is out at the Southwest Research Institute. The initial part of that research focused on oil consumption – trying to make the engine tighter, so that we can take advantage of some of the after-treatment technology, which includes particulate traps. We have done all of the oil consumption testing and right now we are looking at implementing the after-treatment testing. That is something that is fairly far along in the

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highway market – after-treatment devices for emissions, but it isn’t very far along in the railroad industry. I am not sure if everybody has heard of it, but AAR has a Transportation Technology Centre out in Pueblo, Colorado. It is a very large facility where we do real time testing of rail equipment, track, as well as cars and locomotives. We have a Strategic Research Program where we sink – the industry sinks about $10 million a year into research to improve efficiency, and also, for improved safety. One of the things that we have looked at is Top of Rail (TOR) lubrication. It is fairly well known that it does improve fuel efficiency, but the idea is to try to make that equipment hardened enough to withstand the railroad operating environment, and then to develop the implementation strategies for that equipment. Another piece of research is wheel rail profile. I am not sure if you have heard of it, but a real big part of our strategic research right now deals with stress state, what stresses the industry? 286,000 pound rail cars stress the rail environment, and that is a real issue with the shortline industry. Well, one of the things is just the wheel rail profile and just getting that right has the potential to reduce emissions or improve fuel efficiency between one and two percent. In addition is the Advanced Truck Program. Just making that truck more efficient and prevent it from hunting – which is very inefficient – also has the ability to increase fuel efficiency. What we are doing currently this year is, again, Top of Rail (TOR) lubrication. We are looking at different types of friction modifiers. One of our railroads – the Norfolk Southern Corporation, worked with a soybean-based supplier and they feel like they have got a really good product that will help improve or be able to be used for Top of Rail lubrication. And then, again, facilitate the development of Top of Rail applicators that can withstand the railroad operating environment. We are going to continue to work with the Department of Energy on this multi-year program and submit proposals as that money becomes available. Right now, Congress has authorized up to $25 million a year over a 3-year period. This compares to, historically, $75 million a year that has been spent on highway research. We would just like to get a little part of that. Now, the administration has appropriated last year, I think, $5 million for off-road research and part of off-road research is locomotives. So, we are just getting a very small percentage of what Congress felt was appropriate for the industry. We are going to continue monitoring the California Emissions Program (CEP) and work on the after-treatment technology that is currently ongoing. Regulations – you have already heard what the caps are and what the years were. I think what was not stated this morning was that it has the potential – going to 500 parts per million – to cost our industry $92 million per year. That is based upon a 2.5¢ per gallon

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increase in cost. Going to 15 parts per million is $178 million in extra cost. Now, EPA has recognized that railroads, right now, do not have the technology to utilize the 15 parts per million diesel fuel and that is why they are saying that it would not apply to the marine and railroad industries until after 2010. I guess they are trying to figure out when after 2010 the technology might be available that we could take advantage of – things like the particulate trap technology. There were three hearings and we testified at all three hearings on that regulatory initiative. One thing that you did not hear about this morning is the Smartway Program and that is a voluntary program the EPA has. It is similar to – I am not sure if you are aware of the Energy Wise Program, but on certain appliances that you can buy in the United States, they have a little Energy Wise sticker and it shows that it has met some sort of EPA criteria on energy efficiency. This would be something similar where it would try to give incentive to the ground transportation industry in the United States to make improvements on fuel efficiency. That includes the shippers, the manufacturers and the carriers. One of the strategies that EPA is talking about and has in their program currently, is the use of railroads as a Smartway strategy. In other words, they recognize the benefits of rail transportation being more fuel-efficient than highway. So, that is an actual strategy that the shippers can use and other highway carriers can use to meet their Smartway goal. Railroads have been asked to meet a certain percentage increase in fuel efficiency by some year. The year we are talking about is fairly short-term, probably 2006 and 2007, and we are trying to figure out what that ‘x’ should be in improvement in fuel efficiency, keeping in mind that we are not quite sure we are going to be able to get improvements as we implement the Tier 1 and Tier 2 locomotive emission standards. Then each railroad would be able to determine how they would get to that standard. They could implement idling reduction technology, operating controls, whatever. The EPA does plan on implementing new locomotive emissions regulations. There is an Advanced Notice of Proposed Rule Making (ANPRM) that is due out some time early next year. EPA has asked us to participate and come up with what that locomotive emissions regulation ought to be. We formed a committee just recently, to try to put our heads together and figure out what that new locomotive emissions regulation ought to look like. There will be a lot more work done on that in the near future. Finally, AAR did commit to the White House, at their suggestion, to reduce or improve energy efficiency or intensity by 18% by the year 2012. Now, what we did is we looked at the DOE Road Map that I talked about earlier and we felt that, if we could do the research that is indicated in that road map, we could increase fuel efficiency by 25% in 2012 and by 50% by 2022. So, we felt that the 18% was do-able, but it is contingent upon getting some research money, and right now, it is unclear whether the government is going to be coming through with that research money or not. In conclusion, I wanted to say that railroads are part of the solution. You should be able to look at the total emissions from highway or ground transport and develop ways to

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move some freight off of the highways, onto a more energy-efficient means of transportation and be able to reduce emissions as a result. EPA recognizes that, and they have got it built into one of their programs. The railroads are going to continue to work on fuel efficiency improvements and emissions reduction technology on our own and we hope that we can get some money from the Federal Government to help us with that. Q: Ash Olesen – Canadian Pacific Railway Just two questions, which are somewhat related. With respect to the 18% reduction in greenhouse gas intensity by 2012 – could you give me the definition of greenhouse gas intensity? And the related question is that, in the Smartway Program, you were looking for a railroad industry target of ‘x’% by ‘y’. Would that be related to our target of 18% by 2012 or can you give me a sense of that? A: Robert Fronczak, AAR Well, the answer is, or the definition is, revenue ton-miles per gallon and that is what we are looking at as far as an intensity measure goes. As far as ‘x’ by ‘y’, we looked at the 18% by 2012. We looked at the 25% by 2012 and the 50% by 2022 and there was a lot of discomfort committing to a straight line – using the 18% for instance, because of the short-term effect that we saw that might be occurring due to the Tier 1, Tier 2 standards. So, we are trying to come up with what a short-term goal can be, knowing that we have got some issues with the Tier 1, Tier 2. That is why we are having a hard time figuring out what that number ought to be. Q: Daniel Hammond – Transport 2000 Are there any moves to harmonize the environmental rules for railways between Canada and the U.S.? I understand you have some Canadian members. A: Robert Fronczak, AAR Yes, I don’t know if I heard it this morning or not, I think I did hear it at the last Railways and Environment workshop a couple of years ago – I think that the Canadians realize that most of the locomotives that are going to be built are going to be built to the U.S. standards. I think that – I am not sure if the Canadian government needs to go through a regulation because I think they are going to get it anyway. So, as far as what the Canadian government is actually going to do, you are going to have to ask them. I do not know that, but here is a good guy to ask. Q: Daniel Hammond – Transport 2000 Just one final point – although Canada is officially metric, when you ride our railways, you will find that they still use mile posts. They probably have 4 foot, 8 ½ inches between rails, too.

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Q: Peter Eggleton – TELLIGENCE Group I would just like to raise a point. You have projected that one of the main attempts now is to get some research and development funding from DOE, FRA and anyone else in the U.S. There is a mirror image of that on the Canadian side too. You probably have heard of a number of individual initiatives that have occurred in Canada, that are also being recognized in the States. One would think that – if we go back to the 1970’s, and one of the most successful trans-border cooperative research and development programs was the so-called AAR-RAC Train Track Dynamics Program – 10 year, $10 million effort that was coordinated by the AAR’s Dr. Bill Harris that involved the Federal Railroad Administration financially assisting AAR, and in Canada, it was Transport Canada through the Transportation Development Centre, financially assisting activities of the Railroad Association of Canada. They were coordinated and they reinforced each other, and I think there were tremendous results that have occurred from the, sort of, contribution to the safe and present way that the railways operate. One would think that there was a similar opportunity in the area of locomotive energy efficiency and emissions reductions technology development. I just sort of put that to you because we have a precedent of a mechanism that worked for a problem that was similar because of the integration of the Canadian and U.S. railway network. And we have a similar recognition of current need, which is to reduce emissions and improve the energy efficiency of the locomotives and the railway sector. So I sort of put it to you in that regard, if you have any comments. A: Robert Fronczak, AAR Well, I think that is a very good suggestion, and there is no reason why that can’t happen. I mean, we have a group right now that developed and worked with our government on the Road Map. The Canadians were right there at the table with everybody else. So I guess, the key is trying to get the governments to both agree on what ought to be done. Q: Peter Eggleton – TELLIGENCE Group If I could just add one more point, I was involved in some of the governmental activities. Once I recognized that the other side was putting some money in, that was, sort of a technique that was used by each side to stop the chances of getting their budgets cut two and three years downstream, which is very very common. Because, if they did, they may have caused an international incident, and everybody wanted to avoid that at that time. I don’t know if the U.S. Administration has the same strategy as now but that did work, at that time. A: Robert Fronczak, AAR

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We do this fairly extensively on tank car-related research and hazardous material safety kind of research. And we have a project that is ongoing right now where Transport Canada and FRA are contributing money to one project. Q: Daniel Hammond – Transport 2000 Bob, I should just mention – in respect to Peter’s question – that, in fact, somebody referred to it. There are some Canadian members of your organization at AAR. Two of the big members in AAR are CN and CPR. But RAC itself is another big member in AAR and, instead of conducting a lot of activities on our own, we pay something like a pass-through of $2 million a year to share in the kind of research and development programs that they are running. A lot of either our members or employees of RAC actually sit on a number of the committees and so on that Bob was referring to. So there is quite a close linkage in terms of the kind of programs that you are talking about. A: Robert Fronczak, AAR And that is how to make it happen. Terry Judge – Director of Sales and Marketing Kim Hotstart Manufacturing Company EPA’s First Project to Reduce Locomotive Idling The most qualified person to talk on this subject is Mr. Paul Bubbosh, at the U.S. EPA in Washington, D.C. Paul could not be here but gave me his blessing and much encouragement to go ahead and discuss the project with you. I am going to first talk briefly about Kim Hotstart so you know a little bit more about our company. We will then talk about locomotive idling, the problems, the solutions that are out there, get into the project itself and how it worked and the technology that was used and what we have learned at the conclusion of the project. Kim Hotstart is based in Spokane, Washington and has 100 employees all working from our 80,000 square foot manufacturing facility. We are certified to ISO 9001-2000 and many of our products are CSA approved. Our sole mission is to develop innovative diesel engine heating solutions that reduce emissions, improve fuel conservation and improve operating efficiencies. The company was established in 1942 with the first patent on engine coolant heating. Our first product was used to heat diesel engines in school buses so they could start easily without idling. Still today, Kim Hotstart is the preferred supplier to Blue Bird Bus and Thomas-Built Bus for their block heaters. Kim Hotstart diesel engine heaters are also used in heavy-duty trucks, construction and mining equipment, pipeline compressor stations, military applications, ships, locomotives and standby generators. We can all relate to standby generators after all the power outages we have had recently. In gen-sets, our heating systems are used to keep the

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engine temperature above 100ºF, so in the event of a power outage, the diesel engine can start quickly and ramp up to full power quickly keeping that office building, factory, prison, or hospital in continuous operation. Our first locomotive application was done in 1965. This system allowed an idling locomotive to be shutdown by using external electrical power to heat and circulate the water in the locomotive engine. In 1977, Kim Hotstart brought forward the first combination system that heated and circulated both the water and the oil of the locomotive engine. Over 2,000 of our electric plug-in systems have been installed on locomotives. One of the things a few railroads brought back to us, especially the Class 1’s, was that sometimes it wasn’t convenient to bring the locomotive back to a power pole when they wanted to shut it down. Also, there were a few locations where power was just not available or too expensive to bring in. The railroads asked us to develop a stand-alone system that would allow the locomotive to be shut down anywhere. We worked on the system for several years before bringing it to market in 1998. We call it the Diesel Driven Heating System, or DDHS for short. This is the technology that was the subject of the EPA project. The EPA studied locomotive idling and estimated that 38% of the time a road locomotive is idling. In a switchyard application, the number is even higher, 59.8%. I believe the RAC statistics are higher yet; 60% for a road locomotive and 80% for a switchyard locomotive. Perhaps one of the reasons that the RAC idle times are higher is because of the amount of cold weather here in Canada. Why do locomotives idle? Freeze protection is the biggest reason. Locomotive engines do not use antifreeze so you cannot shut down a locomotive in freezing temperatures. The next biggest reason is difficult start-ups. When the engine is 50ºF it is not easy to start, even with good batteries, and most of the time the locomotive batteries are weak and start-up is even more difficult. Most of our customers require that the locomotive engine temperature be maintained above 100ºF for easy re-starts. The problem with idling, as you might guess, is that it is a very wasteful activity. Idling results in a lot of emissions and wasted fuel consumption. There are other problems with idling as well, but these are the two biggest problems. Figure 2.2 shows the fuel consumption at idle for a few different locomotive models. From this data, we can see that locomotives consume from 3.7 to 5.1 gallons per hour while at idle. Figure 2.2 Excess Fuel Consumption (gallons/hour at no load) Model SW12/SW15 GP7/GP9 GP38-2/SD38-2 GP40-2/SD40-2

Idle 3.8 3.7 4.5 5.1

Notch 3 9 8 11 11

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Fuel consumption at notch 3 is also shown because this occurs when idling in cold weather. A typical railroad policy will state that when the ambient temperature drops to 40ºF, leave the locomotive idling, and if the temperature drops to 10ºF, bump up the throttle to notch 3. Notch 3 idling jumps fuel consumption up to 8-11 gallons per hour. In even colder temperatures, Alaska Railroad idles at notch 5 where fuel consumption is even greater. Idling in cold weather is especially wasteful. Using EPA estimates and average fuel consumption figures, we can easily calculate that an average locomotive consumes 21,000 gallons of fuel a year while idling. If we were to factor in some notch 3 idling for cold weather, fuel consumption at idle is 24,000 gallons a year. What pollutants are emitted at idle? The average switchyard locomotive emits 265 pounds a year of particulate matter and 4.5 tonnes a year of NOx. There are many idle reduction solutions that have been developed over the years and are commercially available. The two main generic categories are auto start/stop systems and engine heating systems. Which way to go depends on the ambient conditions. What are the lowest ambient temperatures experienced year-round? Considering these temperatures, what will it take to maintain the engine at 100ºF? How much time during the year does ambient temperature force idling for freeze protection? Figure 2.3 is a slide that was borrowed from BNSF. When BNSF studied what kind of idle reduction technology to apply in their different yards, they looked at a couple of extremes. They looked at the average low temperatures around the year for a yard in Houston, Texas and a yard in Havre, Montana. They concluded that engine heating systems would not be fully utilized in Houston given the year-round warm weather. To reduce idling of locomotives in this environment, they would use auto engine start/stop systems like SmartStart. However, in the Havre environment where sub 40ºF temperatures forced idling nine months of the year, engine heating was definitely required to shutdown the locomotives.

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Figure 2.3 Engine Heating Needed in Havre, but not Houston 80 80

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Most of Canada is similar to Havre with plenty of cold weather. Before I came up here, I asked the question, “Where is our closest installation to the conference?” It happens to be right here in Winnipeg. The City of Winnipeg has three locomotives that are used to help service the aqueduct. They use our electric plug-in engine heating systems to eliminate idling, reduce fuel consumption and reduce emissions. The EPA project was the first demonstration project to reduce locomotive idling. It was driven by the idle reduction directive that is in the President’s National Energy Policy. Our newest system, the Diesel Driven Heating System, was the idle reduction technology selected by the EPA for the project. The EPA Office of Transportation and Air Quality provided the funding and leadership under Paul Bubbosh. The City of Chicago Department of Environment, also put forth funding. The railroads involved in the project were the Burlington Northern Santa Fe (BNSF) and Wisconsin and Southern Railroad. Kim Hotstart was the technology supplier. Three DDHS’s were installed on BNSF locomotives and four were installed on Wisconsin Southern all within the Chicago area. The goal of the project was to study the technology and quantify reductions in fuel consumption, emissions and noise. The project kicked off in April 2002, after all the partners agreed on the scope of work. The technology was studied over a year’s period and the EPA should be releasing a final report shortly. Let’s look at the technology studied in the project. The Diesel Driven Heating System does four things: 1) It heats and circulates the locomotive water, 2) It heats and circulates the locomotive oil, 3) It charges the batteries, and 4) It powers the cab heaters.

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How does it do that? It starts with a small diesel engine which is coupled to a centrifugal water pump. This circulates the locomotive’s water and at the same time allows the engine to operate at multiple speeds to generate the necessary heat. The engine’s waste heat is captured through heat exchangers and transferred to the water and oil of the locomotive. The system operates automatically once the locomotive is shut down by the crew. It is small enough to install easily on the walkway of a switch engine. This is important since the switch engines are the ones that do the majority of the idling. The fuel consumption of the DDHS ranges from zero, when dormant, to 1.23 gallons per hour, a fraction of the fuel consumed by the locomotive when it idles. The DDHS runs off the same diesel fuel supply that is used by the locomotive engine. It heats and circulates the locomotive water and heats and circulates the locomotive lube oil. Early on in the project, one concern came up from BNSF. They said that in their initiatives to reduce idling during warm weather, they did not have good success getting the crews to shut down the locomotives. They said, “We have been beating our crews over the head for 40 years that you never shut down an idling locomotive, especially in freezing weather. How are we now going to get them to shut them down in freezing weather allowing your system to be utilized?” We put our heads together and rather than developing our own system that would allow the locomotive to be automatically shut down, we partnered up with ZTR Control Systems, who has been making a system called SmartStart, which automatically shuts down the locomotive. We signed a strategic alliance with them, allowing both companies to share proprietary engineering data and come up with a solution that worked nicely together. We then installed the first combination “Hotstart-SmartStart” system on the BNSF 2133. Not only did SmartStart automatically shutdown the locomotive, but it also gave us data logging and fuel savings reports that could be accessed over the Internet via satellite. This was very nice for the project partners to be able to monitor actual idle reduction results directly from our respective desktop computers. The DDHS was installed on two types of locomotives; GP38’s, like the BNSF 2133, and SD40-2’s, like the Wisconsin Southern 4001. Three systems were installed on each model type. Only one, the 2133, had both the DDHS and the SmartStart. All of the installations were inside installations. There was plenty of room inside the engine room for installing the system. The EPA held their launch event in September of last year with several dignitaries that witnessed a demonstration of the DDHS. Let’s get into the results. What did we learn? We tracked idle reduction by hours – how many hours we were able to take off the locomotive engine through idle reduction. If you look at Figure 2.4, on the left hand, the y-axis, we have cumulative idle hours reduced. The locomotive with the most idle hours reduced was the 2133 with 2,500 hours. The other units paled in comparison. It is no coincidence, we felt, that 2133 had the combination Hotstart-SmartStart system and the others did not. It was being automatically shut down; the others relied on the crews, and the crews were not shutting

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them down. This despite a bunch of training we did with the crews and applying stickers all over the cab. Figure 2.4 Idle Hours Reduced 2,500

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From BNSF’s perspective, they were looking at their three locomotives back in the November/October time frame and they were starting to see this huge difference in idle time and wondered, “Is this just an anomaly? Is this just an isolated case, or do we really have something here?” To further investigate it outside the project on their own, they purchased and installed three additional systems; two combination “Hotstart-SmartStart” systems and one with just a stand-alone DDHS. This now gave BNSF six equipped locomotives, three with combination systems and three with the stand-alone DDHS. Over the remaining months, the three locomotives with combination systems proved to have more idle reduction than those with the stand-alone DDHS due to the automatic shutdown capability. The data logging we did on 2133, as of September 7th, 2003, showed that the locomotive was in service for 298 days, shutdown time was 2,500 hours, fuel savings was $11,465, and the average fuel savings was 42.7 gallons per day. Additional potential fuel savings was $2,126. In estimating the emissions reductions, we came up with 119 pounds of particulate matter and 2.2 tonnes of NOx. One thing to note is that we are ignoring the higher notch level emissions so all the emissions reduction data is conservative. The FRA conducted noise testing and concluded that the DDHS is significantly quieter than an idling locomotive. This can be a big benefit and a great solution when citizens are complaining about idling locomotives.

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What about cold weather performance? The locomotives experienced freezing temperatures between November 7th and April 6th and the coldest ambient we saw was 0ºF on January 27th. The DDHS showed no problems in being able to keep the locomotive engine hot during cold weather and allowed it to be easily restarted. BNSF asked us the question, “Since we are going to have colder temperatures than 0ºF in many of our yards, what IS the coldest temperature that the DDHS can maintain the locomotive engine at 100ºF?” Our theoretical answer was -66ºF. How did we come up with that? First, we tried to pick the coldest day in Chicago, but we missed it by a couple of days and instead of getting that 0ºF day, we ended up with a 29ºF day. Then, instead of allowing the system to maintain the water temperature between 100ºF and 120ºF as it normally does, we changed the controls to allow unlimited heating. The DDHS drove up the temperature of the locomotive water to 195ºF and the oil to 180ºF. If you take 195ºF and subtract it from the 29ºF ambient, that gives us a 166ºF rise over ambient, subtract out the 100ºF lower limit of where you want your engine temperature to be and that is where we come up with a theoretical answer of -66ºF. Since this is just theory, the next logical question is; what is the coldest ‘real world’ temperature that the DDHS has maintained a toasty locomotive engine? Outside of this project, up in Fairbanks, Alaska, Alaska Railroad has been utilizing the DDHS. They witnessed a day last year of -38ºF. They went through a normal 16-hour shutdown using the DDHS. The engine water was maintained at 100ºF, the batteries were charged and the locomotive restarted easily. Our “real-world” answer is -38ºF. Some of the lessons we have learned is that the DDHS is a reliable method to reduce locomotive idling, even in very cold weather. As a stand-alone system it is limited by the human element, the crews shutting down the locomotive. Also, a DDHS with a SmartStart system can provide the greatest idle reduction. That wraps up the EPA project. To give you a look ahead, we are now right in the midst of launching our Transport Canada project with Athabasca Northern. There will be two DDHS units installed on two of their GP9’s operating up north in the Fort McMurray area. We are excited to be a part of that project and expand our work in Canada. Considering the amount of cold weather there is up here in Canada and the amount of idling that is still being done out there, we think there is tremendous opportunity to reduce idling, conserve fuel and reduce emissions. Please feel free to give me a call if we can help you. In closing, I would like to give special thanks and recognition to the EPA project partners namely the EPA, especially Paul Bubbosh, the Burlington Northern Santa Fe and Wisconsin Southern Railroads, the City of Chicago Department of Environment and ZTR Control Systems. Thank-you.

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Lionel King, Transport Canada Session Chair Since we are doing very well for time, and I thank both of you for that – it gives me the chance to exercise a small amount of privilege in just throwing a gratuitous observation here, that having sat behind a government desk for awhile, I have observed and it occurs to me that one of the points of annoyance, at least for the common folk, with railways is the noise and the fumes from parked and idling locomotives in freight yards and dispersal yards and what have you. That is an area which, for one reason or another, does not always seem to get adequately addressed to the satisfaction of all concerned. I would just throw out the thought and invite you to give some thoughts of that, perhaps, yourselves. Since I do not think we have any formal content on that particular topic in this workshop, just something that sprang to mind as a result of Terry’s excellent presentation there. Chuck Moulis – Environmental Engineer United States Environmental Protection Agency U.S. Emission Standards for Locomotives and Locomotive Engines For those of you who are not familiar with how emission regulations are developed in the United States – Congress has established the Clean Air Act, which requires the EPA to reduce emissions and meet certain air quality standards. In the last set of revisions for the Clean Air Act, Congress directed the EPA to set emission standards for locomotives and for other non-road engines. Our focus was on the criteria pollutants of ozone and PM and their precursors. If you want details on the regulations, they are available on our web site along with supporting documentation. By basic design, locomotive engines tend to be very high in NOx and relatively low in PM. This has to do with factors such as engine speed. Before control, locomotives emitted about a million tonnes of NOx each year, which is about 5% of the total in the U.S. For that reason, the primary focus of our rulemaking was on controlling NOx emissions. PM and HC were really more of a secondary issue initially. We did not regulate fuel consumption or CO2. Our initial projection was that our standards were not going to affect fuel consumption at all. It turns out, now, that new technologies are actually resulting in some net reduction in fuel consumption. The standards that we set apply very broadly to locomotives – virtually all locomotives in the U.S. One of the unique features of the rule is that we set the standards to apply both at the original manufacture of the locomotive and also when each locomotive is remanufactured. I will talk about that a little bit more later. I just want to briefly mention the few locomotives that are not included in our rulemaking: •

Locomotives that were built originally before 1973. These represent a relatively small fraction of the U.S. fleet and are owned mostly by the small railroads.

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• • •

Steam locomotives. Small locomotives, which are regulated under our general non-road engine program. Exported locomotives, or locomotives from Mexico or Canada that are used solely for border traffic.

I want to clarify something that was said in an earlier presentation. We DO regulate locomotives owned by shortline railroads, unless the shortline railroad is a small business. Although, many of the shortline railroads that are not small businesses actually own the older locomotives, which are excluded from our program. The exemption for border traffic was intended to be fairly limited. In general, locomotives that would come across the border could be considered imported, and if they were imported, they would be subject to our standards. During the rulemaking, the issue was raised about locomotives that are used just to come across the border and go back. The RAC requested that there be an exemption for that. We tailored a narrow exemption that would limit it, but it is limited only to locomotives that do not operate extensively in the U.S. – where their U.S. operation is incidental to their primary operation. This is clearly not something that is intended for Canadian locomotives that compete with U.S. locomotives. The standards that we set were set in three tiers which are currently being phased in. The first tier, Tier 0 was for the existing fleet. Tier 0 standards achieved some marginal reduction in NOx – about 34%. These would probably be met with mostly calibration changes and some redesign. The second tier is an interim tier that requires a little bit more redesign of the engine, achieves a little bit more emission reduction, NOx reduction, but also relies heavily on calibration changes. The third tier is the one that was expected to be a major redesign of the locomotive, resulting in significant hardware changes, as well as calibration changes. Tier 3 is projected to reduce emissions by about 2/3 for NOx, and HC and PM emissions by about half. In order to ensure that we got good broad control of emissions over all operations, we established two duty-cycles. One of them, a line-haul cycle is a high-power cycle that emphasizes the high-power notches. The second is a low-power cycle or a switch-cycle, which emphasizes idle and low-power operation. By requiring locomotives to comply with standards over both cycles, we ensure that the manufacturers design the emission controls to work effectively at each notch. With respect to the test procedure, our primary goal was to make sure that we could test the engine when it is installed in the locomotive and that we could get good representative emissions testing. It is nominally, a steady-state test procedure, but we do measure changes during power changes and we also set up a broad range of test conditions so that we could test outdoors. Figure 2.5 is a table of the standards, and the first thing I want to mention is that these are actually the standards, not the emission levels. What I will show later is that the actual

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emission levels tend to be a little bit below the standard and the manufacturers build into them a compliance margin to make sure they comply in use. Figure 2.5 Emission Standards (Line-Haul) E m is s io n S t a n d a rd s f o r H ig h - P o w e r ( L in e - h a u l ) D u ty c y c le (g / b h p - h r ) NOx PM HC CO A vg . B a s e l in e T ie r 0 S ta n d ard

1 3 .0

0 .3 2

0 .4 8

1 .3

9 .5

0 .6 0

1 .0 0

5 .0

T ie r 1 S ta n d ard

7 .4

0 .4 5

0 .5 5

2 .2

T ie r 2 S ta n d ard

5 .5

0 .2 0

0 .3 0

1 .5

Another thing that I want to point out is that if you look at the initial baseline emission level for NOx of 13.0 grams per brake horsepower hour, that is significantly higher than the uncontrolled baseline level for highway engines. This has to do with the locomotive design. But, conversely, the hydrocarbon and PM emissions are significantly lower than the uncontrolled highway. I guess the last thing I want to point out on this chart is for Tier 0 and Tier 1, you will notice that the emission standards are higher than the baseline. This was done to make sure that our hydrocarbon and PM control did not, in any way, hinder the feasibility of the NOx control. I will show what the actual emission results are in a little bit. Figure 2.6 is the Switch Standards. The only thing I want to mention here is that the standards are quite a bit higher than the line-haul standards. This has to do with the brake-specific emissions at idle and low-power being higher. This represents comparable technology or comparable emission reduction.

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Figure 2.6 Emissions Standards (Switch)

E m is s io n S t a n d a r d s f o r L o w -P o w e r ( S w itc h ) D u t y - c y c l e ( g /b h p -h r ) NOx PM HC CO A vg . B a s e l in e

1 7 .4

0 .4 4

1 .0 1

1 .8

T ie r 0 S ta n d ard

1 4 .0

0 .7 2

2 .1 0

8 .0

T ie r 1 S ta n d ard

1 1 .0

0 .5 4

1 .2 0

2 .5

T ie r 2 S ta n d ard

8 .1

0 .2 4

0 .6 0

2 .4

Figure 2.7 displays the actual certified emission results. This is an incomplete set, but you will see that most of the NOx emissions are around 8.5 or so and this is a little bit below the standard. That is the compliance margin I talked about. You notice the PM emissions vary quite widely but most of them are clustered right around the baseline level of about 0.3. You will see, in the lower left corner, the next generation of locomotives meeting the Tier 1 and Tier 2 standards.

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Figure 2.7 Certified Locomotive Emission Levels

Certified Locomotive Emission Levels

NOx (g/hp-hr)

11 10 9 8 7 6 5 0.0

0.1

0.2

0.3

0.4

0.5

PM (g/hp-hr) The result of the standards is that in the near term, we are projecting a 30-40% reduction in NOx emissions. NOx emissions will gradually reduce further beyond that. But for hydrocarbon and PM, the emissions reductions do not really occur until Tier 2 kicks in. While these reductions are good and we are very pleased with them, there is still, if you will notice, quite a bit of emissions left out there 20, 30 years from now. I will talk about our next steps to address these emissions at the end of my presentation. Our locomotive rulemaking was very different from our previous rulemaking for other sources. I am not sure how many of you are familiar with those programs; I will talk briefly about these differences. The most important difference is the requirement that remanufactured systems, remanufactured locomotives, be re-certified. These other differences are just shown to give you a feel for how hard we worked to make sure that these locomotives actually comply in the field: • • •

Minimum useful life, In-use testing, In-use maintenance requirements for operators.

In most of our programs, for highway engines, and for other non-road engines, we require a one-time certification. The manufacturer is only liable for the performance during the 64

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first period to rebuild, within the period we call the ‘useful life’. However, this is not an effective program for locomotives, which can be rebuilt six times or more and can last 40 years or more. One of the interesting things about locomotives is that, when they are remanufactured, they really become almost like a brand-new locomotive again or like a new engine. That characteristic enabled us to set standards that were equivalent for the locomotive when it is remanufactured, equivalent to what we would have set for the brand-new locomotive. The way we do this is that we require that the final product, the remanufactured locomotive, be certified as meeting our emission standards and that somebody take responsibility for its emissions. They do that by certifying a remanufacturing system, which is often referred to as a remanufacturing kit. However, this is a little bit misleading because the system may not include any parts at all, there may actually be no physical kit. It could just be specifications for parts or calibration instructions. We set it up as a market-based program where the market decides who certifies and we opened it up broadly to the manufacturers, to companies that make emission-related parts, to people who actually install the parts, or to the locomotive owners. It is my understanding that we are actually getting some of each that are certifying their systems right now. The ‘useful life’ period I talked about is the period in which the manufacturer is responsible for emissions. Normally in our old programs, we would set a single value that would apply to all engines and it would be fixed. Well, this does not really work for locomotives, because the applications are so variable. There is no single number that works best, and if we set a number that is too small, then we are encouraging manufacturers to not design durable emission controls. If we set it too long, then we are forcing them to design controls more durable than are needed. So what we did instead, was set a minimum value and then require manufacturers and re-manufacturers to specify longer useful life periods if they actually are designed to operate longer. The minimum value we set was about 750,000 miles and we make some rare exceptions for engines that are not designed to last that long, but those are intended to be fairly rare exceptions. We also established a very robust in-use testing program, a two-phased approach, one for the manufacturers, one for the railroads, to make sure that these locomotives are meeting the standards in use. The first one is the manufacturer requirement to test during the useful life. They test at least two locomotives and as many as ten. If that testing shows that the engines are not compliant with the standards, then we could order the manufacturers to recall the product and fix the non-conformity. The second program, the railroad program, is really more of a monitoring program to make sure that the emission controls of those locomotives that operate beyond the useful life period, beyond the period in which the manufacturer is responsible, are still functioning reasonably well. As you recall, I said the useful life period is the average period to rebuild. By definition, many locomotives operate longer than that period, and this is just a way for us to stay on top of the performance of the locomotives in that period. The amount that the railroads have to test is a relatively small number, maybe 5 or 10 locomotives a year, and we allow them to use some short-testing procedures to simplify the program.

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The last unique feature of this was a mandatory requirement for railroads to perform the emission-related maintenance. This is something we had never done before in our previous programs. Under this program, the manufacturer specifies what emissionrelated maintenance is needed to keep it in compliance, and the railroads are then required to do that. If they do not perform the maintenance, there is a possibility of significant fines. But, because we know the railroads are going to need flexibility in implementing this, we give them the option of specifying equivalent procedures and demonstrating to us that they have a reasonable basis for believing they are going to get equivalent control. Probably the most important question here is: what are our next steps? The program that I have just outlined gets very large reductions, but as we get pressed for tighter and tighter air quality standards, the EPA is asked to find more and more ways to reduce emissions. We recently established very low emissions standards for on-highway diesel vehicles and are proposing to set similar standards for non-road. Those standards for non-road that we are considering right now are 0.4 grams per kilowatt-hour NOx, and essentially a zero PM level. The PM mass would only be the sulphate PM. In that proposal where we talked about the NOx standards for non-road, the EPA did propose to lower the sulphur level to 500 ppm for locomotive fuel. We also stated our intent to consider very low emissions standards for locomotives. The starting point would be to consider standards that are essentially equivalent to highway engines or to other non-road engines that are currently being considered. Those standards are projected to require sulphur-sensitive after-treatment for NOx and for PM. To go along with that, we proposed for non-road engines, and are considering for locomotives, requiring that they use 15 ppm fuel. The open question right now is: can these technologies be retrofitted to existing fleets? We would really like that to be the case, but there may be packaging constraints in some cases. We are not sure of the extent to which these technologies can be retrofitted. The other issues that we are looking at are trying to implement an on-board diagnostic type system, where we take advantage of all the new advancements in on-board monitoring of emissions and engine performance to see if we can use that as a way to better control emissions in use. Also, to perhaps mandate the automatic shutdown systems that we have heard so much about. The next step in this process will be an advanced notice of proposed rulemaking, which would then be followed by a proposed rulemaking and a final rulemaking, probably some time in 2006. There is information, a little bit of information, available on the EPA web site at this address on these next steps, http://www.epa.gov/nonroad/f03009.pdf. Right now we are in a fairly early stage in the process of trying to sort all this out and figuring out what is the right level for locomotives and what is achievable. Q: Normand Pellerin – CN Rail

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Just a bit of clarification on your slides about the exporting locomotive and cross-border traffic. Most of the two major railroads in Canada, because it was too complicated basically to try to time the number of hours that each locomotive goes across the border and comes back into Canada, we have embarked on the program of complying with the Tier Program system, the same way as we were in a U.S.-based company. Therefore, all our new locomotives and all of the locomotives that are going across the borders are always Tier-compliant so we would not have to be worried about the time-line and the duration of their trip down to the U.S. Because most of our operations are so much integrated with what is going on in the U.S., it would not be feasible for us to try to comply with a regulation like that. A: Chuck Moulis, U.S. Environmental Protection Agency Right. Yes, I think when we originally were looking at this rulemaking, the number of Canadian locomotives that were essentially used in U.S. fleets, and vice versa, was much smaller than it actually turned out to be. And so, yes, I think that this exemption is probably not all that valuable. Q: Lionel King – Transport Canada Do I understand it that there is a gradual deterioration in the performance of all locomotives, over time of use in terms of the emissions that are actually coming out? In other words, is it automatic that there is going to be deterioration or can just regular maintenance keep it at, basically, a new standard? A: Chuck Moulis, U.S. Environmental Protection Agency Unfortunately, there is no yes or no answer to that question. NOx is formed because of high temperatures and high pressures in the engine, in the cylinder. With wear, sometimes you lose compression, and that actually lowers NOx emissions. So, there may be little or no deterioration in NOx emissions as a locomotive ages. With PM – a lot of the PM controls require very fine control of the fuel droplets, the spray patterns, things like that, and those controls, when they wear, actually do not work as well. So the PM emissions are more likely to deteriorate, and hydrocarbons as well. Once the locomotive is remanufactured, in our opinion, there is no reason why it should not be as good as new. Its emissions should be no worse than they were when the locomotive was originally manufactured. For the new technologies I am talking about, the after-treatment for NOx especially, that is probably going to be a different story. Those will likely deteriorate with use. Question: Two questions: number one, when you talk about responsibilities of railways to make sure they do the maintenance over the period, the life period of a railway engine – what happens with the trucking industry? Will there be the same kind of follow-up for highway and other non-road diesel engines?

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A: Chuck Moulis, U.S. Environmental Protection Agency Right now, there is no plan to do that for users. I get these kinds of questions quite a bit, especially from the trucking companies. One of the things they did not like is that our standards are less stringent for locomotives than they are for trucks. They do not like that in the U.S. The States are completely pre-empted from regulating locomotives, whereas they can regulate trucks. And what I tell the truckers is, that the railroads are required to do maintenance and in-use testing. I think it is not obvious that either one of them is better than the other. We considered that in our rulemaking. The railroads let us know that they thought the pre-emption was so important that they were willing to do additional maintenance requirements and in-use testing; they thought that was a fair exchange in order to get complete pre-emption of state controls, and have it be a federal program only. Question: The second question is somewhat related. I think earlier today, a number of people quoted the fact that you do not want to discourage rail. In fact, if anything you want to encourage rail overall as a policy because, on a per ton-mile basis, it is more efficient and less emitting. But, under your first bullet under the second item, there may be similar to new standards for highway and other non-road diesels. On a per ton-mile basis, is that not going to discourage the use of rail? In fact, on a per ton-mile basis, if you implement that, if I am reading it correctly, you are going to be far more stringent, on a per ton-mile basis, than you would be, say, with the trucking industry? A: Chuck Moulis, U.S. Environmental Protection Agency I would encourage all of you to read the word ‘similar’ there loosely. I do not mean that to be the exact same standard, but the technologies could be similar. We haven’t figured out what the level will be. We certainly would not set it at a level that we knew was going to cause modal shifts. That is not our goal. At this point, we do not know what the costs are going to be of various emission levels. It may be similar in terms of technology, but it actually may be higher numerically. Q: Malcolm Payne – Engine Systems Development Centre Chuck, you related to that database you had earlier. What was involved and how long did it take to establish that database? A: Chuck Moulis, U.S. Environmental Protection Agency Those are the certification emission test results. For every manufacturer and remanufacturer who submitted data electronically, those data were automatically entered into the EPA database. I requested that our compliance folks give me some of that information; they sent me a huge spreadsheet. I just went through and pulled many of

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those numbers out. It is an incomplete set and there are some glitches in it. That is probably about half, maybe a little bit more, of all the certification emission tests we have. Q: Ash Olesen – CPR Hi, Chuck. Just wanting to take off a bit on what Normand had brought up with respect to the cross-border traffic issue and your, I think it’s the, ‘incidental use’ clause. I believe, when you were speaking, you had used the phrase that, “if the locomotive were in competition with a U.S. Class 1 railway, then it would be considered to be subject to the requirements of the locomotive regulations.” I thought that was really a good piece of wisdom in evaluating that clause. I mean, if you are in competition, then clearly, you should be playing by the same set of rules. I just wanted to take this opportunity to make the point that, yes, indeed, the Canadian Class 1’s are complying with the EPA locomotive regulations by virtue of moving into the U.S. and competing with the Class 1’s in the U.S. And just wanting to make the point, maybe for the benefit of some of the folks here from Environment Canada and Transport Canada that, with respect to competition and a level playing field, it is very important to the Class 1’s in Canada that we be given the same kind of tax breaks that some of our U.S. colleagues get for when they do remanufacture their locomotives. Currently, the Class 1’s in Canada are not enjoying, perhaps, the same benefits as the U.S. Class 1’s. I just wanted to take that opportunity to make that point. Harry Gow – Founding President Transport 2000 Canada Rail in Other Jurisdictions Well, “Rail in Other Jurisdictions” is a little pretentious because I have had to limit my scope. I would have liked to talk about the Asian sub-continent, in particular India, which is a subject of fascination for me. But I decided to stick with some comparable continental-size railway systems and throw in Japan very briefly, simply because of the image of the railway system there. Greener pastures, “The grass is always greener on the other side of the fence.” When I am talking with journalists and the public, I’m always hearing this: “Oh, if we only had railways like those in Europe, those in Japan, those in here or there.” They are held up as examples of modernity. Does this really mean, then, that our railways are underequipped and ineffective? Not so sure they are. We have the broken-up, privatized Japanese national railway system with JR East, JR West, and so on and you can see that, on a very large system of islands which are more than the equivalent in size of the Canadian corridor, you have, on a very strung-out high-speed railway system, trains running at 270-300 kph, at frequencies that would leave you gasping. More like GoTransit, than like VIA Rail, and yet people will say, “Well, that’s all very well. Japan is very densely populated, and so on. We don’t have the population base.” That may be so. On the other hand, a lot of the people that say this cannot have visited Vancouver,

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Calgary, Edmonton, Montreal, Toronto, Halifax, or Ottawa, recently. There seems to be population there, unless the places are only populated by cars popping around under radio control. It seems to me that there IS a population base; maybe not enough to do THAT (a Japanese-style high-speed system) but, perhaps, to do something. So, having compared us with something which is really very, very different – I will go on to things that are a little closer to home. For instance, the United States, Europe and Australia, with a little bit about Russia. The sources are: UIC (Union Internationale des Chemins de Fer), the RAC, AAR, trade journals, personal observation, including field trips and seminars known in the business as ‘gold-bricking,’ railway tourism of a kind. Let’s look at some data. I am afraid I haven’t had the time to put this stuff into graphs, so bear with me. In Figure 2.8, what we are seeing here is that, while the European railways have large freight volumes, they are barely more than half the volumes of the total volume in NAFTA. Europe here is bigger than just the European Union, what we are talking about is ‘Europe Plus’ – going east to, at least, the border of Russia. So the scale is continental and, in a sense, it is roughly comparable with what we have here. Figure 2.8 International Data – Railways

Passenger millions km, Freight million tonne/km n Europe: Pass 575,326 Frt 1,861,023 n N. America: Pass 10,740 Frt 2,465,236 n Canada: Pass 1,564 Frt 220,000 RAC n Australia: Pass 1,350 Frt. 38,525 n World: Pass. 1,906,597 Frt. 7,471,720 Source: UIC 2001 Proportions of passenger to freight vary greatly!

The thing I want to underscore is that passenger kilometres are much higher, overall, in Europe and, taken country by country, they usually are notably higher in places like Switzerland but, also, in France and Italy, and so on. In North America, on the other hand, what really dominates is freight. You can see massive amounts of freight being moved by rail in North America. If you go on a percentage basis comparing the USA with Canada, a country with about 10% of the population of the United States, you can see that these figures factor out rather nicely. In passenger field per capita, we actually have a slightly higher use of trains than they do in the States, but that is arguable when you start getting into what is a commuter railroad. I will not get into that issue. The idea 70

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is to give you a bit of scope, so sorry for the raw data. I hope it gives you some idea of the scale of production on various continents. I would say, as we go through this, let’s keep a close eye on Australia, because in many respects, as my brother, who does consulting in Australia from his base in Thailand says, “Australia, of all the countries I have visited so far, is the one that most closely represents Canada.” He includes the railways in that comparison, with, of course, some squiggles. There is for instance, a lot more narrow-gauge trackage and (there is) some broad-gauge trackage. In Europe, railways run off 7% of all the passenger-kilometres produced; in other words, the car, the airplane, and so on are still very important in Europe. I think the critical thing is, where are these travel patterns occurring? Usually in and between major urban centres in Europe and they have invested heavily in this. In the U.S., by comparison, 0.6% of the passenger-kilometres executed are done on rail. In Europe, on the other hand, railways only have 15% of the tonne-kilometres, and this includes countries in the east where rail is dominant. So, you have to bear that in mind that, if that is the average, then it is very low indeed in countries like Great Britain. Finally, in the United States – and this is very conservative, this is from the Union Internationale des Chemins de Fer, UIC – 40% of tonne-kilometres are executed by rail. I do not know if the difference in their percentage with the figures advanced by the AAR is explainable by, possibly, the addition of marine freight, or something like that. There are inconsistencies here, at times, even within my presentation. What I want you to note is the broad trends. Not too daunted by the avalanche of raw data? I know I am, at times. Now, we come back to Australia. Their rail freight share is a bit lower than here, particularly in the southern part of Australia in the Sydney to Brisbane belt and the Sydney-Melbourne-Adelaide belt. Truckers have taken a very large share of a highervalue freight and there is, as here, a feeling among railways that they have been slagged by unfair regulation and rather loose regulation on trucking. You have the same debates in Australia that we have here about this issue. You can see that their freight tonnekilometres is impressive and their passenger rail kilometres seem fairly high in comparison with Canada’s, if you account for the fact that they have 1/3 less population. An interesting figure that I got from the Australian transport statistics for 2003 was that 0.3% of Australian GHG emissions come from rail. That may be surprising and I thought about it a bit and I realized that a lot of the ton-miles are being run off in places like Queensland, where the Queensland Railways are heavily electrified. That may be a part answer. Another is, very efficient, heavy haul railroads, like the Hammersley Iron operation up in the northwest, which are producing huge amounts of ton-miles in very ideal circumstances, fairly equable weather, recent railroads with good grading and not many grade crossings. That kind of thing tends to reduce your greenhouse gas emissions. If this is true, if the Australian government is reporting correctly, for the amount of tonmiles they are getting out of their freight railways, they have a really inconsiderable greenhouse gas problem, with respect to railways, even better than here. In Canada, we see a slight drop in carryings. Rather, you have ups and downs in carryings, 2001, yes a little less than 2000, but very, very small percentage drop. What I

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really wanted to underline was that 32% of the ton-miles being run off are not bulk, it is not potash, it is not coal, it is not grain, it is widgets. I think that is probably a little higher than most people would think. The chit-chat I hear from reporters, and I get a lot of them calling me runs like this: “Well, don’t railways mostly just operate on coal traffic?” Well, maybe in some places, but it is not necessarily the case all over Canada and not all the time. In summary, in Europe, rail passenger is a greater factor. Rail freight is lessened to the point that the European Commission is a bit despairing about it. In the U.S.A., Australia and Canada, rail passenger is less and rail freight traffic is greater. When you hear the environmentalists talking about the poor performance of Canadian railways as compared with European railways, they are only referring to the passenger sector. They never seem to bring up the freight sector, and in fact, they have a myth: that somehow railways must be disciplined and brought under control, because supposedly they are producing huge amounts of greenhouse gas emissions or their bearings leak oil onto the track or they are using too much in the way of Chipman Weed Destroyer, or whatever. I sometimes wonder where this is coming from. Moving on to Japan, Russia and China again. Japan shows a freight million tonnekilometre profile that resembles some of the worst performances in Europe. It is possibly explained by the three-foot-six gauge system that handles pretty well all the freight. It is a rather antiquated railway, even if they do have modern locomotives and microprocessors and all that stuff. The alignments and the curves, and so on, are not that good. Russia is something more of a North American-type railway, if you allow for the fact that they do have rather large passenger volumes. And again, China is not that far from Russia, but with their huge population, they obviously have enormous passenger volumes. What does all this mean for greenhouse gas? What it means is that the continental-sized countries, generally, except Europe, are doing very well in the freight sphere and most of them, except Canada and the United States and Mexico, are doing quite well in the passenger sphere in carrying significant loads and producing reductions in greenhouse gas emissions AS COMPARED to what would happen were road the dominant freight mode in those countries. Well, ask a Russian about road being a dominant mode between Vladivostock and Moscow and he’ll laugh at you because there is none. They do it all by rail, and in fact they have recently electrified the last stretch of track in Siberia to have electrified railway, double track, carrying containers all the way from Nakhoda and Vladivostock at the Japan end right through to Europe at the other end. Another set of indicators I wanted to look at is investment. This is a very partial poll done by International Railway Journal, a couple of pages of which I distributed. I think it is April 2003, but my referencing is deficient because I forgot to write it down on my copy and didn’t bring the original. The illustration here is that the major countries invest huge amounts in passenger rail, even the United States. Canada and Australia have more modest investments, but in a typical year, I would say that one Australian state,

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Queensland, with only 9,000 kilometres, is investing in a typical year, as much as Canada on a huge system with many thousands more kilometres of track. So, go figure. European railways as compared with American railways stack up quite well. Obviously, BNSF is very different from the Swiss National Railways or from the RFF network on which the essence of trains run in France – more compact in Europe, very spread out on the BNSF – but it is amazing how the ball-park figures are largely in the same order of magnitude from one railway to another. Maybe someone should do a study on railway size versus investment and whether there is something in the railway culture that says you only spend so many thousand million dollars U.S. per year. I don’t know. There is a nascent theory there, somewhere. The subject of network links is where it gets interesting. People were talking about constraints on investment in Canada and, perhaps, to a lesser degree in the United States. The NAFTA countries have 23% of the world’s railway network in length but only 14% of the world’s investment. Now, that is partly explained, perhaps, by the richer investment needed for passenger rail, but only partly. The European Union has 15% of the length but 43% of the investment. Not all of that difference can be explained by the passenger rail factor, in my view. China has 6% of the length and 17% of the investment and yet they have North American/Russian type tonnages going over their railways, so they are investing extremely heavily. Some of that is new-line construction mind you, but there is also electrification and stuff like that going on. Just to quickly look at what is being done in Europe – the investment on the lines in Europe is always in the billions of dollars, it seems, particularly in France. This is the French high-speed rail network which covers much of the country except the Massif Centrale around Clermont-Ferrand, Limoges, Bourges, the rest is pretty well covered by a dense network of trains that run off the high-speed lines, on into the smaller provincial towns. The next in that series shows kind of a ‘sparks effect,’ as they call it in Britain. What happens when you electrify and speed up the trains? The distances from Paris, as you radiate out from Paris, with distance, the transit times get longer. The changes are by hour so you see a significant swath of France is within an hour of Paris and then two hours, and then three hours, four hours and five hours when you get down to, say, the Spanish border, maybe even a bit more. That is on a railway that manages to respect schedules pretty well, on a railway where they make, on one line alone, Paris-Lyon $350 million a year profit. That line was built without government subsidy. It was just money borrowed from the bank, paid back over 8 years instead of the projected 11 years. The rate of return at the time of opening until it was paid off was 12.5% per year, capital costs included. So the TGV system is a money-spinner for the French railways, and RFF, the infrastructure provider, knows it and is inching up the access charges, unfortunately, to the point where SNCF, the passenger operator and freight operator, is saying, “We are probably going to have to cut services somewhat, because it is getting too expensive.”

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An innovation in France was to build a roller-coaster railway for high speed. The Japanese railways tend to be pretty smoothed-out, a lot of bridges and viaducts and tunnels like the earlier German ICE systems. In France, they go up and down and, when you are riding in the cab of a TGV power car, as I have done on the Paris-Lyon line, you feel you are in a kind of an airplane. It goes up over a hill and all of a sudden you are coming over the top of the hill and you are looking down and you see several hundred metres below you the bottom of the vertical curve and then it comes hopping up. It really does not burn much more energy doing that than just going across on the flats, because it builds up a momentum and the driver just notches it back a bit as he goes downhill. That is the kind of thing they are doing there. That is all very well. Come back to more mundane considerations. A lot of the differences, ‘particularisms’ between railways in North America and Europe in particular, are explained by the fact that pretty well all railways at first used British technology. That is as much the case in Canada and the States, as in France, as in Russia, what have you. The railways then specialized nationally and became rather idiosyncratic with different loading gauges, sometimes different track gauges – Russia has 5-foot gauge, Poland has 4-foot-8 ½ like France and England – this makes transfer a bit difficult. As everywhere, there is technical obsolescence and management conservatism and, worse, union conservatism, in many cases. The road mode, on the other hand, is much more internationalized and does not suffer as much from the border effect. In the case of France and Spain, your train nowadays goes to the Irun-Hendai border point on the Atlantic coast and it will go through a gauge-changer. It used to be you would transfer the passengers or transfer the freight – not any more, but there is still a time penalty and a cost penalty. The roads do not have a gauge-changer; they are all roughly 4 foot 8 ½ inch gauge and the trucks just wallop through. Of course, they have very much more discriminatory customs and inspection regimes for the railways in Europe than they do for the trucks. That also explains why freight traffic on railways in Europe is depressed as compared to the potential, given you have a continental sized system, and the European Commission is attempting to address that. Globalization is a partial answer to this. We see equipment suppliers, such as Bombardier, internationalizing; Siemens – very international; General Motors is selling in England, Holland, Germany, Norway, Denmark, etc. It is not all new, but the market penetration of GM, GM Diesel Canada, London, is increasing. You see European techniques showing up here, for instance. An early example of post-war European techniques was the use of Siemens signaling on the Edmonton Transit System. The railway inspectors did not like this. So John Baaker (one of the project engineers) and J. MacDonald (the Chief Engineer) said to the inspector chaps, “Well, that’s alright. There will be no transit for the Commonwealth Games.” Well, the Siemens system was approved within weeks and the Commonwealth Games had transit. Sometimes it is difficult to import technologies. The effects of this are beneficial to railways. For example, the Canadian GM locomotives – the Class 66 – are being used increasingly across borders in Europe, getting rid of the old problems of changing crews, changing locomotives at the frontiers.

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Bombardier and Alstom provide world-renowned, energy-efficient rolling stock, and you can see this at work in the U.S. corridor where Bombardier, LRC-type coaches are towed by French-type power cars known as the “Acela locomotives” – at a high speed for North America, up to 250 kph. The modern signaling and control systems can reduce energy wastage as we have heard and the use of European vehicles implies higher emissions standards. A project engineer did a calculation of the Ottawa O-train’s emissions. He figured that this diesel light rail train is producing – depending on your assumptions and the speeds and so on – a quarter or a fifth of the emissions per passenger-kilometre that the OC Transpo buses do, and let me tell you that, with Euro-2 standards, those stack emissions are a lot cleaner than the emissions of even the Flyer buses, dare I say it, tearing up and down the Transitway in Ottawa. There is potential for improvements all over the place. In Europe, I will not bother you with the detail but the border effect thing I have already talked about often applies between suburban rail systems and the town tram networks, with passengers having to transfer to trams to finish their journey. The tram-train, or light rail vehicle capable of traveling on “heavy” rail tracks has emerged as a solution. This is a solution like that we are seeing developing in Ottawa and seeing in New Jersey and in California where European light-rail vehicles are more and more running on tracks that are shared with freight trains on a time separation basis and in Canada with Indusi train protection. The Bombardier BR643 operating in Ottawa has both those features – Indusi-based train protection and time separation. This follows on one of the pioneering applications where Siemens supplied light-rail vehicles to San Diego, where the S.D.A.& E. Railway runs freight at night on the tram tracks. That kind of tram-train is spreading in Germany, in France, in Canada and it is a harbinger of change, I think, for the whole connection between rural and urban systems and inter-city systems. For Australia, their big challenge is to finish unifying the network’s gauge. I noticed that in Victoria State, even some of the most recent upgrades of rail passenger systems to Balorat, Bendago and so on, do not include standard gauging. They still have some challenges there. One challenge they are meeting is extending the reach of rail freight. Formerly, the standard gauge rail freight and passenger system made its way up from Adelaide to Alice Springs, but while there had once been a narrow gauge system from about Catherine to Darwin, for many years there was nothing in the northern territory beyond Alice Springs. Recently, the Austro-Asia Railway Consortium has produced a railway which is now complete as of September 25th or thereabouts, on which doublestacked and trailer-trains will be inaugurated in January, and passenger trains in February. This will mean that containers, instead of having to make the long trip around to the east to Sydney and Melbourne, can be unloaded at Darwin and shot into the centre of the country. What does this do? It gives railways an automatic advantage over trucks because I do not think anyone is going to start having double-stacked road-trains from Darwin to Adelaide or anywhere else. Think of it. Think of the heights of road bridges, just to start with.

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Other countries have similar potential. China is a place where more electrification and construction go on every day. All over the Eurasian continent, gauge changers are being installed to provide more through running, to get rid of some of the frontier effects. In Canada, we can learn from the United States with their incentives for investment. We can learn by implementing taxation reforms, by having more Federal and Provincial investment in transit and rail and, in particular, Transit Efficiency Act or Transportation Efficiency Act or TEA-21 type provisions in Canada where, instead of taking gas tax, putting it into so-called infrastructure funds to repair the arena roofs of the Hawkesburies of this world, as has been done in the past, the money could be put into urban transit, highway improvements, but also into intermodal transfer facilities and facilities in general. How many of us realize that the City of Los Angeles, the State of California, the U.S. Federal Government, through TEA, Union Pacific Railroad and others improved access to the port of Long Beach at a cost of a couple of billion dollars to the point that Long Beach will probably become the “Godzilla Gorilla” of West Coast ports. Such improvements in the States are a serious threat to our container ports in Canada. The kind of money that goes from TEA-21 into intermodal facilities all over the U.S.A., particularly in port areas, will mean that our well-intended and, I should say, underequipped (it’s not really the word, let’s say less-equipped) ports in Canada and intermodal facilities will suffer by comparison. Since we are in a continental market, people will not really care whether the goods come in through Long Beach or Vancouver, whether they come in through New Jersey or Halifax. So, this is a wake-up call for Canada. In summary, European and Asian railways have a strong share of passengers, and sometimes freight. North American and Australian railways do better with freight than do the Euros. That said, we can learn from other jurisdictions. Rail contributes little in the way of greenhouse gas emissions. More emission reductions are accomplished by improving rail systems than by beating railway managers over the head about how their locomotives stink. We actually do rather well here, despite what the press thinks. There may be cultural barriers even if sometimes we are a little self-satisfied. Maybe we have values that are different from those in countries like Switzerland, where clean air is almost a religion. Distance is not such a barrier to improved passenger rail and nor is low population density such a barrier to improve passenger rail, as we sometimes think. The Cairnsville Townsline, north from Brisbane, has had 600-700 kilometres of brand-new track put in to allow new tilting trains to accomplish the trip in about 1/3 less time. At the same time, they have daily passenger service on this line. Compare that with the miserable tri-weekly offering through Winnipeg and you get an idea of how it is that Canada has somehow managed to place itself in the back yard, rather than in the front yard, in the rail passenger mode as compared with countries that are extremely similar but have lower populations, like Australia. This is not the fault of the railways. Action lessons – we should take global warming seriously, and anything I said is not meant to say that we should not have higher emissions standards for railways. I am just against modal shifts happening through inadvertence. We should learn from the whole world; for example the American Acela system is an example of what can be done and

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we should think globally and act locally, as we have in places like Vancouver, Calgary and Ottawa, and get a super-railroad. By the way, the U.S. popular magazine, ‘Trains,’ said a couple of things about that, including the fact that they have a super-railroad in Washington-New York-Boston (totally electrified, double- and even quadruple-track). ‘Trains’ also said, at another time, “Build this – a government railroad that works. Guess what? It’s VIA Rail Canada.” And, “The world’s best railway – yes, really. Who? Canadian National.” Well, I personally was a CPR employee and tend to think that there is no other railway that could compete for that honour. But that said, it is rather astounding what we can do in Canada when we put our minds to it. So, let’s roll up our sleeves and invest in railways. Thank-you. Q: Arnold Miller – Vehicle Projects, LLC I had a question or perhaps a comment about the claimed “low greenhouse gas emissions” in Australia and that the source of that might be a high degree of electrification. But, if one takes into account – well, it depends on how the grid is powered, if it is a coal-powered grid, then that would not seem to be an answer. A: Harry Gow, Transport 2000 Canada Absolutely. Now, the Australia power basket is a mix. They have hydro-power, they have coal power and who knows, they even use a little solar power to operate switches and so on in remote locations. But the point is well taken. Bill Rowat – Railway Association of Canada Conference Chair Interesting sessions this morning. We started out with John Dobson giving us a rundown on Straight Ahead. After two years of consultation and deliberation he gave us a good oversight on that, and then pulled it together at the end to tell us about the environmental components and to emphasize that environment is becoming part of the lead-in to the new Act, assuming that the new Bill C-26 goes through. He also emphasized that modal shift and intermodalism are part of that new Straight Ahead policy by the Government of Canada. Robert Lyman went on to talk from Transport Canada about the greenhouse gas program and the various initiatives that the Government of Canada is undertaking, as well as some key trends in the overall greenhouse gas area. Gord Owen from Environment Canada gave us the rest of the story on the other emissions: the NOx, VOx, particulate matter and so on. He talked about the recent trends in there – showed rail, how it stacked up and what kind of things that they may have in mind in terms of reducing it. He emphasized that we would be moving in the direction of, the objective to line up with the EPA standards in the U.S. I thought it was

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rather interesting, there, that the questioning very much focused on whether that, indeed, were the case. In many cases, railways in Canada, because of the NAFTA economy, are going to have to go to those standards in any event. But there were questions of the level playing field and the policy back-drop, particularly capital cost allowances – I think Barry Prentice raised that. A number of others did, as well. After coffee break, Robert Taylor of my organization gave a very comprehensive analysis of all of the emissions, greenhouse gas, NOx, SOx, VOx and PM’s and so on. In particular he gave it in the context of overall surface freight transportation, and a very extensive comparison to trucking. He emphasized that, with our agreement, we are very much staying on track – the voluntary agreement that we have had with the Government of Canada since 1995. He also emphasized, as did others, the extensive new technology – interesting, innovative new technologies that are coming into play in rail. Lee Jebb from Cando Contracting talked about challenges that shortlines are facing, and that they run a very aggressive innovative shortline. I particularly liked his one phrase that, “We’re competing and we’re competing with government.” He emphasized the fact that trucking gets to run on publicly-funded infrastructure and the railways are responsible for owning, maintaining and then have the privilege on top of that to pay property taxes. So that was some very pointed arguments from a rail operator. We moved on then, to discussion in the afternoon. Bob Fronczak from the AAR gave us a run-down on the kinds of initiatives that not only the government is taking, but what the AAR is doing as response in a number of areas. He talked, too, about the new technologies and the kind of approaches the AAR is encouraging there. He talked about government programs in the U.S. that we would just love to see in Canada and, in particular, under T21 and others. A fascinating part of his discussion was the Smartway approach and the strategy to encourage shippers to include rail so that they can claim themselves and move into the green economy to meet their own environmental emissions targets. We moved on, then. Terry Judge gave us a fascinating presentation on the HotStart technology, and when combined with SmartStart he showed some really interesting results, which I think we will probably see more of in the coming months and years. Then we moved on into this afternoon’s session. Chuck Moulis, U.S. Environmental Protection Service, gave us a good outline of where the EPA has been in terms of setting standards for rail. More interestingly, and maybe, more troublesome is where they intend on going. It will be up to us and the railway industry, both government officials, as well as industry officials themselves to watch that extremely closely. One of the concerns, I think, that we would have is, what does it actually mean in terms of modal shift? Finally, this afternoon, Harry Gow, as usual took us through a very broad extensive review of other jurisdictions and what is happening. I always find Harry’s stuff very interesting because it is not what we normally view on a day-to-day basis, and that was a good, a very good cross-comparison. As usual, Harry brought it down and I would

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encourage you to go back to his three or four slides, he summarized the afternoon session rather nicely in terms of where we need to go in Canada, in terms of what we can learn from other jurisdictions and what we need to do in the immediate future. So, Harry, that was a nice wrap-up. Better said than, I think, I could have done myself in these few words. I would also just comment on the degree of questioning. I thought that, unlike many sessions, we are getting a certain number of good, interesting questions – pointed questions. Nobody’s pulling any punches, which is really exceptional for a session like this, and I would just encourage us to go on and do that over the next two days.

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SESSION 3 – TECHNOLOGICAL ADVANCES AND BEST PRACTICES Bill Rowat – Railway Association of Canada Conference Chair We had a good session yesterday and it looks like we have a number of interesting topics and interesting speakers coming up today. We have the session this morning on “Technological Advances and Best Practices.” This afternoon, we will address “Modal Shift and Intermodal Transportation.” This afternoon we will end the day formally here in our sessions and then we have a site tour of CN’s new intermodal terminal at Symington Yards. Grete Bridgewater – Environmental Policy and Regulations, Environmental Affairs Canadian Pacific Railway Session Chair Good morning to you all. We have a very busy morning and are about to learn a lot about the technological advances and all the opportunities ahead of us in the railway industry. I would like to start this morning with welcome to Marti Lenz, who is here from GM Electro-Motive, and we certainly look forward to your presentation. Martha Lenz – Director, Engine and Engine Systems Design GM Electro-Motive Advances in Locomotive Engines – EMD’s SD70ACe Engine It is a pleasure to be here today, representing GM Electro-Motive, at an important conference, and on another beautiful day in Winnipeg! By now, most of you have realized as you are looking in your binders, that there is not a copy of our presentation. This is an oral presentation today. We are still having some debate at Electro-Motive of exactly when we want to put into print what we are doing with our Tier 2 engine. So, I will do the best that I can. I should mention that in the world of emissions, it is the locomotive that is compliant; it is not just the engine. In our case, we are talking about the SD70ACe locomotive, as some of you have seen in our flyers which are available. My presentation will be on the engine and we will go through the engine changes and some of the other changes that are required for the locomotive to be compliant. First of all I should point out that Electro-Motive has more than one engine line in this size for this kind of a locomotive – we have both a two-stroke engine and a four-stroke engine. The first thing that we had to do at EMD was to determine, in order to look forward to the implementation of the new EPA standards for 2005, what engine did we want to use? We were in a position where we had two engine designs that could meet Tier 2 standards. We recognized that for our customers, cost is probably their number one

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focus and reliability is right up there, because if the product is not reliable, it is not going to work. I think even though this is an emissions conference, that is probably very important, because if the railroads are not successful, then this whole program will not be successful. We looked at our engines, at our choices, and we said, “For this product we should choose the two-stroke engine, the 16-710, because it is proven to be reliable and maintainable, it is accepted by the customers, it does not represent new technology and new risks, and there is no need for new tools and new training. So the engine that we have developed for the Tier 2 application is set up for this locomotive. Salient points are that this locomotive will run 4,300 traction horsepower, and the engine will run at 950 rpm. It does have electronic fuel injection. The DDEC 4 Controller – that is our engine controller – is a new model from Detroit Diesel, that is what DDEC stands for, Detroit Diesel Engine Controller. It has an air-start system, and I should pause for a minute on Automatic-Engine Start-Stop. Yesterday, we heard a lot of great presentations on HotStart and other systems. Our system does not circulate the oil and the water and keep things warm, but there is a lot of monitoring with the technology available on-board the locomotive to monitor the system and allow us to reduce idling time. That is a fuel savings, and of course, of benefit to the customers. Lastly, of course, this engine will be Tier 2 compliant. How did we get here? I mentioned reliability and how it is very important to us. For this audience, I will try to step through reliability changes quickly, but it is probably of use to the audience here to understand what it takes to develop an engine for the market. We will spend some time on the changes for Tier 2 emissions and then we will breeze through the remaining presentation. The 710 engine was introduced in 1985, and today it is a mature product. In the mid-90’s we had introduced some new technologies such as electronic fuel injection and separate after-cooling. We were having some problems with reliability on our units. So when I talk to customers, of course, we go into detail, but this will give you an idea of the types of things we work on, and the span of time that it takes to make an engine really successful in the field. So, in 1997 we started working, as I mentioned: • • •

•

We had introduced fuel injection, we had some problems with that, so there was a fuel pump change. We have been working on connecting rods and different parts of the power assembly, on injector improvement, another liner improvement, and fuel jumper lines. Lower peak pressure, this is an interesting one. You will note that 2000 is when Tier 0 came into effect, at least in the option that we selected as we were working with the EPA. There is a benefit in emissions technology that typically reduces the peak pressure of combustion, that is one of the keys to getting NOx down, and that is a benefit from a reliability point of view. Water drain valves, with separate after-cooling, after-cooler ducts.

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• • •

Improvements to the engine controller itself and more cooling system stuff, sensors that go with them. Another lower peak pressure, and in this case, this was Tier 1 coming in, in 2002, also with another generation of separate after-cooling. Valves, lash adjusters; again, power assembly components at the end here.

Now, obviously, we are not going into depth, but just to give you an idea. There is a lot of ongoing work to keep engines reliable in locomotive applications. This has been a successful engine for us. We have produced over 5,000 of them; about 2,000 of them are in 70-series units. With the culmination of all that work, we have brought the reliability of the engine itself, not the locomotive but the engine and the support systems, to a reliability number of 600 days between road failures. Again, I know this is not a reliability-focused conference, but that is important. That is approaching automotive kinds of levels. That is over a year and a half between failures that affect the mission of the locomotive. Considering the increased duty-cycle that you have with a locomotive engine as compared to, say, your automobile, we are pretty proud of that fact. That comes along and gives us this tremendous baseline to start with because, when you start making changes for Tier 2, you have to introduce some changes, but every change represents a reliability risk and you have to deal with that. So that is our baseline. We will talk a little about emissions. Now, one of the speakers yesterday noted that, this is starting to get redundant, so we will not spend a lot of time on the rule itself but, as you know, the rule gets more stringent over time. I should comment, though that the EPA levels for Tier 2 are comparable to the UIC II limits that we meet in Europe. One of the things that we really appreciate about the approaches being taken here in Canada is to try and keep things consistent because that allows us to target a similar product for the different countries. With the emissions rule in the States, we are looking at maximums for particulate matter, CO, hydrocarbons, and smoke. It will have to satisfy the requirements for freight and switcher-duty cycles. That was all mentioned, I think, yesterday. For an engine manufacturer, these issues are important: 45-105°F (apologize for not converting it to Celsius), but that is quite a temperature spread; elevations up to 7,000 feet, when you get up in altitude there is not as much oxygen in the air and combustion is quite a lot different at that level; the useful life of the locomotive, and there are test requirements. This engine has demonstrated its ability to meet the standard. Here we are being a little bit vague, but yesterday it was mentioned, when Chuck Moulis (U.S. EPA) was speaking, that in general all of the certifications for the locomotives have come in below the standard. What is happening there is that the manufacturers are allowing for deterioration, in terms of particulate matter and some of the other things over time, but also the variation from unit to unit. What manufacturers do is: they select a target for NOx and get their hardware set up how they want it, set everything at the NOx target, the design target, and see where everything falls. Why is that important? For the other items, particulate matter, hydrocarbons, CO and also for fuel efficiency, everything you do to improve those items once you have your hardware selected deteriorates NOx. It is

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a balancing act. You cannot always get everything to move the same direction. Again, we set up for NOx, and everything else falls where it is. This engine has demonstrated an emissions performance significantly better than the Tier 2 standard. Now, this does not necessarily mean Tier 3 levels, although we have not ruled that out. But this is important to our customers in the States, particularly the ones that travel into California and into Texas because they have special agreements, Memoranda of Understanding, that they are going to have fleet average before 2010, I think, in the Los Angeles Basin of Tier 2. Well, if they are going to get a fleet average at Tier 2, some of those units, if they could perform better than Tier 2, could help them out a lot, but there is a trade-off for doing that. Once you have a hardware configuration selected, you are going to do that by adjusting timing. That is a trade-off with fuel efficiency. Again, our internal emissions targets were set to provide the best fuel efficiency we could while meeting that standard. The fuel efficiency projections for the SD70ACe Locomotive are near Tier 1 levels. Yesterday, Chuck Moulis wanted to know if I would agree with him that there has not been much of a penalty on fuel efficiency. Well, fuel efficiency is very important to the railroads. The number one expense on the expense budget would be fuel. We know that we have to continue working on fuel efficiency, but that does not come cheaply. Still, I could agree with him. Our Tier 1 product is very fuel-efficient and, depending locomotive model-to-model, your comparisons can be close to pre-Tier 0 levels, in some cases. The important point here – the 710 engine is an emissions-friendly engine. Now, this comes as a surprise to a lot of our customers, particularly world-wide. In Europe and in China specifically, the two-stroke engine is thought of by some people as a dirty engine. Earlier this year, when we certified the 710 engine, in that case a 12-710 engine, for UIC II limits, the people that were sent over to witness the test were just absolutely impressed that this engine could achieve the levels that it does. Also, the trade-off between emissions and fuel efficiency is pretty friendly compared to other engines. So, we have not seen the point of diminishing returns yet, with this configuration. Fuel efficiency though, we continue to work on as I said, and we will be working on the fuel efficiency on the locomotive level beyond the initial introduction. What did we have to do to make EPA Tier 2? Well, in this case, no new technology was required. There is no after-treatment or any of those things. There is a list of things that any diesel engine manufacturer has to address in order to work on either fuel efficiency or emissions. These things are not new, it is all a matter of tweaking and controlling the combustion event in the engine. So, you will be working with things like: turbo matching, to get the air flow where you want it to be; oil carry-over; oil consumption; camshaft timing; piston is very important, both the bowl shape and the compression ratio, in some cases. We have the injector itself, when you get worrying about atomization and spray. After-cooling, after-cooling, after-cooling – if there is anything in the emissions world that is a benefit to an engine, it is after-cooling because this is one of the few things that improves NOx and fuel efficiency. This is key, and that also gets to why it is the

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locomotive that is compliant, not the engine itself. Then you have your engine control hardware and the locomotive control. Tier 0 – we all know the Tier 0 standard was not as stringent. Tier 1 was harder, Tier 2 was even harder. Of course, you are only going to implement as many changes as you need so you can see fewer changes for Tier 0, more for Tier 1, more tweaking for Tier 2, and in each case, going back and re-evaluating all the items. None of those changes are big and none of them are things that we have not looked at before. We are comfortable with the level of change, but it is a lot of work, a lot of hard work, in trying to get that package optimized just perfectly. A significant spin-off of these programs, as I mentioned before, is the reductions in peak pressure. From a pre-Tier 0 standard, this new configuration will bring us 15% below where we had been. Peak pressure generates the cyclical loading on all the different components in the engine, and that creates the fatigue cycles and those are the sorts of things that create reliability problems for engines. Reducing the peak pressure reduces the level of stress, and helps us with our reliability. In addition to those problems with emissions there are some thermal inputs that are maybe a little bit more important than what we have had in the past. So, we do have additional changes that are focused on improving reliability on this unit. I just want to touch quickly on the test program. Reliability is so important that you have to go back and you have to prove it. A lot of rigorous analytical modeling and testing in the test cells is necessary. The test plan itself, we have three engines in test cells doing performance testing, two durability sites with reliability growth testing that is going very, very well. We are about half-way through our reliability growth test. Four locomotives that have been built, one of them is in our engineering center in LaGrange, Illinois finishing up engine testing, and three units are at the Transportation Technology Centre in Pueblo, Colorado where we are doing some locomotive validation and also will be doing reliability growth testing. Two of the units will continue on into altitude and tunnel testing and then, early in 2004, we will be rolling out demonstrator locomotives. Another key point, though, back to the concerns with reliability, is that everything that we did not change on the engine continues to prove itself in actual railroad service on 5,000 units that are out there. In summary, previous reliability improvements have generated large strides; again, averaging 600 days between road failures. We have taken the technology and tweaked it for Tier 2, derived from tuning Tier 1 technology, and we do have upgrades that will further improve the reliability. I mentioned earlier, how much Electro-Motive appreciates the opportunity to speak at this forum, but also the approach that is being taken here, and want to emphasize that anything that we can do to make things productive for the industry, environmentally friendly but not onerous, is a benefit to us. We really appreciate the approach that Canada is taking to try and make this practical and also consistent with the EPA so that

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we can maintain that flexibility for the railroads in terms of operation. But also for the manufacturers, in terms of not having to make different products for different countries and different types of paper work and certification. We feel that is working very well. So, I would like to thank you for having me come and speak today. Q: Terry Judge – Kim HotStart Martha, that was a good presentation and I think the reliability factor is an important one when it comes to emissions, especially when you are looking at your options to meet Tier 2, or even Tier 0 on a rebuilt kit. I found Chuck’s presentation interesting yesterday, his second to the last slide, the EPA standards have some sticky things in them and one of them Chuck talked about here. He said, “Failure to perform maintenance is considered equivalent to tampering, which can result in heavy fines.” And to me, that says, “Well, if you have got a reliable Tier 2 solution, you have less concerns about maintenance and fines, as well as if you are looking at a Tier 0 rebuilt kit.” So, I think there is a bigger connection there between the reliability in the EPA standards than maybe is first seen. A: Martha Lenz, GM Electro-Motive That is an excellent point because anything we can do to error proof things – you know, ‘If it isn’t broke, don’t fix it,’ right? Just keep it rolling and it should be working okay over the years. Q: Peter Eggleton – TELLIGENCE Group You have gone through the process of developing the engine to meet higher reliability to Tier 2 and I guess you have obtained the EPA certification for Tier 2. If you had to do that again, but with biodiesel instead of ASTM Diesel Number Two, what would be the general things that you would have to do? Or any other alternate fuel? A: Martha Lenz, GM Electro-Motive Biodiesel question – right. The biodiesel and the different fuels, you get different products out of combustion and, of course, not all biodiesel is the same. Actually, we are very interested in trying some B-20 kind of fuel because we think that we can probably roll that in with just very minor tweaks with the current configuration. If we were going to try and do this with biodiesel on more like a B-80 level where it is 80% biodiesel and maybe only some diesel fuel, we would have to significantly reconsider how we would address that. Chances are, what we would have to do is some piston kind of changes, some things internal to the combustion chamber, to tailor it to the burning of that fuel. We have not done that yet, we have only dabbled with the thoughts of burning biodiesel. As I said, we are interested in running that in our durability facility. We have not done that at this point in time.

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Other kinds of alternate fuels, we have looked at some alternate fuels over the years, but nothing recently. Lots of discussion yesterday on the sulphur levels and so forth, we have engines running in Norway and in Sweden on low sulphur fuel and we have seen no problems with them. There is a lubricity concern that some manufacturers have with the lower sulphur fuels but, from a technical aspect, for our engine, we are comfortable but we recognize the big cost increase, again, cost being very important to our customers. Q: Bob Dunn – Consultant You mentioned sulphur levels changing in the future, and it is going to happen as well in Canada. One of the big things in Canada is, because of our climate, our fuels after they have been hydro-treated, tend to be a lot harder than American fuels and lubricity could become an issue in Canada. We are not quite sure where we are going on this, but with 500 ppm with hydro-treated fuels, it could become an issue. I just want to point that out. If we move to 15 parts per million by 2010 or beyond, there may be some real serious problems with very hard fuel, and particularly in Canada because of the climatic conditions here, viscosity tends to be a lot lower. A: Martha Lenz, GM Electro-Motive Yes, there are always concerns in cold weather with viscosity and so forth and we have had different applications on the locomotive where we put pre-heaters in and tank warmers and so forth. It is an interesting combination between low sulphur and biodiesel because one of the things biodiesel does for you is it does add back in the lubricity, and there are other lubricity kind of additives that may have to be looked at. Again, for our product, the lubricity does not seem to be a tremendous issue and there is an advantage from an engine manufacturer’s perspective to get the sulphur out because it does create sulphuric acid and so forth, which can be corrosive. So what we see so far, is beneficial. Eric Panet-Raymond – Director, Marketing and Product Planning, High-Speed Rail Bombardier Transportation JetTrain High-Speed Locomotive Environmental Assessment Thank-you, everyone. I was going through the list of speakers yesterday and I realized I am probably going to be the only one talking about passenger rail. I know Harry Gow, yesterday, talked maybe, let’s say, 50-50 on passenger and freight. I will try to do 100% on passenger rail. I have essentially three topics I would like to cover. The first one is addressing the North American high-speed rail needs. The important point here is that the North American environment is very different from the European environment and we need a different approach. Then I will talk about, the JetTrain locomotive, which is a product we developed to meet this need and finally explain why we think the JetTrain technology is

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environmentally friendly and what it can do on the case study that we have done on the Quebec City-Windsor corridor. To start a little bit on Bombardier. Of course, our new CEO is very familiar to most of you in the room. Paul Tellier, formerly CEO of CN, became CEO of Bombardier in January. So the picture you see here is changing. This was for the fiscal year, which ended in January 2003. At the time, we had essentially four main divisions: two large ones that were aerospace and transportation, recreational products was the third one, and capital, which is essentially financing, the fourth one. We have since then announced we would be selling the recreational products division to focus mainly on aerospace and transportation. If we talk about transportation, a lot of people may not realize but Bombardier Transportation is actually the largest rail manufacturer and service provider world-wide: 36,000 employees, a presence in 24 countries, 54 manufacturing sites, $9.4 billion Canadian dollars in revenues and an order backlog of $25.7 billion. A little bit of background on the North American high-speed rail market. A few years ago the FRA and a lot of people in the industry realized that a new approach was needed to address the specific needs of this market. So far everything that had been done was to try to bring European technologies to North America, but of course, the market is completely different. There are different sets of regulations and, as Harry pointed out yesterday, the market is mainly a freight market whereas in Europe it is a passenger market. The FRA launched what it called the “Next Generation High-Speed Rail Program” and the objectives were to develop, demonstrate and validate cost-effective, and this is very important, high-speed passenger rail technology to operate on existing infrastructures. There was no more building new right-of-way and fully dedicated tracks. They wanted to reduce upgrade costs for high-speed rail and make proven technologies and methods available to States for high-speed rail implementation. So, clearly straightforward objectives, but which also have a very large impact on the market. Some of the barriers that prevented, in our minds at least, the market from growing, because essentially North America is the only place in the world where you did not have high-speed rail for passenger service, were: •

• • •

There was no product that met the North American standards. Now the JetTrain meets all of these requirements. The Tier 2 requirements here do not refer to the EPA Tier 2. These are FRA/APTA which is the regulatory body for passenger rail standards. So they are mainly standards that deal with crash worthiness. The price tag for dedicated electrified right-of-way was cost prohibitive. Now we are able to do it running on existing tracks. Actually, the JetTrain allows higher speeds for 25-33% of the cost of new right-of-way and electrification. Speed advantage of air travel. Traveling at 150 miles per hour, the train becomes competitive with air for, say, city pairs of 600 kilometres or less apart. Flexibility advantage of car travel – of course, train service offers downtown-todowntown service.

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• •

Competing freight railway requirements. This was always an issue and part of the debate. If you upgrade the infrastructure, it benefits both because you can offer passenger service as well as increase the capacity for freight. One of the main roadblocks that we saw was that there was no proven track record in North America of making passenger rail successful. The ACELA service was introduced in 2000, and by 2001 had proven to be quite successful with riders. Actually, in the Northeast corridor, between Boston, New York and Washington, it has about 50% market share with air.

Let’s talk a little bit about the JetTrain, which was developed a few years ago. As I mentioned, Bombardier took a look at the FRA Next Generation High-Speed Rail and decided to develop this product. This was developed in cooperation with the FRA at a cost of $26 million U.S., which was shared 50-50 between Bombardier and the FRA. It was the first non-electric high-speed product developed specifically for the North American market. Again, not trying to take a European technology and just adapt it. It is powered by a turbine. It meets all the FRA noise-level requirements as well as EPA. It uses a Pratt & Whitney turbine, 5,000 horsepower. I do not think I need to explain to you how it works. The turbine that we have in it right now is actually a turbine that has flown over 441,000 kilometres. It meets all of the FAA, the Federal Aviation Agency requirements, which I am sure you can imagine are pretty stringent. It uses standard diesel to run. Of course, being a turbine, it can take any fuel, but since diesel is readily available, we figured it might be the more easy solution for this. In terms of noise level, as I said, it meets all of the FRA requirements. It actually even meets the 100-feet requirement at 50 feet. So it is an extremely quiet technology. It is the fastest non-electric locomotive in North America. It can run at 150 mph or 240 kilometres an hour. It was tested at 156 miles per hour at the Transportation Test Centre in Pueblo, Colorado. It can accelerate twice as fast as conventional rail. It has shorter braking distance and advanced tilting technology to increase passenger comfort in curves. So, all of these elements are really designed to minimize trip time which is key for passenger service if you want to attract ridership. As a comparison, because of the power of the turbine, one turbine can essentially achieve the same speed as two traditional locomotives could in the past. Of course, if you put two then you can reach the 150 miles per hour. In terms of its impact on the infrastructure, the main advantage of this over what has previously been tried is that you can run the JetTrain immediately and then you can gradually upgrade the infrastructure. In the past, you would have had to completely build the infrastructure, electrify the entire line before you could start service. We are probably talking about anywhere between five and ten years, most likely around 7-10 years to do this. With the JetTrain, because it uses existing infrastructure, it can start right away, and it reduces the cost to start such a service.

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As a comparison, Bombardier was involved in a project a few years ago to try to implement European technology in the Quebec City-Windsor corridor. At the time, the price was estimated at $12 billion, which would represent roughly $16 billion in today’s dollars. By comparison, to implement the JetTrain in a similar type of corridor, 600 kilometres or so, would require $3.3 billion, including the infrastructure upgrade as well as the rolling stock. Why do we think JetTrain is environmentally friendly. The JetTrain meets all of the EPA requirements at the power requirements that are typical for the application. If you look at Figure 3.1, the curves you see are typical curves for turbines – they are not the same as diesel engines would have. But, if you do, Montreal-Toronto or Calgary-Edmonton, you will see that the total emissions for the trip meet all the requirements. Figure 3.1 JetTrain Emission Levels

JetTrain emission levels Emission rates vs power

NOx

Emission rates (g/bhp/hr)

5,00 4,00 3,00 2,00

CO

1,00

HC 0,00 0

1000

2000

3000

4000

5000

Available power (SHp)

Let’s take the Quebec City-Windsor corridor, to give you an idea of what the JetTrain could do on this corridor. If we consider only inter-city travel, and this is only passenger traffic, 24 million inter-city trips annually between the various cities along the corridor, 8 billion passenger kilometres traveled. If we look specifically at Montreal and Toronto, up to 150,000 cars per day on the 40 around Montreal, and up to 400,000 per day on the 401 around Toronto. The average vehicle spacing on the 401 is 6 car-lengths or less. This is average for the year. Now, if we compare the JetTrain emissions and fuel consumption with that of a car, JetTrain consumes 59% on a per-passenger basis of the level that a car would consume, and emits 60% of what a car, again on a per-passenger basis, would emit. If we bring all 89

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of this to what could happen if the JetTrain were implemented in the Quebec CityWindsor corridor, you see that the total emissions before implementation, status quo, were 1.8 million tonnes, and with the introduction of JetTrain and the mode shift that would follow this, it would drop by 6% to 1.7 million. If you look only at the MontrealToronto-Ottawa, which is denser than the rest of the corridor, then you are looking at a 9% reduction. If you focus only on Montreal-Toronto, you can actually achieve a 12% reduction, and this is traffic only traveling Montreal to Toronto, again this is all due to a mode shift. As you implement high-speed rail, it becomes an attractive alternative for travelers. A lot of people rather than take their cars, will take the train if they can do the trip much faster. The target here for what JetTrain could do on the Montreal-Toronto corridor would be 3 hours, if we assume 150 miles per hour travel. That becomes very competitive with other modes for a downtown-to-downtown service. It is generally agreed that a mode shift is a quick-win in terms of reducing emissions, and introduction of high-speed rail is clearly a mode shift. In conclusion, we think JetTrain can be an attractive and environmentally friendly solution for inter-city travel. It can reduce GHG emissions, and is energy efficient on a per-passenger basis. It is less intrusive, makes use of existing infrastructure, no need for electrification, which tends to have an extremely high cost , anywhere between $3 and $4 million per mile, and makes less noise. It is as quiet as electric trains, even at maximum speed and it actually makes less noise than diesel trucks. Thank-you for your attention. Q: Harry Gow – Transport 2000 Canada Transport 2000 has tracked the progress of this project carefully and we have advocated for its adoption, that is the JetTrain proposal with the $3 billion expenditure. In the dying days of the Chrétien government and in the morose atmosphere of the Standing Committee on Transport at the House of Commons, we find that it will be more difficult to get the full amount, but there are stories that perhaps a few hundred million dollars more might become available for at least, we would hope, some key upgrades to get people around the traffic at Coteau, for example, on the CN line and maybe bring them in on another line, that kind of thing. Those are incremental upgrades. Would this locomotive thrive in an incremental upgrade environment, as opposed to a $3 billion allsinging, all-dancing one? A: Eric Panet-Raymond, Bombardier Transportation I guess a quick answer is, yes. As you said, the $3 billion that has been talked about is supposedly for the full project. The advantage of the JetTrain is that it does not necessarily need the full upgrade. So, as soon as you start to upgrade, you can increase the speed. Of course, the speed will be limited by the infrastructure, so if you can only,

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let’s say, upgrade 20% of the infrastructure, then you can reach your maximum speed on 20% of the infrastructure. The equipment is certainly designed to run on any existing infrastructure. So, it could still benefit from whatever amount gets approved. Q: Harry Gow – Transport 2000 Canada The supplementary question is: VIA has a fair amount of rolling stock now, which is designed for higher speeds than classic North American equipment was in the past. One only has to think of the LRC cars, which are used in a modified form, on the ACELA. Those are cars that are somewhat similar to the Canadian LRC cars. One can think of the somewhat criticized but excellent channel-tunnel stock that we have purchased for the Renaissance Program. Those things, for instance, have triple-disc brakes. They have probably the safest car bodies in North America and they have the most comfortable ride of anything I have ridden on in Canada. Would the JetTrain locomotive or power car be compatible at the foreseen speeds with these cars or would further upgrades to the vehicles, particularly referring here to the Renaissance equipment, be needed? A: Eric Panet-Raymond, Bombardier Transportation It could be, of course it is a power car that can pull any coaches, but as far as I know, and I do not know all the details on the Renaissance cars, but I think they are still limited to 100 miles per hour. So, if you want to get the maximum speed, you would need more the ACELA-type coaches which are designed for 150 miles per hour. Q: Harry Gow – Transport 2000 Canada They may be limited to 100 miles an hour in Canada, but in Britain they were designed for at least 125, in my understanding. No modern British railway coach is designed for less. My suspicion is that they are designed for higher than that. Now, between that and what the safety people do to a good train set in North America is usually horrific. Q: Peter Eggleton – TELLIGENCE Group With respect to the evolution and the development of the JetTrain and paralleling the development of the prototype LRC equipment, the last phase of the LRC testing was to put the locomotive and the coach in daily operational service for about a year. It went from Toronto to London, just being operated at the conventional track speed. Is there a plan for such a similar road-worthiness evaluation? Could you elaborate on that? A: Eric Panet-Raymond, Bombardier Transportation There is one. The JetTrain was actually tested between Montreal and Ottawa for about 3 weeks or so, around the spring. There is more extensive testing that is actually part of the agreement with the FRA; there is a revenue demonstration program that is part of the whole development agreement. So this will be starting probably early next year. We still need to work out some details with the FRA and with Amtrak on where we would do it

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and under what conditions. I do not know if it is going to be a full year, but there will be some more testing done. Arnold Miller – President Vehicle Projects, LLC The Fuelcell Locomotive Project Well, it is a pleasure to be here. My company has done business over many years with Canada. Our initial projects were in underground mining, fuelcell powered mining vehicles, and so we have worked a lot with the Government of Canada, in particular CANMET, a national laboratory within Natural Resources Canada, and then many mining companies. Most of them are in Toronto or Vancouver. Anyway, we are back and for a different reason, and that is fuelcell locomotives, mainly for surface applications but also for underground applications such as subways. This project is funded presently by the U.S. Department of Defense and I will explain a little bit later why they are funding it. We are located in downtown Denver, we have a suite of offices and share the facility also with the Fuelcell Propulsion Institute. The two organizations work cooperatively and in a complementary way. They are independent, completely independent companies. The Fuelcell Propulsion Institute is a non-profit corporation; Vehicle Projects is a limited liability company. If there are companies here that would be interested in being in this organization, then I would be very pleased to talk to you about that. Basically it is an advocacy group for fuelcell industrial vehicles in different industries. To date, it is mainly in underground mining but that is very rapidly expanding into rail transportation. The other is Vehicle Projects, and I am actually President of both of these and I am representing them both here today. Vehicle Projects is the organization that usually conceives of the project and then organizes it. There are usually large international consortia to execute such a project. It appropriates the money through lobbying, primarily. Then it manages the international consortia that execute the project tasks. This is not an up-to-date list but gives an idea of the members of the Fuelcell Propulsion Institute. Caterpillar, Inco headquatered in Toronto, Lonmin in South Africa, Newmont (gold-mining), Noranda, Placer Dome. We also have, the BNSF Railway Company, Burlington Northern Santa Fe, also General Motors, EMD is interested in joining us and I think that will happen very soon. So this organization is non-profit, it has a Board of Directors. Each member, which is an institution, has a seat on the Board. I just wanted to point out that most of these are in mining and that is because of the fact that we have worked to date in mining, but we will see very soon many more members that represent the rail industry. I want to give you a little bit of background on the technology. I want to show you both of these mine vehicles that we have built, or one of them is in the middle of being built. These are fuelcell powered. There is a locomotive for underground mining, small

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locomotive, it is only 4 tons, 4 English tons. This was originally a battery locomotive, so the traction drive and so forth was essentially unchanged. There was a very large traction battery, a lead acid battery that was removed and replaced by the fuelcell power plant. The fuelcells are very small. Fuelcells are quite power dense, more so than diesels. Then there is fuel storage which is a kind you may not be familiar with called metal hydride storage. It is a very safe and compact way of storing hydrogen. Basically, you store hydrogen within the crystal structure of a metal. Hydrogen is so small that it can actually occupy “holes” in a metal, in the interstices. We also have the hydrogen production plant. There is an electrolyzer, this is also done by a Canadian company, Stewart Energy in Toronto, they were a partner in this project. The locomotive itself was actually Canadian; the other parts are not. The power plant for that locomotive is broken down into its two major components. You have energy storage, this is a metal hydride system. The metal hydrides store hydrogen not by pressure. It does not really matter what the pressure is, this is quite low; this is all aluminum. There is the fuelcell, the power part of the power plant and there are the fuelcell stacks. I am certain, since most of you here are Canadians, know about fuelcells. There has been a tremendous push by the Government of Canada to stimulate the fuelcell industry here and it has been very successful. So we will go under the assumption that you know about them. For the vehicle in Figure 3.2, the fuel cell stacks are made in Italy, the fuel cell is made by Nuvera. Surface testing was completed in Reno, Nevada. The sound it makes is very quiet, it is mostly the track noise you hear. It was a cold day in Reno during the testing and you can see the water vapour exhaust. The water produced by a fuelcell is comparable to the amount produced by an engine in a car and so on a cold day, just as you see in a car, you see a plume of water vapour. Normally you do not see any water or anything.

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Figure 3.2 Surface Tests in Reno

This is another project. It is about halfway through and I will go through this very quickly. Figure 3.3 is a loader for underground mining. It is a larger vehicle, small, of course, compared to locomotives, but 23 metric tonnes. It is actually 150 kilowatts of maximum power. It is a fuelcell battery hybrid. The fuelcell, itself, is rated at 90 kilowatts continuous but the batteries are rated at 60 kilowatts peak power. We are in Phase 2 now, the vehicle is essentially designed. I would like to point out also that the Canadian Government has been very generous in funding both this project and in funding the mine locomotive. The following are in U.S. dollars but we are in this Phase, we will start February 1st – so it is about $3.6 million U.S., 50% cost-shared. Part of this costshare, well, half of this $1.8 million was provided by the U.S. Department of Energy; part of the balance of this was provided by the Government of Canada, as well as our corporate partners – the mining industry.

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Figure 3.3 Loader for Metal Mining

Figure 3.4 is a CAD, 3-dimensional CAD of this loader. There is the engine compartment and the chassis. We have a vehicle at Caterpillar Approving Grounds in Peoria, Illinois, and the engine has either been removed already or will be replaced with these components. What is interesting is that the whole area would be a diesel engine, but fuelcells are the very small blue boxes, and are quite power dense. On the other hand, the orange tanks, which are being provided by another of our Canadian partners, HERA, Hydrogen Storage Systems in Montreal, it is rather larger. So that is a trade-off in fuelcell vehicles compared to internal-combustion engine vehicles. If you compare the engine with a fuelcell, the fuelcell is smaller. It is more power-dense, substantially more than diesels. But the energy storage, the fuel tank is larger, but overall there is no problem and it packages OK. It is just different so you have to design around these characteristics. Metal hydride storage, as I mentioned, is quite compact for hydrogen storage. It is actually the most compact in terms of the volume required to store a given amount of hydrogen. It is also safe.

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Figure 3.4 Powerplant Packaging of Mine Loader

Fuelcell system control Power electronics Hydride storage

Loader chassis

Fuelcell

Fuelcell stacks (dark blue) (dark blue)

Now let’s go to the subject at hand here: the US Army, or the Department of Defense, locomotive. This project just started in May; the contract was signed the 27th of May. We do have the vehicle, in fact it is number 4645, it is a GP18, so it is a fairly old vehicle, it was given to us by the army. They have it in Utah and it is being refurbished. It will be like new when it is finished, when it is completed. Now the Army calls all of their vehicles GP10’s, all the EMD ones, but in the commercial world, it would be a GP18. The objectives are to develop the world’s first fuelcell-powered locomotive for surface haulage, demonstrate the locomotive in a Department of Defense non-tactical application and facilitate commercialization of fuelcell power for rail transportation. The locomotive will be somewhat updated in its appearance, although the army colours, red and yellow, will continue. The Department of Defense has a very enlightened view of this project and many of you probably know about this concept of dual-use technology development. The idea of this is that it can be justified for the military to do research and development if what they do has both applications to the military and to the commercial world. Well, they have had some outstanding successes in this, two are right here: the Internet and GPS. Those were both developed as R&D projects by the Department of Defense. Then this one, of course has been turned over completely to the private sector and this one (GPS) is still controlled by the Department of Defense. The Department of Defense seeks similar success in fuelcell vehicles. 96

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The project has four phases. We just started, as I said. We used the same kind of technology in both the mine locomotive and the mine loader, it is PEM fuelcells, those are the same kind that Ballard, for instance makes and Hydrogenics in Toronto. Ours were made by Nuvera. It is actually based and headquartered in Cambridge, Massachusetts, but the stacks are made in Milan. It is a very experienced company and we are very pleased. They have metal bi-polar plates for those of you who know about fuelcells and that is a very rugged and compact method. Then we have also used a metal hydride storage, which I mentioned. But we are going back to a clean sheet of paper on this one and considering other ways of doing it, fuel is a very important issue in rail transportation. There is not going to be a universal solution. What may work for freight may not be appropriate for a subway system. We are looking at fuels such as: hydrogen, compressed hydrogen, liquid hydrogen, metal hydrides, feed stocks can give you hydrogen by processing on-board the vehicle: methanol is a good example, liquid ammonia is under consideration, and hydrocarbons and different fuelcell types. PEM is the type we have used, proton-exchange membrane, solid oxide and phosphoric acid, those are the three that are most actively under consideration. This will be decided probably in November of this year what it will be. The second phase is power plant fabrication, but this actually has been changed somewhat. The next phase is integration of the power plant into the locomotive. The final phase is a demonstration in a non-tactical application. In Phase 1 of the project there are about 20 partners. There are too many to enumerate and acknowledge, although we are very happy with all of them. I do want to just acknowledge a few that we take very special pride in and which have a very special role, and these are the end-users. This project is designed from the very beginning to be customer-pulled, rather than pushed by technologists or otherwise. We have the BNSF Railway Company as a project participant, the New York City Transit, the subway system of New York City, Regional Transportation District of Denver, and a Japanese organization we expect to join us very soon, they will be at our next meeting in October. That is RTRI, and they will represent passenger rail, high-speed rail. Figure 3.5 is a CAD drawing, a preliminary one of the vehicle GP18. This was a baseline study just to show that this is possible, that you can package this new technology into a locomotive. Well, you can package it quite readily; in fact, there is room to spare. This uses the same technology that we have used for our other fuelcell industrial vehicles, the mine locomotive and the mine loader. You have the metal hydride storage, this stores 400 kilograms of hydrogen at very low pressure. It is essentially not hydrogen, it is a metal hydride, it is a solid material actually. The nice thing about this design is that it is modular. This is one megawatt of continuous power, that would be about 1,300 horsepower, but that is continuous. Engines are rated by maximum power so this would be capable of possibly 2,000 horsepower maximum, for a short period of time. Just like electric motors, there is capability of overload.

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Figure 3.5 Design Study of Fuelcell Locomotive

So each of these modules, there are eight, are 125 kilowatts, and these are each a standalone module. So, 8 times 125 is 1,000. If this were a commercial vehicle and there were some failures in the field, you could just come in and take out one of these modules and replace it, or you could run on seven, you could run on six, you could probably get home on three. So we think this is an advantage, the inherent modular nature of a fuelcell power plant. The other advantages of fuelcells of course are zero emissions, same when you use hydrogen, you would have low emissions in other cases, very low. It is quiet, it is efficient, possibly twice as efficient as an engine-powered vehicle as a rule of thumb. But you do have an analogue of the Carnot limit, thermodynamic limit, that you have in heat engines, but it is much higher than what the Carnot theorem says for heat engines. Now, the BNSF Railway has 5,000 locomotives. They spend one billion dollars a year on fuel, that is U.S. dollars. This is more than the U.S. Navy. If they could save 10 or 20% by increased fuel efficiency, you would have $100-200 million savings just on that, and that does not take into account compliance with environmental regulations or any of the other advantages that fuelcell vehicles can provide. So we think the driving force of this will be efficiency and environmental quality. This just continues to show the enlightened position that the Department of Defense is taking on this project. We are going to demonstrate one particular locomotive on an army base; it will be in the State of Nevada, but this is a spring-board to other projects. There is a utility locomotive in subway systems. You have to shutdown the third rail when you do maintenance because people cannot work around that safely. So they have

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to use either battery locomotives, or diesel locomotives. This is not good because there is no ventilation system in a subway, except for the trains moving through and you do not have that when you are doing maintenance. There is a Siemens light-rail vehicle in Denver. Also, there is a GE locomotive on BNSF. And there is an ICE. Now these are in order of difficulty of commercialization and we are not proposing that commercialization is going to be immediate. But, as you probably know, the first are about 16 megawatts of power for an ICE. The others are not actually all that bad. These are only three trains in a set, but they are 1.8 megawatts. The last is about 3-4 megawatts. Figure 3.6 diagrams what the 15-year plan is. This is not commercialization and I am quick to point this out. These are demonstrations that we think are important, demonstration projects that will be the beginning of commercialization paths. So, right here, right now, and this projects on to about a five-year project going near the end of 2007. This is the order which we believe commercialization would make sense, and this would be the order in which demonstrations would occur. Figure 3.6 Follow-on Projects and Commercialization Paths 2003

DoD locomotive

2008

Subway utility loco

Yard switcher 2013

Commuter, light rail, subway

Heavy freight

2018

High-speed High-speedrail rail

Major benefits of this project once it has been brought to commercialization are: • • • •

increase the energy efficiency of the transportation sector, increase national energy security by reducing dependency on imported oil, Canada is in a very good position with your hydro-electric power, in producing hydrogen, improved environmental quality, and position project partners as leaders in advanced rail transportation.

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My last point is acknowledgement of our partners or funders, in this case. These are funders we have had for all these projects I have mentioned – the mine locomotive, mine loader and the current army locomotive: • • • • •

The U.S. Department of Energy, Hydrogen Program, The U.S. Department of Energy, Office of Industrial Technologies, Natural Resources Canada, U.S. Department of Defense, And our many corporate cost-share funders, in particular the mining industry of Canada.

Q: Barry Prentice – University of Manitoba Transport Institute Most of my familiarity with hydrogen fuelcell vehicles suggests that the storage systems are high-pressure hydrogen. I am interested in your focus on the hydride storage systems and what your refueling rates are. How long is it out of service to refuel the storage pack? A: Arnold Miller, Vehicle Projects For the mine locomotive, it was close to an hour to refuel it, of course that was a lot faster than recharging a battery. For the mine loader, the plan right now is ten minutes. What limits the rate of refueling of a metal hydride system is the rate of removal of heat. It is pretty much unrelated to pressure, so I think it could be comparable, probably somewhat longer than diesel, refueling a diesel, but a reasonable amount of time, 10 to 20 minutes. Q: Malcolm Cairns – Canadian Pacific Railway What sort of infrastructure would a railway need to have in place in order to be able to refuel a locomotive across a network as large as the CP? A: Arnold Miller, Vehicle Projects Well, that is a very good question. Depends on the fuel, of course. One could imagine using existing diesel fuel infrastructure that railroads have and then you can reform diesel fuel, it is a technology that works. I would not call that a mature technology, there is still certain problems with it, but you can produce hydrogen from diesel fuel, that is one way of doing it. The hydrogen could be produced off-board the vehicles along the track and then transferred to the vehicle when it needed to be refueled. There are others, it depends on the fuel. One of my favourites is nuclear power production of hydrogen. You can make it electrolytically, have no greenhouse gas emissions whatsoever. Most of the hydrogen in the world today is made from natural gas, and that does produce greenhouse gas, CO2, as a by-product. Since you have a greater efficiency of fuelcell vehicles, and it could be as high as twice as efficient, I should say, as an engine, then you need half as much fuel and half as much greenhouse gases, even if it is CO2.

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Your question is really a complex one and there are many answers. There is probably no universal solution. But it could be, using electrolysis you would rely on the grid. You could also rely on the natural gas pipeline system and reform natural gas where you needed it to produce hydrogen. Or you could have these, well, for example, if you use methanol as a fuel, you can use that on-board the locomotive, and then do the reforming on-board. You have to produce hydrogen but it is just produced in small amounts as you need it. But there you have a liquid fuel, and the infrastructure could be similar to what you have presently for diesel fuel; it would be a liquid under low pressure, ambient pressure. I hope that starts answering your very good and very complicated question. Erika Akkerman – Environmental Systems Engineer CN Correlation of Reductions in Emission to Changes in Operating Practices: Successes and Lessons Learned We are going to basically take a look at the past. Over the last decade we have been able to reduce emissions by about 7% while increasing our traffic by about 21%. This presentation looks at some of the factors that have contributed to achieving those results. The primary initiatives have been: modernization in the locomotive fleet, operational improvements, and locomotive upgrades. Emission Trends NOx emissions are a function of overall fuel consumption. Emissions have remained relatively constant through the early ‘90’s then suddenly drop between ’97 through ’99. The two primary reasons for this decline are: 1) In 1995, CN was privatized, which brought about operational efficiencies, including scheduled railroading and utilization of longer and heavier trains. 2) In 1996, CN implemented a program of fleet renewal and started replacing older locomotives with new, more efficient and higher-power units. What factors drove the fleet renewal? The latter half of the last decade saw significant rises in fuel prices. In an effort to offset rising fuel costs, CN looked to modernize its locomotive fleet, replacing aging locomotives such as GP38’s, GP40’s and SD40’s with newer, higher horsepower, and more fuel-efficient units such as SD70’s, 75’s and the dash 8’s and 9’s. With the addition to the fleet of newer, higher horsepower locomotives, the number of locomotives per train could be reduced from three mid-power locomotives to two higher horsepower locomotives with the same or better results with respect to emissions. However, this does not tell all the news. When looking at NOx emissions alongside GTM’s, for the same period that NOx emissions fell, GTM’s increased by over 15%. Net efficiency, in terms of NOx emissions per GTM, has shown dramatic improvements,

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particular over the last 5-6 years. Put in other terms, despite increased traffic, we have managed to improve fleet operational efficiency by over 20%. Locomotive Fleet Composition Let’s look a little deeper at why we have achieved some of these improvements. In the period from 1995 through 1999, CN retired about 328 locomotives. In the same period, 343 new locomotives have been added. If we look at the whole fleet, including the U.S., the spread would be even greater because a lot of our new locomotives went to the IC in the States. Of significance is the net power distribution. The majority of the locomotives removed from service were 3,000 horsepower or less, while most of the new additions were in the 4,000 horsepower class. For example, in 1996, 105 4,300 horsepower SD75’s were added to the fleet, while 61 locomotives of lower power 3,000 horsepower or less, were removed. What has this change in fleet composition done to our operations? For the most part, it has reduced the number of locomotives required to pull a given train, which means less fuel is needed to pull the same tonnage. The efficiencies are not only a function of the reduced number of locomotives but also a function of the efficiency of the motive power, with the older locomotives having significantly higher fuel consumption ratings than the new locomotives added. The overall trend, since 1990, has been to renew CN’s locomotive fleet. With the exception of a small rise in 1997 through 1999, we have held constant at slightly over 800 road freight locomotives throughout CN’s Canadian network. What has changed dramatically is the composition of the fleet, which now consists of nearly 50% newer, more powerful and more fuel-efficient locomotives. Also to emphasize the effect of the fleet renewal, if we pay particular attention to the fuel graph, we see a significant reduction in fuel consumption starting in 1997. This correlates with the introduction of a large number – 105 – of new locomotives in the same period. Please note that the same period saw continuous growth in CN’s GTM’s. As we were looking at fleet renewal, we were also looking at expanding rail traffic and winning back customers that were lost to the trucking industry. Fuel was an issue for both industries, but with rail being more efficient and CN making these savings available to its customers, it was a factor in the increase in traffic. Operational Improvements As mentioned earlier, efficiencies have also been achieved through operational improvements. These are primarily categorized into four main areas: • • • •

train handling, or locomotive operations, rail gauge face lubrication, freight car productivity, and train length versus locomotive power.

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Improvements in train handling Improvements in train handling, specifically in terms of power application and improvements in the way we use dynamic braking have contributed to lower NOx emissions. Also a factor is the use of longer sidings. By timing train meets, trains can continue to move slowly along the siding without actually having to stop. The use of dynamic brakes is not new. Many of the older locomotives, such as the GMD SD40-2’s, have been equipped with dynamic braking for several decades. However, the way they are used, as well as the braking effect realized from them has changed. The “old” method of braking saw limited use of dynamic braking combined with simultaneous use of train brakes. The idea was to keep enough tractive effort in force to prevent the train from bunching under braking. Essentially, brakes would be applied to the cars while the throttle was kept on the locomotives to not only maintain speed but to keep pressure in the air hoses. In the mid-90’s, with improvements to dynamic braking in the new locomotives, as well as operational changes, the use of dynamic brakes has increased. Trains now achieve a higher percentage of braking through the use of dynamic braking than ever before. The increased use of dynamic braking means that power is removed from the train earlier and to a greater effect, thus reducing fuel consumption by up to 10%. As an added benefit, there is less wear on the wheels as well as the brake shoes. Rail gauge face lubrication Rail gauge face lubrication is another operational improvement. This involves the periodic lubrication of the flange of train axle sets, primarily in areas with curves. The increase in rolling friction through a curve is primarily due to the increase in the lateral force component, which pulls the wheel against the gauge side of the rail, resulting in the flange rubbing against the rail face and increasing the wheel’s rolling resistance. This is often characterized by the high-pitch squealing that is often heard in trains negotiating curve sections of track, which I believe was mentioned yesterday. It has been estimated that 1-2% of fuel can be lost due to these frictions. Lubrication of the inner track face reduces the friction, and subsequently reduces the amount of power required to maintain speed through the curve, thus reducing fuel and NOx emissions. Freight Car Productivity Maximizing car capacities means fewer cars need to be used to move a given tonnage of train. The significance is that fewer cars means fewer axles, fewer axles means less net friction, which also translates into reductions in fuel consumption. The empty car movements, I think that is pretty much self-explanatory, fewer of those means that you are getting more productivity. Train length to locomotive power The availability of different power combinations realized by mixing new locomotives with older units means that horsepower can be more closely matched to tonnage requirements, and thus reducing wasted power output.

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Locomotive Upgrades The older GM locomotives typically idle at around 315 rpm and consume about 4.5 gallons per hour of fuel. By changing the settings in the governor, the idle speed can be reduced to about 275 rpm, which reduces the fuel consumption to about 3.5 gallons per hour. On the newer locomotives (710 engine, 4,000 horsepower), the idle speed can be reduced to about 200 rpm with fuel consumption going down to about 2.5-3 gallons per hour. Automatic start/stop systems shutdown locomotives if certain conditions are met, including sitting for a period of time. However, being shutdown for an extended period can create problems particularly in colder climates as locomotives use water and not glycol for cooling as, again, was mentioned yesterday. This is where the autostart feature comes into play. Systems such as water temperature, charging the battery and air pressure are monitored. When any of these get to a point where they would cause problems during start-up, the system will start up the locomotives to be able to recharge the systems. The auto start/stop systems can also be combined with auxiliary power units, which are essentially small generators that start up instead of the large locomotive generator and serves the same function, but uses less fuel and produces fewer emissions than a locomotive engine at idle. Challenges Some of the challenges we are faced with: 1) Increases in intermodal traffic means increases in emissions from intermodal operations. Intermodal operations are typically less efficient than regular freight operations due to a number of factors including the speed of the trains. Intermodal trains tend to operate at higher speeds, have large gaps between cars as well as variations in the height of the cars which creates air drag. Increasing the speed also exacerbates the air-drag problem. 2) Increases in traffic naturally lead to increases in fuel consumption and, therefore, greenhouse gas emissions. 3) Locomotive improvements. How much more efficient can they get and at what cost? What more can we do to reduce greenhouse gas emissions? As was mentioned yesterday, maybe it is time to start looking at the freight transportation industry as a whole. In a world that is increasingly concerned with air emissions, specifically greenhouse gases, the efficiency of rail versus other modes of transportation presents a real opportunity. With greater utilization of the rail component of intermodal freight transportation, significant improvements in greenhouse gas emissions resulting from moving a tonne of freight can be realized. Thank-you.

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Q: Lee Jebb – Cando Contracting Good Morning. I think, if I heard you correctly, you said that CN concentrated the placement of the new locomotives south of the border in the U.S. Can you tell me why you placed them in the U.S. as opposed to Canada? I have got a couple of theories, but I would like to hear what you have to say about that. A: Erika Akkerman, CN My theory on that is they had a lot of older locomotives and also with the U.S. regulations that a lot of them had to go there first. Q: Lee Jebb – Cando Contracting Can I throw my theory at you? Would the ability to accelerate the capital depreciation have anything to do with placing the expensive power down there? A: Erika Akkerman, CN I couldn’t answer that. Q: John Pearce – Transport 2000 Atlantic You have mentioned the increasing train length. What we have found in the corridor is that that has dropped and been the principal factor, I think, in the Quebec-Windsor corridor in dropping VIA’s on-time performance from about 90% to about 70%, well, 66% I guess, in the east of Toronto. I think that has had quite a negative impact on people using the train and, therefore, a negative impact on environmental pollution, because people are reverting back to either air or automobile. So, I guess I am just pointing out, and maybe you might have a comment, but these longer trains are causing difficulties in not only blocking crossings, but particularly in VIA’s operation. It is a very significant drop in on-time performance this year compared to last year. It is very difficult to pinpoint other reasons for this happening other than freight train interference. A: Erika Akkerman, CN That is not something I have personally looked at, so I really can’t address that. Q: Robert Taylor – Railway Association of Canada Well, Greta, I will just add some clarification, actually, to that question. Erika, you can correct me if I am wrong, but I think CN has increased train length, but we are in the range of maybe 3-5%. One thing you get with increasing train length is you decrease the frequency of trains which is, I think, also very relevant. I think part of the

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VIA experience out east this winter was weather-related, as well. So, I think it is a little bit unfair just to make the link back to CN’s need for on-time performance. Q: Grete Bridgewater – Canadian Pacific Railway Actually, I could probably just clarify that further, speaking from the CP side. We have increased train length over the last four years. It is not a recent phenomenon. It is not a recent initiative on our parts and, Erika, correct me if I am wrong, but I believe CN has had longer trains for the last few years. Donald Eadie – Vice-President, Technology Kelsan Technologies Corp. Top of Rail Friction Modifiers and the Railway Environment Thank-you, Madam Chairman and thank-you to the organizers of the conference for the opportunity to tell you a little bit about friction modifiers. As the Chairman said, Kelsan is focused on the global rail industry and with what we believe is a technology that is going to change the railroading industry and make it more efficient with Top of Rail Friction Control. The idea here is really quite a novel one and we are already seeing this Canadian technology have global applications. Today I would like to review some basic concepts and definitions of what friction modifiers are and what they are not. If there is one thing you take away from this workshop is to understand the difference between a lubricant, which is a traditional way of controlling friction, and a friction modifier, which is fundamentally different. We will talk a little bit about how these materials are applied, and then a little bit about the potential for emissions reductions and fuel savings which we are currently quantifying. There are other environmental aspects of friction modifiers and we have gained a lot of our experience to date in noise control, particularly wheel squeal in curves, and we have systems all over the world doing this today. It is not a technology that is in the research phase, this is reality in Europe, North America, Japan and other parts of Asia. Also, inherent in the idea of optimal friction control is other benefits, particularly rail wear reduction, and I will talk a bit about that as well. Finally, I am going to summarize and give you some conclusions and our future directions. Starting at the beginning, Top of Rail Friction Control, what is it and what does it look like? Well, just starting with something you can get your hands around, KELTRACK ®, our friction modifier is applied to the top of the rail. If you apply it at the optimum levels, you can barely see any physical change to the rail. Once it has been sprayed on the rail, it provides a thin dry film, with no oil or grease components, so if you run your fingers on it, it feels like rail; it pretty much feels dry. I would like to acknowledge the really innovative partnership approach that B.C. Rail has taken with us, to allow us to do a lot more test work. I particularly want to pay

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tribute to Norm Hooper, their Chief Engineer, who has had the vision to see the potential for this technology on his railroad. A lot of the data I will be talking about will have come from B.C. Rail, but also from the Class 1 railroads, Japanese railroads, as well as in Europe. What is a friction modifier? Well, in terms of functional behaviour we describe two key attributes. The first is that the friction modifier provides an intermediate co-efficient of friction when applied to the top of the rail. I think it stands to reason that, if you put anything on the top of rail with too low a co-efficient of friction, (as with a conventional oil or grease lubricant), you are going to have serious issues with traction or braking. So this is a key aspect of a friction modifier and it is based on the inherent material properties of the applied film. The second key aspect, which is key to noise control, is positive friction at the wheel-rail interface. I will talk a little bit about that, but not too much because it gets rather complex from an engineering point of view. Physically, friction modifiers are a water-based suspension of dry solids and other additives. If you were to see them, it looks somewhat like a water-based paint, a latextype paint, with no oil or grease components. Once the water is evaporated, this thin dry film is left to control the friction at the wheel-rail interface. Again, the amounts of material that are required to be effective are extremely small. At the sub-micron level, and even lower than that, we have seen effectiveness at below 0.1 micron nominal film thickness. What is happening here is that you are actually applying the materials in the interstices of the roughness of the rail. Again, I have just put this out for those of you who do not spend a lot of time thinking about co-efficient of friction. If you measure with a push tribometer on the top of the rail, typical rail most everywhere in the world, on the top of the rail, you measure the coefficient of friction between 0.4 and 0.7. That wide range is dependent on environmental conditions such as primary temperature and humidity that affect the rate, the quantities and the types of iron oxides that are formed. There is some reversible behaviour in here, and this is the rail wheel as it exists today and variations in that friction have a huge impact on operational performance of railroads. If you put a traditional lubricant on the rail, of course its job is to reduce the co-efficient of friction to as low a value as possible. A typical measurement is under 0.2; 0.2 is considered less than the minimum level for safe traction, adhesion and braking. In practical terms, putting a lubricant on the rail is not a really effective way of controlling friction. A true friction modifier, such as KELTRACK ®, by its material properties and once the water has evaporated, will give a co-efficient of friction from 0.35, with some small variation which is primarily related to environmental conditions and the surface conditions of the rail. That is the concept. I would like to show you some data to support that. Figure 3.5 is a curve showing friction measurements on the top of the rail. This happens to be on the top of the low rail but could equally well be the high rail. We sprayed the friction modifier to the body of a 1,700-foot curve. In the baseline (before we sprayed the friction modifier),

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friction levels ranged from 0.5 up to maybe 0.7, with a fair amount of variation. This is very typical. In Figure 3.5 the bottom diamonds are the friction measured through the same curve after the friction modifier has been applied, and you can see a very, very tight control of friction right at the 0.35 level. The other two lines here, the squares and the light-blue triangles, are the friction measurements after the passage of two subsequent freight trains. You can see that the friction is still relatively optimal. There are some signs of the film being degraded a little bit, but typically the friction control would be maintained for at least three freight trains. Figure 3.5 Friction Control in test Curve: Hi-rail Application

I talked about friction control. The other aspect I am going to talk about quickly is positive friction. To understand positive friction, you have to understand the concept of creep rate, which is a railway engineering term related to the relative velocity of the wheel and the rail. This can be creep rate in the longitudinal direction, the lateral direction, and there is also something called ‘spin creep,’ which I will not go into. Lateral creep characteristics are extremely important in curving performance and also in the generation of noise. Most materials in the universe, giving steel-on-steel, metal oxides on metal oxides, have so-called negative friction characteristics. That refers to the slope of this graph, Figure 3.6, beyond this maximum point, or so-called ‘point-of-creep saturation.’ This characteristic is what, fundamentally, it means to ‘wheel squeal,’ of

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trains and curves. Wheel-squealing curves is not due, contrary to popular belief, to the contact of flange on the side of the rail. It is due to what are called ‘stick-slip’ oscillations between the two points of equal energy, and so you get oscillations, frictional oscillations, as the body negotiates the curve. These are subsequently amplified in the web of the wheel, leading to the characteristic extremely irritating, high-pitched squeal. With a friction modifier, where the material of positive friction at the interface between the tread and the wheel, you instead get a slope that is positive in nature over the entire creep range. This is what at a fundamental level eliminates, first of all, wheel squeal, and secondly, in transit situations, a generation of short-pitch corrugations. Short-pitch corrugations also have noise implications because they lead to the so-called ‘roaring rail.’ Figure 3.6 “Positive” Friction: Lateral Creep Force Characteristics

Negative friction

0.50

0.40

KELTRACK 0.30

Y/Q

Clean Contact Condition

0.20

Log. (KELTRACK)

0.10

Positive friction

0.00 0.0

0.2

0.4

0.6

0.8

1.0

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Creep Rate (%) * Replotted from: “Matsumoto a, Sato Y, Ono H, Wang Y, Yamamoto Y, Tanimoto M & Oka Y, Creep force characteristics between rail and wheel on scaled model, Wear, Vol 253, Issues 1-2, July 2002, pp 199-203

So, that is friction modifiers. Again, just to emphasize, first of all, friction control is the intermediate level; secondly, is positive friction. Let’s get on to the more practical aspects of how we are going to apply these materials. Well, one of the benefits of having a friction modifier is that there are several different ways you can apply it, depending on the objectives and what you are trying to achieve and what is operationally viable for the railroad and for the particular area of track. In some ways, the optimum method of doing this is to mount a system on-board the locomotive, with an atomizing spray system. This is probably the most developmental of the three methods. It is being used in test situations on a couple of railroads, which I will talk about. But the second way of doing it, which is further along the commercial path, is spray application from a high rail or track maintenance vehicle. And this is something

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that has been practiced, in routine commercial operation for over 2 ½ years by B.C. Rail. B.C. Rail thereby became the first freight railroad in the world to practice Top of Rail Friction Control on a commercial basis. Finally, trackside application is very viable for controlling forces and rail wear in specific curves. This is something that is now under extensive testing by almost all the Class 1’s in North America, as we speak. We expect that in the next year we will start getting into full commercial operation on one of the Class 1’s with trackside application. I will talk about all of those. Again, the key thing is with the friction modifier, you have the option to do any one or two or all three of these, depending on the particular problems and situation that is being faced. The B.C. Rail high-rail spray application is mounted on the back of the truck. The system is designed for winter operation. The atomizing spray goes down on the top of the rail, forming the thin film, and this is something that they now do on about half of their territory, all the way from North Vancouver up to Williams Lake, with two separate vehicles. Trackside application is the most widely used top of rail application method so far. We have these in about 20 railroads world-wide, primarily at this point for noise control. It uses a Portec Rail electric dispensing system on the side of the rail, mounted with four bars. The key difference between this and traditional gauge-face lubrication is the fact that the bars are mounted on the field-side of the rail, because you are going to dispense it onto the top of the rail. If you had it on the gauge-face, the flange of the wheel, of course, would knock the bars down. The bars have to be close enough to the top of the rail to get material there. Pittsburgh transit system has been using trackside Top of Rail systems now for four years controlling noise. The Top of Rail bars are mounted on the field side of the rail and mounted on each of the rails, four bars total. Next we look at locomotive application technology. In this case the application equipment is provided by Lubriquip. They have developed this train-mounted system in which the friction modifier is applied from the last locomotive in the consist. The friction modifier reservoir, re-circulating pump, filters, etc., are mounted in the compressor room. Lines run to typically one end of the locomotive, but the possibility is to go to either the short or the long hood end. Then there is a metering box on each side, going down to the top rail nozzles. The nozzle is the heart of the process, and this incorporates technology which Kelsan itself has developed. That is a little bit about the application. We talked about what friction modifiers are, we have talked about how they can be applied. Well, this is an environmental conference and why is friction control, Top of Rail Friction Control, expected to reduce emissions? There are two reasons. The first is that controlling the Top of Rail friction reduces the lateral forces, or curving forces, by about 30-50%. If you go into the physics of negotiating a curve and look at the forces on the tread and on the rail, you will see that the lateral forces are directly related to the Top of Rail co-efficient of friction, or more precisely the co-efficient of friction between the tread and the Top of Rail. Curving

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resistance or lateral force resistance is directly related to train resistance and to specific fuel consumption in the curve. This is one mechanism by which friction modifiers reduce fuel usage and, hence, greenhouse gas emissions. The second method is by controllably reducing the friction on the top of the rail. In tangent track this reduces rolling resistance and hence the energy needed to move the train. There is also a third mechanism, in which by controlling the friction we reduce the critical speed at which ‘hunting’ is initiated. ‘Hunting’ is, in itself, a form of inefficiency which leads to higher fuel usage. Here is some data to illustrate lateral force reduction. I could have picked many examples of lateral force reductions. This happens to be a trackside application but it really does not matter what the application method is. We have obtained data and examples of lateral force reduction for all three methods of application. This is from a 12-degree curve on B.C. Rail that is instrumented for vertical and lateral forces with strain gauges. On the y-axis of Figure 3.7, we are looking at lateral forces in units of thousands of pounds. This is a summary graph of about six months of data, including several months of baseline data. Each point is an average for one train, looking at the leading axles only, and filtered to only look at axles with the heaviest vertical forces. You can see that for the baseline, the forces on the low rail were running at around 1415,000 pounds and on the high rail, slighter lower, around 11,000 pounds. With the data over here, with the friction modifier being applied, we see a substantial reduction, about 35-40% in lateral forces. Again, of course, some variation from train to train, depending on other factors. But you can see a consistent and regular reduction in the curving forces. As I mentioned, these curving forces do directly translate into reduced train resistance, negotiating a curve.

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Figure 3.7 Lateral Force (curving resistance) Reduction, B.C. Rail 2 0 . 18 .

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Secondly, I talked about why friction modifiers will reduce emissions. One of the Class 1 railroads recently conducted some so-called coast-down testing and estimated that Top of Rail will lead to about a 12% reduction in rolling resistance in tangent track. The same railroad calculated by modeling a 16% reduction in energy used in curves. One thing about Top of Rail, of course, or friction control is that in heavily gradient areas where gravity dominates the train resistance, there will be reduced benefits. So the optimum area for getting emission reductions with Top of Rail will be either tangent or highlycurved territory that is relatively flat, rolling shall we say. The specific amount of fuel consumption and greenhouse gas emissions will depend very much on the track distribution. One of the things we are doing is developing train resistance modeling to calculate the expected train resistance and looking to correlate that with actual field measurements. As a result, we do not have to go out and estimate for every particular railroad or piece of track what kind of fuel savings in greenhouse gas emission reductions will occur. We can predict it from validated modeling. We can then look at the optimum means of distributing the Top of Rail friction modifier. What I am going to do now is give a little bit of a snapshot of a major project, which was mentioned yesterday, which is our Top of Rail greenhouse gas reduction demonstration project on B.C. Rail. The test train uses Dash-9 locomotives, and tests are being done on B.C. Rail’s main track on the Chetwynd sub-division. We are in the middle of this project, so I am just going to give a snapshot, tell you about the project goals and objectives and some early results.

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First of all, this is part of the freight sustainability project and we would like to acknowledge Transport Canada’s funding and Nicole Charron and her group for their help in getting this project set up. Also, B.C. Rail are partners, CN has put in some funding and is a key partner on this, and CP is also involved in a stewarding and advisory role in the project, and Kelsan Technologies. The project involves installing the Top of Rail locomotive systems on two Dash 9 locomotives and measuring, as accurately as possible, the fuel reductions and the energy reductions and using them to convert these into greenhouse gas emission reductions. The detailed calculation measurements are being done by the National Research Council Centre for Surface Transportation, but we have done some of our own initial calculations which I will show you in a minute. Again, the objective is to demonstrate and quantify the fuel and greenhouse gas reductions of Top of Rail. We know very well that this technology will only be successful if equipment reliability is acceptable to railroads. So we are approaching this from a very proactive point of view, monitoring the equipment very closely and taking whatever steps are needed to address any reliability issues. We are also looking at optimizing friction modifier application rates to make sure that the economics of this are as positive as possible. In Figure 3.8, on the Dash-9’s, the top rail spray nozzles are mounted on the sand bracket right over the rail. The metering boxes I mentioned are part of the key part to get accurate dispensation of the friction modifier. There are two metering boxes on either side, looking underneath the locomotive. Figure 3.8 B.C. Rail Installation

One of the ways we go about the analysis is to break down the sub-division into different segments, depending on characteristics, gradient, curvature, etc. We do that by having Global Positioning Systems (GPS) mounted on the locomotives. We relate GPS position to the electronic track map and work back to both the notch settings on the throttle and 113

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the mechanical electrical forces which are being monitored on the locomotive. These are the results for one short-hill, uphill section. Mechanical energy is measured with an instrumented sheer-pin between the last locomotive and the first rail car. We are looking at plotting speed versus the gross ton-miles per kilowatt hour. Higher numbers are inherently more efficient, using less, getting more tonnes pulled per kilowatt of mechanical energy. A clear distinction is seen between the Top of Rail and the baseline conditions. Figure 3.9 shows some preliminary results on fuel in gross ton-miles per U.S. gallon of diesel. You can see that, plotting against speed, we have got a good relationship here for the baseline and then, quite clearly, statistically, a distinction between that and the Top of Rail being more efficient in terms of fuel consumption.

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We have a lot more work to do, a lot more testing and data analysis to do before the full picture comes in. We are hoping and expecting that overall we will see a fuel reduction between 4 and 6%, but we will just have to see. As I said, what will be equally important, from our point of view, will be to validate train resistance modeling so we can take, not just this understanding from the Chetwynd sub-division, but take it elsewhere and look at across the country, what kind of fuel savings can be achieved. That is the fuel and emissions savings. I am going to quickly talk about noise control. As I mentioned, wheel squeal is an environmental problem, particularly on transits. I have talked briefly about the mechanism. I just want to share some data from a paper we 114

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presented this summer. Figure 3.10 shows the noise reduction in decibels, dB. This is a series of railroads around the world, tram systems in Europe, two metro systems, one in North America and the other in Europe, and heavy-haul freight. Typically, we will see about a 10 decibel reduction, it ranges from 8 to 15 but very consistently. If there is wheel squeal and flanging noise, the friction modifiers will significantly reduce or eliminate that noise. We have this in commercial operations. It is actually about 20 railroads, most of them multiple units and most of them expanded. This includes five railroads in Japan, and those of you who know Japanese railroading, will know it is extremely technically demanding. Major users in North America are New York City Transit with about 18 operational units, Pittsburgh Transit and Tokyu railroad in Japan. Figure 3.10 Summary of Noise reduction with Friction Modifier 120

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Let’s summarize. Top of Rail is an emerging Canadian technology with, we believe, significant environmental potential. It is a thin film with intermediate friction control, positive friction. It has flexibility for different application methods and with emission control, emission reduction potential. Noise reduction has been established globally. Right now, we have tests underway with virtually every Class 1 railroad in North America, with either the trackside or locomotive testing. We believe we are just starting and we have a lot more to go. Thank-you very much. Q: Bob Dunn – Consultant Don, do you see this as having potential to replace traditional way-side lubricators, flange lubricators? A: Donald Eadie, Kelsan Technologies Corp.

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It has potential. I do not think we would argue at this point that it is going to totally eliminate gauge-faced lubrication at all. Gauge-faced lubrication in freight railroads will still be required. At this point it makes it less critical, particularly because you reduce the flanging forces but you cannot get away without gauge-faced lubrication. I think one of the ways that I could best summarize that is a quote that Joe Kalusac of the National Research Council made when I was talking to him about this. Joe said that, “Top of Rail makes sharp curves into intermediate curves and intermediate curves into shallow curves.” So, the degree to which you require friction control on the side of the rail will still be there, but it will be less critical with Top of Rail. But we believe the two together are still fundamentally required. Q: Bob Dunn – Consultant The second question is: The two have totally different objectives, yet one is to lower the flange friction and the other one is to maintain or manage the friction of the surface. They are both trying to do it in curves, so they are both going to be there. How do you keep the water-based polymer, or whatever it is, off the flange and the grease, which has always been the traditional problem, keep the grease off the top of the rail? A: Donald Eadie, Kelsan Technologies Corp. Well, first of all, Top of Rail can and does work, even with some contamination or migration of grease to the top of the rail. But the preferred way is to use the modern lubricator technology for gauge-face, which are the Portec Rail electric lubricators with long bars. If you use those and a good quality grease, you get minimal migration to the top of rail. But, you are quite right, you do want to put grease with the low co-efficient of friction where it belongs, or where it is needed, on the gauge-face, gauge-corner, and Top of Rail on the top of rail. That can and is being done; it is simply a question of using state-of-the-art equipment. Steve Easun – Account Manager ZTR Control Systems Inc. Advances in Locomotive Idle Reduction Technologies I am going to explain today a little bit about ZTR and the products that we make and produce for the railroad industry. ZTR is a control systems company, located in London, Ontario, Canada. It was established in 1987 by five General Motors engineers who decided to leave General Motors and pursue a career owning and operating their own company. We provide monitoring and control systems solutions for the locomotive and industrial industry. Today we have offices in Canada and the USA and we employ about 60 people on both sides of the border. We are comprised of three divisions: a locomotive division or railway division, the industrial division, and an operations center. I will explain a little bit more about each division. The locomotive division provides:

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• •

locomotive auto shutdown technology, a product called SmartStart, that is our term for the technology; control and adhesion enhancement systems for locomotives. Products include BOA and Nexsys. BOA is an adhesion excitation control product for older-style GP-9 type locomotives to increase the adhesion and bring up the reliability of the wheel-slip system. Nexsys is a full-control system which brings typically a second-generation locomotive into a micro-processor realm.

Our industrial division provides monitoring for industrial sites such as methane sites, gas compressor sites, etc. This is a big thing in the States where we gather methane. We run it through the CAT engines and produce power for the grids down there. The operations centre provides: remote monitoring, tracking, control and alarming for the industrial division mainly. Also it provides site management, data management, and storage. It is a 50-50 operation, we are partially owned by Caterpillar, the affiliate is called Pointguard. During the last power outage we had some Cat engines in the Toronto area. We got up and running very quickly from Minneapolis, that is where our operations centre is, but we had no place to send the power. So, just one of those things. What is idle reduction technology? I will go through a little bit of the history. The term ‘idle reduction technology’ refers to a technology that allows locomotive operators to refrain from long-duration idling of the main propulsion engine by using an alternative technology, such as automatically shutting down the prime mover or using a layover heating system. ZTR has been providing idle reduction technology to the railway industry since 1990. There were some previous attempts at it, I think Harman was one of the companies that started it. We ran with the idea and we would like to think that we are pretty close to having a very stable and solid product. It was a tough sell when the industry standard was idling locomotives. Fear of dead batteries, hydro-locked engines, did not offset the potential fuel savings. In the old days, you would walk into a yard, like a BN yard or a CN yard and all the locomotives were idling. Fuel had been cheap and reducing idle was not a high priority. If you wanted somebody to shutdown an engine it was a tough go. Lately, this attitude has changed as the railways realize the monetary savings coupled with environmental responsibility. So it is two-sided – it is the money and it is environment. AESS, or Automatic Engine Stop/Start and SmartStart are terms used widely to define the locomotive stop/start systems. Why use idle reduction technology? • • •

Reduce fuel consumption, Exhaust emissions, Engine wear resulting in decreased maintenance costs – these are one of the hidden costs that is hard to quantify but there is a large savings. If you do shutdown your locomotives, you will have a lot of mechanical savings and decreased maintenance costs, and

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Noise pollution for people living or working nearby. A lot of times, if a locomotive is idling, and I have seen it happen, the guy jumps over the fence and pushes the stop button and then runs away. Then if it is cold enough, you have got a big ice block and trouble.

Idle reduction options. The first option is the manual shutdown policy. A lot of railroads have a manual shutdown policy basically during the summer months, March through to November. It is something the railroads do. Some of them do it well, some of them do not do it well, but it requires the intervention of a person and it is limited by the human element. There is increased engine wear and visible emissions when a “cold” engine is started. Again, crews have always been taught, “Don’t walk away and leave an engine shutdown when there is a possibility of freezing, or you will be up for an investigation.” So, it is tough to get them to shut it down. Another option is the SmartStart. SmartStart is a system that automatically stops and starts the engine. It is active 365 days a year, 24 hours a day, 7 days a week. It keeps the engine in a ready-to-use condition, and provides detailed reporting of fuel saved. Other idle reduction technologies are: Electric Layover or Standby Heating systems. It is an established technology. Plug in electric systems infrastructure is required. Applications are stationary, not portable. Not every railroad can afford to drag around a pole and be able to plug it in. You have to run the locomotive up to the power source, plug it in and park it there, basically, every night. An alarm or a back-up system may be desirable. In this case, if you are up in the middle of nowhere and the power fails and you do not have any alarm you are in trouble the next morning when the crew shows up. A final idle reduction option is DDHS, Diesel Driven Heating System. They are mobile, they go with the locomotive. It provides true layover capabilities and allows the engine to remain shutdown. It also keeps the engine in a ready-to-use condition. Terry forced me to say this: SmartStart is a technology that is only good or is good to a certain temperature, it operates up to 32ºF. If the temperature is below 32ºF, we will not shutdown the locomotive. I will go through that scenario a little bit later, for obvious reasons. Some railways are using SmartStart and Diesel Engine Heating Technology. The BNSF, as Terry said in his speech yesterday, uses the combination DDHS and SmartStart. The BN is seriously considering many more systems in the near future. They are very impressed with the combination technology. Again, it is the old adage – if you draw a line through the middle of the country down there, SmartStart has its application, DDHS has its application and both systems combined have an application. Also, Union Pacific is very committed. Right now they are purchasing SmartStarts very rapidly, almost as fast as we can make them, to apply to their low-horsepower fleet. CN has a fair number of SmartStarts. It has been one of our preliminary railroads, or first railroads we applied to, CN and CP are very good customers, and they use the SmartStart technology. Norfolk Southern is using SmartStart, Rail America is using SmartStart and DDHS – not coupled

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yet, Tennessee/Wyoming is using SmartStart and DDHS – not coupled yet, and the Alaska Railway is using SmartStart and DDHS. Kim Hotstart has over 1,500 electric and DDHS systems out there. ZTR has 1,500 systems, so there are over 3,000 systems out there. It is probably a lot more than that now, but I am using these dated numbers. There are numerous advantages of combining technologies: • •

• •

•

SmartStart automates the idle reduction process. You saw on that chart yesterday. To me, that was a very graphic example of the SmartStart intervening in the place of a crew shutting down the locomotive. It also provides reporting capabilities. The DDHS virtually eliminates idling required to keep the locomotive running. As I said earlier, the SmartStart is only effective up to 32ºF, below that we do not shutdown the locomotive. We do not want it to freeze. Whereas the DDHS can then take over and provide true layover. Able to shutdown the locomotive in very cold weather. Both systems monitor and protect each other, we look out for each other. In the event one system fails, the other automatically takes over and prevents freeze-up or battery discharge. We will monitor the DDHS, if it fails we start the locomotive to protect it. To maximize fuel savings, combine the two. Then you can get right up to the high 90’s of reducing idle.

SmartStart is a microprocessor technology that safely and automatically manages the shutdown and restart of the locomotive while parked idle. It monitors: reverser position, throttle position, air brake cylinder pressure, engine coolant, ambient air, battery voltage, and battery charging amperage. If all these conditions are met the microprocessor says, “I can shutdown.” Figure 3.11 is a picture of our SmartStart, we have modularized it. On the Dash-2 it will take up the place of two modules. SmartStart has an interface and satellite capabilities. Typically, the SmartStart will just slip into the module compartment and, after some minor connections, away it goes. We can also as an option, have SmartStart through our Operations Centre, talk through a satellite linked to our Operations Centre. So we have some remote monitoring and alarming capabilities with SmartStart. We could have a locomotive up in the north and we know exactly, pretty well, what is going on with it through our satellite link and the Operations Centre. This is an option that can be purchased with the SmartStart package.

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Figur Fig ure 3.11 SmartStart

We also have GPS available. In the States it is going to become an issue of when you are going for EPA credits, we are hoping that is going to be the case soon, while the EPA wants to make sure that the locomotive stays in the attainment area. Well, GPS is going to be an integral part of that reporting function, to make sure that it actually stays there. So, we do have GPS available with our SmartStart Operations Centre package. We have a reporting function. If this were your railroad, you could have all your locomotives in a database managed system. The database manager can log on at a remote site and check out the exact savings of the locomotive. It is colour-coded, red means that there is a problem with the reporting or they are parked. What we look at is the percentage parked idle, if it is red it is under 75%, if it is yellow 69%, if it is white it is okay. We colour-code it for easy identification of potential problems or something that is going on, maybe somebody turned off a switch or the locomotive’s sitting under a bridge. An example of a SmartStart detailed report. A Canadian Pacific locomotive is sitting in London, Ontario. To date it has saved $155,000 in fuel, and the system was applied December 2nd, 1993. The report tells you everything that has gone on with that locomotive since inception. It gives you how many times it was shutdown, the reason why, and it gives you detailed information on everything that has been going on since that system was applied. We are also looking into revising or adding more reporting based on the actual fuel consumption of a locomotive. We are going to calculate the 120

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particulate matter, NOx, and all the other emissions. When the locomotive is shutdown, it is not producing these emissions; then we will calculate that for our customer. We have a duty-cycle report. If you are a yard master and you are looking at how your yard locomotives are being used, this is an excellent tool. You can see the loading hours of the locomotive, when it was parked, it was working, it was idle, the percentages, and that is all real data. I did a couple of case studies. The studies are examples of savings that can be obtained using SmartStart technology. This is not coupled with DDHS. The calculations were based on an EMD 12-cylinder 645EB engine. The engines used in the case studies are not exactly the same type but the fuel savings will be similar. Case number one involved 155 locomotives. This is real data that I took, 1.67 years of data, 1.6 million gallons of diesel fuel was saved. That averages out to 10,000 gallons of fuel was saved for each locomotive over the 1.67 years, which averages about 6,200 gallons per year of fuel saved by SmartStart. The SmartStart shutdown each locomotive, resulting in a reduction of 6,200 gallons, based on an idle fuel consumption at 3.2 gallons per hour. The average shutdown of each locomotive was 1,900 hours. Now this is an average, and then I just took the particulate matter in all of them, added them together. The total average of 2,300 kilograms or 2.2 long tons was saved per locomotive per year, that was emissions kept out of the atmosphere. Case number two was 40 locomotives in a different area. These were all in Canada, they were two Class 1 railroads in Canada. 40 locomotives, 4.8 years of data, and 2.6 million gallons of fuel were saved and that gives us an average of 13,800 gallons each locomotive per year was saved by SmartStart. The SmartStart shutdown each locomotive, resulting in a reduction of an average of 13,000 gallons based on an idle fuel consumption rate of 4 gallons per hour. It is a little bit different with this case. The average shutdown time of each locomotive was 3,400 hours per year. Total average amount of emissions kept out of the atmosphere came out to 4,083 kilograms, approximately 4 tonnes of emissions were kept out of the atmosphere per locomotive. Besides the emissions savings, the railroad saved a LOT of fuel. These locomotives are very good performers for that particular railroad. The total amount of emissions kept out of the atmosphere per year, when you add it all together, was 519,000 kilograms, or 511 long tons saved for the 195 locomotives. That is per year, we kept that from going up in the atmosphere. The advocation of these SmartStarts saved a total of 511 tonnes of various pollutants being kept out of the atmosphere and 1.58 million gallons of fuel not being consumed, in a one-year period. These numbers are based on data downloaded from the 195 locomotives in different areas of Canada. Obviously, the higher numbers were in a more temperate climate. ZTR Control Systems has been involved in working with the government agencies and customers to identify/promote emissions reduction program/solutions for the railway and

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industrial sector. SmartStart technology is one tool for the railways to tackle the emissions problem and at the same time offset some of the expensive emissions reductions with fuel savings. Application of a SmartStart and a DDHS will provide the maximum shutdown time while keeping the locomotive ready to use. Thank-you. Q: Malcolm Payne – Engine Systems Development Centre I would like to know, Steve, if it is possible, if you can tell me how you correlated the emissions saved to the numbers you showed? A: Steve Easun, ZTR Control Systems Inc. I basically took a section of the, I cannot remember the exact one, it was based on some studies done in the States, from the Journal of Engineering for Gas Turbines in July ’91. I just took those figures of particulate matter based on idle time and just moved those through based on my reporting on the actual shutdown time on the locomotive. It is a very simple case study, I was just trying to make show that there is a lot of fuel that was not burned and that these efficients were kept out of the atmosphere because we are not running the locomotive.

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SESSION 4 – MODAL SHIFT AND INTERMODAL TRANSPORTATION Richard Gilbert – Director of Research Centre for Sustainable Transportation Session Chair Thanks very much, Bill. Just by way of introduction, the afternoon session is entirely on intermodal freight. Some people regard that as a euphemism for ‘moving more stuff by rail’ and, indeed, it is an appropriate euphemism. From an environmental perspective and, particularly, from a global environmental perspective – there are two, absolutely startling facts about freight transport. One is that, if you take your average large truck and it is ¼ full, it is using 2 ½ times as much fuel per pay load tonne as a truck that is ¾ full. That is startling fact number one. Startling fact number two is: whatever you do for a given loading, occupancy, whatever you like, rail uses only 30% of the fuel that road uses. Now, obviously, if the rail cars are empty and the trucks are full, it is something else. So you have to do it on a loading equivalent. But, other things being equal, that is the second startling fact, that, on an energy basis and therefore on a CO2 emissions basis and on many other kinds of emissions basis, rail from an environmental perspective is incomparably superior. That is basically what we are addressing this afternoon, how to get more stuff on rail, what people are doing about that. It is called ‘intermodal’ because, mostly, the first and last few metres or kilometres are by truck and, therefore, there has to be that interchange, and that, of course, poses problems. But that is part of what we are also going to be talking about this afternoon: how to get more stuff by rail, what the advantages are, and what the intermodal challenges are. Barry Craven – Director, Logistics Canada Post Corporation Rail versus Road: A National Shipper’s Perspective Thank-you, Richard. I am pleased to have been invited to participate in this workshop today and to represent the shipper’s perspective. Some of you might not think of Canada Post when you think about a shipper, but hopefully we do come to mind when you have something to ship or send, and that is the end of the commercial part of the presentation. In fact, from a perspective of the transportation functions within Canada Post, we are a major purchaser of transportation services, be it air, road, rail or marine, both domestically and internationally, which should qualify us as a shipper. Our annual spending on transportation is close to $300 million or about 5-6% of our total revenues. About 30% of this amount is for air transportation with the remainder split between road and rail, along with a small amount of marine. Today, I will start with some history of Canada Post and railway transportation, which should help to explain the evolving roles that railways have played in the movement of mail across this vast country of ours. Then I will address some of the factors that led to a shift away from rail in the ‘70’s and ‘80’s, followed by a look at recent trends that have

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brought rail back into play for the movement of selected mail products. Finally, some thoughts on where we might go in the future with rail-mail. When I was doing some research for this presentation, this opening line in a paper about the railway mail service, which I discovered on the Canadian Postal Museum web site caught my attention. I will just give you the quote, “The pivotal turning points of postal history generally follow soon after the appearance of new modes of transportation.” This was certainly true when railways started to appear in Canada in the mid-1800’s. Significant growth in postal operations occurred during this period, with many new post offices being opened, often located in close proximity to the rail lines. Some of that legacy still exists today in our older facilities located in downtown areas, such as Winnipeg, Vancouver, Edmonton and Calgary. We also had an old facility in downtown Toronto and it is now been reborn as the Air Canada Centre. The ingenious use of railway mail cars literally traveling mini postal sorting facilities helped to reduce transit times back in those days. The number of railway mail clerks, a special breed of postal worker, grew from 137 in 1873 to about 400 by the year 1900. Now, this is from high tech this morning to low tech this afternoon. The inside of one of the rail cars has the sortation taking place even as the mail was moving towards its final destination. This is a really fascinating concept. In today’s Canada Post, we are trained to focus on processes that add value to the customer and here we see a value-added process, being sortation happening within another value-added process being transportation. Michael Hammer, best known for the term ‘re-engineering’ but now a proponent of process-based enterprise, would be impressed with this operation. When I joined the Post Office Department in the early ‘70’s, some of the former railway mail clerks were working at headquarters and they had the most interesting stories to tell about their adventures in this unique service. Anyone who wants to know more about this should look at the Museum of Civilization web site, which has the Postal Museum archives. A little more low-tech technology, another feature of this operation was the non-stop transfer of mail bags, using specially-designed catch posts, a great idea when the volume is small and there is no time for the train to stop for loading or unloading. This early era of Canada Post on the rails peaked around 1950, actually the year I was born. The decline in dependence on rail was attributed to a number of factors, including: • • • • •

rapid growth in mail volumes due to population and economic expansion after the war, must have been all those birth announcements, I guess, expanding role of trucks in the movement of mail and other goods spurred on by the improvements to the road infrastructure, at taxpayer’s expense, of course, introduction of air mail, especially for letters, has also impacted the shift away from rail, between 1950 and 1960 the number of railway mail clerks was reduced by half, and finally, the railway mail service was abolished completely in 1971,

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•

bulk mail, and by that I mean parcels and packets and publications, continued to move by rail car until 1987, when Canada Post suddenly stopped using rail as a mode of transportation.

Let’s examine some of the factors that accounted for the shift from rail to road for surface transportation of mail. On October 16th, 1981, the former Post Office Department was converted into the new Canada Post Crown Corporation. This was a new era for the Post, which led to many changes, including the hiring of several new executives from the private sector. These people had very different ideas about how to run the Post Office, and they began the long process of transformation from a department of government to a business enterprise. At the same time, many competitive threats were moving into Canada from the South, especially for the expedited parcel and courier business in the urban areas. Although we enjoyed a monopoly on regulated services, like letter mail, we had to compete on most of our services as we do today. Our new management executives needed to quickly change the focus toward service quality at competitive prices and they decided that rail transport did not fit into this equation when compared to the features offered by trucks. The competitors did not use rail, so neither would we, and consequently we stopped using rail completely in 1987. So, why did this happen? Trucks with teams of drivers could achieve lower transit times, were more reliable than rail at that time and, in terms of arriving on time, were more flexible in terms of schedule. I am told, by the way, that the fact that one of the most powerful men in Operations came from an automotive background and really preferred trucks, may have also been a factor. About four years later, when financial pressures arose, but with strong apprehension from senior management, one person in particular, we started to use rail for the long-haul movement of mass mailings of publications and advertising mail, which was considered to be less time-sensitive than letters and parcels. Rail was also deemed suitable to return empty equipment from the west to central Canada. We have that imbalance that most people have. Several improvements in the operation of the intermodal service from Toronto and Montreal to the West, during the late 1990’s, combined with a redesign of our parcel network and process, prompted an increased shift from road to rail for surface long-haul transportation. Our recent experience has been with CN Intermodal, who have invested significantly in on-line systems and expanded terminal capacity. We have seen great improvements in transit times on our major lanes. Reliability has also improved, however, I should say, we still have some concerns with dependable performance in all seasons. Last winter comes to mind. Recovery times after supply change disruptions, like the power outage in Ontario, are also of concern. In the field of e-business, there have been great strides made by the railways, which provide customers with visibility of their shipments, as well as the ability to order empty equipment and monitor their accounts on-line. Taken together, these improvements have certainly influenced our decisions to shift some of our business to rail in recent years. Figure 4.1 illustrates the shift that has taken place

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over the past three years. The numbers show a 26% increase in rail movements, while road movements have dropped by about 14% in that same time period. Just by way of explanation, there are still many more road movements, primarily due to the volume of product moving in the southwestern Ontario, Montreal-Toronto-Ottawa lanes. It should also be noted that a typical highway service could involve several stops along the way, each leg being counted as one movement in this particular graph, whereas the rail movements are point-to-point between major processing and distribution hubs. Figure 4.1 Recent Shift to Rail

Rail and Road Rail and RoadMovements Movements 60000 50000 40000 30000 20000 10000 0

48275

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42902

41623

5378

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2000

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Intermodal is still only practical for us on long-haul lanes, mostly from Toronto to the West. The majority of our parcel, publication and advertising mail originates in Toronto and Montreal, where the large national mailing houses are located. We also send some units from Toronto and Montreal east to Moncton that serves as the distribution hub for most of the Atlantic Provinces. When you examine modal shifts at Canada Post, there are two main types that have taken place over the past five years. First, there has been a shift from air to road for our premium and core products. Now, in some cases, this shift took place due to security restrictions that were implemented post-September 11th, but most often it was enabled by reduced processing cycle times, which expanded the transportation window in what we call the mail pipeline. Significant savings have been achieved through this modal shift. Of note is the fact that, while this air-to-road shift has been taking place, service performance has actually improved, being at 97% on time for letter mail and over 96% for Express Post. The second shift has been from road to rail. In both cases, the factors 126

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that go into any decision to move to a different mode of transportation are mainly customer-driven. Of course, our customers will pay more for faster service, but increasingly, they expect reliability and consistency, and I will get into this a little bit more later on. For our operations, having transportation that can flex with the variability of our volumes is important. Since we do not control the input to our pipeline, we need to be able to add transportation capacity on short notice. As a result, advance planning systems, such as CN’s IMX Initiative, which requires shippers to book space in advance on the intermodal trains, present us with a challenge. But we understand why they want to move in this direction. In fact, we would love to be able to control our customers’ inputs to us for the very same reasons. Of course, we are always working to stay ahead of our competitors. We are also using the rails whenever it works in their processes. We were even successful in convincing our sister company, Purolator Courier, to jump on-board the rails. One of our busiest lanes is between Toronto and Montreal, where we have tried to use CN’s road rail units, to see if we can reduce truck traffic on the 401. To be really effective for us, though, we would need more frequent service and faster on-off cycle times, but we are giving this a try. So, what does the future hold? Well, we have taken a brief look at the love/hate relationship that has taken place over the past 150 years between the Post and the railways. We are back together, again, after a trial separation but the question is, what does the future hold? To understand this, you must first look at what drives Canada Post operations these days. Our Senior Vice President of Operations, Tom Charlton, has been pushing operations to get quicker, and by this he means to reduce lead time and eliminate waste through the application of lane production principles. We have enjoyed some successes, such as at our large parcel plants in Toronto and Montreal, where the elapse time taken by a parcel to pass from a trailer at the receiving dock, through sortation and into a trailer at the dispatch dock has dropped from several hours to about three minutes. But we have much work to do to become truly lean. For this strategy to work, it will be essential that the transportation network be synchronized with the processing and delivery cycles of the postal business. We cannot afford for the mail to sit waiting for several hours for the next train. In the language of lean production time spent waiting is ‘Muda,’ the Japanese word for waste. This speaks to the need for more timely and frequent intermodal services, as opposed to one big batch per day. Batching is also a bad word in the lean world. I guess that gets into some of the discussion this morning about the length of trains, and so on. I think I just voted for shorter trains, maybe. Then, of course, there are those demanding customers. How do we respond to those who are concerned about the environment? And that is a growing number. Well, our marketing folks are considering offering a ‘green parcel service.’ The parcels are not green, but it is their lower adverse impact on the environment that allows for the green

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label. They would use rail transportation wherever practical and include other emissionsreducing features, which I cannot tell you about because it is secret. Remember those mass mailings of publications and advertising mail that got us back into the use of the railways because they were less time-sensitive. Well, it turns out we were wrong. These customers, these mailers, want these mailings to be delivered within a specific three-day window so that they can synchronize the arrival of this mail piece with other media events related to their overall campaign. This means that we have to be more precise with the handling of this product. So we are about to implement a new eventmanagement system that will help us do just that. The question is, can we count on the railway to deliver to the agreed-to window? Well, we believe that we can but you can see how changing customer demands can influence our network decisions. Now, back on the environmental front. We would love to be able to help reduce truck traffic in the Quebec-Windsor corridor by using more rail, but it really just does not work for us for our overnight products. The windows are too tight, unless someone can invent a way to reduce the lead-time between intermodal unit arrival at the terminal and the time that the train gets moving. There may also be opportunities to look at north-south movements, which now go by road or air exclusively. Certainly, delays at the border make the rail option worth some consideration. Finally, you may be interested to hear that we have been asked, recently, to look at the feasibility of putting our core product, letter-mail, back on the rails on selected lanes. We have not yet been asked to look at re-establishing that railway mail service concept where they are sorting the mail on the trains, but maybe we could install some of our lettersorting equipment into a rail car. I hope that over the past 20 minutes, I have been able to convey to you some of the factors that go into our decisions when choosing the most appropriate mode of transportation and, specifically, when choosing rail. The mail is back on the rails, and hopefully this time to stay. Thank-you. Q: John Pearce – Transport 2000 Atlantic VIA Rail has started up an extensive parcel-delivery system which is really connected to almost every train they operate in the corridor. I am just wondering, with respect to timesensitive parcels or pieces of mail, if there is any consideration being given to the use of that system? A: Barry Craven, Canada Post Thanks. You are talking about VIA Pac, I guess? I think that’s what it is called. Q: John Pearce – Transport 2000 Atlantic

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Yes, I think that’s the right name for it. A: Barry Craven, Canada Post Without mentioning the name of a competitor, yeah. Q: John Pearce – Transport 2000 Atlantic Actually, we have tried that out between Ottawa and southwestern Ontario and the application was for what we call the ‘tail of the mail.’ It is mail that did not get finished processing when the trucks left, and we used it for a little bit in that lane. I think what happened was, first of all, it was not exactly cost-effective and, secondly, we were able to speed up like our Senior Vice President wants us to do and the ‘tail of the mail’ does not exist any more. But it would be nice to be able to jump on-board. The key there is that the schedule has to be there at the time when we need it. Richard Gilbert, Centre for Sustainable Transportation Session Chair Barry, thank-you very much. You made me feel like a relic, showing those slides of people sorting mail on trains because, a few years after you were born, that is exactly what I did as a Christmas job in the UK. Even in the few days before Christmas, next day service was guaranteed by the British Post Office everywhere for first-class mail, everywhere in the mainland of Britain, and the Post Office trains were absolutely essential to that. Of course, they got a bit chaotic over Christmas and they had crazy people like me working on them as casual labour. But it was exactly like you say, those very narrow corridors, all the little pigeon-holes and even the mail being taken off the moving train. I mean, that was amazing, seeing that. Just one comment, too. I read in the paper the other day that UPS has now shortened all of its schedules by a day. It is now competing with FedEx (in the U.S.) at a lower price and that scheduled freight rail is part of the improvement in service. So maybe there is a lot of potential there. But, what is amazing to me is that 50-60 years ago and longer, you could do these things and you do not seem to be able to do, WE do not seem to be able to do them so well in many cases now. You should write a history of that. Moving on to something very interesting in terms of the return to rail. This seems to be very much a success story for intermodal freight, presented by Gordon Peters. Gord is variously with Cando Contracting and with Athabasca Northern Railway.

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Gordon Peters – Chief Executive Officer Cando Contracting / Athabasca Northern Railway Athabasca Northern Railway & Alberta Pacific Forest Industries: A Testament To a Successful Modal Shift I do not have a railroad background. I tell everyone that right off the bat. I am an entrepreneur. I started in the railway business by a little bit of an accident 25 years ago in the contracting business and we still have not gotten rid of the contracting name, “Cando Contracting.” I really was loose looking for a job 25 years ago and this summer we find ourselves celebrating our 25th anniversary. Now we say we are in the railroad business. I tell everyone that because I think it brings a special light to our view of the world in transportation and, in particular, the railroad industry. I found it fascinating as an entrepreneur to walk into an industry that had an unbelievable history going back, and the way they did business, and the things that have changed. In the 25 years we have been involved with rail, I have seen huge changes and we like to think that we prodded and we helped everybody make some of those changes. Barry’s comment “love/hate relationships” between rail and I call them the ‘widgetbuilders’ of the world, I could not say more. I think that is what we are good at. That is where we come in as far as the Cando Team. Our success has probably been solely attributed to that fact of trying to make the widget-builders and the railways, both CN and CP, the Class 1’s, get together and create new opportunities, new traffic, and we have had pretty good success. Cando is the parent company of Athabasca Northern Railway, Central Manitoba Railway and a couple of railways in Ontario. We also do a lot of industrial switching, in which there is no railroad, but we do industrial switching, loading, things like that. Once again, I always say it is just the interface between the Class 1’s and the widget-builders of the world. Many times I find that they just cannot get along; there is either so much bad blood from something that happened years ago or they just will not look at each other and try to get a solution. So, it has been a very rewarding career, leading success stories, new opportunities and, of course, when we get into shortlines now, we always look for some big wins. It is fun to work on them, put them together, and then watch them years later succeed when everybody else thought they couldn’t. That is what we are all about. My presentation is about Athabasca Northern, one of the latest shortlines that we acquired. We are not quite into a success story yet, it has not got the financial rewards we want yet. About a year ago, Athabasca and Alberta Forest Products in northern Alberta got together. We own the shortline in the area; they own a big pulp mill. All our movement had been going by truck. Athabasca Northern, a line into the Fort McMurray area, was acquired three years ago on very short notice. An American firm wanted to pull out of the area’s 200-mile shortline, and CN at the time just could not pull out of the area. They did not want to operate it because it is not their core capability to operate in the remote areas of northern Alberta. We were approached to look at it. We did; we were successful in the bid to acquire the 200-mile line, and that led to the creation of Athabasca Northern.

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I have always been lucky in my life. If you go back three years ago, some of you might remember that the oil business took off about that time. For the year prior to our purchase, Athabasca Northern had virtually no traffic at all on a 200-mile line. The boys down in Boqueton, Florida had a hard time understanding what northern Alberta was going to be. It is quite a bit easier today explaining how important it is to Mr. Bush with energy issues and things like that. From the day we took it over, literally, the thing just exploded on us for opportunities, mainly in the oil and gas industry; hauling petroleum coke and sulphur out the Fort McMurray area. That is how we came to owning the Athabasca Northern. Alberta Forest Products is a very large pulp mill with a very successful operation with a huge forest management area. When we bought the line we really did not look at these opportunities. We got looking at it after the purchase. Their forest management area and our track run next to each other through a vast area of very difficult terrain. Let’s review what the deal was when we started the project. We saw thousands of trucks. Highway 63 runs to Fort McMurray. It is not a divided highway and it is the only highway going to Fort McMurray. Literally thousands of trucks come in and out of there, especially in the last 2 or 3 years; log trucks, oil trucks, all kinds of traffic. We knew that Alpac was interested in a commercial agreement; they had logs to haul. The prior owners of the line had tried to convince them to haul the raw product in. All the pulp does go out of the mill, always has gone out of the mill, to Vancouver to go to off-shore markets. The raw logs coming in had never been moved by rail, they had always been moved by truck. We are talking movements of 250 miles, something like that which, typically, the railroad industry would not look at at all, it is too short. CN and CP would have a hard time making a go of this. Because we controlled the whole movement, I had always felt that we could make the thing work. Obviously, to get Alpac interested there was going to have to be some money put on the table. There had to be a cost-saving to Alpac to make this work. The start of this reduced load road impact and safety improvement in the transportation sector was a sad moment in both Alpac and our company. We had a fatality on our rail line before this started. One of their log trucks hit one of our trains, and it was from meetings about the accident that we decided to look at the traffic shift from road to rail. The line had not been run and we started running trains on it, it was an unfortunate accident. But it was a huge issue to Alpac and it is a huge issue to us to do it right. Also, from what has been said in the conference here today, we are very confident that rail, particularly in the long-haul movements, will have savings in greenhouse gas emissions and things like that. On a smaller move like this, it is a little hard to quantify, but Alpac is a very progressive company that wants to be green and wants to do things right. That was a big issue for them, and obviously it had to be profitable for us. If we were going to change and move from about 500,000 existing tonnes to about a million tonnes a year of product on the line, we were going to have to figure out a way to make money doing it.

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To give you an idea where the line is, Fort McMurray is towards north-eastern Alberta. Fort McMurray is in the top and coming down to Alpac where their plant is. We actually hook into the line at Boyle with Rail America, another shortline we hook into. We have running rights on that track for 25 miles to the plant. The proposal to move the 500,000 tonnes of logs is that we would put lay-down yards in several areas. One is the Fort McMurray terminal and the other is at Conklin, pretty well right in the middle of our track. We scale the logs going into our yards, do inventory and then load and ship the logs out to the plant. The Fort McMurray terminal, has close to 100 acres of land for laydown space between this project, coking, coal and sulphur; different trans-loading that we do up there. All our product is trans-loaded. If anyone does not know the Fort McMurray area, the main oil upgraders are about 30 miles north of Fort McMurray at Tar Island. So we are moving right now probably 800,000 tonnes through Fort McMurray by truck to our rail head. Fort McMurray then goes from us to Rail America to CN to the markets of the world. We are working on a proposal right now that would push that track 25/30 miles north right up to Tar Island also. That is where we operate out of. It is a very tough area; there are very few roads in and out. In 200 miles, I think we have got five roadcrossings, something like that. It is tough to get in, a tough area. The plant at Alpac uses about, believe it or not, when you talk about heavy volumes, 2 ½ million tonnes of logs a year. It is unbelievable the amount of logs that go through that facility, and like I said, the finished product is moved out by rail. They were moving entirely by trucks up until then. There were a couple of problems with the trucks we could quickly see. One was the fact that trucks could only move eight months of the year. They store logs for four months of the year. Alpac has a huge log yard at the Alpac plant. A huge expense is incurred to unload these logs and store the logs. They can keep a half-year supply of logs, a million and a half tonnes, on the ground at the plant. That is a lot of product to store in the area. Our concept was to use our lay-down yards as inventory control and we would deliver over 12 months of the year. It has been a furious year. That is one of the reasons why the principals of Athabasca Northern Railroad, Don Barr from our side and John Ellison are not here from Alpac. We have had to put a considerable amount of effort into the operations in the last year and the boys up there are putting the finishing touches on all the logs, all the yards and that here, so we are ready for winter this year. In November we signed the contract after five months of negotiations. Obviously, if we are going to put capital into infrastructure, we needed commitments to make it work. We signed a ten-year contract for about half a million tonnes of logs a year. Really, when it comes down to it, the move is now 80% by rail and 20% by truck. We receive the trucks, we scale them, we off-load them and then we re-load them on rail or direct load them on the rail cars. That is the two things we do, the loading and unloading. I think this is unique in the railway industry. We are not like the Class 1’s, we are nowhere near like them. To be successful in this type of work today, I believe you have got to be modeled

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after, similar to what we have got, which is to do more than pull trains. There is no doubt that when we first started talking to Alpac, their view of the world, once again I use this term ‘widget-builder,’ they wanted to make pulp, they did not want to worry about transportation costs. You have to solve a lot of problems for the customer and we typically like to find a customer that has got a lot of transportation problems. To us that is fertile ground to bring them onto the rail network. Obviously, you can see that between the two companies, we are about ¾ of the business. We have spent about $8 million bringing this project together. For our company, a small entrepreneurial company, $6 million was a huge capital investment. However, we believe by the time we get through this, it is going to work out and we have doubled the volume on our line. One of the problems we have gone through in signing this deal was that we actually started too quickly, it is the entrepreneur come out in me. We signed in November and by the 10th, 15th of December, we were receiving logs and we had no yards, we had nothing. They scraped away the bush and laid down just about 200,000 tonnes of logs before we had everything into play. We have paid the price all summer. Once again, WE HAVE paid the price, not Alpac. We should have probably waited a year and got our stuff in place but anyone that knows us, we move ahead very quickly. We will get it resolved and we will get the operation moving efficiently. We have had lots of problems. One of the ones that really sticks in my mind, was the big flack from Alberta Transportation. We brought in 50 cars for the dedicated move. There were a couple of holes in the floors of a couple of the cars. The cars came from B.C. Rail. They were old log cars but they will work for us, and they were going to stop the whole train because of these couple of holes. We had to show them pictures of the trucks running down the road. I do not know if you are familiar with pole-pole, these are big logging trucks that have got one skinny pole in the middle, all loose, all the way, any log could drop out, fall into the road. Once again, a road with other people, you or me are driving behind them. When we are running on our track, with our own cars, and nobody else on it and we have a hole this big, and honest-to-God, they were going to shut the train down. I just could not understand it. We faxed them, or sent them pictures of the trucks, and then said, “Explain to us how you let the trucks go with no floors at all and we have one hole and you are going to shut us down? Doesn’t make any sense.” Well, we got that resolved. This summer we are looking forward to the next nine years of the contract, the benefits that it is going to bring us all. For me, it is very rewarding to change the way business was done. There is no doubt that the greenhouse gases will be reduced, when we negotiated the deal, Alpac receives all the benefits. If there is a Kyoto benefit, if it ever comes about, they are going to receive the benefits. We were offered nothing from governments to do this, even though the logs were running on the roads before. The reduced gas emissions are estimated at 50,000 tonnes over ten years. Alpac is going to save the better part of $1 million a year in their transportation costs. The year-round

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delivery of logs to Alpac is very important to them, although they never did come out and say how important. They are talking about expansions and they do not have to expand their log yard, so I think that has got a fair number to it. Reduction of road impact costs result from taking 12,500 truckloads a year off highway number 63, south of Fort McMurray. So between an impact cost and a safety issue, it has been a huge issue. For the local communities, there are less trucks on the roads. Obviously, increased revenues for us, we just about came close to doubling our revenues on our shortline. There should be a little profit left at the end of the day. Another point on the improved road safety in local communities. Interestingly when we started to put the yard in, the government came to us and said, “Well, if you guys are going to do this, we want you to put, what they call accelerator lanes in,” and a whole list of stuff. Even though the logs were coming off every side road onto #881, as soon as they got to our yard, they thought we should have all this stuff in. Long story short, it was a $600,000 bill that I believe the government tried to stick us with, this is still not resolved. It is just amazing to me that we are taking trucks off the road and the government turns around and charges us more money to fix their roads up. Another thing it has led to is that we have got another log movement right now we are working on that is about 125,000 tonnes a year. It is about a 200-mile move also. These are the benefits that we have seen as companies and as communities up there. I have a short film that I would like to show you. Here are the contact people, it is in your package, the two individuals that are chiefly in charge of putting the deal together. Obviously, I worked on the negotiations, but the operating side Don Barr, on our team and John Ellison from Alpac. I know John and his team at Alpac are very proud of this, of what it has done and talked quite extensively about that. With that, we have a little film here that was put together on the log-haul move. Thanks a lot. Just in closing, a lot of the people heard me saying before that in our business I always say that we want a short, short, short line with a huge loading contract at the end. So that is what this is. Q: Richard Gilbert – Centre for Sustainable Transportation It is more of a comment than a question but there is a little question at the end. I would like to congratulate both presenters to this point on achieving a significant intermodal shift, and with it, reductions in production of greenhouse gas emissions. Having been involved in one failed scheme in the Uteway to having a wood-loading and transport operation on a now-abandoned branch-line, I admire your success. And I just wondered if you could mention any, sort of, resistances that may have come up to what you were doing. You mentioned the highway safety demons and the sort of cross-modal discrimination, which is one barrier, which I think we are always coming up against in the rail business. But were there other resistances within or without either corporation or regulatory bodies?

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A: Gordon Peters, Cando Contracting Yes, there is always the issue of change, and the bigger your organization, the harder a time you have with that. Our group is very entrepreneurial and we are very young, so we are kind of like WestJet. Our team was ready to look at anything. The Alpac guys, the trucking issue, there was obviously some trucks that got displaced by this, and stuff like that. Alpac existing crew, and that is what we point out, we are only hauling 20% of the raw logs. So they had used a lot of spot trucks just for a month or two of the year. That was not very efficient anyway, but there was a little bit of a downside in that. Our headquarters are at Lac La Biche, an aboriginal community. We have a huge component of aboriginal people working on the railroad up there, a very good team. We want to promote that more, so they have done very well on it. For the town of Lac La Biche there is a lot of activity. Some guys do not like the activity, but if you kept going down the road the rail yard was there, the existing rail yard, but we are just using it more. So there is a lot of activity going on, and we are trying to put together a package right now to put a building in place at Lac La Biche and stuff like that. On one hand, the city fathers love the tax revenue. On the other hand, the activity of the trains and things like that is always an ongoing problem. They are trying to even these four crossings. It is a dangerous country to work in, because here in the south, you see a lot of crossings. We do not have crossing protection, lights, and things like that, in some of them. If you have been running for years and never saw a train, if you were a truck driver and then all of a sudden there was a train, we have had some close calls. We have advertised in the paper, we have done everything to try to make people aware that we are up there and we are operating now. We can be there any time of the day. So we had to re-educate everybody that was involved with that on a safety aspect. Richard Gilbert, Centre for Sustainable Transportation Session Chair Well, thank-you very much, Gordon, for that encouraging presentation. A couple of years ago, I had the opportunity to do some work for OECD on freight transport in Sweden. The culture there, if you want to call it that, is really startlingly different, in terms of how freight transport services are deployed and how they are purchased. The startling difference is the great prominence given to environmental criteria in managing logistics, supply chain management, in purchasing services, and so on. I think it is probably true to say that in Sweden now, the environmental criteria are just about at the top of the list. I mean, they are obviously there with all the other things like cost and reliability and so on. I was intrigued to look at a list put out by George Atek of the criteria that the 19 major shippers in the United States use for purchasing freight services. There were about 38 criteria listed and there was not a single environmental criterion among them of any kind. There is a startling difference and I wondered how on earth what goes on in Sweden could ever be brought to North America. What went on in Sweden was driven very much by the Swedish government, but I wondered how it could

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possibly happen. I have now figured out how it is going to happen, it is going to happen through Sabina. IKEA is, of course, a very prominent Swedish company and is doing absolutely extraordinary things in Sweden in terms of how it manages its own supply chains in Europe. What I see happening, and what I am going to be very, very interested to hear about, is how IKEA is introducing this kind of thinking into North America. That is, perhaps, how it is going to happen in North America, through IKEA’s example. Sabina has been with IKEA for some time and, before that, she was a rail person. She comes especially equipped as an environmental specialist, working for a huge shipper, and a former rail history to tell us what IKEA is doing in North America and how these changes are going to happen; Sabina Strautman. Sabina Strautman – Environment Transport IKEA North America Services Case Study in Modal Shift: IKEA I am a rather newbie to IKEA, relatively new, I have only been with IKEA for coming on two years now. It has been quite a big change from working in the rail industry, or other regulated communities, to a retailer like IKEA. Several of you do not know very much about IKEA, and some of you do very intimately, by putting together all our furniture. So I want to take this opportunity to introduce IKEA, give you an idea about the company, where we are located, how we are organized, then what drives our environmental policy and how that policy affects our choices in the transportation network. The reason that I am rather new here is that there has been a big explosion of growth here in North America for IKEA. So, a lot of the policies and procedures and our strategies in choices of a transportation network are now being translated to North America. IKEA started 60 years ago, in 1943, so we are celebrating this year our 60th anniversary. It was founded by a gentleman with this vision, “To create a better everyday life for the many people.” You will find throughout this presentation that I have many Swedish translations from English into Swedish, so we have ‘Swenglish’ in this whole presentation. For those people who like trivia, the ‘IK’ stands for this gentleman’s name, Ingvar Kamprad, who is our founder. The ‘E’ stands for the farm that he grew up on, Elmatrid. And the ‘A’ is the village, which I assume, is just another farm with his farm, Agunterid. To give you a little bit of an idea about IKEA. Our business idea is, “to offer a wide selection of furniture at a price that as many people as possible can afford.” To give you an idea of our facts and figures for our fiscal year 2002, our fiscal years run September to September. We have more than 10,000 articles, 154 stores in 22 countries, and 1,700 suppliers in 55 countries. That is because IKEA mainly designs the furniture and shops it out to the manufacturer for the lower price, anywhere in the world. We actually do own

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wood factories, because we need to secure the amount of wood that we do use in our products. So we do have our own factories called Swedwood. There are 35 factories in 11 countries and I believe there is one Swedwood located in Nova Scotia. We have 75,000 co-workers and 286 million customers. The fiscal year 2003 just ended. To give you an update of where we are: we are now in 43 countries and we have about 76,000 co-workers. We had over 3 million customers and we had, again, here in North America a big explosion of growth. We opened nine stores in North America, three of which were in Canada, the rest in the U.S. We are looking to open seven new stores, one of which will be in Canada, in Calgary. If I have anything to do with it, I will try to get one in Winnipeg. To give you an idea of our sales, in Euro, in 2002, we had 11 billion in Euro sales. Our plans are to double our sale volumes within 5 years which is quite a significant growth. I would like to give you an idea of where we purchase our goods and where our sales are. Our sales are mainly in Europe, our biggest selling country is actually Germany. It is closely followed by the U.S. as well as the U.K. However, on the purchasing side, where we actually purchase our goods, it is quite a big shift. The majority of it is in Europe. Actually, that percentage has gone down for this past fiscal year in FY03. A lot of our goods are now made in Asia, a big significant movement there. As you can see, a lot of packages moving out of Asia to the other parts of our company and our stores. So our distribution network makes it possible to move all these articles to everywhere in all these stores in the various countries at the lowest possible cost. Figure 4.2 gives an idea of where our distribution centres are. We have a few more actually, in North America that have not shown up here. This is not quite an accurate depiction, but it kind of gives you an idea of our regional distribution centres world-wide. As you can see, a lot of them are based in Europe.

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Figure 4.2 Distribution Centers all over the World

Our transportation split today. Road handles 60%, rail handles 20%, ocean carriers handle also 20% and, of course, air is less than 1% given the size and the weight of our goods, not the most efficient transport. The kind of a unique advantage is that, if you are familiar with the IKEA concept, we flat-pack all our tables and chairs and whatever else you have to assemble into a self-assembly type of package. This flat package allows higher loading capacities. We have large volumes and a common transport network that we work on. One of the difficulties in the transportation side is, for every cubic metre that we sell, we have to transport 2 ½ times that volume, even with the flat packages. So that becomes a significant cost in our transportation. Our environmental policy, again here is a little bit of Swenglish, ‘the good company.’ Essentially, it means that IKEA wants to be the responsible company and viewed as a responsible company by all our stakeholders. Our policy basically states that we are going to strive to minimize damaging effects to the environment. Our environmental responsibilities as well as our social, IKEA does NOT just focus on the environmental side, and working conditions issues that we are concerned about, especially with our suppliers, is now going to translate to our distribution side. Basically, it covers our whole supply chain. All the way to the store and all the way to the customer. This whole philosophy and our policy translate into actions into six areas of our company. To focus on the transportation side, we are looking at the energy and emissions, our carrier development and review. We realize that a lot of times working with our carriers, when we set a stake in the ground to make a certain environmental improvement, it takes a lot of awareness and a lot of dialogue and partnering. We do see the railway as a solution and there are all the other aspects as far as activities that we are taking on; again, throughout the whole supply chain.

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Just to reiterate that our concern about the distribution environment is that we want to continuously reduce the environmental impact of the transportation of our goods. We have set a several year goal in mind to a strategy for transportation based on our vision and business idea. We want to create and maintain transportation solutions in order to meet all the needs of our customers in the most environmentally-adapted way. Our objective is to become a world-class distributor and we want to be the most resourceefficient distributor. We do focus, from the environmental aspects, on the three E’s which are: energy, engines and efficiency. We have set a goal for ourselves by 2005 and that is what is driving a lot of our decisions right now. Basically, we have made a decision to reduce our emissions of CO2 in transport by 15% per cubic metre, again this is an intensity. Obviously with the growth we are experiencing a total increase in CO2, and we are looking at how to reduce the total in the future. However, transport is one of our most important environmental aspects. When we looked at our emissions, basically for all our articles, we realized that transportation stands for at least 80% of the total emissions. IKEA’s transport volumes are growing fast because of increased sales volumes and the fact that we are distancing our source suppliers. We are taking a look at that, as far as distance source suppliers are now starting to try to develop more suppliers within North America, within each region, instead of trying to source from Asia. The transportation sector overall is our greatest challenge to what we call sustainable development. This is no surprise to this group. That is because the transportation sector is basically 100% dependent on fossil fuels. These are just other issues that are of importance from a world-wide perspective that directly contribute to 30% of emissions of CO2 world-wide. Transportation is also a major source of local and regional pollutants, of which those are usually regulated now. There is a big concern on external noise in urban areas and I was actually surprised to see how often, in the presentations of the last day and a half, that noise was actually mentioned. As well, there was a big demand for land-use for infrastructure. This is just to show you, based on information from the European Commission, that the transportation sector is the highest consumer of energy as well as the biggest emitter of CO2 emissions. The actions that we take in order for us to be pro-active is that we have set in mind how to measure and follow-up our environmental impacts from our transportation network. Actually, setting this goal of reducing 15% per cubic metre has started to make us look at our systems and realize that we have to change the way we measure things. In order to hardwire an environmental metric into the business decision-making, we had to start changing the way we were measuring and the transparency of how our network was working. On the transport planning side, we focused on increasing our filling rates and reducing our empty positioning. We cooperate with carriers to improve fuel efficiency and missions performance. We do a lot of awareness raising. We work, again as I mentioned, with them as partners and we choose the most environmentally-adapted mode

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of transportation, and it is a mix between road, rail and ocean. We do use a tool, again, it needs upgrading in order for us to calculate our own emissions. We look at our shipments and we take the volume data, filling rate, the distance we move it. We apply an emission-value factor, and then come out with what our CO2 per cubic metre is and we track that to try to meet our goals. To give you an idea of why we are focusing on flat-packing as well as filling rate. We have a target internally of trying to have our filling rate at least 50% of the load. Our reason of course, is fairly straightforward. This example here is if the filling rate on a tonne-basis increases from 50-60%, the fuel consumption per tonne of goods decreases by 15%. How do we select the right mode of transport? Well, we did have our own metric internally where we set a CO2 reduction goal, and if we were to only focus on that, then, obviously, transporting by sea would be the best, given this relative CO2 per tonnekilometre. Rail is of course, less than 100%, because a lot of the systems in Europe are electrified, and they do have the ability to purchase ‘green power.’ However, we do not solely look at CO2 when we are looking to evaluate our carriers and our carrier choices. We also looked at all the other aspects of what that transportation represents. As you can see, if we were to use shipping alone, and we have just looked at CO2, we would be missing the fact that shipping is a big emitter of SO2. Who are the right carriers? Well, we are looking to actually couple with like-minded carriers, the ones that have the same type of vision, look at environment as part of incorporating into how they are doing business. The tools that IKEA uses to evaluate the performance of a carrier are what we call an environmental performance survey. We had gotten a lot of feedback and the lessons learned from the European region of IKEA are that a lot of carriers were coming back to us saying that IKEA is not the only one interested, and they were getting continually submitted these questionnaires. So we realized that we wanted to standardize that tool, because we did not want to put an undue burden on all the carriers to have to continually fill out a different form of an environmental performance survey. So, IKEA has been working together with a group called “Business for Social Responsibility” who are a nongovernment organization and they are based in San Francisco. There are a lot of other shippers involved with IKEA and dialogue with carriers, and mainly it has been the ocean carriers and the trucking business so far. We look to expand that into having dialogue with rail carriers. We have actually come up with a standardized tool and we are hoping that that will be standardized for all other shippers who are interested in evaluating their carriers’ performance. We also looked to see whether the carriers themselves have put together an ‘environmental action plan,’ an EAP, with goals. We also do a carrier review. We look at the type of reports they do and we are looking at them to do continuous improvement also. Another unusual aspect about IKEA and the tools that we use is that we actually have what we call ‘minimum environmental demands’ or requirements. In order to be an

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IKEA carrier and service provider, at different times or different fiscal years, we actually want to see an actual improvement for each carrier, and we actually define those criteria. There is a certain entry level in order to even do business with IKEA. Then we set examples in the staircase model of the different areas of criteria that we want to see improvements in, depending on the type of mode of transportation. An example of what IKEA uses in Europe for their rail carriers and the staircase model that they use, and present to them that these are the minimum requirements that they have to meet for every fiscal year that they do business with IKEA. IKEA, of course, tries to work together with these carriers and basically identifies the reasons for being pro-active, which are very important for IKEA. Since we are directly associated with the customer, the customer has a lot of requirements on IKEA. We basically see that we can differentiate ourselves from our competitors, we improve efficiencies, obviously reduce fuel usage as savings, pro-actively alleviating negative publicity from NGO’s which is a bigger issue I would say, in Europe than it is North America. However, we are not immune to that in this area, and to be an active stakeholder, ensuring an environmentally sustainable world for future generations. This is not just the end for IKEA. Our steps are also to incorporate social responsibility into our processes on our way to sustainable development. So, I think this term, if somebody else has seen this, “Think global but act local,” kind of gives you an idea of how this policy now works within our regions. The way IKEA is organized is that we have a North American region, for which I am responsible for integrating the environmental policy into our business decision, and there is Europe and the Asia Pacific region. IKEA was getting rather frustrated because they noticed that, although their policy dictated that they wanted to reduce emissions, as well as do more cost-savings, they realized that their shares on the railroad were continually decreasing year-by-year. There was a lot of frustration in discussions because of the problems with cross-countries moves. So they ended up becoming their own rail operator. To give you an idea, the railway was established in 2001, and the first train operated in June of 2002. It runs from Almhult, Sweden, which is the ‘Mecca’ for IKEA thru Denmark to Duisburg, Germany. That is over 1,000 kilometres and it has a load capacity of 30 trailers. The improvements are that it basically replaces 60 road trucks a day. CO2 has been reduced by 70%, particulate emissions more than halved, and hydrocarbon emissions are slashed by approximately 80%. Future goals are to move more volume on train by physical year 2006, and that is not just on IKEA Rail. We are actually focusing also in Britain and a lot of other moves within Europe, and there are a lot of gains to be made here. In the North American region, from our Brossard terminal outside of Montreal we are going to our four stores in the Toronto area. We basically shifted 98% from road to rail, which results in over 4,000 regular drive-in moves per year to be shifted onto rail. We also partnered through this move with Hudson Bay, we are actually on their back-haul, on CP Express. So we actually have really made great gains from an environmental perspective.

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During 2002, in the U.S. we tested service runs from our distribution centre outside of Baltimore to Chicago. Unfortunately, the service levels had the same problems, on-andoff-time ramps. We are also supporting a project of rail development from the L.A. port to Lancaster, and this is just a project that is on the books right now. Because IKEA is importing over 44,000 containers, our future goal is to continue to develop source-suppliers in Mexico and South America and to shift more towards rail. To give you an idea of our Asian experience – we have actually done a test run on the Trans-Siberian Rail. For a while there I did not think we knew where our container was, but I think it did show up three months later, so we are working on that solution. Just to close, basically, as IKEA likes to say, “Most things still remain to be done. It is a glorious future.” I thank you for your attention. Q: Robert Taylor – Railway Association of Canada Sabina, you used an interesting measure of CO2 per cubic metre, I think which introduces density into the equation. We have talked mostly at this conference about grams per tonne-kilometre, which is weight in distance. I wonder what light you could shed on that and if you could indicate if you also look at weight in distance? Because, if you are comparing commodities of equal density, I think CO2 per cubic metres can do it for you. But, in the rail business, for example, where we are comparing very different products with very different densities, I do not know if it really works? A: Sabina Strautman, IKEA North America Services Again, this is like an internal metric that we use and the reason why it started is that we had to take the type of measurements we had, which is basically our cubic metres. We were more concerned about our filling rates than we were really concerned about the weight, the weight was not really a big restriction for us. However, as we were working more and more with carriers, we needed to come up with a common, almost an agreed-to measure between these other shippers such as Nike and Home Depot, and everybody else who is concerned about the performance of the carriers. This is also in dialogue with the carriers so I suspect that as we are moving forward and start talking with the rail industry, that that issue about which metric to use will come out. Q: John Spacek – Manitoba Transportation and Government Services Sabina, you bring an international perspective and that is what I am curious about. Many of us have been involved here domestically and in a North American context of trying to improve our transportation performance from a sustainability transportation perspective. Many of the examples that are brought to us are European examples and you have highlighted many. I wonder if you could share with us your view as to whether there are any cultural, institutional or any other barriers that tend to differentiate applying those

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examples here in North America? You have had great success in Europe, you have had some success by the look of it in North America, and I am curious what lessons are to be learned? A: Sabina Strautman, IKEA North America Services Interesting question. I am wearing war wounds over this past year, trying to get this concept introduced. I think a lot of the issues have to do with the transportation industry. It is highly regulated, especially on their engines’ performance, and I think, different in the U.S. of course than Canada, U.S. also has not signed on to the Kyoto protocol. However, like most companies who are going to work or are working trans-nationally, that basically does not have any boundaries. However, to introduce that kind of conversation to companies that are regionally-based operators, whether it is a trucking company or a shortline railroad or whatever, it is a long process. We have done it oneon-one, right now, to talk with our service providers, basically raising awareness, taking on responsibility ourselves. We also worked, as I mentioned, with BSR to get more of an industry-to-industry discussion, to realize that we are not the only shippers to start using market leverage as a way to change the mindset. So, I think it is going to be a slower process in North America. There are still parts in Europe, although everybody looks at Sweden and Switzerland and Denmark as being very environmentally aware, that have a lot of, I would say, institutional just systemic issues that create barriers that we have to try to come over. Q: Richard Gilbert – Centre for Sustainable Transportation Sabina, could I just ask John’s question in a slightly different way? What could government do in North America, if anything, to move us in the direction that IKEA has been moving in? A: Sabina Strautman, IKEA North America Services Well, actually what IKEA has been using, or I have been using to create that kind of dialogue, is using voluntary initiatives. I believe Bob Fronczak was mentioning SmartWay as well as FleetSmart program, and Bob Smith is here, so there are a lot of other programs, voluntary programs, that have a lot of tools that a lot of companies can use to start integrating these thoughts and concepts. Do I necessarily believe that regulation is the way? I do not think so. I would rather see, I think the cooperation that I see in an industry-to-industry free market is much more effective than through regulation. Q: Bob Fronczak – Association of American Railroads Sabina, when we had our first meeting for the SmartWay program, we had a discussion about, would a shipper be willing to spend a premium for an environmentally friendly mode of transportation, if you will. There was quite a bit of talk about shifting from road to rail and, as a matter of fact, you could probably get some economy for doing that, from an economic standpoint, but you might sacrifice some service or time. I just wondered,

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had you considered that? Is there a cost that you would be willing to spend for the environmentally friendly transport mode, if you will? A: Sabina Strautman, IKEA North America Services I would say yes, but it is interesting how I have internal discussions with our business developers. IKEA actually has, and this issue came up with our ocean carriers, because you can imagine the costs for them to change out their engines. I mean, exponentially you go from truck to rail to the ocean carriers and a lot of the shippers did agree that they would agree to some cost supporting it, if this is what they wanted. What is interesting is the reverse, that it is supposed to be more efficient in operations, too, so eventually there should be cost-savings. So there is not just the increase, the added cost, there should be some efficiencies then in the system and it all depends on how you start evaluating what the total cost is. I mean, do you include the environmental piece? I mean, how big is the cost umbrella that you put that around? So, again, it is just changing the way you are thinking. Question: We have handled the macro side of it; I have a question on the micro side. My wife drives from Sault Ste. Marie to Toronto to go to IKEA and back again. That is 20 hours in the car, right? Causing emissions. But that is not the worst, I have to cook for 3 days and you should see these emissions! So, my question is – when will you open up in Sault Ste. Marie? A: Sabina Strautman, IKEA North America Services I think you need the high-speed rail line. Isn’t that a solution? John Spacek – Senior Director, Transportation Policy and Service Manitoba Transportation and Government Services Rail versus Road Access to Remote Communities in Manitoba Given the kind words Richard just said about my background, one of the interesting things about this project is that it brings together all of the issues that lifelong learning brings to this business. I guess what we could have called this presentation is “Public Policy Case Study in Sustainable Transportation” because it is far more than trying to deal with some remote access issues to some of our original constituents. In fact, it really brings together all of these intriguing elements that those of us in public policy deal with. It brings into conflict Federal and Provincial jurisdictional issues, that is, the “who is going to blink first” syndrome. It brings in that awful word called “subsidy.” It brings in First Nations and then, of course, with First Nations comes the INAC region, and of course, headquarters. It brings in the Canadian Transportation Act with our net salvage value legislation provisions. It certainly brings in remote access, and I will get back to that with a reference to ‘Straight Ahead’ shortly. Frankly, it all ends up with the

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proverbial, for those of us in the transportation business, or what used to be called, the highway business, is “We want our road.” I am going to talk about three kinds of general areas thematically. One is just to give us an idea of what remote access in Manitoba means. Certainly, there is a large railway dimension to the Manitoban remote access story, and I am going to finish up with a few examples of what it means to address the rail-versus-road policy issue here. One of the more interesting aspects of Manitoban life, and I am reasonably new here, is just how many remote communities we have. We have 36 or so remote communities in northern Manitoba. An interesting policy angle is the definition of what is a remote community. Believe it or not, the definition of a remote community is whether or not you have all-weather road access. If you cannot jump in your car and go somewhere anytime, you are in a remote community. It is also from a program point of view in the “who is going to blink first” arena. INAC also defines their funding programs by whether or not you have a road. Fascinating. But at the end of the day, we also have to appreciate that the people that live in these communities do not have access to mainstream Canada. They do not have access to our mainstream economic system through our road network. Consequently, their costs are higher. Certainly, their job opportunities are more limited, they have lower incomes as a result, and basically, they tell us that their quality of life is less than ours. About 3% of our population live in remote communities, that is about 33,000 people. It is not a lot of people, but wait till you see the dimension of this. It is also about 6.5% of our rural population. Some people call Manitoba a city-state, I do not, but Winnipeg is 55% of our population. Our remote residents are 90% First Nations under Federal jurisdiction and about 10% under Provincial, the majority of those living in Churchill. Then we have the Métis communities that are around the North. Not a lot of people today, but collectively they are the fastest growing segment of our population and within 20 years, their population is expected to almost triple. We have 39 remote communities. Winter roads – 36 are served, 34 get air service by float plane or wheeled, 6 are served by rail, and that is where we are going to focus this discussion today, and 11 by marine ferries. We have three communities not served by winter roads and five not served by air. We provide winter road service to most of these communities. In fact, every year we build enough road to drive from Winnipeg to Vancouver, if laid end-to-end, so it is a big job every year. There are a couple of thousand shipments done on our winter roads, primarily the bulk supply of fuel. General freight is hauled by truck. We have a $4 million annual winter road budget. Most of the roads are opened mid-January and close mid-March. By the way, we also as a Province own 22 airports in these remote communities. We have 6 communities served by rail, no road access: Pukatawagan, Ilford, Thicket Portage, Pikwitonei, War Lake First Nation, Churchill and the Port of Churchill. All of these have air service and we provide winter roads to these communities, except

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Churchill. Figure 4.3 is our northern rail network, 810 miles of track, operated by Hudson Bay Railway. Figure 4.3 Northern Railway Network

Rail-serviced Rail-serviced remote community community

Passenger services are provided by VIA Rail, through a contract with Hudson Bay Railway. General freight service is provided by Hudson Bay Railway. Hudson Bay Railway is one of our larger employers in the North, 124 person-years plus spin-off employment. On the Hudson Bay line, they get three trips a week by VIA passenger service. On the Sherridon it has gone from three to two trips per week over the summer. Certainly there is a lot of concern, and in our policy and service group, we address a lot of the concerns that are expressed to our Department and our Minister over the service in the North. It is a problem, their on-time reliability service, frequency, equipment reliability, basically the last trip of that equipment, they say, should go to a museum. Overall, it really needs some help, and certainly one of the big issues is a lack of space for locals which is a problem that we face. Interesting, there has been some references here to climate change and I believe Minister Sale positioned Manitoba quite properly. We are, in our view, lead-by-example in this area. In 2001, the Premier, with the help of the Honourable Lloyd Axworthy, had a Climate Change Task Force. The report was put out and recommendations were made and the Premier accepted the recommendations. In fact, as Departments, we are obliged annually to report on our progress. Both the original task force report and the plans are available on our government web site. But, interestingly enough, there were 18 recommendations in that report related to transportation and all of them were focused on

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sustainable transportation. One of them was to deal with adapting to any impacts, first understanding the impacts on infrastructure and then secondly, adapting to them. We did that as a Department and with the help of our Federal colleagues, we had a Transportation and Climate Change workshop process. We put out a report, which is available on the UMTI web site, and I would encourage people to go and look at it. There are implications and recommendations on rail infrastructure as well as general transportation infrastructure. We face, in the North, a large part of our railway, and CN hands in this room will remember from their experience, that the northern railway to Churchill is built on permafrost and very susceptible to climatic change. Even our winter roads have had to deal with that. Certainly, we need to look at what needs to be done there, and we intend to do that. One of the problems, of course, has been our winter roads. We have not had good luck with them the last five years. We have had one year when we could not get any of the winter roads in, and you people helped pay for that. It was, I think, a multi-million dollar air-lift price tag to serve these communities by air. Over the long term, the demand for all-weather roads is also sensitive to climatic change. I mean, if we need to deal with this, the winter roads certainly are a problem for us and we question their future. The other thing, of course, is that all of these communities are based on very, what we would call, ‘thin freight and passenger markets’ and so, a change in one greatly impacts the other. A loss of Pukatawagan, for example, which only has rail access, impacts the Band which also owns the airline, so it has interesting intermodal sensitivities. But the one thing it does point out is that we need to make decisions from a full systems cost benefit approach. We need to understand what the implications are, and not just the “What is the VIA subsidy?” or “What would be the annual subsidy for another operator?” There are other costs and there are other implications. We need to understand who they apply to and, also, who should share in those burdens or benefits. We have looked at the cost of building roads to all of those communities, $1.1 billion. Just the 6 communities we have listed right now that have rail access with more than once a week, 2 or 3 times a week passenger service, amount to $500 million price tag if we were to build roads. Churchill, by the way, would be a $330 million project. Thicket Portage and Pikwitonei, for example, modest price tags for roads, $20 million and $20 million, total of $40 million. But on a net present value basis, we can only justify 20% of those costs on cost-savings to those residents and the delivery of services to those communities. Certainly, Churchill is important to us, it serves a community of 1,000 people. It also is Manitoba’s, the Prairies’ export port and Canada’s only Arctic port. Certainly, I am happy to say as of yesterday, we had a very good year at the port, our second best year in recent history. It just shows what we can do when things come together and we have shipments through that port that have never happened before. Canola for the first time, and 78,000 tonnes of feed peas, and so on. Frankly, it might be our best year yet, as the year is not over for Churchill. I would also like to point out, certainly for those of us with

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the Class 1 railways here, I would like to say, it does take a lot of effort and a lot of coordination and a lot of help. CN and CP have been helpful with car supply in a very time dependent and difficult logistics system. Here is the road option, if we want to build an all-weather road, Gillam to Churchill. (Gillam is the end of the road right now, if anyone wants to drive to the end of the road, it is a power dam up in northeastern Manitoba). $330 million construction, $2.5 million maintenance a year, winter road is $3.4 million construction, $1.1 million maintenance. I am going to go through these quickly. We looked also at building a road to Nunavut and we also looked at the cost of a railway equivalence. Our attraction there, of course, is the mining properties that are opening in the Baker Lake, Rankin Inlet area. All-weather road, $1.6 billion, $8 million a year maintenance. Railway, what we would call a basic railway that would suit, $1 billion if you want to go to a Class 1 level, of course it is double that but it would be $1 billion to a $1.6 kind of comparison, interestingly enough. Since it is a railway and it is privately-owned, I guess we would not have to be involved in the maintenance of way, such as the $8 million all-weather road maintenance. By the way, the Premier of Nunavut came to town one day and said, “I have a vision. My vision includes being able to drive my car to Canada.” This road from Nunavut would join Canada’s all-weather highway system, $1.7 billion piece of work; $11 million maintenance of way cost. Railway, $1.1 billion or $2.3 billion again, depending on what standard we built it to. Quickly, we have an issue right now. We have published an ‘Abandonment’ by OmniTRAX for the Sherridon Line. It is something we have to deal with now and we have to deal with it quickly. It is this railway portion from Sherritt Junction to Pukatawagan and Lynn Lake. There was a mine, the mine now closed, and rail traffic is done. Other than passengers, it is not a financially viable line. Certainly, between Pukatawagan and Lynn Lake, there is no traffic left. In fact, passenger service was stopped in August. We operate to Pukatawagan – it has no other access, right now, other than small commercial aircraft. We have engaged and had the CTA do a net salvage value calculation for us as part of our quest for knowledge and what to do with that railway. Certainly the costs would go up to those involved, particularly in the resource industry, and also so-called quality of life issues. $100 million to build a road into this community or $10 million annualized over a 20-year period. We can only justify 22% of that expenditure, based on actual cost savings. We funded a business case with INAC. The Band hired IBI Consultants out of Toronto. It is going to cost money to keep this going, but they had some nice solutions, some nice options. Basically, what they were saying, is “Let’s go to this kind of service.” They investigated some options, Kershaw, Bud Cars, and a beautiful self-propelled car from Poland, very expensive car but it is nice. We are also doing a detailed cost-benefit study, to find out who the winners and losers are in all of this. Certainly, initial results suggest that the big losers are going to be the community of Pukatawagan, it is going to cost them over $3 million a year more to heat their homes and feed themselves. Certainly, Tolko

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Forest Products, it is estimated to cost them $2.4 million more to switch to truck. Thanks for your time. Q: Gord Peters – Cando Contracting Just one question on a comment that we heard somebody else had told them earlier, do you look at the whole cost to build and maintain the road versus the rail option? Is the Federal government involved by Agreements? A: John Spacek, Manitoba Transportation and Government Services We have looked at that Gord. We are also looking at a partnership approach. We are also looking at setting up a non-profit authority, much like the Winnipeg Airport Authority. We are looking at the winners and losers; we are estimating those costs now. We know, on an equity basis that if we were to build a road into that community, we would be paying, never mind the capital costs or the 22% benefit ratio, we would be paying $400,000 a year in maintenance of way for the highway. Jim Vena – General Manager, Operations CN Prairie Division Winnipeg Intermodal Terminal Relocation Richard, thank-you very much for the introduction. Thanks to all the participants here. Thank-you very much for coming in and listening to me. I did not hire on the railway as a child. That is a fallacy and I am going to deal with the guy who wrote that history on me, but I did hire on real early and have we changed? Absolutely, we have changed. Why have we changed? If you want to stay alive in this business and you want to make a dollar and make sure that you grow, then you have to change. I have seen a number of changes in the 25 years I have been with the railway. Okay, why relocate? We have a perfectly good intermodal terminal sitting out there in the western part of the City. Really, it did not bother us that much. A few issues, such as: capacity limits, operational factors, lease specifications and political considerations are all reasons why we had to move. Intermodal at CN is 1/6th of the total revenues we make, so it makes up a big part of what we are doing. Half of that is Canadian business, Canadian domestic business. The other half, or close to it, is import-export business that comes into Canada, some of it coming from the Orient through the port of Vancouver, lots coming in through Halifax into Canada and the U.S. But the biggest issue that we have is that we have to have an efficient place that works right, and we have to do something with this location. The other thing we are working on and partly tied to the whole issue of what CN is doing is IMX, Intermodal Excellence. Our intermodal business is NOT very profitable. Yes, it takes trucks off the roads. Yes, the railways are better at handling the traffic, especially

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once you get out 5-600 miles. We are better than trucks; less cost involved in the move. Now, we do not offer everything a truck does and we understand it and we cannot beat them at every piece of the market. But, one thing for sure is, there are markets that are good for the railway, good for the whole country, but we do not make a lot of money at it. So, with IMX, we needed a new terminal here to fulfill what we have done in other places, in Vancouver, Toronto, Halifax, Chicago and down in New Orleans, as far south as we go. Capacity issues here in Winnipeg: • • •

At the old facility we could run about 85,000 lifts through there at the max, Geographically constrained, there was nowhere to expand, and We tried to purchase some land, but for good political reasons, when people are starting to build houses just south and east of you, you are in big trouble, and we knew that so we had to get out of that location.

Specific Operational Factors: We built the old terminal, I do not know the guys before me, but they were not real smart. You build a railway facility where you can flow in and flow out. The house up in East St. Paul where I live, just outside the City of Winnipeg and I am going to get myself in trouble for living outside of Winnipeg. But I finally found the perfect house, my wife hated it, the kitchen was too small. But the garage was perfect you can actually drive in the garage and drive out the other end, they have a garage door on both ends. When we built the old terminal, those guys previous to me, built it so it is only open on one end, a real problem. You have trains running both ways, so we had a big issue. In addition we have a major road just east of the intermodal facility that the City and no one else would like us to run another railway track over, so we were constrained. Trucks were a problem, not a real easy location, and remote from the main facilities. We were running two operations. It costs you money any time you run two operations when one will do. When you get into the railway business, it is like people with boats, big boats or ships, something that has a lot of infrastructure. Nobody wants to lease you anything for a short period of time. So, the lease that we had was for 75 years, but they did one thing right, they had an ‘out’ on the contract. The ‘out’ was in 2005. We had an opportunity to get out of that location, so we had a decision to make. When you add it up, what we are trying to do is make intermodal more profitable. So, we made the decision in 2002 to go. We worked with the City and the City was very, very helpful in working through the issues that we had to work through. At times we can disagree on certain things, but I will have to give the City of Winnipeg a lot of credit for being able to work through the issues that we had to make the move from one location over to the other. Political Considerations: If you live in Winnipeg, people know about “Kenaston Crossing.” It happens that they built real nice houses just south of where our main line is (double main-line track). We

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run 3,200 rail cars a day through Winnipeg, a major location for us. We run every one of our trains over Kenaston and having the intermodal facility there bothered a number of commuters Decision steps: We had to deal with a few of the City’s concerns. Relocation options: We looked at a number of places. One was to see if we could get everybody together in one spot. I think there is some value to that but where we are today, in the whole industry, it just did not make sense. I think we worked through that issue, but I think it is something that, down the road, we have to really look at. In certain situations, certain locations, it makes a whole lot of sense to have the efficiencies that come along with doing it. Transcona, we could have moved it to the east end of the City. Same problem, a couple of major roads. I will tell you, any time you are in the City, major roads, nobody wants to put overpasses in. I do not know what the problem is. Symington worked out to be the best location. We have a natural place there. We have got a yard and, if some of you want to join us on the bus tour, you will be able to come and take a look at it. We have got a big hump operation there; we do a couple of thousand cars a day over the hump, 3,200 cars through the place. There is easy access in and out, and good road access with truck routes already there. So, really, I made the decision that, ten years down the road when the fellow that comes next to me, he will not come to any session and say, “Who was that idiot that put this thing in this place?” And I cannot give you the name of the person that made the decision, okay? Construction process, when we got at it, we went at it fairly quickly. We announced it in August 2002. Initial construction started in the fall of 2002. We stockpiled early this spring. Full construction in late spring, early summer. We tied it into the city roadwork. The City had some work that they had to get done, did a good job there. The terminal was operational in July 2003, less than 11 months later. Some issues remain and we will have to work through them. Any time you make a change problems arise, we have over 400 trucks a day coming into the facility. They have options of how they go, once they get out on the truck routes. There are truck routes north and south. Some of the residents that live just north of our location have problems, we will have to work through that with them and see if we can alleviate some of their concerns. End Result: • •

We spent $16 million and that is all rail-related costs to build the facility. Present capacity is 100,000 and we can easily expand it by 20-30% with the land that we have at Symington.

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• •

•

Good road access. The City invested in giving us access off of Plessis Road, so that the trucks could enter and exit the facility properly. The City also gained, it is a true win-win. The City, instead of us having 4 or 5 rail tracks that they had to worry about getting over with the needed underpass or overpass, we are down to two tracks in that location. So it will be cheaper for the City when they build the overpass/underpass. And real important to us, is the CN and City working relationship.

The intermodal terminal is a central pad set up. Trains come from a number of origins. We run our trains now at 10, 11, 12,000 feet, we never went metric. They did not think we were smart enough to go to metric, they kept us at the old system. So, 12,000 foot trains – 2 ½ miles long. When they come in, they go right to the pad. The biggest benefit for us is, we use to lose a day’s cycle on the equipment, Rail cars cost us $60 to $100,000 to purchase, and we used to lose a day in Winnipeg. $16 million cost, you do NOT get your return on capital by moving the terminal from one location to the other, or even the reduction of a couple of supervisors. Where you save is in car costs, and for us, that was the big benefit. Today, a train comes in at midnight and gets stripped. It will come in with 2,000 feet of containers double-stacked. We strip it, the cars are gone that same morning by 6 o’clock, and for us that is where the benefit is. Our President has said at a number of sessions, that it did not make sense for CN to be in the intermodal business. We were covering our costs of day-to-day operating the system, but what we were NOT doing was covering the cost of capital that is required to stay in this business. Trailers, rail cars, new locomotives that cost you a couple of million dollars, wasn’t there. Now, IMX turns the rail cars faster which makes the whole system more profitable than it is today. Thank-you. Q: John Spacek – Manitoba Transportation and Government Services How many more Winnipeg’s are there in terms of increasing your efficiency? How many more of these kinds of opportunities? A: Jim Vena, CN Prairie Division Well, we have looked at Toronto. We are out-growing the terminal. Toronto is our largest intermodal facility. We have got to do something there. That has got to happen in the next planning period for sure. The rest of the facilities were not built with the same sort of mistakes. In Edmonton, we have just finished relocating about a year ago. Calgary, we upgraded. Vancouver was upgraded about 10 years ago. So, we have done a number of them over the last 10 years. Q: Doug Duncan – University of Manitoba Transport Institute

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Now that you have moved the yard, does that give us an opportunity to release additional land, such as the Fort Rouge yard and some of the infrastructure there? A: Jim Vena, CN Prairie Division Seems you must have been in my office this morning at 10:00 or something. In fact, we are working with the City on that subject. So, yes, we are. Bottom line is yes, we are going to give up some property. Question: You said that the City helped with the relocation of roads and access to your facility. I presume that they paid for the paving and setting up of those roads to the new yard? A: Jim Vena, CN Prairie Division That is correct. Question: I guess my question is: Would you say that this is a useful role for government to be involved in? In other words, developing access, egress to intermodal facilities, as a useful form of public policy? A: Jim Vena, CN Prairie Division Normally if you listen to the railways, we always say that we pay our own way. It is our capital, we make the capital and we spend it. Basically on this relocation, we did the same thing. We are not asking for money for the relocation directly. The City helped us because we had double taxation costs. We have to keep the lease on the other property till 2005. The City is going to gain in that the cost of building the overpass or underpass at Kenaston is substantially reduced. It worked out for both of us, it was a win-win situation for both of us. So, the answer is yes, there are places for government help. Q: Gord Peters – Cando Contracting Jim, one of the things you did not mention, and just correct me if I am wrong, your intermodal business is not that profitable but it is also your fastest-growing segment, your growth in your business. So, sooner or later, it is like anything else, it is going to cross over and it should be a big generator. That then takes you to the next step, I know you guys are using, and CP also, the hub-and-spoke scenario, big intermodal terminals. We heard customers today having problems with some of those, they could not get in, could not get out. You guys are managing them all. Do you ever see the day that you will partner in the winnports of the world, kind of idea, in more places than you are now, where you guys cannot be effective at it but some other operator might be able to do it?

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A: Jim Vena, CN Prairie Division Thanks for the question. I think, absolutely, like I said before. I think there are places where it makes sense that we work as an individual party. There are areas where we are better off to work as a group to run joint ventures, I think we get better efficiencies out of the whole system. Just a couple of weeks ago we were in Moose Jaw, Saskatchewan, trying to work with a small company, to take containers out to the farm, directly. The problem with the container or trailer is that you have to have a place to load it or unload it. But, in Moose Jaw, we set up a little terminal there and it is privately run, where the container actually goes out to the farmer’s field. We have only moved a few so far, but I think there are more opportunities. So, as much as we want to run 3,500 rail cars, my job, and the rest of us at CN, we are willing to find one car if we can figure out a way to move it and it fits into our system. So, absolutely, I think there is, Gord, a benefit for all of us in certain areas.

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SESSION 5 – ALTERNATIVE DIRECTIONS FOR MOTIVE POWER Frank Donnelly – Chief Technology Officer RailPower Technologies Corp. Green Goat® Hybrid Switcher The Green Goat® Hybrid Switcher. The Green Goat® differs from a traditional switcher in that it uses a relatively small engine and batteries. It is a hybrid because the energy comes from two different sources, the engine and the battery. The small engine basically maintains the battery. The majority of the power is drawn from the battery itself. In a traditional switcher, the engine, the prime mover, supplies all of the power through the main generator and then it drives the traction motors. Mainline railroads typically ‘cascade’ down large road switchers into yard service. But, RailPower® has bucked the trend by coming up with something different. Very simply, the energy comes from diesel fuel; it powers the generator; the generator, in turn, charges the battery. Then we go through some power conditioning that throttles the power into the traction motor – a very simple concept. Currently, RailPower® is offering the Green Goat®, which is a 1,500-2,000 horsepower remanufactured road-switcher that started as a GP-9. The Green Kid is a smaller version of the Green Goat®. We sometimes refer to it as a ‘Son of a Goat,’ and it is designed for industrial applications. The present configuration of the Green Goat® features a 90 KW Isuzu engine. It is Tier 2 certified and it includes a special oil filter. We do not do oil changes, we just change filters, so it is a very low maintenance engine. It runs automatically, and it comes on on demand and when the battery is satisfied, or returned to the state of charge where we want it, then shuts off. The batteries are lead-acid. They are not sealed and are ‘valve-regulated.’ If one of the batteries, for any reason, builds up pressure, it will vent. The size of the battery is a nominal 640-volt, with 320 cells. It has 1,200 amp/hours capacity and weighs approximately 25,000 kilograms. No maintenance is required. The traction motors are extremely popular D77, and the equally popular 26L brake system. The compressor is driven by an inverter that runs on demand, the compressor will run even when the engine is off. The Green Kid, on the other hand, is basically half the size. The generator is only 45KW and the battery is half the number of cells, 160 individual cells which provide 320 volts and weighs half as much. Configuration. Figure 5.1 shows the engine compartment. On the left-hand side is the end of the Isuzu engine. Because of length, we had to remote the radiator and the radiator is cooled by a separate motor.

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Figure 5.1 Green Goat® Engine Compartment

The main battery compartment, you gain access to the batteries by lifting fiberglass lids. Standard trucks and traction motors, everything below the deck is basically a conventional locomotive, the railroads like this because they are very familiar with this equipment. The compressor is a rotary screw and it is driven by an induction motor. The induction motor, in turn, is driven by a variable-speed drive, basically an inverter, right off the 600 volts. The control stand is a standard AAR control stand. The interface is identical to a conventional locomotive. We have had engineers, in the middle of the night, come in, sit on the seat and start running the locomotive. The next morning they were told that it was something different than they were used to operating. They just thought it was a new diesel because they heard the diesel running and it performed like any other locomotive. So, the look and the feel are exactly like a conventional locomotive. The reason we are able to do what we do is because of the duty cycle. The duty cycle, typically, is such that we only need 1 or 2% of the total time in the 8th notch. Most of the time the locomotive is operating, it is at idle a very high percentage of the time. So there is ample opportunity to keep the battery charged up. In Figure 5.2, here are two examples: a California yard cycle, and a B.C. Rail switcher locomotive. Data is off the

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event recorder and there is pretty good correlation. Every time we examine the duty cycle, this is basically what we see. It does not really vary that much. Figure 5.2 Examples of Yard Switch Duty Cycles T/H

Traction Power %

8 7 6 5 4 3 2 1 Idle

100 83 68 55 42 29 17 5 0

Duty Cycle Notch Setting/Duration % California Yard B.C. Rail #613 (AAR) (99/08/04-99/08/19) 2 1 0 0 0 0 1 0 3 1 3 2 4 3 4 7 82 86

You do need high power, but it is very transient, very sporadic, and it happens throughout the day. When you are flat-switching you need high power, for kicking the cars or moving a long cut of cars. So, you cannot do the work that we do unless you do have the power. Figure 5.3, is a histogram of the load profile. Figure 5.3 Load Profile

Frequency (seconds)

9000 8000 7000 6000 5000 4000 3000 2000 1000 0 -100 150 400 650 900 1150 1400 1650 1900

Current Figure 5.3 shows the battery current, and you can see that, in terms of current, we go up to just beyond 1,400 amps in a tiny fraction of time. Then, we do not go that much

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higher, so most of the current draw is down much lower. You can also see where it goes negative and that is where we are actually charging the batteries. Figure 5.4 State of Charge Battery

900

800

Amp Hours

700

600

500

Cumulative Amps Out [AH]

400

Cumulative Amps In [AH] 300

AH Difference [AH]

200

100

0 8:00:00.0

9:12:00.0

10:24:00.0

11:36:00.0

12:48:00.0

14:00:00.0

15:12:00.0

Time

Figure 5.4 is a typical day, when everything is working right. You can see that they started out probably about 8:30 in the morning. The engine came on while the locomotive was running, and you can see that appears to be about 10:00 or 10:30 a.m. the engine shut off because the battery returned to a full state of charge. After the coffee break, they started up and you can see that, each time the bottom line goes back basically to the bottom of the graph, we are approaching a full state of charge. Then, at the end of the day, when they climbed off the locomotive, the batteries were essentially restored. Another reason that the locomotive performs so well in terms of fuel economy is that most of the time when it is operating in the lower notches, we are much better than two competing sources of power here. On Figure 5.5, the top curve is a 12-cylinder, 645 engine. As you go through the notches, you get its best economy around the sixth notch and then it starts heading back up again. The other curve that starts at the same place is actually a CAT engine. The CAT engine is very fuel-efficient. However, in the lower notches, the Goat is better. The reason that the line on the Isuzu engine goes up linearly is because of the internal resistance in the battery. That is just the harder you pull on the battery, the lower the round-trip efficiency. In practical terms, the Goat does very well.

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Figure 5.5 Comparison: Specific Fuel Consumption

The core concept of the Green Goat® was to put a large battery on the locomotive. We are fortunate with hybrid locomotives because, contrary to most hybrid vehicles, weight is not a concern. In the case of the Green Goat®, we had to add an additional 17,000 pounds of ballast made of concrete and nail clippings just to get the weight up. So a large battery gives you a very conservative battery design. We are not pushing this battery at all. We get a very high round-trip efficiency; we get a long battery life; we have the ability to operate for long periods of time. This locomotive engine can be switched off and run inside a building and probably run for a whole shift. We tested it when we were in Chicago and we ran for about 50 miles on battery only. Once again, with a large battery, we have few constraints. Our philosophy in operating the battery is that we run it at a partial state of charge – 60 and 80% state-of-charge. It appears that in batteries most of the wear takes place when you return the battery to a full state of charge. We do not return the battery to a full state of charge, we stop around 80%. The strategy for charging the battery and terminating the charge is depletion and replacement of ampere hours. The battery life depends upon usage, temperature, vibration and shock. The target we are hoping for is about 10 years of life, and the battery economics are simple. In explaining it to the customer we say the replacement cost is comparable to the cost of a major engine overhaul of a traditional diesel locomotive. So, if you know what it cost to overhaul a conventional mediumspeed diesel engine, you get an approximation of what it costs to replace the set of batteries.

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Our field trials have included an 18-month test of the Green Goat®. Our first test was in Roseville, California. We started the serious testing July of 2002 and we ran through to December. The locomotive performed very well. We had unusually hot weather, about 45ºC in July and August. Late in the year, we decided that we needed to do some cold weather testing, so we took the Goat to Illinois and we tested it through into 2003 when it experienced temperatures as low as -10ºF. Once again, it performed very well. We were able to develop full power under those conditions. What happens with the battery is that you lose performance when the battery is cold. In July 2003, the Green Goat® went to Pacific Harbor Line (PHL) in Los Angeles. PHL is a highly productive operation. The management wanted to see if they could get an equipment reduction. The job that normally took two SW1200’s was replaced by the one Goat, and it did very well, except that we were not replacing the energy as fast as it was coming out of the battery. Over a period of about eight hours, we saw about 1,000 kilowatt hours of usage. During four of those eight hours, we saw a usage of about 200 kilowatt hours per hour and we ended up, at the end of the day, with about a 500 kilowatt hour deficit. What we have learned from our experience at PHL is that we are going to have to size the generator up because energy was going out much faster than it was coming in, and we actually had to stop operation. The Green Kid has been tested at Southern Rail in B.C. and at the ChevronTexaco oil refinery in El Segundo, Los Angeles. Environmental Benefits: •

• • • • • • •

80-90% reduction in NOx and in particulates. 98% is possible with a diesel particulate filter and SCR. The Goat really lends itself to post-treatment because the hardware can be sized for the small engine and we run at a constant temperature. 50% reduction in greenhouse gases, simply, we burn a lot less fuel because we are extremely fuel-efficient. You burn less fuel, you produce less greenhouse gases. Virtually eliminates noise pollution. You walk 100 feet away from it, you can barely hear it running. Easily meet the Tier 2 regulations for locomotives and the expected, whatever the Tier 3 is. However, because the prime mover is only 90 kilowatts, we just do not fit the criteria for the locomotive. So, this is kind of in limbo as to what we are. We are exceeding all the local government requirements. In California, the local air quality control standards are sometimes much tighter on industrial sites than the EPA. The nice thing about the Goat is that in this day and age of recycling, it basically was built from a lot of recycled parts. We are looking at emissions credits. They are traded publicly, and it looks like even though it is not a point source, we can take advantage of that and market them. Government grants are available and we have already applied for them.

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•

And one thing we keep on hearing, going back to noise, is that the noise is something that affects all railroad operations. Because what has happened is that on the land that used to be just industrial, now residential, railroads constantly get calls about idling diesel locomotives. The Green Goat® is very quiet and it certainly seems to help in those regards.

Our consultant put some information together for us. In comparing a GP-38, which is kind of the locomotive of choice now that is being cascaded down into yard service, we are getting a very good reduction, about 86% in NOx. There are actual cases that have been submitted for funding under the Carl Moyer and Texas Emissions Reductions Program. We are also looking at very good reductions in fuel consumption, in the order of 50-80%. The graph in Figure 5.6 was first produced by Southwest Research and it shows the family of diesel locomotives. You can see that inside of the Tier 2 box, there are two engines, truck engines. The Goat has an industrial engine that is not quite as good as the truck engines; however, because we get such good economy because of the hybrid cycle, we actually do better than those two spots. So we are way inside of the 2 Tier box. Figure 5.6 EPA Locomotive Exhaust Emissions Regulations

Line Haul PM (g/hp-hr)

0.8 0.7 0.6 CP38&35

AMD-103 SD50

0.3

F40PH

SD60

0.2

0

B32-8

Tier 1 = 2002 - 2004

0.4

0.1

MP15

Tier 0 = 1973 - 2001

0.5

Tier 2 = > 2005 2002 Trucks

1998 Trucks

2

SD70MAC F59PH C44-9

4

6

8

10

C40-9

12

14

Line-Haul NOx (g/hp-hr) Source: Southwest Research Institute

Summarizing, the Green Goat® technology achieves significant reductions in emissions compared to standard practices on diesel fuel. We use standard diesel fuel; we are not using alternative fuel. It is a cost-effective way of achieving emissions reductions. Thank-you.

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Question: Are you looking at regenerative braking applications with the Green Goat? A: Frank Donnelly, RailPower Technologies Corp. In the yard, there is not much opportunity because it is ½ mv² and when you are moving it 5 miles an hour, it is hard to do. However, what we are looking at is that there is one customer that does want dynamic braking in a hump and I think we can do it. Regenerative braking is a little more difficult but it is doable. There are applications we are looking at where there is high speed involved and it does make perfect sense, like in a commuter application. Question: Your yard experience sounds rather convincing. I deal a certain amount with shortlines in my own area, and a tourist pike. I wonder, would this be something I could recommend to the operators for shortline operation or for tourist train operation? In other words, would the continuous movement over a longer distance sometimes at a higher speed, sometimes not be too challenging or is this something that the Green Goat®, at least, could handle? A: Frank Donnelly, RailPower Technologies Corp. Well, I think in a lot of instances, shortline operations, the limited branch-line switching, yes, this makes perfect sense. We have used it in those applications. In a tourist operation, we probably, what comes to mind when I think of tourist operation might be the NAPA Valley wine train in California, and this would be very doable. Q: John Spacek – Province of Manitoba Frank, did the Green Goat® have regenerative braking? A: Frank Donnelly, RailPower Technologies Corp. It does not because it adds complexity. However, we could have a variant of it that would have regenetive braking. Where it would make great sense is high speed, a commuter application. Question: What are the rough numbers of that unit cost in that, your Green Goat®? A: Frank Donnelly, RailPower Technologies Corp.

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Right now, everything remanufactured, we are looking at about $700-750,000 U.S. However, there are ways to reduce that, some of the operators want to buy kits and they can do it for a lot less money. Q: Barry Prentice – University of Manitoba Transport Institute You mentioned that cold weather was a bit of a constraint. How far north, or into our region, could you push that technology before the cold temperatures start to make it inefficient? A: Frank Donnelly, RailPower Technologies Corp. The manufacturer of the battery has its specification to -40º, so I think we can operate most places in Canada. I do not think it is a problem. The only thing we would have to worry about might be that it might get so cold that the plastic on the battery might crack, in real cold temperatures. When you start working the batteries, the batteries generate heat and they self-heat so I do not think it is a problem. Q: Jim Popplow – Manitoba Health I am interested in accident prevention. You have invented a quiet engine. Will that fool people on the yards, that they are used to noisy things being ready to move any time. Something that is quiet might just have an accident? A: Frank Donnelly, RailPower Technologies Corp. You are right, it is a concern. One official mentioned that if we had a second bell on it, it might be a good idea. This is dangerous, yards are very dangerous to begin with, and when they are backing a long line of cars and the locomotive is on the other end, it is the same thing. So, I think there needs to be some added vigilance, there is no question about it. Robert Dunn – Consultant Biodiesel as a Locomotive Fuel in Canada Thank you. I would like to acknowledge the Transportation Development Centre of Transport Canada, who funded this project. This discussion will deal with the potential of using biodiesel, as an alternate fuel, in railway locomotives. Canadian railroads have been very pro-active in evaluating alternate fuels. They were the first railways to use locomotive fuel derived from Canada’s tar sands, and have been using such fuels since 1972. With the energy crisis of the early 1970’s, they tested bunker blends, of up to 10% bunker in diesel fuel, to try to reduce fuel costs. That

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program stopped when significant mechanical problems developed. They also had a lot of interest in the natural gas program of both Burlington Northern and the Union Pacific. They performed their own studies to see what could happen in Canada with natural gasfueled engines. Later they developed their own “locomotive-type” diesel fuel that is different from on-highway fuel. A Canadian General Standards Board specification for locomotive-type diesel fuel developed as a result of this work. The interest in biodiesel follows this interest in alternate or different fuels. The railways are interested in biodiesel because of the potential for government incentives for greenhouse gas emissions reductions. As we heard on Monday morning, the Province of Manitoba will be announcing initiatives on biodiesel. The Government of Ontario has already removed the road tax on biodiesel, Alberta is considering similar incentives. Quebec was considering some action, but it did not get into the last budget with the change in governments. It does show, however, that there is interest by governments in biodiesel. The railways would like to position themselves to be able to take advantage of any government initiatives, if it becomes cost-effective. Greenhouse gas emissions reductions associated with biodiesel are life-cycle reductions. It is unlikely the railways would see any reductions in their operations but it might become interesting to them if emissions trading develops in Canada. The railways would work out purchasing agreements with the biodiesel suppliers to take advantage of greenhouse gas emissions reductions trading. The Railway Association of Canada generates an annual report on locomotive emissions and included in the report are statistics on greenhouse gas emissions. The Canadian railway industry, therefore, has the mechanism in place to follow greenhouse gas emissions. The government initiatives are taxation related. The Ontario government has removed the road tax from the biodiesel component that goes into biodiesel blended fuels. This has had the effect of lowering biodiesel costs that have made it interesting for fleet users such as bus companies and Toronto City Hydro, who now have extensive in-service experience. The City of Montreal’s bus program was funded by NRCan and the Quebec government. The biodiesel was supplied by Rothesay. The taxation issue will be important to the railways. As Provincial government incentives evolve, the railways will evaluate the cost benefit and react accordingly. It could quickly become interesting to the railways. The purpose of the biodiesel program was to get a better understanding of the issues of using biodiesel in railroad-type locomotives. The environmental benefits are: • •

Life-cycle greenhouse gas reductions of 75-80%, Lower particulate emissions.

The environmental negatives are:

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•

•

NOx appears to be higher. NOx, as shown in the locomotive emissions monitoring report generated by the RAC has been flat since 1990. Increasing NOx would be a negative. A balance must be established between GHG reduction and NOx increase which should be monitored closely. The energy content of biodiesel is slightly less than regular diesel which suggests higher fuel consumption.

The objective of the biodiesel project was to answer questions: What is biodiesel? Where does it come from? How is it made? How do they get it to the railways? Why should the railways use it? Or perhaps – are there any reasons not to use biodiesel? What are the properties that are critical to the Canadian railways? What experience is there? Will the locomotive operator, the people actually driving the locomotives, see any power difference when they try to power up? Will there be any problems when climbing the mountains into B.C. with a load of coal behind? There are some major issues regarding warranty on new locomotives and for the locomotives under contracted maintenance and the associated performance guarantees. What happens with the use of biodiesel regarding EPA compliance? All new locomotives are being purchased to the latest U.S. EPA compliance level, Tier 1 which will become Tier 2 by 2005. The costs of biodiesel blends are higher than railway diesel fuel. Finally, there has been very little locomotive testing on biodiesel, aside from one locomotive at Southwest Research. What is biodiesel? The technical term is “Fatty Acid Methyl Esters.” The feedstock for the process could be either seed oils, which in Canada, would likely be canola oil. In the United States it is soya oil and some processors may import palm oil from Asia. It could also be animal waste from the rendering industry. Dead stock could be processed into biodiesel, as well as spent cooking oils from the fast food industry. All of these materials are fatty acids of different types which, when treated with methanol, yield a fatty acid methyl ester. The technology is well known and the process is not difficult. Where in Canada is biodiesel processed at the present time? The City of Montreal had a bus program in operation for one year, which was very successful. The supplier was Rothesay and a variety of feedstocks was used to produce the fuel. The fuel was delivered to one of the City of Montreal’s seven garages for buses assigned to that garage. The trucker would fill up 80% of his truck at the diesel fuel rack and then top up at Rothesay with hot, 35ºC, biodiesel. Biodiesel is totally soluble and disolves quite easily. This mixing process, in the delivery truck, is called splash blending. Canadian railways should be concerned about the following physical properties of biodiesel blends: 1. Cloud Point. Canadian winter diesel fuel is very different from the American winter diesel fuel. The American railroads generally have to add kerosene to get suitable winter diesel fuel properties. In Canada, fuel is delivered by the refineries for the area of usage and their guideline is the 2 ½% winter design temperature. Temperature measurements are made at every airport in Canada and this data has been collected by Environment Canada which has produced temperature charts for every area in Canada. For example,

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in Edmonton, in the middle of December, January and February, the 2 ½% winter design temperature is about -38ºC which means that 2 ½% of the time the temperature, during the course of the day, could drop below that temperature. They also have curves for 5% and 10%. The 2 ½% winter design temperature is the guide from which Canadian railways buy their fuel. In Canada, the railways are very large users of fuel derived from the Athabasca tar sands, which has a naturally low cloud point. The tar sands fuel in 1972 was actually a crude cut. It changed to a gas-oil sidestream for many years and now is on-road truck quality. In eastern Canada, the situation is different. The cloud point is controlled at a certain temperature and the use of flow-improver additives are common. These additives keep the wax crystals at very low particle size, so they can pass through fuel filters. The railways have invested in hot wells. That is, the warm fuel returning from the engine is directed, in the winter, through a 3-way valve, to a certain area of the fuel tank where the fuel uptake to the engine is located. Biodiesel is completely soluble in diesel fuel but there is a concern regarding large wayside storage and cold weather precipitation of the biodiesel component. 2. Operating Range. The railways travel about a thousand miles between fueling. In other words, they go from Halifax to Quebec City or from Toronto to Winnipeg. If they cannot make it that distance, a trucker is called to fuel the locomotive. With the lower energy content of biodiesel, this could be an issue, and expensive truck-to-locomotive fueling could result. 3. Contamination. Glycerin contamination is really a quality control issue. Glycerin is butter-like in consistency and quickly blocks fuel filters. 4. Lubricity. Canadian railways have not experienced any lubricity problems in Western Canada with the use of low sulphur fuel from the tar sands. In eastern Canada the sulphur levels are 2,500 ppm and lubricity is not a problem. Environment Canada will be regulating railway diesel fuel sulphur levels to 500 ppm by 2007. On-road diesel fuel suphur levels will be regulated to 15 parts per million. The railways use on-road diesel fuel for direct-to-locomotive fueling. Sulphur levels are therefore going down. Lubricity could become a problem in the future. Biodiesel, with excellent lubricity properties could be of benefit if lubricity becomes a problem. 5. Performance. What is the preferred blend of biodiesel? It could be anywhere from 520%, although 20% would likely be the blend ratio of choice. Would separate biodiesel fuel storage tanks be required, or will direct-to-locomotive fueling be required? On small operations direct-to-locomotive fueling would be preferred. Wayside storage would be required for fleet-wide operation. 6. Warranty. There has been no clear statement from the engine-builders yet on biodiesel. The Canadian railways do have contract-maintenance for their fleet and

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performance guarantees. New locomotives are being purchased at Tier 1 which will be Tier 2 by 2005. As well, the Canadian railways have been upgrading their older locomotives to Tier 0 at time of overhaul. There is a clause in the EPA rule-making that says that if the fuel is changed the locomotives must be retested for compliance in the EPA test procedures again. This would be an expensive proposition. Costs. What are the costs of biodiesel? This is the most difficult property to predict and will be determined by the actions of both the Provincial and Federal governments, particularly with respect to incentives. The railways do not pay road tax but they do pay consumption tax, which varies from province to province, but it is about 4-5¢ a litre. The net result is that railway fuel is about 10¢ a litre lower than on-road diesel fuel. Costs will be affected by: • • •

The size of the biodiesel plant – commercial size or batch operation, The price of railway diesel fuel, The introduction of emissions trading programs.

Canadian railways need more precise data on exhaust emissions from locomotive-type engines. Southwest Research performed a single test on a GP-38 that indicated higher NOx. Testing on railway type could be performed in Montreal, at the Engine Systems Development Centre, ESDC. Malcolm Payne can provide you with more about ESDC. They have a single cylinder railway-type engine where a lot of data can be obtained very quickly, with different blends. A locomotive could also be brought into their plant to confirm the data on a full-sized locomotive. Where could biodiesel be introduced? Yard locomotives, which are not emissionscertified engines, or commuter rail operations such as GoTransit are two possible choices. GoTransit is an interesting possibility because they have a single fueling location and are always interested in public image. In conclusion: • • • • •

Technically, locomotives can use biodiesel, Greenhouse gas emissions are reduced but the railways themselves will not generate lower GHG emissions. It is the producers of biodiesel that will generate lower emissions, Commercial-size plants are required to lower costs, There are outstanding challenges, such as warranty and EPA compliance, More testing on locomotives in Canada is required.

Q: Doug Duncan – University of Manitoba Transport Institute Being the accountant in the group, what is the financial driver for the railways? What would be the relative comparative biodiesel to straight diesel?

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A: Robert Dunn, Consultant If we can get the costs down, it might be very interesting, and costs are important. If the costs remain where they are, I cannot see the railways having a lot of interest. But the railways would be interested in government incentives and emissions trading in the future which could make biodiesel an interesting potential fuel. Q: Normand Pellerin – CN Bob, can you clarify a bit on the life-cycle aspect of this, because I think the point may be, who is getting the savings on the GHG? A: Robert Dunn, Consultant The way it is at the present time, is that the railways would not get credit for GHG emissions reductions. The GHG’s emissions reductions will be credited to the supplier. There was work done a couple of years ago that showed where the reductions come from. They came from absorption of carbon dioxide in growing the grains, less fuel use in the manufacturing process and removing fuel from the processing in conventional refineries. From a railway operator’s point of view, there is almost no GHG reduction. But I can see in the future that if prices do become interesting, there may be some interesting negotiations between the railway purchasing people and the suppliers, to try to get some of those GHG credits. Q: Zachary Patterson – McGill University What kind of sources would there be, or where would you be able to get the source for biodiesel fuel in large enough quantities for, say, railways? A: Robert Dunn, Consultant Biodiesel can be obtained from small batch operators, from companies such as Rothesay. As well, BIOX in Ontario has a demonstration plant that is producing significant quantities. Both Rothesay and BIOX have announced that they are planning to build larger facilities, say 50 million litres a year facilities. Or biodiesel can be imported from the United States. Q: Zachary Patterson – McGill University I guess maybe I did not clarify, I meant raw materials. A: Robert Dunn, Consultant

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The raw materials come from either the rendering industry or from seed oils. Seed oils in Canada would probably be canola oil. The driving force for the Provincial government is to provide new markets for their farmers. Anthony Perl – Professor University of Calgary Making Zero Emission Urban Transportation a Reality Today: Calgary Transit’s Wind Powered LRT Thank-you, John. I am very glad to be here and I wish I could have come earlier and partaken of the full conference, but as some of my colleagues at University that I see in the room will confirm, our day job with teaching students has to come first. So, I am sorry and if I do sort of overlap or somehow miss connections with things that have been discussed already, please excuse me on that. What I am going to be talking about is the policy and primarily administrative and organizational innovations that allowed existing technologies in urban rail transportation, electric-powered LRT and windmill generating sources of electricity, to come together in a new and very innovative way in Calgary, which puts both Calgary and Canada, I would say, at the forefront of railway and environmental innovation in an urban setting. Now, when we talk about urban environmental pollution, transportation is usually the largest or the second-largest contributor to air pollution emissions in urban areas in Canada and major American cities as well. There are many programs for various air quality emissions management programs in both Canada and the United States. These programs focus on new technology, introducing new technology into either private passenger vehicles, a very little bit into urban freight delivery vehicles, and a fair amount into urban transit, primarily bus vehicles. New vehicle technology, new energy sources and long-time horizons for future development are where many of the programs in North America that deal with urban transportation emissions have focused. As well, alternative energy supply initiatives are a piece of that puzzle, coming up with, whether it is biodiesel or, in this case, a hydrogen-fueling experiment in southern California. The efforts to develop these infrastructures and have a whole network in place at the time you need it to power these urban transportation alternatives is under development. Interestingly enough, the support for this type of long-term and fairly costly and ambitious type of technology transformation seems to come from the two extremes on the spectrum. There are, of course, some real environmental activists and strong technology boosters who are doing it because they really want to push the envelope and bring in the next generation or beyond what may seem even the next generation’s worth of technology, like hydrogen fuel. But these same programs tend also to be supported by, I would say, environmental skeptics. George W. Bush in the United States, for example, has put his energy and environmental emphasis on hydrogen, in my estimation, mainly because that puts the implementation off for at least a generation. So,

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you get people from either extreme looking at these sort of major changes in fuel and technology in urban transportation. Meanwhile, in Calgary, we have become the only jurisdiction, the first jurisdiction, in North America to convert an existing urban rail transportation system to 100% emissionsfree renewable energy source, wind power. This happened because people in the middle won out from either extreme, rather than either putting things off for a generation or focusing just on pushing that envelope and bringing it a few years closer or faster to fruition. Pragmatists who said, “Well, what can we do? What is available out there now to actually make a difference in terms of the environmental impact of an urban rail operation?” came up with a way to connect dots that exist already. Calgary is not necessarily the place you might, or some people might, first imagine renewable energy zero emissions-type sourcing to emerge first. As we all know, Calgary is the headquarters in Canada of the non-renewable energy sector and there are an awful lot of people, businesses and organizations based in Calgary that make their money and have their interest in non-renewable energy, at least for the current generation. So, when I tell people that Calgary was the first jurisdiction in North America to do this, and they know a bit about Calgary, they start to scratch their heads. Those who know Canadian politics and policy, the areas that I work in, are even more surprised because, in many ways, Calgary is sort of known to be the headquarters for skeptics of both the environment and Kyoto more generally. There you see Alberta’s Environment Minister explaining why the Province is against the Kyoto protocol and Canada’s position on it. There is a typical billboard that some people have put up in town about Kyoto, the National Citizen’s Coalition. One of my fellow Calgarians, Esra Levant, has a book out there which I would hesitate to recommend, since I have not read it, but it is available and sort of claims that Kyoto will be the end of Canada as we know it. There is a lot of vocal activity that says, “These environmental problems should not be priorities.” The last thing you would expect is for a municipal agency in a setting like this to be the first to change its energy source to completely renewable sourcing. Well, I am going to try and explain that to you in terms of organizational innovation, and I would say there are three components that made the difference in this transformation. I think that, whether it is wind-powered electric energy or biodiesel or other innovations, I think some combination of this type of vision in leadership is a key ingredient in actually implementing and realizing environmental gains in rail transportation, particularly in urban areas. First, Calgary municipal government, the City Council of Calgary, has made a corporate commitment to reducing its greenhouse gas emissions. We will get into more detail on that, but that was an essential enabler to have the City committed to this because Calgary Transit is an agency or a division of city government. It is not a separate stand-alone entity like TransLink in the lower mainland or the TTC in Toronto or GoTransit. Also, Calgary Transit, it may or may not surprise you, is the most successful operator of “new

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start” light-rail transit in North America. We will go into details on that, but that gave us sort of a credibility; they know what they are doing in terms of running a LRT system. Then on the energy supply side, we had both the municipally-owned Enmax, which used to be called Calgary Electric, and a green energy pioneer in southern Alberta, known as VisionQuest Windelectric, both primed as a result of deregulation of the energy sector, which produced all sorts of interesting consequences, some of which were intended and some of which were not. One of the consequences is that energy distributors and new producers were available and interested in pushing different sources, including green energy out there. So, those three dimensions came together in a very fortuitous and successful combination. Calgary, as a municipality committed, made a corporate commitment that across the board, the City, in all of its operations, will reduce greenhouse gas emissions 6% below its 1997 levels by the year 2012. Perhaps a little bit less ambitious than Canada’s Federal Kyoto commitment, but within the context of Alberta, certainly this was one of the leadership moves in terms of any level of government, putting this forward in about 2000. 1999-2000 was when the commitment was made in principle. Of course, once the commitment is made in principle, then the challenge is, “What are you going to do in practical terms to achieve that?” Urban rail transportation turned out to be one of the areas that came at the head of the queue in terms of implementation. We in Calgary are very fortunate to have such a successful light-rail system. Our newest equipment has just recently been acquired in the last year or two from Siemens. The latest ridership surveys, which actually were given to me late last week from Calgary Transit, show that we are now carrying on a weekday 200,000 riders in a city of 950,000. Just for a point of comparison, if you go to the United States, people will say that the most successful LRT in North America is the San Diego trolley, because they do not count Calgary or much of what happens outside of the U.S. Within the U.S., it is true that the San Diego system has been one of the early success stories, but in a city of 1.2 million, they get 90,000 riders a day. The bottom line is that 40% of the jobs in Calgary are still concentrated in the central business district. Calgary Transit is actually able to carry even more than that rough average they are carrying, 42% of the trips into the CBD are made by transit. Figure 5.7 is a schematic map of the system, which has 100 light-rail vehicles, 33 kilometres of track and some expansion plans, and 33 stations.

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Figure 5.7 Calgary C-Train Map

Now, the other piece of the puzzle is electricity deregulation. We had a very successful LRT operation going which used electricity, as you could imagine, in large amounts. In late 2000/early 2001 Alberta threw the switch on electricity deregulation, which initially led to price spikes and great swings, ups and downs, and unpredictability in power pricing. In terms of large-scale consumers like Lethbridge Iron Works, which almost went out of business as a result of having to pay triple the rates for electric power during the winter of 2001, and many other small and medium-sized businesses really were pushed to the wall by the unpredictability and the price spikes that were going on. This affected every user, including municipal users of electricity. There was a lot of criticism of the deregulatory policy. One of the quotes that sticks in my mind when I was researching this came from the Alberta Federation of Independent Businesses, that represents small and medium-sized businesses. Their president publicly stated that he could have picked three monkeys from the Calgary Zoo who would have implemented deregulation more successfully than was currently happening in the province. This is a province where business generally tends to support the government, and vice-versa. So there were some real policy tensions, uncertainty and unrest coming out of this electricity deregulation. Into that mix stepped the three gentlemen who are standing there on top of that Vestas wind-power generator down in southern Alberta in the Pincher Creek area. I interviewed one of them as part of this project. These were three fellows who went through school together, were really seeing the technology and the environment as complementary and 172

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had a vision of entering into production of green energy. Of particular vision, that electricity could be generated that would have an integral added value from the fact that it would be emissions-free and renewable. That you could charge a little bit more for that just like you can charge more for certain brands of wine or whiskey when they really have very similar molecular content to one another. They saw the future for themselves and a business venture where they could capitalize on the added value of green energy. They were the ones who initially approached Calgary Transit on the possibility. In fact, literally the claim is that, their office, like 40% of the other jobs in Calgary, was on that stretch of LRT between 8th Street SW and City Hall. The LRT trains went right by the window, and while they were in the start-up phase of their business early on, one day they literally saw the train roll by the window and thought, “Well, that is a huge electric power consumer. Why don’t we try and power that with wind-powered energy and create added value for the image of public transit?” In the public’s mind, actually, public transit has a very mixed environmental image. What many people see are diesel buses, maybe not biodiesel, but traditional diesel buses, and they see the particulates spewing out from them. In opinion surveys and public awareness, people do not necessarily associate public transit with green environmental solutions to the extent that it actually is, simply because the image that most of them have is being caught in traffic behind the bus when it starts up and having to suck in all the particulates from it. So the idea of connecting green, emissions-free, renewable energy into the C-train started, from the producer’s point of view. They made the case and made the initial case with Calgary Transit and the City government. What they wound up with was a 10-year supply contract, which was signed in 2001, to purchase 26,000 megawatt hours annually from VisionQuest Windelectric, from those windmills. That allowed VisionQuest, which did not have those windmills, those particular windmills up and running, to go out and get financing for 12 more wind turbines, each of which generates 660 kilowatts, and have them on-stream by September 2001, which was when the Ridethe-Wind initiative was launched. Now, the idea originated with the producers but this was at a time of deregulation and deregulation often brings a lot of new players into an energy market: new retailers, distributors and lots of claims, not all of which turn out to be valid. Calgary Transit and the City of Calgary both wanted some third-party assessment. Consequently, the Pembina Institute, which has a long history in Alberta, was brought in, as well as Climate Change Central, which is the Provincial coordinating body for climate change initiatives in the Province of Alberta. It is supposed to be the leading friendly supporter within government for climate change adaptation and initiative. Both of these organizations were given copies of the business plan, the proposals and did their own assessments of, specifically, the greenhouse gas and other urban air environmental consequences of going ahead with this power purchase. At one point, there were questions about whether this would, perhaps, open the door to a public, Federal or, maybe, Provincial funding stream. Transport Canada’s Moving On Sustainable Transportation (MOST) grant program funded a little bit of this early research and there was at least the potential that this might bring in Federal resources. That did not happen. The deal went ahead even without a Federal contribution or a Provincial contribution. But these assessments did provide an

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independent seal of validation that this green power actually would deliver both the greenhouse gas reductions and other urban air quality improvements. Now, as I mentioned, the City had made this commitment in general to reduce its greenhouse gas emissions 6% over 1997 levels by 2012. To actually implement it, each of the departments of City government, including Calgary Transit, was given targets that they were supposed to plan on meeting. But to actually go ahead and sign a long-term contract that did have a slight cost premium, which we will get to, over coal-fired electric supply, needed a political champion. Alderman Bob Hawkesworth on City Council turned into that political champion. He was someone who has been a strong supporter of rail transit in the city, has understood its strength and its success story. He happened to be at that time (no longer) on the Board of the City-owned electric supply company, ENMAX, and he also happened to be on the Board of Climate Change Central, the provincial climate change activity and incubator. So Alderman Hawkesworth was very well-positioned to be able to connect the dots, and be the leading spokesperson in deliberations at the municipal level, which were contentious and brought forward the full range of views that you might expect, including skeptics that this was just another scheme with smoke-in-mirrors and that it would not actually reduce any pollution because you would not be turning off coal-fired electric power plants. But Alderman Hawkesworth was essential I think, in moving this proposal from a concept to a contract. The results of the deal have been an emissions reduction, one that has been validated by two external bodies: 26,000 tonnes a year in annual CO2 reductions. That is by switching Calgary Transit’s annual electric consumption to the wind-powered generation. The cost premium over 2001 electricity prices, which was built into the 10-year contract, works out to about half a cent per LRT passenger, and that is because Calgary’s LRT has quite a healthy and growing ridership base to spread that over. One of the things that the contract offered, that was a real advantage in 2001, and I think will prove its worth over the life of the 10-year period, is a fixed 2% annual price escalation. Unlike the supply of non-renewable energy in Alberta, especially that which goes to power electricity which has had these real spikes in price and huge fluctuations in cost, Calgary Transit now has a predictable cost for its electric energy needs for the next 9 years now, or 8 ½ years, to be able to work within a municipal budgeting framework that, again, does not lend itself to lots of quick re-budgeting based on energy price spikes. In conclusion, I think that this initiative offers a few lessons that should extend beyond Calgary. There are other urban transit operations and there is commuter rail, certainly in Montreal, that is currently powered by electricity. There are other regional rail and transit operations that could be electrified in the medium term, certainly sooner than a hydrogen-powered fleet of vehicles is likely to be the dominant energy source in an urban setting. I think that innovation as we have seen it in Calgary, emphasizes the organizational component, the fact that you can create by adjusting some of the expectations and ways in which markets and supplies are organized. You can stimulate innovation, get people connecting the dots in different ways and producing these new initiatives that allowed, in this case, wind power to be both cost effective and exceed Calgary Transit’s relative share of Calgary’s emissions reduction strategy. In other

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words, Calgary Transit is now able to exceed that quota and that helps other municipal departments to make their adjustments still within the total envelope. Where you have electric infrastructure to power urban transportation, or rail transportation in particular, although there are some bus applications as well, in Vancouver, but where you have the electric infrastructure in place, it is just a matter of plugging in a renewable energy supply to get a quick-win. I think I can say this from personal experience, having returned to Calgary after a year and a half away, there really is a public consciousness, at least at the University. With people that I come across and to whom I mention this project that I have been working on for this presentation, there is an awareness that the LRT is now really a clean form of transportation, which was not there with the dirty diesel sort of bus imagery. That gives: 1) momentum, 2) support to people in the municipal government, in the power industry and, really, across the board, 3) opportunities to keep environmental leadership initiatives moving forward in Calgary and, I would hope, elsewhere across Canada if similar initiatives were to happen in other jurisdictions. Thank-you. Q: Harry Gow – Transport 2000 Thank-you, Anthony, for a scintillating presentation. I know the Regional Environmental Council in Gatineau has been urging an adoption in western Quebec and Ottawa of electric transit based on an initiative like that in Calgary, whether it be wind or some local equivalent, whatever that might be. Maybe just hydro-power, which is produced abundantly by the Gatineau and Ottawa Rivers. That said, I would like your comment on the following thesis, and I will just briefly present the paradigm here. It is that, in the minds of Transport 2000 activists, the socalled alternative to LRT, the bus-way, is seen as a way of putting off real rapid transit by simply fiddling around with the deck chairs on the Titanic. In a new way, pour more asphalt and run more buses, produce more pollution, that is our prejudice. Perhaps we are wrong. In Winnipeg, the Mayor talks transit but proposes bus-ways and then Council benignly zones at least one CN line, which was identified as a Transit corridor, just this week as a commercial property, and residential is in their minds as well. So, the virtual bus-way is rather short-lived, in that case. But, I would like your comment on this theme, in Winnipeg and in Ottawa, and elsewhere, are bus-ways the asphalt equivalent of hydrogen for administrations to put off real rapid transit? A: Anthony Perl, University of Calgary Well, that is a challenging question, Harry, as I would expect from you, no less. I guess it depends on the results of the activity and then where governments go, or other organizations responsible for transportation planning in the region. I think that the results, and in Calgary this dates back now at least 25 years for the roots of the LRT

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system in both Calgary and Edmonton and I know that there were proponents of bus-way alternatives at that point, but the results in Calgary really do speak for themselves. I guess I would say that the judge of a bus-way paradigm, if you will, or approach has to be in the outcomes. Has Ottawa been able to increase the share of travel into the major transit markets, central business districts or other nodes, by developing these bus-ways? What have the results been? What has the pay-off, if you will, from those investments been? I would like to think that one could make an objective assessment rather than basing it entirely on the values associated with different technology. But if bus-ways can be shown to increase the usage of public transportation to get people out of their cars, then I think there is a case to be made for them. If, on the other hand, it is just a matter of moving some people from local buses or generating new trips onto the bus-way and not really demonstrating an ability to attract users out of personal vehicles, of one sort or another, then the case for bus-ways is correspondingly weaker. Then the deck-chair analogy would be, perhaps, more apt. I think you should focus on the results of the existing projects and hold a close light up to other proposals in that perspective. What will they do in terms of outcomes? If it is just about moving people around differently, without really changing the emissions and travel mode within urban areas, then, whether it is a bus-way or some other innovation that does not have the track record that LRT now does, certainly in Calgary, I think you have to question whether it is the most promising solution. So it is an answer that suggests looking at the outcomes, I suppose, to make your judgment on that. Question: Yes, very nice presentation. I have just got a couple of quick questions. When the wind does not blow, if you checked it in the last years you have been running this, what was the response? Obviously, you just feed into the grids. The question is: How many times when wind did not blow, if the trains had to stop, what type of effect would that have had if you only used wind power? You never talked about the supporting energy powers you talk about. And has there been any comment in visual pollution in Pincher Creek and that for the wind towers and that? Did that go into your calculations at all? A: Anthony Perl, University of Calgary Well, I have had lots of people raise the issue of visual pollution. To my knowledge, there has been no morbidity or mortality ever attributed to visual pollution in Canada or any other jurisdiction, whereas there are literally thousands of people who die every year in urban areas because of air pollution. So I think it is sort of a non-starter for me. I mean, it is an aesthetic issue and then we are into values again. Some people, when I moved to Calgary, I moved into a neighbourhood that looked rather similar to where I had grown up, with trees right along the river valley. I remember talking to colleagues who said, “Well, what would you want trees around your house for? They just block

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your view of the mountains.” So it really depends what you are used to looking at. I would be willing to make a wager with anyone in the room that, a generation from now, the children who grow up in Pincher Creek, hopefully into a more sustainable world, will actually enjoy looking at those windmills between them and the mountains. As opposed to people who might see them as some sort of intrusion on the natural landscape. On the question of the variability of wind: I asked that question of both Calgary Transit and the producers at VisionQuest Windelectric. The contract is structured financially so that there are penalties in place, or rebates if you will, that allow Calgary Transit to purchase alternative energy, in this case non-renewable sources, if they are not, for either maintenance or climatic reasons, the wind farms are not producing enough to meet the needs of the system. So the trains will not shut down because it is a grid. Of course, the more one can diversify the inputs into that grid the greater the chances that renewable energy sources will be able to complement each other in terms of availability and cycling. Wind power is not, by any means, the only form of renewable energy that can be used to produce electric energy. There is also some hydro-power in Alberta, and there could be other sources as well. But for the moment, Calgary Transit has a financial clause in there that allows them to not pay a premium, to actually get compensation if the wind power is not available and they need to buy non-green power. Because, again, VisionQuest is sort of making its case in its market that they are offering premium power at a slightly higher price and, when that is not available for any reason, you do not pay a premium. In fact, you gain a financial rebate on that. Q: Harry Gow – Transport 2000 Anthony, I did write a review of the Ottawa Transit System’s performance and found that, in the 10 years after the introduction of the bus-way, ridership went down. A review of the system carried out by, among others, Professor John Backer of the University of Alberta at Edmonton, produced a recommendation that a pilot project for light-rail be put in place. An 8.5 kilometre-long line is carrying 30% more people than predicted whereas the bus-way is carrying less people than predicted. A: Anthony Perl, University of Calgary Well, I guess that might suggest that, just like ‘green power’ has a potential value-added, light-rail can also bring a value-added in terms of customer or traveler’s preferences and does seem to carry a premium with it, in terms of building changes in urban travel. John Spacek, Province of Manitoba Session Chair Thank-you very much, Anthony, and a fascinating talk. Gordon, your comment about visual pollution, we visited the California wind alley several times from a government perspective. What the area residents tell us, and the government officials there tell is, is

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that it was noise pollution with those, believe it or not, which they have conquered with these larger windmills, the type they are using in Alberta. But, certainly the first and second-generations were noisy based on the smaller size. Lastly, Harry talking about Winnipeg’s BRT program, I am modestly involved in that and most BRT’s that I have been on have grade separation for cross-traffic. This one will not in one place, and it is the access to the VIA Maintenance Centre. So that is the only level access that is going to be on BRT and actually is a safety issue for us.

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SESSION 6 PANEL – CANADIAN EMISSION STRATEGIES: ARE WE ON TRACK? Barry Prentice – Director University of Manitoba Transport Institute Panel Chair Thank-you very much, Bill. It is a pleasure to be here today and, as Anthony said earlier, the difficulty of trying to keep that day job as well has prevented me from attending the full conference, but certainly, it seems that from the comments I have received from people and what I have seen – this has been a very successful conference. Our first speaker is Robert Taylor, the Executive Director of Policy Development and Economic Analysis, the Railway Association of Canada. Panelist 1 Robert Taylor – Railway Association of Canada I am going to cut right into my notes here. Today in Canada we have an emissions problem. It is not rail-related. Environment Canada’s plans for stringent regulation of critical air contaminants may address certain emissions, but there is no realistic Federal plan to significantly reduce GHG emissions. We have seen, in presentations over the past two days, that global and Canadian shippers already recognize the benefit to the environment, to their cost-base and to society at large of a shift to rail and intermodal. This is relevant, not only from a climate change perspective, but also on the contribution of higher mean and peak temperatures in smog creation. In the case of rail, we have seen declining or flat levels of overall emissions and declining emissions on a tonne-per-kilometre basis. When the MOU model is working well, we should continue to leverage its success. It is a model of cooperation in progress. It offers many benefits such as annual reporting, and is similar to other industries in producing annual reports. Not other modes. Meeting current and future EPA standards will put Canadian continental railways at a competitive disadvantage with their U.S. counterparts and North American trucking companies without changes in tax policy, particularly CCA’s. Without these changes, in a NAFTA-based economy all Canadian shippers and exporters will be disadvantaged. The rail industry is also in discussions to lower sulphur in the fuel we use. We recognize that other modes in the U.S. will be at ultra-low sulphur levels and we are challenging fuel providers to meet this challenge on a cost-effective basis. We expect them to meet this challenge. Rail has an intrinsic fuel efficiency advantage and we are improving. Considerable reductions in truck emissions on a per unit basis, something in the order of a magnitude of 3-5 times, will have to be garnered before the situation changes. This is in the context

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of the exciting developments we are implementing and have coming in the future. We have talked about a lot of these over the last couple of days. I am going to list just a few: • • • • • • • • •

New Tier 1, Tier 2 locomotives, SmartStarts, Top-of-Rail lubrication, APU’s, Hybrid switcher locomotives, Fuelcell locomotives, Increased asset utilization, By-directional running, Heavier car loadings.

The list is long. Data availability in Canada is also a serious problem. We need estimates of emissions by source before we can systematically target the problems. Furthermore, data on transportation is weak and comparisons are very difficult. We need better data to make more informed decisions. A lot of work needs to be done in this area. Jurisdictional or other issues must not block progress in the building box for this informed policy analysis. Also from a policy perspective, we should not look at emissions on a mode-by-mode basis. The goals should be reducing overall emissions of each type of emission on a least-cost basis. Targets must also allow for changes in the transportation strategies of shippers, and we talked about some of these already in the last couple of days. Other policy levers that are available to government, such as fuel tax, infrastructure spending, CCA’s, truck size and weight must be considered in the context of emissions reduction. Low CCA’s in Canada for locomotives are at a particular competitive disadvantage. That is having a direct tangible effect on Canadian railways’ ability to renovate its fleet at a faster rate and achieve better emissions. Working together with or without the MOU. E.C.’s projection, 105 kilotonnes of rail’s NOx emissions in 2020, may be high in the context of the up-take in Canada of Tier 1 and Tier 2 compliant locomotives over the next 17 years and we certainly expect to see Tier 3 or Tier 4 in the years to come. Ultra-low sulphur fuel and after-treatment of emissions also may be the reality for all modes in all jurisdictions, including Europe and around the world. Given this, the rail industry in Canada, under the framework of the current MOU, will revisit this estimate over the coming months. Do not be surprised if the next estimate contains 2 or more scenarios: one that is based on the current CCA structure, and one that is based on a more favourable CCA treatment. I would also like to challenge the government to introduce a Canadian version of the U.S. SmartWay program and also explore credits for emission reductions. In addition, we are 180

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also open to exploring third-party verification of our reporting under the LEM report to ensure credibility and progress in this area. In closing, I would like to reinforce the point that Canadian railways are very proud of being an environmentally friendly mode. Our progress on reducing emissions is very important to us. Government and all stakeholders will have our full support in ensuring that Canadians have clean air to breathe and a stable climate to live in for decades and generations to come. I would just like to leave you with a little quote and I think, Barry, I am quite ahead of my time limit. This is a quote by Edward Wilson, I do not know if that rings a bell for people in this audience but he is a Harvard professor who won two Pulitzer prizes and I think he has published over 20 different books on bio-diversity. I find this quote very interesting, and it kind of puts us in perspective, I think. “If all mankind were to disappear, the world would regenerate back to the rich state of equilibrium that existed 10,000 years ago. If insects were to vanish, the environment would collapse into chaos.” Thank-you. Panelist 2 Russ Robinson – Environment Canada Before I start into the comments, I think it is important that we realize there are two separate issues that are being talked about in terms of emissions. One is the – clean air, criteria air contaminants, regulated emissions – there are a number of different names for them, but generally NOx, VOx, and particulate and so on. On the other side, the other major issue is the greenhouse gases. It would be really nice if we could talk as one on both of these and deal with all of them at the same time. But, in many cases what we find is what will assist one of these issues, may actually harm the other, we have to be aware of that. If we can find that silver bullet that does both at the same time, then it is going to come to the top of everybody’s list in terms of support, and so on. But we need to keep in mind there are separate issues being discussed here. I think part of the reason I say that is, generally, Environment Canada has the lead role on the clean air issue and Transport Canada has the lead on the greenhouse gas issue. Certainly we talk to one another often and we do try and keep the two issues coordinated, but there is a different approach and different way of doing things between the two issues. I would like to make a couple of comments on what I have heard at the workshop and I will start with the good news, and that was the comments from the engine manufacturers that the Tier 2 standards are achievable. That was the term that they used, and not only achievable but achievable with readily-available technology and know-how. What is being worked on at the moment is the durability and reliability issues around the technology. But that certainly is good news to hear, that the technology will be coming on line and we are going to see this on schedule.

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To also reassure the engine manufacturers, they made this comment a couple of times, that they would really be happy to see regulations in Canada harmonized with those in the U.S. It is certainly our wish that we not come up with a uniquely Canadian solution for the emissions problems, and certainly nothing in the rail area that would require unique Canadian technology to deal with it. It is the same air pollution and same problem and we will do everything we can to harmonize activities in Canada with those that have gone on in the U.S. and with the reg’s that the EPA has already put in place. Next, I think the group that we heard from loud and clear was the rail companies. It certainly seems like in the past few years, they have been very progressive in what they have done, both from a business sense, times are good and profits are up, but I think they are also becoming very aware of the environmental footprint left by the rail sector in Canada and are prepared to deal with it, and it is very encouraging to hear that. We still see the criticism, I think the word that was used the other day was ‘over-zealous regulations’ and I am not sure that we have ever been over-zealous in anything but I guess that is our own perspective on it. The industry does seem to be a little hung up on the idea of capital cost allowance as the only issue out there. The bottom line of any company is far more complex than a single issue and a single point. However, we hear you and we would love to be able to use the tax system to deal with environmental issues. There are so many issues out there that we could move on right away if we set tax policy. I think, personally, it would be a little scary if you thought the environment department was setting tax policy in Canada. But there is not an issue out there that we could not solve with taxes and not have to do any environmental regulations at all. We would just do it all through taxes but I think we would end up with far more problems than we do at the moment. Maybe the good news for the rail companies is that the last improvement in capital cost allowance for the railways was under the term of Finance Minister Martin and soon-to-be-Prime Minister Martin and perhaps you have got a window of opportunity and a receptive ear to discuss those issues with him. Neither Environment Canada nor Transport Canada can help you directly with this issue. The one thing I did hear from the rail companies that I think was a little concerning, and it was mentioned a few times, that these newer, cleaner engines will end up on the northsouth runs or will end up all the time in the U.S. To your critics, that would appear that you care more about the air quality and health of Americans than you do of Canadians. I think that, somehow, we have got to balance that out a little bit more. It has to be very obvious that that best technology, that clean technology, will be used everywhere that you run engines. I think there were a lot of good news, again, on alternative fuels, alternative drive systems. The R&D that is going on out there is very encouraging and obviously giving the results that are being looked for. But, for any of this R&D activity out there, you need to keep in mind that it will not come to the marketplace unless there is a clear driver for it, unless there is a need. If it does not do something for the bottom line of the companies, or unless it is there to deal with environmental regulations, then we are going

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to see real great R&D but we are never going to see that progress ever make it to the marketplace. Again, I was very impressed with the shortlines and the information from shortline operations. I find that is one area that is extremely creative in the rail industry. We had the opportunity to tour the shortline operation in Ottawa, and it was quite amazing, the kind of things they do, aside from running railways, much of which will actually help the environment, if we could just quantify it a little better in terms of what they are doing. The one point, there, of a bit of a concern is they also could end up being the ‘dumping ground’ for the worst of the dirtiest of the engines that are out there. Economics being what it is, they will continue to run them long after the major railways would have scrapped them. In terms of any movement forward on regulatory activity, clearly, we are going to have to be very sensitive to the very nature of the shortlines and the fact they just could not afford to deal with those kind of regulations. We will have to find some other programs or approaches to deal with the shortline problem. Nice to hear from the activity in the U.S., both from EPA and from the engine folks. They always kind of point us in the direction of where we will be going, where we are going, and the kind of things that we should be looking at in terms of emissions reductions for any of the equivalent transportation activity in Canada. A lot of talk on intermodal activity, and it does seem that this kind of activity, if it is good for the bottom line, it is going to happen for economic reasons. I think it would be very difficult to sell it solely on its emissions benefit or environmental benefit, but it is certainly positive to think it can be done. It is not going to be a major contributor to any emissions reduction program but it is also safe to say there are no major contributors out there. There is just a whole series of little things that need to be done, and that may just be one of the ones on that whole list. Now, I had prepared a couple of slides, I had put together a couple of slides last week. I thought the intention on this section was to do a synopsis to put forward our own perspective on the issues. I have talked about what I saw coming out of the workshop but there are a couple of things that I think need to be reinforced. Some of this is a follow-up to the slide presentation that was done on Monday by Environment Canada. I will not go over all of the details but there is a lot of information in there, in terms of the future and where we are going and what it means. Figure 6.1 shows the NOx emissions forecast. The particulate emission forecast does the same thing. We take a lot of pride in the fact that those areas where we see major emissions reductions, those parts of the transportation sector are areas that are being regulated. Now, we certainly cannot take all the credit. These are regulatory activities that have started in the U.S. and we have gone forward with harmonizing, and we can see the benefit of that. Those areas without regulatory activity, at the moment, are scheduled to worsen. Some of those we are already dealing with and we will be back shortly with revised slides. It does highlight that there are some issues out there that are completely unregulated and it shows in terms of the future of their emissions compared to the rest in

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transportation. Certainly, aviation, rail and marine are issues that are going to have to be dealt with, and there is a lot happening there. The low-sulphur fuel will have an impact there, certainly on the particulate side, and that is likely to kick in at the end of this decade. Figure 6.1 NOx Emission Forecast - Transportation 1800

N O x ( k ilo to n n e s /y e

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I think that Figure 6.2 is the one that is a little troubling, this slide was presented on Monday and shows that, at some point in the future, total NOx from rail will, in fact, be higher than all on-road heavy-duty vehicles. The point that is of concern to us is that we want to be careful that we do not bring in climate change programs, intermodal programs, any of the programs that would move truck to rail for GHG benefit today that, within a few years, could turn around to harm us on the clean air side. That is an area where we do need to bring both of those programs together and come up with a common solution that gives us everything we want.

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Figure 6.2 Forecast of NOx Emissions from On-Road Vehicles – Canada Forecast of NOx Emissions from On-Road Vehicles - Canada Source: SENES & AIR Inc. October 2002

1,000,000 900,000

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Regulations Proposed Under the NOI (Tier 2, HDV Ph 1 & 2, 15 ppm diesel)

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Certainly, Figure 6.3 is the kind of slide that, for us, deals with why we love the idea of harmonized mandatory emissions standards in Canada. We do not write regulations for the sake of writing regulations. I think the rail industry, among others, has said, “You know, why would you bring in a regulation if we are going to voluntarily comply with the new engines emissions standards?” But there are a number of reasons behind the scene, a number of other issues that come to play in this issue. The first one being documentation, certification that the engines meet the standards. This is something that is important to us. There is such a big difference between somebody’s claim that they “meet” an emissions standard versus being certified to an emissions standard. Certified means something to me, meeting something does not mean anything at all except one engine, at that one point in time. We need to be able to verify that the standards are being met.

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Figure 6.3 Harmonized Mandatory Emission Standards

• • • • • • • •

Documentation (Certified) Transparency Mandatory Maintenance OEM Parts Supply Recalls Equity – within the industry and the sector Cross Border Movements MOU as a learning curve

I think everybody needs to know that these deals or MOU’s or agreements are not being made behind closed doors. Carrying out a full regulatory program means that everyone in Canada gets their chance to comment on the regulations, be aware of it and realize that everyone is being treated equally on this issue. Bringing in the standards would enforce the mandatory maintenance that is required to maintain these engines as clean as they need to be. OEM parts supply tends to have more relevance in terms of on-road vehicles where, in the past, we have seen differences between Canadian and U.S. emissions standards and over a period of time there were problems with getting parts supplies on those uniquely Canadian vehicles. We need to avoid that. Any recalls on the engines, we would like to know that those recalls are also applying in Canada and that the same remedial action will be taken. There is also the issue of equity within the industry and also between industry sectors, maybe not quite as much within the industry sector for rail in that the sourcing of the engines will all be U.S. But certainly, some of the on-road and off-road equipment manufacturers are very concerned that someone will use Canada as the dumping ground for older, dirtier engines and they just cannot compete in that kind of a marketplace. Cross-border movement, something that is an issue and has been dealt with by the industry, but I think going forward with the mandatory emission standards, this whole issue simply disappears. My final point on the creation of an MOU. We would like to talk about doing the MOU route first. It is the learning curve for both sides in terms of how we would ultimately comply with a mandatory emissions standard. We would certainly be interested in further discussion on the specifics of MOU’s that would mirror what we will do in terms of mandatory programs.

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Panelist 3 Robert Lyman – Transport Canada First, I want to congratulate the organizers, the participants and the speakers of this conference. I think it has been extraordinarily interesting and useful, and I have learned a lot. It has been much more than a dialogue between people in the rail industry and people in government. I think that the presence of rail equipment manufacturers and shippers brought another perspective to the event, which has really enriched the conference. I think it is the sort of thing one should continue and repeat again in the future. I think whether rail is on track is something that one needs to answer both from the perspective of the past, the present and also the future. With respect to the past, I guess my central message is that I heard you; I heard the industry. I think rail as a transportation mode offers considerable advantages in terms of air emissions, congestion relief and inter-city movement, and land use from an environmental perspective. The rail industry has, since 1980, made really considerable and, indeed, impressive gains in improving its performance in terms of energy efficiency and emissions per tonnekilometre freight. I think that has to be acknowledged. I think it also has to be acknowledged that regulations in the United States and the development of voluntary agreements in Canada and the United States will likely assure that improvements will continue for the future. So, in many ways, the industry is on track and should be recognized for that. I heard that industry faces a very difficult competitive situation. Certainly, the competition for freight from trucking is strong because of certain advantages that the trucking industry currently enjoys in terms of service and flexibility. The rail industry is clearly in the midst of quite significant changes for a whole variety of reasons that have to do with global markets, North American markets, and technology. The creation of a large number of shortline companies has added a very interesting entrepreneurial element to the industry that, perhaps, has been lacking since the earliest days of the rail industry. New investment opportunities in intermodal are really challenging and I think we could look to new technologies in the future. So those are some of the key messages that I heard. But there are a couple of messages I think I would like to leave with you. One is that the opportunities for the rail industry to continue to have a very good level of environmental performance in the future is not just dependent upon one single strategy. In fact, there are lots of options here and many of them came out. Clearly, over the longer term, there are some very promising new technologies. We heard about them both in terms of the equipment and in terms of fuels and operating practices. I particularly appreciated the point that innovation is not just about long-term transition to new technologies that may take 20 or 30 years and beyond. It often has to do with finding ways to use the technologies that are currently available and use them better. We did not hear a lot about this but I think it is, in fact, a fairly significant point. It is one that is emphasized in many of our programs: the question of best operating practices. Many

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of us are managers within our own organizations and we have heard some of the principles of total quality management. A lot of that has to do with the matter of how you assure that you integrate into your business planning and into your operations the principles of continuous improvement. It is about looking at ways to re-engineer the company, looking at ways to constantly improve processes, and adopting a kind of discipline that applies from the most senior levels of the company down to the lowest levels. In many ways, what we are talking about for the environment is just simply doing that but including environmental considerations within the realm of how the company manages. Part of quality management is client responsiveness. I think that there is a very real possibility that, as we heard from IKEA, there will be shippers who will demand increasing levels of environmental performance from the rail industry. So, it will be very good business practice to demonstrate that you are being responsive to that. Entrepreneurial skill is more than finding new ways to make money. It is also finding new ways to save money, finding new opportunities, and finding new ways to partner with other companies and partner with government. As part of my presentation, in an earlier session, what I tried to say is that Transport Canada has a number of programs where we are trying to help you by offering some funding, particularly for technology demonstrations or, in some cases, for the more rapid dissemination of technologies that are already in the marketplace. That offer of partnership stands. A lot of this has to do with the question of corporate culture, and whether the rail industry and rail companies in particular, see the environment as a value, as something that is really worth pursuing, and is reflected in the business plan. It is in some sense an element of social responsibility. I am familiar with other sectors of the economy where the commitment to do that has, in fact, enriched the company; not least of all because it leads to employee engagement, and to union engagement. It means that a company can use its high level of environmental responsibility or social responsibility as a message that makes employees proud to work for this particular company. I would not underestimate the potential for creativity that comes out of that kind of an approach. One final comment, and I say this with respect. I get the impression that, in many respects, the rail industry is in a bit of a defensive mode on environmental issues, notwithstanding the good performance, and quite concerned about the possibility of tighter regulations, too rigorous regulations, unrealistic approaches to meeting the Kyoto target. So the approach, in some respects, is to say, “Well, we are not going to do that unless you give us this.” Deal with the tax system or deal with level playing field issues related to public funding of roads or deal with other issues. I would not, in any way, suggest that those are not important issues, but I would suggest to you strategically that, to hold forward movement on environmental performance hostage to resolution of those other difficult issues is not going to serve you well in the long term. Engage on both fronts at the same time and take advantage of those within government who want to be your partners. Thanks very much.

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Panelist 4 Peter Eggleton – TELLIGENCE Group Messieurs, Mesdames. I have been asked to provide the viewpoints of ‘industry’ vis-àvis, “Are we on track regarding railway emissions issues in Canada?” I would like to first say that, regarding the category ‘industry,’ I interpret the purview to cover all constituents of the rail sector except, of course, the operating railways and the governmental regulatory agencies as represented by the other three members of the panel. Examples of ‘industry’ participants are the locomotive and engine OEMs, the rebuilders, the maintenance support and service companies, the equipment and parts suppliers, the fuel and lubricants suppliers, the developers of new technology, on which we have heard several presentations on Canada-based innovations that are influencing North American rail operations – and I think I take a little exception to Russ Robinson saying that, “we are glad to hear what is going on in the States, because we sort of follow.” Well, I think there is an opposite trend that is ongoing, and it is not only in locomotive-based technology but also in rolling stock and infrastructure-related technology. I also like to include in this industry category the university researchers, where significant breakthroughs are being made; for example, in sensor technology, combustion, airflow dynamics, computation, fluid dynamics, etc., and of course, the consulting sector, both on the hard and the soft sides of the emissions issue. Also included are various advocacy groups like Transport 2000, interest groups, syndicates, and even the legal and accounting fraternities because they have such an influence on, for example, how things are measured and justified. All these groups generate economic activity from or in association with the railway transportation sector and hence are affected by its economic well-being. The regulatory climate of the various jurisdictions traversed and a wide range of ongoing challenges and issues, be they technical, competitive, social or environmental, it goes without saying that the challenge of emissions transcends all of these issues. How the railway emissions issue is managed and governed in Canada has significance for every group. Now, all the groups in the ‘industry’ section that I have just mentioned ask similar questions about the issue: What track are we on in Canada? Why? and Where is it leading? For someone like myself, who is involved in research and development (R&D), testing and evaluation of new transportation technology, international technology benchmarking and transfer aimed at realizing new products and processes in Canada, the question I always receive, when promoting a new initiative (I always seem to be on the leading edge, stretching the elastic) is: What is the big picture? This is asked by senior managers, Boards of Directors and funding organizations so as to assess what the potential market is, what the opportunities and risks are and, in particular, what is the regulatory climate.

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If the response to these questions can be quantified, then this is the collateral that is offered up to obtain the clearances to proceed. Like Mr. Vena said yesterday, “You have really got to have a good story to get the money.” I emphasize this word ‘collateral’ and the situation on the emissions regulatory climate is part of the challenge of getting the collateral that is offered up to obtain clearances to proceed. It goes without saying that the unclear situation at present, regarding locomotive emissions regulations in Canada does not facilitate this and compromises obtaining the collateral to obtain resources to develop and deploy emissions reductions technology in Canada. In point of fact, it stifles innovation. I think that innovation is one of the important goals of Canadian governmental programs – on the same level the Kyoto Protocol goals. The unclear situation also compromises the collateral needed by those federal and provincial funding agencies which manage advanced science and technology programs which rail sector participants can tap into. Examples are the National Research Council’s Industrial Research Assistance Program (IRAP), Technology Partnerships Canada (TPC), the Program on Energy Research and Development (PERD) of Natural Resources Canada, the Natural Sciences and Engineering Research Council (NSERC) and so on, plus such organizations that may not readily come to mind as the Canadian Institutes for Health Research (CIHR) or the Manitoba Ministry of Energy, Science and Technology. None has a specific budget item for railway-related research and development, but all of them could be tapped for funding to initiate private sector activities, and they also become strong partners. When evaluating approaches for funding assistance, they also want to know, ‘What track are we on and where we are going.’ If it cannot be identified, then these organizations have no ‘collateral’ to support emissions reduction technology and energy efficiency strategies in the railway sector, and hence, we all lose in Canada. Right now, I would say Canada is on a track, but: • • •

I am not sure what the destination is (sometimes it feels like being on a train in which each passenger has a different idea), I think the train is stalled, and I think the signaling and communication system has to be upgraded. (I say this because when people see all the new developments we have heard about in this workshop, they have an idea of working toward a cleaner environment. I feel it could be done in a more coherent and coordinated way, and, in fact, even if there were one group in Canada that had a database of all the things going on, that this would be the first step to upgrade the signaling and communication).

So, I ask Transport Canada to provide a policy statement regarding locomotive emissions, is it either: •

continuation of the status quo (no regulation), or • rubber stamping of the U.S. EPA regulations (issued in both official languages) or • a ‘made in Canada’ regulation or emissions containment framework.

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I hope everyone knows that it is Transport Canada which is empowered with the authority to regulate locomotive emissions (not Environment Canada which regulates other modes). People say to me, “We don’t need an emissions regulation in Canada when we have the Kyoto Protocol as a precedent, which means maximizing energy efficiency and minimizing CO2 emissions.” Well, one reason for having clarification on diesel locomotive emissions in Canada stems from my asking Marti Lenz yesterday if we could have a locomotive in Canada, say the new SD70ACe, which has been specially tuned to maximize its energy output and minimize fuel consumption. Since there are no locomotive-specific regulations in Canada on NOx emissions, then there is nothing being violated or anything to enforce. Marti explained that the SD70ACe can be now be changed from Tier 2 to Tier 1 to Tier 0, or otherwise, just by remotely electronically advancing and retarding the timing (which is how NOx is mainly reduced). So, you could imagine this locomotive operating legally in Canada at Tier 0 (or even better for maximum fuel efficiency, since in Canada, we do not have any regulations for NOx) and, as soon as it crosses into the U.S.A., there is an electronic trip-switch via satellite communication that will put it to Tier 2 status so as to meet U.S. EPA NOx regulations. One cannot then refute Hunter Harrison, CEO of CNR when he says, “Our company abides by all governmental regulations.” I just put that out as an example, not in a trivial way, to show that with the miracle of modern electronics a locomotive’s emissions rate can be changed remotely as it passes through different jurisdictions – which should spur Transport Canada to establish a position. So, what track do I think Canada should be on? Well, my response is: 1) A track that will lead to a targeted reduction in emissions for the railway sector. (The voluntary RAC-EC Memorandum of Understanding (MOU) will expire December 27, 2005. The track should lead to an emissions regime that is more rigorous and reflects the reality of today’s concern about the environment. The scenario could be an MOU with more teeth in it, or standards that could be verified and enforced); 2) A track that will stimulate innovation in the Canadian railway sector that will lead to enhanced service to shippers and the traveling public, and enhanced economics for the operating railways; and 3) A track that will attract to the railway sector the best and brightest of Canadian university graduates to address complex, multi-disciplinary transportation targets. (One area I suggest being addressed is how to effect a modal shift from trucks to rail, with the resulting reduction in emissions. The chart in Figure 6.4 portrays this in a self-obvious way. It was borrowed from the AAR / U.S. DOE report on Research and Development Opportunities in Railroads (formerly called the ‘Road Map’)).

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Figure 6.4

16

Small railway sector can leverage reductions in larger truck sector Histor y History

Pr ojec tion Projection

E n erg y U se (M M B D O E )

14

Freight Transport

Ra il Rail

12 10 Assuming modal shift from truck to rail

8 6 4 2 0 1 970

1 97 5

198 0

19 85

19 90

1 995

2 00 0

200 5

20 10

2 015

2 020

(Chart courtesy of Frank Stodolsky, Argonne National Laboratory of U.S. DOE)

There is a plethora of needs and opportunities for research, development, testing and evaluation of new technology and processes for the Canadian railway sector. I take this opportunity to suggest ‘The Track’ for a ‘Locomotive Emissions Reduction Program for the Canadian Railway Sector.’ The principal elements would include, inter alia: a) b) c) d) e) f) g) h) i) j) k) l)

Program Management / Interaction with U.S. DOE program and other U.S. initiatives, Setting Targets for Emissions Reduction in the Canadian Railway Sector, Baseline Measurement Actions, Survey and Assessment of Applicable Emissions Reduction Technology, Reinforcing the Infrastructure to Test and Measure Emissions Compliance, Research and Development of New Technology and Processes, Operational Trials to Evaluate New Emissions Reduction Technologies and Fuels, Operational Research and Systems Analyses aimed at Modal Shift Trials, Data Gathering, Monitoring and Reporting Actions, Development of Human Resources Knowledgeable on the Subject, Transmission and Diffusion of Knowledge Generated, Enhancing Innovation by Identifying Sustainable Financing, Outputs and Markets.

The envisaged resource requirements to mount the above program would be $500,000 to $1 million per year. It is recommended that there be linkage with similar R&D initiatives

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in the U.S.A. so as to lever scarce Canadian R&D funds. The suggested administrative structure could either be an: a) Integrated Cross-border Program, or b) Separate Canadian and U.S. Programs, but with regular consultations. I recommend an integrated cross-border cooperation modeled after the 10-year, $10 million Track Train Dynamics Program undertaken jointly in the late 1970s and early 1980s by the AAR / U.S. DOT / RAC / Transport Canada. It resulted in significant improvements in the safety, reliability, durability and cost effectiveness of rolling stock and the rail structure. I foresee that a similar cooperation arrangement could exist for the locomotive emissions reduction challenge. I have spoken with, and obtained encouragement from, for example, the head of the U.S. DOE program, Sid Diamond, the U.S. DOT FRA’s John Pulwani, the AAR’s Brian Smith, and the Southwest Research Institute’s Steve Fritz. Such an arrangement would certainly focus what the emissions reduction targets could be for Canada, starting with measurements to establish baseline data. In this regard, one thing that we have in Canada is the largest in-house testing facility for diesel locomotives in North America, that is, the Engine Systems Development Centre Inc. in Lachine, a suburb of Montreal. This totally private initiative is cleared for EPA certification and testing of all locomotive and diesel engine parameters. Lastly, I am sure that you are saying, “Where is that money going to come from for this R&D activity?” In this regard, I end my remarks with a challenge to Bill Rowat, president of the Railway Association of Canada (RAC): in addition to lobbying to have the Capital Cost Allowance period for locomotives shortened, he should also lobby governments to double the funding available for railway-related R&D. For 2002, I identified about $300K in federal funding for railway-related R&D projects (not counting SR&ED tax rebates), while in 2002 the railways paid $644.1 million in taxes to federal and provincial governments (as displayed in Figure 6.5). This is a return for R&D of about one-twentieth of one percent of the taxes paid! I challenge Mr. Rowat to lobby governments to double the return for R&D, that is, to one tenth of one percent of the taxes paid). In closing, I leave as messages a request to Transport Canada regarding locomotive emissions policy clarification, and a challenge to the Railway Association of Canada to lobby to double the return for R&D of the taxes paid by railways. Thank you.

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Figure 6.5

TABLE I

The breakdown of taxes paid by the operating railways in 2002 to federal and provincial governments is ( x $000 ): Locomotive Other Capital tax fuel & excise Property sales & customs tax tax tax duties Alberta 4,051 9,924 67 0 British Columbia 15,241 32,372 24,991 3,811 Manitoba 9,400 14,031 11,940 1,794 Nfld. & Labrador 0 105 0 0 New Brunswick 1,525 841 102 160 Nova Scotia 0 1,900 0 115 Ontario 29,534 34,821 40,105 6,256 Quebec 5,191 35,951 9,366 10,716 Saskatchewan 31,664 13,221 8,586 4,144 Northwest Territories 47 0 0 0 Federal 71,167 0 1,958 14,642 Totals: 167,820 143,166 97,115 41,638

Payroll taxes Income tax QPP 515 1,499 0 1,231 1,441 3,966 12,937 0 0 16,514 38,103

Grand total

CPP UIC Health 44 34 6,381

14,601 77,948 43,546 105 3,859 205 3,661 13,444 128,126 13,030 23,127 110,318 57,615 47 54,666 45,323 204,270 13,030 54,666 45,323 43,236 644,097

Source: Railway Association of Canada, 26 September 2003

Barry Prentice – University of Manitoba Transport Institute Panel Chair I would like questioners to come to the mike, but before we start and while you are preparing your questions, I would like to offer the panel members an opportunity if they have questions of their own or rebuttal for what they have heard. Go ahead, Robert. Panelist 1 Robert Taylor – Railway Association of Canada I would just like to take a minute and I have to say, Russ, I just want to comment on a few of the things you said. In terms of railways making money. We have just, in the last couple of years, gotten sustainable in terms of our cost of capital. We invest about 25% in infrastructure and I think you want to look at these numbers before you throw out excess profits, because the Canadian Transportation Agency and Transport Canada, which we saw in Straight Ahead and John Dobson presented, have a different view. In terms of CCA’s, we are not talking about broad tax policy and about solving the environment in terms of tax policy. We have a CCA in Canada that takes us 20 years to write off a locomotive, it is written off in 8 years in the U.S. and a truck is written off in 8 years in Canada. We have to buy new locomotives to be EPA compliant, and obviously, it costs us a lot more. This is a disadvantage, not for us, but for shippers as well. I just want to make a comment, also, on cross-border, that is about 2/3 of our business. That is the entire growth in our business. That is where we put, not only our new locomotives, but also our new management systems, our new information systems, all of our strategy, at both CN and CP, has been geared on continental activities. So it is not

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just that we are putting locomotives there for EPA compliance. It is the core part of our business and without NAFTA and growth in cross-border traffic, the marginal success we have had would not be here today. The other thing I would just like to comment on is that chart that we have seen a few times. I think we are going to go back and look at our 105 but I would like to know today, what NOx emissions for trucks are. I would kind of like to know where that 2000 and 2005 number, what the methodology is. Even going to 2010 because everything I see, and the U.S. experience has much better data than we have, shows that trucks are up 6% at overall levels. That 6% is probably more than the entire rail sector contributes to NOx. So I would just like you to talk a little bit about your methodology. The last point I would like to make is about the Rail Safety Act. The Rail Safety Act has been a glowing success because it is not prescriptive, it is performance-based. We have a safety management system; we put it forward. It is approved by Transport Canada and we do not have 1,000 Transport Canada people coming out kicking the tires of rail cars. But we know very, very well, unless we decrease fatalities, unless we decrease accidents, we have a problem. In 2003 in Canada, I think, regulation generally has moved in that area. That is why a model like the MOU, which has resulted in lower emissions and will result in significantly lower emissions in the future, has worked so well. I think prescriptive regulation is very expensive for taxpayers and it is also very expensive for industry, and I think that is relevant. Panelist 2 Russ Robinson – Environment Canada If I could comment, specifically, on the data situation in terms of emissions, we are always happy to have another look at emissions numbers and the data that is available, the emissions factors and so on. As you know, we just recently changed the emissions factor that is used within the LAM Report. I am certainly very concerned that this factor – we essentially distill the entire rail sector down to one number which is emissions per amount of fuel used – may not be fully representative of the sector. However, my concern would be that, if we looked very closely at the data, it may actually come out worse than our current emissions estimate. Certainly, moving forward on better data collection and better data analysis is something that we would always be happy to discuss with you or with any other group. I would point out that the road emissions numbers are taken from a Senes report from about 2 or 3 years ago. We would certainly be happy to make available a copy of that report. Senes is a consulting firm that does a lot of the number crunching. If you are interested, you can take a look at the assumptions that they have made, the factors they used, and get a better feel for yourself of the accuracy of the results. This analysis is the basis of a lot of the regulatory analysis related to road transport and we believe these to be reasonably accurate numbers. I would say that, if anything, we would be more concerned that what we have on the rail side is not as accurate and we would be interested in undertaking more work to improve the data – from more emissions testing to better modeling, more

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information of the amount of time at notch settings which is critical for the total emissions, and so on. QUESTIONS & ANSWERS Q: Grete Bridgewater – Canadian Pacific Railway Russ, I just thought I would provide a little more clarification on this notion that our new high-power locomotives are all going down to the U.S. Yes, we have a continental strategy. But yes, we have some very big mountains in the West that we have to carry bulk commodities through to the port of Vancouver and so on. So I assure you that the higher percentage of our high-power new AC fuel-efficient, EPA-compliant locomotives are heading to the west coast – that is just geography. So, hopefully, that information will be of some comfort to you. Robert, you had mentioned some very forward-thinking notions in terms of social responsibility and some comments about, perhaps the railways could be presenting themselves in a better light in terms of environmental enlightenment. You may well know that both the Class 1 railways in Canada are responsible care partners, we are partnering with our customers. That is a fairly rigorous process and we have undergone an external verification where the verifiers were very impressed with our environmental health and safety management systems. We have also just released the second of our annual social responsibility reports where we demonstrate what our commitment is to the environment, including specific targets and goals and objectives and do report on our performance. To that end, we recognize that it is an integral part of our business. Our customers are recognizing it, our investment community is demanding it and recognizing it, and we certainly have partners throughout the industry that are recognizing it. We are engaging our employees; in fact, we have a gain-sharing program so that there is a direct buy-in from our employees to implement our fuel efficiency measures. What we are asking is and what we are wondering is, why the government is not recognizing it. Q: Chris Jones – Railway Association of Canada Russ, I just want to pick up on a couple of the comments you made, as well that my colleague Robert did not mention. What I find somewhat disquieting about some of what you had to say concerns the continued nature of a ‘silo’ mentality within the government. You made reference to us having to deal with finance on our own because Transport and Environment would not be in a position to offer much help there in terms of the CCA rates. As Robert will know, I just finished participating in the Department of Transport’s Sustainable Development Plan for the next three years. I finished on a Friday afternoon and I went back to my office, The Department of Industry called me up and I then spent half an hour talking to them about their sustainable development plan. It occurred to me that it might make sense for government to link these plans together so that we do not have this continued sort of ‘silo’ approach. The problem with that is it is resulting in a lot of issues falling through the cracks. Take the U.S. government, it has an office of

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intermodalism in the Department of Transportation. We do not have any such agency in Canada, we essentially are working at cross-purposes in many cases, and the upshot is that environmental policy is affected by that. Just one other comment about intermodalism. One single double-stacked intermodal train can take about 200 containers off the road. So I am not quite sure how one could make the assertion that it is not really a significant part of the solution. So, I just wanted to leave those. Q: Richard Gilbert – Centre for Sustainable Transportation I, too, want to congratulate the organizers and offer the strong suggestion that this workshop or conference be held every, at least every other year and not every 4 years. Hardly anything could be more important for Canada’s transport future than rail because of its environmental advantages. This kind of workshop is a beautiful way. So, I think as NRCan has the Windsor Workshop on Automotive Technologies, there should be the biennial Winnipeg Workshop on Rail and the Environment. I would like to make a proposal for the one to be held in 2005, and that is more attention be given to what is probably for the future the most important environmental advantage of rail, and that is its ability, through rail-fed or wire-fed systems, to use a large variety of renewable fuels, getting its electricity from rail or wire, tethered systems. It was featured just once in this workshop, Anthony Perl’s paper, and if that continues, when you have the 7th biennial Rail and Environment conference in 2013, there will be a lot of regret as to why it has not been given more attention. In 2013, it will be realized that, like natural gas cannot keep up with demand now, oil world-wide will not be keeping up with demand. The hydrogen economy and fuelcells and everything associated will be exploded as expensive and unrealistic myths. Canada, which depends more on transport than any other country in the world, will be left without a means of looking after itself in this most important respect. The future of rail is tethered systems, getting their power from wire or from rail. It has got to be a component, and an increasing component, in thinking about rail in this country and, indeed, everywhere else. So, I hope for the 2005 conference, we see more than one paper on this topic. Q: Harry Gow – Transport 2000 Canada I would certainly support remarks made about the quality of the conference and the organization and again, that it be held again in two years. To compliment, in particular Environment Canada and Transport Canada, for the hard work done in implementing the ideas which the rest of the organizational panel, like myself, floated knowing that we would not have to bear the brunt of making 100 phone calls to get one speaker. I think that is noteworthy and a successful effort on the part of people like Joanna here, and Russ and others, who put themselves out to achieve this, and I cannot emphasize that enough. I found, in general, that I only disagreed once or twice with what people had to say, and I think that is a record for the 20 or so railway conferences I have attended in the last 10

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years. That is an achievement, too, because people have strained out a lot of the dross and have come up with some pretty good data. I was somewhat dismayed by disingenuous suggestions that, possibly, the railways might be engaging in hostage-taking around CCA and was also concerned at the notion that railways might somehow contribute to a worsening of environmental conditions by carrying more traffic. That said, on the subject of hostage-taking, I would think that, in the future, Transport 2000 and other groups in this area, and I should mention we are not a lobby group, despite the press interpretation of our advocacy, we shall have to do advocacy where we take no hostages in future in order to obtain things like CCA. My question is addressed to nobody in particular and to all of you as a group, based on Peter Eggleton’s excellent suggestion of an increased research and development effort: would people be interested in taking another look at NOx through a specific rail-centred research effort with serious contributions from partners such as Transport Canada, Environment Canada, the RAC and the railways and so on, maybe even the truckers, to try and get to the bottom of this. Because I find it very difficult to believe that NOx on railways has not gone down and will not go down. On the other hand, people have a right to a point of view, but in the end, viewpoints have to be converted into research questions and then verified, validated or nullified. So that is my question. What about a research effort on NOx? A: Robert Taylor – Railway Association of Canada Sure, we are definitely going to revisit our estimate for our NOx emissions in 2020 based on Tier 1, Tier 2, Tier 3, Tier 4 and low sulphur fuel. So I just wanted to provide clarification around that. I do not think that 105 is a great, great number, I do not know what the number is, I am not the person. But I think a process which would look at that number is relevant in the context of quantum leaps in NOx emissions and in the context of after-treatment of emissions coming out of Tier 3 or Tier 4 and 2012. But I think we definitely, the RAC and Mike Lowenger is the guy, would be open to more research but it is really at the locomotive manufacturers’ level. We do not build these things we just use them. We do not tinker with them, either, too much. So I think the manufacturers, in conjunction with operating railways and the AAR and the RAC – I do not know if Bob Fronczak wanted to add anything. I know the AAR does quite a lot of that in Pueblo so there might be some synergies that could be beneficial. A: Peter Eggleton – TELLIGENCE Group Connected to this, let’s get down to the basis of the NOx issue. We know that the MOU will expire on December 27, 2005. (How do I know December 27? It happens to be my birthday and I happened to notice that it was signed in 1995 on December 27). So, prior to the expiry date, one scenario is that the MOU will be renewed and one would think that some things in it could be modified or changed. One of changes could be addressing in a more rigorous manner the reporting of the NOx emitted each year, to establish just how it is to be measured and derived and that sort of thing. Of course, electronics are

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advancing very rapidly so there may be ways of getting this to be more accurate and more automated. Barry Prentice – University of Manitoba Transport Institute Panel Chair Thank-you very much. On this last word, I think I would like to draw the panel to a close and Bill Rowat has invited me to give a few closing remarks, as well. First of all, I think it is (what I heard) some important issues in terms of the railways contributing to our Kyoto goals, beyond just what the railways do. This is really a goal for transportation. It is all forms of transportation and the railways have, I think, an incredibly important role in reducing our total emissions from transportation, and I think that is what the conference was really about. Simplistically, if I look at the issue we have, there is really two strategies: you can change what comes out of the tailpipe or the smokestack as it were, and you can change the number of tailpipes. Those are the two things you can do. We heard a lot about taking things out of the tailpipe, some really innovative and interesting ideas, just burning less fuel because of either better lubrication on the top of the track or having a hybrid railway battery-powered, but very innovative and interesting idea of how to reduce those emissions. So there is a lot of ways that we can reduce what comes out of the railway smokestack, but perhaps the biggest opportunity in terms of the environment, is the ability to reduce the number of tailpipes in total. That comment about 200 containers on a double-stacked train representing 200 trucks, I think that is a very significant change. I presume that those charts that show the reduction of truck emissions must have within that the assumption that those trucks are moving over to rail. So, even though rail emissions are perhaps not going down, you have to come up with what is the net contribution as opposed to just the absolute contribution that might be there, certainly some innovative ideas. I was quite taken at the end of the conference. We heard Minister Sale’s comment about electric trains come back with Anthony Perl’s comment on electrification. Certainly there are places that you can electrify, I am not sure that you can push that quite as far as a national system, for various reasons, just in terms of economics. But one thing that I am not sure, I was not here for the whole time, there is a question of where the emissions occur. I mean, total emissions is what we have focused on but the real question is “Where do they happen?” In a train that is putting forward emissions in the wilds of northern Ontario, it would be quite a bit different from one idling in a yard in Toronto, given that there are already a lot of emissions there. I do not know whether we have actually addressed that question as to: Where is the concentration? and How do we reduce it to critical point? as opposed to just emissions in total. Because there are two issues, one of which is climate change but the other is health. So again, the focus of the conference, as I see it, tended to be very broad and touch on these issues but we maybe need a bit more refinement. Certainly, we would welcome the idea of having this

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conference every two years in Winnipeg. I am not sure the organizers, Russ and Joanna, would really, or up to this very moment, contemplate another conference any time soon after going through the experience and the work of doing this, and they have done a marvelous job. But, certainly, we would be very willing to assist at the Transport Institute. This conference does form a milestone, as did the previous one. It is a very useful point of reference, that you can look back and see where we have progressed and how far we have to go. I think that is important in a number of ways, perhaps the most important of which is that the clock is ticking, if we are going to meet the goals that have been set in terms of trying to reach the Kyoto commitments. There are really two questions outstanding in my mind in that regard. The first one is: Are the incentives adequate to permit the players to make the changes that have to be made to reach those goals? and Is there sufficient time that really allows that to happen? I think those are the big issues because it takes a long time to make that investment in infrastructure. The new yard that you observed the other day, yes, that was built fairly quickly once they had the commitment to build it but it was a tough battle to sell that. Those of us living in Winnipeg know that that has been on the agenda for many, many years. Of course, the questions is: Where do you put that investment? Do you put the investment in things that are going to really reduce emissions or do you put it into areas that are going to help the flow of the railway? Maybe we will attract and move traffic off trucks onto rail but there has to be a balance in those, too. Obviously we need to invest in all. So those are my closing comments Bill, and I invite you to come and officially close the conference.

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CLOSING REMARKS Bill Rowat – Railway Association of Canada Conference Chair Thank-you very much, Barry. I guess just a few closing comments. I did thank everyone involved the other night at the dinner on Monday night and I will probably leave it to Russ in his closing comments to thank you again. But I would like to just re-emphasize and thank Russ and Joanna and the rest of the team that it has been a really exceptional effort over the last number of days. It is hard to pull these things together and they are always worthwhile, even when there are a few areas of disagreement, but they are very worthwhile having. I should just say, overall, I found the conference very heartening in the sense that there are a whole lot of new innovative approaches, technologies and a lot of new innovative thinking that I think are going to encourage us in the rail industry, as Robert said, to revisit some of our numbers, some of our estimates and forecasts, particularly of the NOx number. There are clearly some things there that we have to reassess. We are very proud of where we have come from over the last 10 years. We are very proud of where we are today, vis-à-vis, and particularly other modes. We know and we feel and we believe that we have to achieve the kind of targets that we have talked about over the next 10 years. I guess where I would register some disappointment is, I am hearing a very clear message that mandatory regulation, mandatory approaches are the way to go and any voluntary agreement is a way to learn what we need to learn so we can move into more mandatory regulation. I do not personally agree with that. I think there are many new measures, incentives and so on, that we can use and, I would say, that we have successfully used in many broad areas in rail working with governments over the last number of years. I guess the second point I was a bit disappointed in, and I think a number of the questioners have raised it as well, is that, there is a tremendous potential in terms of multi-modalism, intermodalism, moving more product onto rail that I think will have bottom-line results. I think that we have to continue to revise our analysis on that and government has to have a harder look at that, and we have to have better numbers in that area. The only other point I would make, as well, is that I would really like to encourage and challenge my government colleagues that we want to deal with the Government of Canada. It is extremely important. I think Bob Lyman talked a bit about us acting defensive. Maybe we are defensive in one sense, that we are being asked to work and achieve a very valid and valuable set of objectives in one area in the environment but we are basically saying, “To do that, we need some help in some other policy areas.” I guess, dealing with my Government of Canada, I would say the standard is not good enough to be told, “My job is this, and go and see somebody else on that front.” When we deal with our Government of Canada, I think the silo approach has to be bridged and we have to find a way, internally with the Government of Canada, to pull together a team

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of the respective Finance people, of Industry Canada people. NRCAN, for instance, yesterday, I had not realized that Natural Resources Canada was actually contributing to a project and I think it was a bit of a surprise to some of my government colleagues, as well. We have to be able to deal with our Federal Government on major issues in a cohesive fashion and not be sent to a number of different desks on something as important as this is to the future, to our future as Canadians. So those may be disappointments but I take them and put them out also as challenges to all of my colleagues. So thanks, again. It was really a first-class conference and a good three days. I want to thank Barry for taking up the quick challenge at the last minute to make a few comments, he did a fine job. So thanks again. Russ, I will turn it over to you. Russ Robinson – Advisor, Sustainable Transportation Environment Canada There are a number of people who need to be thanked as a result of this excellent workshop. It has really come together well and it has been delivered very well and that is certainly because of the hard work of a number of people and a number of different groups. First, I would like to thank all of the speakers who went through an excellent set of presentations over the last 2 ½ days, very informative, I think really, really worthwhile. It was a good agenda that was put together. I would like to start the specific thank-you’s with Joanna Bellamy and Francine Lavallee from Environment Canada who both worked hard for months and months on this. I think Joanna was still in the office up till 8:00 on Friday with the last of the details and still working on it, so, certainly excellent work on their part. I would also like to thank a few folks with the University of Manitoba Transport Institute: Christy Sokol, Karime AbdelHay, who did all of our electronics and Megan Warachka. They arranged for the registration, arrangements for meals, looking after logistics, and all of that has just been excellent all through this 2 ½ days, a real good job. EC would also like to thank the organizing committee who worked over the last 6 months to develop the program for this workshop: Harry Gow of Transport 2000 Canada; Nicole Charron and Lionel King of Transport Canada; Terry Zdan and John Spacek of the Province of Manitoba; Anthony Perl of the University of Calgary; Roger Cameron and Mike Lowenger of the Railway Association of Canada; and Doug Duncan of the University of Manitoba Transport Institute. Certainly Doug and his staff gave us a lot of help in finalizing all the conference programs, contacting speakers and a special thanks to them for a job well done. It was an excellent group of speakers who were brought together. I would like to thank the translators of the conference, Suzanne Hoard, Chantel Hamel and Marielle Arsac who have been working away back there the last 2 ½ days. I would like to thank the hotel staff of Hotel Fort Garry and, in particular, Helen Staines and Sherraine Christofferson. Certainly this was an excellent hotel for this. It is the second

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time we have been here with this and they always do a great job of making us feel welcome. I would have no problems committing Environment Canada to doing this again in two year’s time. I am looking at retirement in one year, two months and 11 days so I think a two-year schedule would be no problem at all. A special thanks to Jim Vena and staff of CN for arranging yesterday’s tour of the Symington Intermodal Yards. Now I know everything there is to know about humping, I am much better for it. Finally, a thank-you to Bill Rowat, CEO of the RAC, for acting as Conference Chair over the last 2 ½ days and doing an excellent job of keeping everybody on schedule. Thankyou, Bill. Finally we certainly appreciate all of you folks for taking part in this Conference and for your participation. It has been an excellent workshop and, yes, I think we should commit to doing this in two years’ time. Thank-you.

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2003 PARTICIPANTS SPEAKERS (in order of appearance) Bill Rowat Tim Sale Russ Robinson John Dobson Robert Lyman Gord Owen Robert Taylor Lee Jebb Tim Hibbard Lionel King Robert Fronczak Terry Judge Chuck Moulis Harry Gow Grete Bridgewater Martha Lenz Eric Panet-Raymond Arnold Miller Erika Akkerman Donald Eadie Steve Easun Richard Gilbert Barry Craven Gord Peters Sabina Strautman John Spacek Jim Vena Frank Donnelly Robert Dunn Anthony Perl Barry Prentice Peter Eggleton

Railway Association of Canada Minister of Energy, Science & Technology Environment Canada Transport Canada Transport Canada Environment Canada Railway Association of Canada Cando Contracting Environment Canada Transport Canada Association of American Railroads Kim Hotstart Manufacturing Company U.S. Environmental Protection Agency Transport 2000 Canada Canadian Pacific Railway GM Electro-Motive Bombardier Vehicle Projects, LLC CN Rail Kelsan Technologies Corp. ZTR Control Systems Centre for Sustainable Transportation Canada Post Corporation Cando Contracting IKEA Manitoba Transportation & Government Services CN Rail Railpower Technologies Corp. Consultant University of Calgary University of Manitoba Transport Institute TELLIGENCE Group

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PARTICIPANTS Karime Abdel-Hay Neil Ames Glen Appleby Jason Barnes Harry Beaton Kevin Beechinor Jurgens Bekker Joanna Bellamy Ronnie Brewer Carol Burelle Malcolm Cairns Roger Cameron Nicole Charron Alan Clayton Doug Duncan Tim Feduniw Jo-Anne Foy Chris Gotmalm Darrell Grywacheski Daniel Hammond Irene Hanuta Chris Jones Ashley Langford Francine Lavallee John Lawson Harri Liivamagi Bruce MacLeod Josee Maillette Chrissy Martens Ron Mitchell Don Norquay Ash Olesen Zachary Patterson Malcolm Payne John Pearce Normand Pellerin Andrew Pickell James Popplow Daniel Richmond Bruno Riendeau Patrick Rooney

University of Manitoba Transport Institute Transport Canada Portec Rail Products Ltd. Kim Hotstart Manufacturing Company Transport Canada Golder Associates University of Manitoba Transport Institute Environment Canada CN Rail Environment Canada Canadian Pacific Railway Railway Association of Canada Transport Canada University of Manitoba, Department of Civil Engineering University of Manitoba Transport Institute Destination Winnipeg Transport Canada EcoTrans Technologies Brotherhood of Locomotive Engineers Transport 2000 Prairie Adaptation Research Collaborative Railway Association of Canada Siemens Canada Ltd. Environment Canada Transport Canada CN Rail Winnipeg Airport Lands Corporation Environment Canada Manitoba Heavy Construction Association Transport Canada Manitoba Transportation & Government Services Canadian Pacific Railway McGill University, Department of Geography Engine Systems Development Centre Transport 2000 Atlantic CN Rail Southern Alberta Institute of Technology Manitoba Health Rentar Environmental Solutions VIA Rail Canada Inc. Kelsan Technologies Corp.

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Gerald Sandell Robert Sisler Jackie Skinberg Bob Smith Douglas Smith Christy Sokol Lorraine Sourisseau Graeme Tamson Tony Turrittin Ed Tyrchniewicz Megan Warachka

Transport Canada Transport Canada NRCan Transport Canada University of Manitoba Transport Institute Transport Canada Transport 2000 York University University of Manitoba Transport Institute University of Manitoba Transport Institute

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SPEAKER BIOGRAPHIES WILLIAM (BILL) ROWAT (Conference Chair) President and CEO RAILWAY ASSOCIATION OF CANADA BILL ROWAT, President of the Railway Association of Canada since 2000, is a former career officer in the federal public service. He was educated at the University of Waterloo where he obtained a Bachelors degree in Economics and went on to do graduate course work in the same discipline at Queen’s University. His experience in the public service was extensive, providing him with both policy and operational management in several departments and central agencies of the Canadian Government. As Associate Deputy Minister of Transport and, subsequently, Deputy Minister of Fisheries and Oceans, he had responsibility for managing tens of thousands of public servants while overseeing budgetary envelopes totaling over a billion dollars. While Deputy Minister of Fisheries and Oceans he was responsible for providing strategic direction during the “turbot war” with Spain and the European Union and was the Canadian Government’s Chief Negotiator during the ensuing talks. Also, during his tenure at DFO, he oversaw the amalgamation of the Canadian Coast Guard into the department. As Assistant Secretary to the Cabinet for Economic and Regional Development in the Privy Council Office, Bill oversaw a range of critical economic files and had responsibility for mediating the differing expenditure demands put forward by line departments. In this capacity he reported directly to the Clerk of the Privy Council. In addition to his time in Ottawa, Bill has spent a considerable portion of his career in the Atlantic Canada region. Prior to his appointment with the RAC, he had been on secondment from the Privy Council Office as a senior advisor to the Premier and Government of Newfoundland in relation to the Churchill Falls hydro-electric power project. A secondary part of his duties involved negotiating land claims with the Inuit people of Labrador. Since assuming the reins of the RAC, Bill has given the organization a new impetus and direction with respect to its advocacy, policy development and public affairs work. The 55-member Railway Association of Canada represents virtually all freight and passenger railways operating in Canada today.

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TIM SALE Minister of Energy, Science & Technology PROVINCE OF MANITOBA TIM SALE, Minister of Energy, Science and Technology; Minister responsible for The Gaming Control Act and Minister responsible for Manitoba Hydro. Tim Sale was elected in 1995 to serve the Constituency of Crescentwood. For five years before his election, Tim owned a successful consulting business serving the health care, education and public finance sectors of governments across Canada. His 25 years of experience in management included five years of senior management experience in government. Tim taught at both the Universities of Manitoba and Winnipeg in the field of economics, health policy and management. Tim served as an Assistant Deputy Minister of Education from 1987-1989, and before that as a Senior Policy Analyst for the Manitoba Government in the Finance Department. From 1976 to 1985 he was CEO of the Social Planning Council. Tim received his Bachelor of Science and Bachelor of Theology degrees from the University of Toronto. A Minister of the Anglican Church of Canada, Tim served two terms as a trustee for the Fort Garry School Division, eight years on the board of the United Way in Winnipeg and was a spokesperson for the Manitoba Medicare Alert Coalition. Tim and Irene live in Crescentwood where their now adult children attended public school and the University of Manitoba. He was appointed to the new portfolio of Minister of Science, Energy and Technology by Premier Gary Doer on September 25, 2002. Previously he served as Minister of Family Services and Housing. After being elected in the 1995 general election as the MLA for Crescentwood, Tim was named as the NDP Critic for Industry, Trade and Tourism. He has developed a reputation as a strong advocate for justice and fairness for his constituents, maintaining contact through 13 newsletters and regular meetings with community organizations. RUSS ROBINSON (Session Chair) Advisor, Sustainable Transportation ENVIRONMENT CANADA RUSS ROBINSON is currently an Advisor in Sustainable Transportation to the Director of the Transportation Systems Branch of Environment Canada. Russ has worked for the Federal Government for more than 32 years in various departments and positions. He started his career with the Department of National Defence in 1971. He also worked for

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Public Works and Government services and Natural Resources Canada before coming to Environment Canada in 1992. He holds a Bachelor of Science degree from Sir George Williams University in Montreal. JOHN DOBSON Senior Policy Advisor, Rail Policy Branch TRANSPORT CANADA JOHN DOBSON is a senior policy advisor in the Rail Policy Branch at Transport Canada. John has been with Transport Canada for 29 years and has worked in airports marketing and financial planning in addition to rail policy. He has worked extensively on issues related to grain transportation and most recently was involved in developing policy options on rail transportation issues for consideration by Ministers subsequent to the submission of the report by the Canada Transportation Act Review Panel. Mr. Dobson has a Bachelor of Commerce degree from the University of Manitoba. He is married and has three children. ROBERT F. LYMAN Director General, Environmental Affairs TRANSPORT CANADA MR. LYMAN is a graduate of the University of Windsor where he obtained an Honours BA in Economics and Political Science. He began his public service career in 1969 as a Foreign Service Officer with the Department of External Affairs. While a Foreign Service Officer, he was posted to the Canadian embassies in Caracas, Venezuela and Washington D.C. In 1981, he joined Energy, Mines and Resources as Director, Special International Energy Projects and, in 1984, he moved to the Canadian Gas Association as Director, Government Affairs. From 1986 to 1992, he was Senior Director, energy Policy Branch at Energy, Mines and Resources. During the period 1988-to 1992, he also co-chaired the Federal-Provincial Committee on Climate Change. Mr. Lyman was appointed as senior Advisor at the Privy Council Office inn 1993, a position he held until his appointment as Senior Director, Oil Division with Natural Resources Canada in 1995. In October 2002, Mr. Lyman was appointed as Director General, Environmental Affairs at Transport Canada. GORDON OWEN Director General, Air Pollution Prevention ENVIRONMENT CANADA GORDON OWEN was appointed as Director General of the Air Pollution Prevention Directorate (APPD) of Environment Canada on December 2, 2002.

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Mr. Owen holds a BSc (1982) and a MSc (1985) in Agricultural Engineering from McGill University. He started working for the Public Service in the Research Branch of Agriculture Canada as a soil properties researcher in 1985, first, at the Fredericton Research Station and, then, at the Central Experimental Farm in Ottawa. In 1991, Mr. Owen joined Environment Canada where he has held a variety of positions in the Toxic Pollution Prevention Directorate, the Office of the Minister (Departmental Assistant) and the Environmental Technology Advancement Directorate (ETAD), most recently as Director General until his move to the Air Pollution Prevention Directorate. ROBERT TAYLOR Executive Director, Policy Development and Economic Analysis RAILWAY ASSOCIATION OF CANADA A respected economic policy professional, ROBERT TAYLOR was appointed to the position of Executive Director, Policy Development and Economic Analysis, Railway Association of Canada (RAC) in November 2000. His initial mandate was the development of the Association’s policy platform and support for the expanded public affairs activities of its 60-member freight and passenger railways. Mr. Taylor directs the RAC’s annual research program through substantive public policy development and economic analysis, develops the association’s annual policy book, and authors numerous submissions, presentations and briefs. Working with the VicePresident, Operations and Regulatory Affairs, he provides strategic advice on key environmental issues and climate change. A member of the Association’s executive team, Robert oversees the industry’s Human Resources planning and training function, and manages the RAC web site and database development. Prior to joining the RAC, Mr. Taylor was Executive Director of the Labrador Hydro Project for Newfoundland and Labrador Hydro, managing the team of legal, financial and engineering specialists developing new projects and commercial arrangements related to hydroelectric generation in Labrador. His responsibilities included negotiations with Hydro-Quebec officials, contractors, aboriginal people and consumers associated with planned new multi-billion dollar developments. Robert also served as Senior Policy Analyst in the Cabinet Secretariat of the Government of Newfoundland and Labrador with responsibility for all economic policy Cabinet Memorandum. A graduate of Dalhousie University, he holds a Master’s Degree in Economics.

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LEE JEBB Vice-President Manitoba/Saskatchewan CANDO CONTRACTING LEE JEBB is Vice-President, Manitoba/Saskatchewan Division of Cando Consulting. He has been with Cando for about 2 years. Previously, he spent 9 years in business and economic development in Brandon, Manitoba. He is responsible for the Operations, Central Manitoba Railway. Cando handles about 10-12,000 cars per year. Principal commodities are paper, fuel, metal products, grain and fertilizers. And they are partnered with both CN and CP’s Class One railways. LIONEL KING (Session Chair) Senior Engineer, Environment, Rail Safety TRANSPORT CANADA LIONEL KING is currently a Senior Engineer with the Rail Safety Policy & Regulatory Affairs Branch of Transport Canada, where he is responsible for examining and developing options for the control of emissions from Canadian railway locomotives. Prior to joining T.C., Mr. King spent 6 years as a Senior Project Engineer with the Transportation Systems Branch of Environment Canada, where he dealt with air emissions from aviation, rail and marine sources. He worked for 10 years as a consultant in alternative energy sources and emissions technologies for vehicles, including gases and alcohols together with advances in conventional engines and fuels. Mr. King holds a B.Sc. (Hons) in Mechanical Engineering, and trained as a truck fleet engineer after leaving university. Before becoming involved in emissions control and environmental matters he held various positions concerned with the operation and maintenance of trucks, buses and heavy equipment in Canada and the U.K. He is a registered Professional Engineer in Ontario and a member of the Society of Automotive Engineers. ROBERT E. FRONCZAK, P.E. Assistant Vice-President Environment & Hazardous Materials ASSOCIATION OF AMERICAN RAILROADS MR. FRONCZAK is currently Assistant Vice President Environment & Hazardous Materials for the Association of American Railroads in Washington, DC. His responsibilities include the development and coordination of railroad industry environmental policy. Before joining AAR, he was a Senior Program Manager with Radian Corporation in Milwaukee, WI. He spent six years with the Milwaukee Road Railroad in Chicago, IL as Director of Environmental Engineering. He has a B.S. in Civil Engineering from Valparaiso, University, and a Masters in Business Administration from Depaul University. He is a registered professional engineer in the State of Illinois.

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CHUCK MOULIS Environmental Engineer UNITED STATES ENVIRONMENTAL PROTECTION AGENCY CHUCK MOULIS is an environmental engineer with the United States Environmental Protection Agency. He received degrees in chemical engineering and environmental engineering from the University of Michigan and has worked in the Office of Transportation and Air Quality for 17 years. While at EPA, he has been involved in developing regulations in a variety of areas such as alternative fuels, on-highway and nonroad engines, and diesel fuel quality. Since 1995, he has been EPA's primary contact for issues related to locomotives, and was the project leader for the 1998 rulemaking that established new exhaust emission standards for locomotives. TERRY JUDGE Director of Sales and Marketing KIM HOTSTART MANUFACTURING COMPANY TERRY JUDGE received his Bachelor of Science degree in Mechanical Engineering from Gonzaga University. He also has attained his Masters in Business Administration degree from Seattle University. Terry’s professional career experience includes engineering positions with Boeing, the U.S. Department of Energy, as well as marketing positions with IBM and Hexcel. He is currently serving as the Director of Sales & Marketing for Kim Hotstart Manufacturing Company based in Spokane, Washington. During the past two years Terry has been working with the U.S. EPA on their first funded project to reduce locomotive idling. HARRY W. GOW Founding President TRANSPORT 2000 CANADA HARRY W. GOW, B.A., Carleton, M.S.W. McGill, advanced studies with G. Allen Roher Institute Harry Gow learned the basics of transport and logistics from his parents who were both professionals in the field. His first employment in transport was as a driver in the Army, followed by five years with the Canadian Pacific Railway in various engineering support roles. After graduation from Carleton University, he went into work in applied criminology with the Ontario and Québec governments (probation, parole and then agency directorships). He obtained a Masters degree in Social Work at McGill University in 1971. He went on to teach for the Roher Institute at York University and the Institut québécois de la Déficience intéllectuelle at the Université du Québec à Montréal, and

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latterly the University of Ottawa (a total of 16 years at U of O as Field Placement Coordinator of the Department of Criminology). In 1976, Harry Gow co-founded Transport 2000 Canada, a transport consumer network across Canada with international affiliations. The association does applied research and advocacy work, drawing on a multi-disciplinary team. Work has included in particular creation of new service models, often adopted, for passenger and freight rail services, for municipal and interurban bus and rail transit services, and air safety. Mr. Gow was in particular a consultant for Transport 2000 for studies for the City of Ottawa, particularly the By Ward access study which recommended the maintenance and improvement of automobile access to the market as well as improvements to other modes. He has played a role in much other work for Transport 2000, often in cooperation with the City of Ottawa. He is currently coordinator of a project initially funded by Health Canada to improve rural passenger transport in Western Québec. Gow is vice-president of le Conseil régional de développement durable de l’Outaouais (CREDDO), board member of les Transports Collectifs des Collines, and a member of various economic development and environmental bodies. He is a member of the Chartered Institute of Logistics and Transport. GRETE BRIDGEWATER (Session Chair) Manager, Environmental Policy and Regulations, Environmental Affairs CANADIAN PACIFIC RAILWAY GRETE BRIDGEWATER’s current position is Manager Environmental Policy & Regulations, Environmental Affairs, with Canadian Pacific Railway, based in Calgary, Alberta. Ms. Bridgewater’s primary responsibilities at CPR include the development of corporate environmental policies, strategies and programs to address environmental issues and opportunities and to monitor and report on regulatory trends and compliance. Prior to joining CPR in 1991, Ms. Bridgewater worked for several environmental consultancies; taught environmental management courses at the Faculty of Environmental Design (University of Calgary); and conducted research at the Department of Epidemiology & Health (McGill University). She holds a B.Sc. (Biochemistry) from McGill University and an M.E.Des. (Environmental Science) from the University of Calgary. MARTHA LENZ Director, Engine and Engine Systems Design GM ELECTRO-MOTIVE MARTI LENZ joined GM Electro-Motive in 1981, and worked as a Project Engineer in Engine Development for over 10 years. Since then, she has held positions in all facets of the business, including Sales & Service, Engineering and Manufacturing Operations.

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After five years as Director of Quality, Marti returned to Engineering and is currently Director of Engine and Engine Systems Design. Marti attended Northwestern University as an undergraduate in Mechanical Engineering. She received an MSME at the University of Wisconsin at Madison, and later completed her MBA at DePaul University in Chicago. ERIC PANET-RAYMOND Director, Marketing and Product Planning, High-Speed Rail BOMBARDIER TRANSPORTATION ERIC PANET-RAYMOND is Director, Marketing and Product Planning, High-Speed Rail for Bombardier Transportation North America. He began his career as an Industrial Engineer before moving on to management consulting. In 1999, Eric joined Bombardier Transportation in the field of Strategic Planning. Since then he has held various positions in Strategy, Marketing and Product Planning, including a recent assignment in Switzerland. He is a Professional Engineer. ARNOLD R. MILLER, PhD President VEHICLE PROJECTS LLC ARNOLD R. MILLER, PhD, is President of Vehicle Projects LLC, a company leading the development and demonstration of industrial fuelcell vehicles. The company conceives projects, raises project funds, organizes projects, and manages consortia that execute project tasks. Its projects include a fuelcell mine locomotive, mine loader, and locomotive for commercial and military railways. Arnold Miller is also President of the Fuelcell Propulsion Institute, an international nonprofit industry group whose primary mission is stakeholder education (www.fuelcellpropulsion.org). In 1993, Prof. Miller was Visiting Faculty Associate in the Electrochemistry Division of the U.S. Air Force Seiler Research Laboratory, where he conducted research on direct ammonia fuelcells. From 1993 to 1998, he was Research Associate Professor of Chemistry at Colorado School of Mines, where he was co-principal investigator on a joint fuelcell project in the departments of Chemistry and Physics. From 1994 to 1998, he was founding Director of the Joint Center for Fuel-Cell Vehicles at Colorado School of Mines. For most of Dr. Miller’s career, he was a research faculty member at research universities, including the University of Illinois at Urbana-Champaign. He has published numerous papers in refereed journals such as the Journal of the American Chemical Society, Journal of Organic Chemistry, and American Mathematical Monthly.

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Dr. Miller received his doctorate in chemistry from the University of Illinois, UrbanaChampaign. ERIKA AKKERMAN Environmental Systems Engineer CN RAIL ERIKA AKKERMAN graduated from the University of Alberta with a BSc in civil engineering and a M.Sc in Environmental Engineering. She joined CN's Environmental Department in 2001 as an Environmental Systems Engineer. DONALD T. EADIE, PhD Vice-President, Technology KELSAN TECHNOLOGIES CORP. DON EADIE is Vice President, Technology, for Kelsan Technologies Corp., based in Vancouver. As such, he is responsible for all of Kelsan’s research, development and engineering efforts. These are focused on development of innovative friction control technologies for the global rail industry. A key aspect is the use of thin film friction modifiers for the top of rail, to reduce fuel usage, greenhouse gas emissions, lateral forces, rail wear and noise. Don obtained a BA in Chemistry from the University of Dublin (1977), a PhD in organometallic chemistry (University of Victoria, 1981), and held a Post-Doctoral Fellowship at Cambridge University (1982/82). Prior to joining Kelsan in 1999, Don held a number of Technology Management and R&D positions in the Forest and Petroleum industries. During 11 years with MacMillan Bloedel Research he held positions of Program Leader, Papermaking, and Section Head, Fiber Chemistry, as well as Senior Technology Leader for Pacifica Papers. Prior to this he was a Senior Chemist for six years with Imperial Oil Research in Sarnia, Ontario, working with the global Exxon technology effort. Don has published a variety of papers in the area of friction control for the rail industry and has presented these at major international conferences. STEVE EASUN Account Manager ZTR CONTROL SYSTEMS INC. Good Morning Ladies and Gentlemen. My name is STEVE EASUN and I am an Account Manager for ZTR Control Systems.

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With offices located in London Ontario and the Minneapolis Minnesota, ZTR Control Systems is involved in the design and marketing of monitoring and control system solutions. The company has a special focus on the railway, power generation and wastewater treatment industries. I have been employed with ZTR for approximately 3 years and I am responsible for the Railway accounts located in Canada and the North Eastern USA. My career has included 28 years in the Canadian National Railway- Mechanical Department, Operations Training and CANAC International. After leaving CNR in 1998 I spent two years working on a CIDA funded Railway development project in Bangladesh. I have also worked as a contact trainer/developer for International Technical Services located in London Ontario. Major projects worked on at ITS included Distributed Power Training for UP-EMD Service Engineers and as an electrical trainer at the EMD training center in Chicago. IL. RICHARD GILBERT (Session Chair) Director of Research THE CENTRE FOR SUSTAINABLE TRANSPORTATION (CST) RICHARD GILBERT is a consultant specializing in transportation and energy issues, with clients in North America, Europe, and Asia. He serves as transport consultant to the Paris-based Organization for Economic Cooperation and Development (OECD) and to Civic Exchange, a Hong Kong-based think tank, and also as part-time research director of the Toronto-based Centre for Sustainable Transportation (CST). Major reports published in 2002-2003 include Electrifying Hong Kong: Making Transport Sustainable, for Civic Exchange; Soft Measures and Transport Behaviour, for Umweltbundesamt, the German Federal Environment Agency; Energy and Smart Growth, for the Neptis Foundation and the Government of Ontario; Policy Instruments for Achieving Environmentally Sustainable Transport, for OECD; and Sustainable Transportation Performance Indicators, for CST. BARRY CRAVEN Director, Logistics CANADA POST CORPORATION BARRY CRAVEN commenced his career with Canada Post in 1973 as an Analyst, Statistical & Economic Analysis in the Operations Research function. Other roles held by Barry include: Senior Analyst, Operational Planning; Planning Analyst, Facilities Planning.

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After creation of the Canada Post Corporation in 1981, Barry assumed several roles within the Real Estate department including Director, Planning & Control; Director, Architectural & Technical Services; and Director, Real Estate Business Improvement. After 17 years in Real Estate, Barry effectively changed careers in 1999 to become Director, Transportation & Logistic Systems, where he was responsible for the National and International transportation operations for Canada Post including an annual expenditure of approximately $120 million spread between air, road, rail and marine modes. Barry holds a Bachelor of Mathematics degree in Computer Science and Operations Research from the University of Waterloo. GORDON K. PETERS Chief Executive Officer CANDO CONTRACTING PERSONAL: • •

Born and raised in Rapid City, Manitoba. Resides in Brandon, Manitoba with his wife Diane and son Nicholas.

BUSINESS SUMMARY • • • •

President and General Manager of Cando Contracting Ltd. - Brandon, Manitoba President of Cando Contracting Inc. (US Operations) - Adel, Iowa President of Central Manitoba Railway Inc. - Pine Falls/Winnipeg/Carman, MB President of Athabasca Northern Railway Ltd. – Lac La Biche, Alberta

COMMUNITY ENDEAVOURS • • • • • •

Past Chairman (2002) and Active Director for Manitoba Chamber of Commerce. Director of Canadian Chamber of Commerce (2002 to present). Active member of the Business Council of Manitoba (1997 to present). 2000 Manitoba Entrepreneur of the Year Award. The “Best in Business” Award 2000 (Manitoba Business Magazine). “Success in Mind” Fundraising Campaign at Brandon University, Co-Chair (Brandon Division 1999). • 1999 President’s Award for “Businessperson of the Year” – Brandon Chamber of Commerce. Served on the Brandon Chamber of Commerce as a director, executive director, and finally as president in 1991-1992.

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SABINA STRAUTMAN Environment Transport IKEA NORTH AMERICA SERVICES, LLC SABINA STRAUTMAN has been dealing with environmental management issues both nationally and internationally, including regulatory compliance and development and implementation of operation policies and procedures, for over 20 years. Sabina had worked in the consulting field providing expertise to the petroleum, chemical, utility and other industrial sectors. Before joining IKEA, Sabina worked for Consolidated Rail Corporation (Conrail) for close to 10 years until it was acquired by CSX and Norfolk Southern. She holds a Master of Science degree from Texas A&M University and a Bachelor of Science from University of Connecticut and has studied at the University of Innsbruck, Austria with concentrations in engineering geology, geochemistry and geophysics and is also a licensed Professional Geologist in several states. JOHN SPACEK Senior Director, Transportation Policy and Service PROVINCE OF MANITOBA MR. SPACEK is Senior Director, Transportation Policy and Service Development. He is responsible for the development and implementation of integrated multi-modal transportation policies and service development strategies and programs. In this capacity, Mr. Spacek establishes, leads, and directs project teams to support, develop and promote Manitoba’s transportation sector, private sector service developments, and general transportation sector initiatives supporting international trade and industrial developments in Manitoba. He also leads and directs the development of transportation policy options and provides policy advice to government. John Spacek represented Manitoba as a member of the National Transportation and Climate Change Table as well as Chairing the Freight sub-table. He was awarded a National Transportation Week 2000 Award of Excellence in recognition of his work in climate change. John was also recently seconded to project manage the Manitoba Climate Change Task Force secretariat. In 2003, John has also been included in Canada’s Who’s Who. Prior to entering government service, Mr. Spacek was Principal of Spacek & Associates from 1988 to 1995, a consulting firm offering services in transportation, energy and the environment. During this period, he was also Manager of the Canadian Oxygenated Fuels Association from 1990 through 1994 During 1980, Mr. Spacek was employed by the Strategic Planning Branch of Transport Canada to develop a Multi-Modal Strategic Plan for Newfoundland. The Newfoundland Railway was abandoned and the highway and marine system enhanced, as recommended by the Study.

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Mr. Spacek has an Honours BA in Economics (Dean’s List) from the University of Western Ontario. He also attended (1972-1974) the Graduate School of Urban and Regional Planning at Queen’s University on a CMHC Research Fellowship. John is also a Director of the Centre for Sustainable Transportation. JIM VENA General Manager - Operations CN PRAIRIE DIVISION JIM VENA began his career with CN at the age of 16 with summer jobs on Engineering Gangs and in the Equipment Department. He joined CN full-time in 1977 as a trainman, and progressed through the ranks as conductor, locomotive engineer and yardmaster. He moved into management as an Ops Trainee in 1984, and held supervisory positions at several locations across Western Canada. Vena's first Marketing appointment was in the Coal and Sulfur Business Unit in 1989, followed by postings to Network Operations in Edmonton and then to Montreal as part of the office of the Chief of Transportation. Vena re-joined Marketing as an account manager for potash customers in Saskatoon in 1994 through 1996. He spent 1996-2000 in Vancouver as Pacific District Superintendent. He assumed his present position as General Manager, Prairie Division in February 2001. Jim Vena holds an undergraduate degree, and a postgraduate business degree and certificate. He is married to Karen and they have 2 children. FRANK DONNELLY Chief Technology Officer RAILPOWER TECHNOLOGIES CORP. FRANK DONNELLY is the original founder of Railpower Technologies Corp., a company which develops specialized energy technology systems for transportation and power generation. Frank provides technical vision and is responsible for developing key proprietary technologies and products for Railpower. Frank has spent 30 years working on railway equipment, including locomotives and passenger cars, performing such work as modifying propulsion and control systems. His specialty is electronic design. Frank has led the electrical design in the largest re-engining of switcher locomotives ever done with Caterpillar engines. In addition, he regularly provides consulting services to VIA rail, Finning and others. Frank has an Applied Science Degree in Electrical Engineering Technology and a B.A. in Industrial Design BA with concentration in Electronics/Power Mechanics.

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ROBERT DUNN CONSULTANT ROBERT DUNN is a specialist on railway fuels, lubricants and emissions. The scope of his activities encompasses all aspects of railway fuels. In 2001, he completed the study Diesel Fuel Quality and Locomotive Emissions in Canada, TP 13783E and in 2002 he co-authored the study Influence of Duty Cycles and Fleet Profile on Emissions from Locomotives in Canada, TP 13945E. As a professional scientist, he possesses a solid understanding of the chemistry and physical properties of diesel fuels and alternate fuels with respect to locomotive performance and emissions. Mr. Dunn holds a BSc degree from McGill University (1965) supplemented by courses in management. His career has included: 32 years with Canadian National Railways as a Senior Chemist, Research Chemist and Manager of Analytical Services; consultant to Centre for Surface Transportation Technology of the National Research Council on fuels, lubricants and industrial chemicals; independent consultant providing training/advice to railways, to the Railway Association of Canada and to various government departments. ANTHONY PERL Professor UNIVERSITY OF CALGARY ANTHONY PERL is a Professor of Political Science at the University of Calgary where he teaches public policy and Canadian government. He received an undergraduate honours degree in Government from Harvard University, and MA and Ph.D. degrees from the University of Toronto. Perl's environmental and transportation research has crossed modes and disciplines to explore the organizational and political dynamics that influence transportation finance, ownership, and management. His research has been widely published in scholarly journals such as Transportation Research, Transportation Quarterly, World Transport Policy and Practice, Journal of Air Transport Management, Journal of Public Policy, Canadian Public Policy, Journal of Policy Analysis and Management, Canadian Journal of Political Science and Scientific American. He has received awards for outstanding papers presented at the World Conference on Transport Research in 1992 and the Canadian Transportation Research Forum in 2001. He has also produced three books. The Politics of Improving Urban Air Quality, which he co-edited and co-authored was published in 1999 by Edward Elgar, U.K New Departures: Rethinking Rail Passenger Policy in the Twenty-First Century was published by the University Press of Kentucky in 2001. In 2003, the University of British

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Columbia Press released The Integrity Gap: Canada’s Environmental Policy and Institutions, co-authored and co-edited by Perl. Anthony Perl is married and lives in a traffic–calmed neighbourhood of Calgary. BARRY E. PRENTICE, PhD, MCIT (Session Chair) Director, TRANSPORT INSTITUTE Associate Professor, I.H. ASPER SCHOOL OF BUSINESS UNIVERSITY OF MANITOBA DR. PRENTICE holds degrees from University of Western Ontario (1973) University of Guelph (1979) and University of Manitoba (1986). His major research and teaching interests include logistics, transportation economics, urban transport and trade policy. Dr. Prentice has authored or co-authored more than 150 research reports, journal articles and contributions to books. His scholarly work has been recognized for excellence in national paper competitions and awards. In 1999, National Transportation Week named him Manitoba Transportation Person of the Year. Dr. Prentice serves on the Boards of Directors of several transportation organizations: National Transportation Week (President, 2001 and 2003), Honourary President of the Canadian Institute for Traffic and Transportation (2001-3) and the Canadian Transportation Research Forum (Past President, 1997). He is Associate Editor of the Journal of Transportation Research Forum. In addition, Dr. Prentice has served on Winnipeg Airports Authority, Inc., Winnipeg TransPlan 2010, the Mid-Continent International Trade Corridor Task Force, expert committees, and is frequently asked to speak on the topics of trade and transportation. PETER EGGLETON Consultant TELLIGENCE Group MR. EGGLETON is the principal of the TELLIGENCE Group, a trans-Canada network that he formed in 1996 to provide multi-sectoral consultancy for international technology collaboration. His expertise is focused on innovation in transportation technology, particularly for railway and high-speed magnetically levitated (Maglev) systems, including the management strategies leading to implementation and operational deployment. Mr. Eggleton also undertakes international science and technology cooperation activities based on his experience as a science diplomat. He has a BApSc (Mech Eng) from University of British Columbia (1961) and a MApSc (Mech Eng) from Rugby College of Engineering, England (1968) - thesis on medium-speed diesel engines. His career has included assignments in:

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mechanical engineering at Canadair, Montreal (F-104 fighter program), Free Piston Engine Development Co., Kingston (diesel cycle gasifiers and air compressors) and Pratt & Whitney of Canada Ltd., Longueuil, Que. (PT-6 and JT-15D gas turbines) management of transportation technology R&D and testing programs at Transport Canada’s Transportation Development Centre, Montreal (LRC prototype, Budd RDC, B.C. Rail electrification, Track/Train Dynamics, Skytrain LIM transit, Maglev) transportation engineering consulting with Canadian Pacific Consulting Services, Montreal (coal-water fuels pipelining, energy technology transfer, rail passenger) science diplomat with Dept. of Foreign Affairs (Japan, European Union postings) consulting in international technology benchmarking, diesel emissions reduction technologies and scientific evaluations with TELLIGENCE Group, St. Lambert, Que

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