Table of Contents

EXECUTIVE SUMMARY

In May 1999, an organizational redesign initiative was undertaken by Transport Canada’s Rail Safety Program. Part of the input to that initiative was an environmental scan involving selected stakeholders in railway safety.

Participants in the scan were asked to look ahead five years and identify coming changes in the Canadian railway industry. They were further asked to identify what the anticipated changes in the industry would mean for the Rail Safety Program.

A number of key issues emerged. The most prevalent by far, was the issue of ‘continuing shortline activity’ . The shortline phenomena was identified as having a number of implications for the Rail Safety Program, including in the areas of workload and role.

Closely linked to the shortline issue was the issue of ‘jurisdiction’ . With the proliferation of shortline railways in Canada has come a heightened awareness of the differences in regulatory régimes in place at the provincial and federal levels. The result is a call for Transport Canada to take the lead in defining a national framework for railway safety.

Consistency was a recurring theme during the scan; as was the importance of establishing the right balance of traditional and new skills for Transport Canada employees. Other themes included: continuing competitive pressures on the railway industry and the implications of new technologies being adopted by the industry.

The over-arching message, however, was change; rapid, extensive change, for both the industry and the regulator --- and a suggestion that the regulator will be challenged to keep pace.

I. INTRODUCTION

1.1 BACKGROUND & OBJECTIVE: 

In 1997, following a number of railway accidents, the Minister of Transport chose to postpone planned changes to the Railway Safety Act in order to allow his Department the time necessary to critically review existing mechanisms for overseeing railway safety and to determine whether other improvements to the legislation would be beneficial.

The review commenced in 1997 with the formation of a multi-discipline Review Group under the direction of a Steering Committee of senior departmental officials. It concluded in early 1998 with the publication of a report titled, "Review of Railway Safety Act Amendments and Safety Oversight and Regulatory Compliance Mechanisms".

The report made recommendations in each of several areas of study. Included were recommendations aimed at modernizing the Rail Safety Program, in part, through additional changes to the Railway Safety Act. The changes were drafted and went through the legislative process in 1998/99; and given Royal Assent, March 25, 1999.

Another recommendation aimed at modernizing the Rail Safety Program, was for a review of the organization itself to be conducted. This, Transport Canada has undertaken to do in 1999/2000 with assistance from Consulting and Audit Canada (CAC).

One aspect of the organizational redesign with which CAC was tasked, was an environmental scan of key stakeholders in railway safety. The primary objectives of the scan were:

• to identify anticipated changes in the Canadian railway industry over the next five years;
• to identify anticipated changes in federal-provincial service agreements and other workload generators, over the next five years; and
• to identify what the anticipated changes would mean for the Transport Canada Rail Safety Program, in terms of role, responsibilities and workload.

The findings of the environmental scan are the subject of this report.

1.2 SCOPE & METHODOLOGY:

The environmental scan was conducted by way of telephone interviews with railway safety stakeholders. Participants were selected from the following broad categories of railway safety stakeholders: representatives of industry and labour, Rail Safety Program representatives, representatives of other governments and other federal government departments, and representatives of provincial bodies overseeing railway safety.

The following activities were carried out during the environmental scan:

• Development of the Interview Guide – An interview guide, including proposed questions, was drafted and vetted with the Rail Safety Project Manager. Revisions were made based on feedback received and the guide was finalized for use during the telephone interviews.
• Identification of Participants – A list of potential participants was developed and vetted with the Rail Safety Project Manager. The list was amended based on feedback received. Potential participants were then contacted to establish whether they would be willing to participate and to schedule telephone interviews. In most cases, when initially contacted, potential participants either agreed to participate or named someone in their stead.
• Conduct of Telephone Interviews – Telephone interviews were conducted with 38 participants from May 21 to June 8, 1999. As a general rule, participants were provided with a copy of the Interview Guide in advance of the interview.
• Presentation of Preliminary Findings to Rail Safety Management Committee – In an initial review of the interview notes, a number of emerging themes were identified. These themes were briefly outlined to the Rail Safety Management Committee on June 10, 1999.
• Synthesis & Analysis of Information – Information provided by participants during the telephone interviews was compiled, synthesized and analyzed. The table found in Appendix C provides a detailed summary of participants’ responses to the five core interview questions.

II. ENVIRONMENTAL SCAN

There were many insightful comments and ideas forthcoming during the environmental scan. Some of the main ones are described below.

2.1 SHORTLINES:

Without exception, each participant commented on the growth and development of the shortline industry in Canada. In most cases, the feeling was that the proliferation of shortlines would continue; although there was a suggestion that the trend would now begin to slow in the east. It was also suggested that the next phase of growth for shortlines would be in terms of re-alignments, rationalizations, consolidations and mergers, as individual shortline companies find their own niche and begin to grow their business to fit it. This said, it was suggested that shortlines will necessarily be looking to penetrate different areas of the market. They will increasingly be interfacing with Class 1 railways; and will be increasingly handling passenger operations and dangerous goods.

Accordingly, there were a number of challenges identified for the Rail Safety Program vis-à-vis shortlines:

• to adopt a regulatory approach that would recognize shortline railway companies as different than Class 1 railways;
• to resolve differences in federal and provincial railway safety regulatory régimes, since:
• those shortline companies that have non-contiguous operations in two or more provinces could find the differing regulatory régimes onerous and confusing; and
• at the interface between Class 1 railways and shortlines a standard code of practice is required, in the interest of safety; and
• to determine the level and distribution of resources necessary to provide effective regulatory oversight of both shortlines and Class 1 railways.

A final word of caution was offered by at least two participants in the environmental scan. The suggestion was that the state of the railway industry in Canada is becoming much as it was at the turn of the century; that is, fragmented, possibly to the point of becoming inefficient. In the past, the federal government found itself stepping in, in an attempt to build a cohesive national railway system.

2.2 JURISDICTION:

The second most prevalent issue raised by participants in the environmental scan was federal-provincial jurisdiction. The issue was primarily linked to the proliferation of shortline railways, some of which fall under federal jurisdiction for the purposes of railway safety; some of which fall under provincial jurisdiction; and some of which, by virtue of federal-provincial agreements, fall somewhere in between. Largely, the challenges identified for the Rail Safety Program were as stated in item 2. above.

There were influences, other than the shortline phenomena, cited as driving the need for a resolution of issues arising from jurisdictional differences. These included:

• the pressures on government to harmonize cross-border regulatory requirements in the area of railway safety, as a consequence of NAFTA;
• the push for invisible borders and a seamless North American railway system, as a consequence of trade and transportation flow shifting to north-south; and
• the pervasive pressure from industry and labour for consistency, both within and across regulatory programs.

A number of suggestions were forthcoming regarding how differences in the railway safety regulatory régimes of the various jurisdictions could be addressed. Several suggestions were as follows:

• Transport Canada should take a leadership role to define a railway safety regulatory régime that will work across all jurisdictions;
• Transport Canada should implement a performance-based regulatory régime that would allow the provinces to manage safety and Transport Canada to monitor performance; and
• Transport Canada should form alliances with the provinces to resolve jurisdictional issues and establish a consistent national approach to railway safety.

As with the issue of shortlines, a final word of caution was offered by one of the participants. It was noted that Canadian railway companies are no longer viewed as exclusively within Transport Canada’s domain when it comes to safety. The suggestion was that provincial and municipal government bodies will increasingly exercise authority over railways and that the courts will be prepared to uphold the actions of those other government bodies, provided there is no conflict with federal requirements.

2.3 COMPETITION:

Competition was a recurring theme in the environmental scan; competition within the railway industry itself and competition between the railways and trucking. The suggestion was that competitive pressures on railway companies will continue to be manifested in the following ways:

• continued downsizing and lay offs, in the short term;
• increasing focus on operating ratios and productivity targets;
• decentralization of corporate structures, in order to better respond to client concerns and needs;
• continued consolidations, acquisitions and mergers (including multi-national), primarily of large roads;
• more contracting out of railway work; and
• more co-production initiatives and inter-line agreements.

The suggestion was that Canadian railways have exhausted most all cost-cutting measures possible and must now focus on building their businesses and managing their assets. It was further suggested that railways will begin to realize that their greatest competitors are outside the rail industry. With this realization, will come the recognition of the benefits of co-production initiatives and inter-line agreements. Accordingly, railways will move away from competing with each other and will increasingly enter into cooperative arrangements.

The challenge for the Rail Safety Program will be to allow for competition, while providing effective railway safety regulatory oversight. One participant indicated that the Rail Safety Program will find it increasingly necessary to intervene in non-traditional areas, such as maximum train length and minimum number of employees, as railways look for new ways to improve they operating ratios.

2.4 NEW TECHNOLOGY:

Participants from most all stakeholder groups indicated that the railways will increasingly implement new technologies, including high tech systems. The following were examples of new technologies that could be expected:

• improved detection and remediation systems;
• satellite-based communications;
• "smart" or labour-saving devices;
• improved signal systems; and
• more computerization of systems overall.

One participant pointed out that due to the costs associated with acquisition and implementation, such technologies would not be implemented globally, but rather only where expected benefits would exceed expected costs.

One main challenge was identified for both the Rail Safety Program and the railways as a consequence of new technologies being implemented by the industry: To work effectively with such technologies, technical experts with skill sets and expertise quite different than the traditional will be required. In particular, the Rail Safety Program will be faced with a new dimension in railway safety regulatory oversight; that being, evaluation of the safety implications, capabilities and limitations of new technologies and high tech systems, as they are increasingly put into use by the industry.

2.5 SAFETY MANAGEMENT SYSTEMS (SMS):

The issue of SMS was mentioned repeatedly during the environmental scan, however, in no particular context. What seemed clear was that there are a number of expectations associated with SMS and very little certainty. The expectations voiced included the following:

• implementation of SMS will change how Transport Canada does business and will require that Transport Canada redirect resources;
• implementation of SMS will reduce the number of regulations;
• a number of partnerships and strategic alliances will form in response to SMS, for example industry alliances to develop strategies for implementing SMS;
• SMS will be a vehicle for obtaining railway data; and
• SMS will be an additional tool for Transport Canada.

As one participant described it, the challenge for the Rail Safety Program will be to show some early successes with SMS and to give substance to something that is currently not well understood.

A final word of caution was offered by another participant. The concern expressed was that with the implementation of SMS, the industry as a whole will lose track of what is actually enforceable.

2.6 KNOWLEDGE, SKILLS, EXPERTISE & TRAINING:

Most all participants commented on the knowledge, skills, expertise and/or training of Rail Safety Program personnel, given the recent changes to the Railway Safety Act and the anticipated changes in the industry. It was repeatedly suggested that different skill sets and training would be needed for conducting audits and for evaluating high tech systems, for example. It was strongly suggested by most participants that a balance of new skills and traditional technical skills would be required, if the Rail Safety Program is to remain effective and credible.

The challenge to the Rail Safety Program, therefore, was essentially described as: to define the "new" program that will be delivered; to define the skills base and balance of skills necessary to deliver the "new" program; and to define the training needs of the organization, given the "new" program.

2.7 ROLES & RESPONSIBILITIES:

The participants provided quite varied responses regarding how anticipated changes in the industry would affect Transport Canada’s role and responsibilities in delivering the Rail Safety Program. If there was a message to be divined from all that was said, it was that with all the anticipated changes, Transport Canada’s role and responsibilities would require review and possibly redefinition. A number of participants envisioned Transport Canada’s role and responsibilities as necessarily changing and in some cases, broadening in scope. For example, the implementation of safety management systems will, according to some participants, significantly alter how the business of the Rail Safety Program is conducted. Specific comments on role and responsibilities included the following anticipated changes:

• more of a coaching, mentoring, advisory role, particularly when it comes to shortlines and requirements for safety management system implementation;
• more of a shift from a prescriptive role to a management role;
• more of a consultative role;
• more responsibility for security and environmental issues;
• more of a lead role in resolving federal-provincial jurisdiction issues in railway safety; and
• more responsibility for education and awareness initiatives.

The challenge for the Program, therefore, will be to define and communicate their new role and the scope of their new responsibilities.

2.8 WORKLOAD:

Most participants indicated that Transport Canada’s workload in delivering the Rail Safety Program would increase as a consequence of two things: the continuing shortline activity and the recent changes to the Railway Safety Act. There was a suggestion that the potential existed for Transport Canada to carry out additional work on behalf of Human Resources Development Canada. As well, a number of industry participants indicated that Transport Canada can expect more work in the way of more requests for exemptions from existing federal requirements coming from railway companies. On the other hand, there was no indication from the provincial participants, when their responses were viewed collectively, that Transport Canada’s workload would change due to increasing requests from the provinces.

One participant suggested that changes in workload would be driven from within the Program itself. Several others, however, offered the observation that the Rail Safety Program is currently under-resourced and does not appear to be expanding to meet the increased demands on the program that will result from coming changes.

The challenge for Rail Safety, therefore, will be to identify resource levels necessary to respond appropriately to the new demands that will be made on the Program and to position those resources accordingly.

2.9 CREDIBILITY & CONSISTENCY:

Comments from a number of participants closely linked credibility with consistency: consistency of approaches (headquarters-regions, federal-provincial and Canada-U.S.); consistency of program delivery; and consistency of policy interpretation and application. However, further comments suggested that any national framework of consistency must be sufficiently flexible to allow for differing regional needs and concerns.

Other participants suggested there is a need to be aware of, and to manage, perceptions of credibility. The following examples were cited, in particular:

• the public’s perception of the Program’s credibility, if Transport Canada is seen as partnering with the industry it regulates;
• railway employees’ perception of the Program’s credibility, if the majority of Railway Safety Inspectors are former railway officials; 
• andrailway companies’ perception of the Program’s credibility, if Railway Safety Inspectors lack the training and expertise to carry out their new functions, such as auditing.

Many other factors were cited as affecting credibility, including: qualifications of Railway Safety Inspectors; even-ness of regulatory action; and the demonstrated ability to think in terms of the larger picture.

The challenge for the Rail Safety Program, therefore, is to be sufficiently aware of credibility issues in order to be able to account for and manage them.

2.10 OTHER ISSUES:

Numerous other issues were raised during the environmental scan. All were interesting, some intriguing and many insightful, in terms of what changes are anticipated over the next five years. Some of the other issues that were mentioned are listed below:

1. Changes to the structure and operation of VIA Rail are expected. There were several concerns associated with this expectation, including: concerns with fragmenting the national passenger rail system; and concerns with who the operators of passenger services will be if VIA is franchised, for example.
2. It is anticipated that there will be increasing emphasis on environmental issues and emission standards. Largely this was viewed positively, since environmental concerns may favour rail transport over road.
3. Security was raised as an area increasingly requiring attention. One suggestion was that Transport Canada will need to foster a security culture, as well as a safety culture.
4. The importance of maintaining and nurturing existing partnerships and alliances was raised. However, there were cautions around being aligned too closely with railways and railway associations. The suggestion was that Transport Canada should be partnering with Canadians, as opposed to the industry it regulates. However, a number of participants endorsed tripartite alliances as beneficial and as having worked well in the past.
5. There was a strong suggestion that Transport Canada must begin to exercise their authority over more than just the railway companies, if they are to be effective in areas such as crossing safety and trespassing.
6. It was suggested that the Rail Safety Program will face a challenge in the area of information exchange and management requires. One participant indicated that it will be increasingly difficult for the Program to obtain reliable data --- this at a time when new Program directions will be dependant on the accessibility of reliable data.
7. There were numerous comments made on consultation and communications. Several participants emphasized the importance of consultation to decision-making. In addition, it was suggested should be communicating with the industry by way of interpretive documents and internet publications.
8. Finally, there were a number of interesting "big picture" comments made. First, it was suggested that railway companies will move away from competing with each other and will enter into more co-production and inter-line arrangements. Beyond this first level, however, the need for more cross-modal thinking was identified. It was suggested that a uniform multi-modal safety framework is crucial to Canada’s transportation system. It was further suggested that all stakeholders in railway safety must become increasingly aware of how changes in the rail mode affect other modes of transportation, if a better transportation system for Canada is ever to be achieved.

III. CONCLUSIONS

3.1 CONCLUSIONS:

From all the messages received during the environmental scan, three issues emerge as being priorities: the need to develop a strategy for dealing with shortlines; the need to resolve jurisdictional issues associated with different railway safety regulatory régimes; and the need to define and communicate the roles that Transport Canada will play in the delivery of the Rail Safety Program and identify their human resources requirements based on those roles.

The over-arching message, however, was change --- change at a rate that appears to be increasing, rather than slowing and appears to pervade the entire rail sector. Large railway companies continue to restructure. Smaller railway companies are beginning to re-align and re-consolidate themselves. Labour groups are involved in re-alignment initiatives. The Rail Safety Program, itself is undergoing redesign.

The challenge for all stakeholders in railway safety, therefore, is to manage the change, while remaining focused on safety.