Vol. 151, No. 13 — June 28, 2017

Registration

SOR/2017-121 June 9, 2017

RAILWAY SAFETY ACT

Locomotive Emissions Regulations

P.C. 2017-705 June 9, 2017

His Excellency the Governor General in Council, on the recommendation of the Minister of Transport, pursuant to subsection 47.1(2) (see footnote a) of the Railway Safety Act (see footnote b), makes the annexed Locomotive Emissions Regulations.

Locomotive Emissions Regulations

Interpretation

Definitions

1 (1) The following definitions apply in these Regulations.

active fleet means all of the locomotives being used by a railway company for its railway operations in Canada. (parc de locomotives actives)

CFR means Part 1033, or any other part that is specified, of Title 40 of the Code of Federal Regulations of the United States, as amended from time to time. (CFR)

crankcase emissions means substances emitted into the atmosphere from any portion of the ventilation or lubrication system of a locomotive crankcase. The crankcase is the housing for the crankshaft and other related internal parts. (émissions du carter)

EPA means the United States Environmental Protection Agency. (EPA)

EPA certificate means a certificate of conformity to United States federal standards that is issued by the EPA under the CFR. (certificat de l’EPA)

exhaust emissions means substances emitted into the atmosphere from any opening that is downstream from the exhaust port or exhaust valve of a locomotive engine. (émissions de gaz d’échappement)

family emission limit means the maximum level of nitrogen oxides or particulate matter, or the maximum combined level of nitrogen oxides and hydrocarbons, that a locomotive covered by an EPA certificate issued under Part 1033 or Part 92 of the CFR, as applicable, and belonging to an engine family may emit under paragraph 4(5)(b). The family emission limit is determined by the manufacturer or remanufacturer of the locomotive in accordance with Subpart H of the CFR or Subpart D of Part 92 of the CFR, as applicable, and is set out in the EPA certificate issued under Part 1033 or Part 92 of the CFR, as applicable. (limite d’émissions de la famille de moteurs)

freshly manufactured locomotive means a locomotive that contains less than 25 percent previously used parts. (locomotive nouvellement construite)

incidental operations means the operation of locomotives by a railway company in the case where

• (a) the locomotives cross the border between Canada and the United States;
• (b) the company’s locomotives that are operated in Canada operate for a distance of not more than 40.23 km (25 miles) in one direction on a line of railway inside Canada; and
• (c) in the calendar year preceding any day on which the conditions set out in paragraphs (a) and (b) are met, the operating time of the company’s locomotives in Canada represented an average of less than five percent of the total operating time of all of its locomotives. (exploitation accessoire)

line-haul locomotive means a locomotive that has a total rated power of more than 1 715 kW (2,300 horsepower). (locomotive de ligne)

locomotive means a self-propelled piece of on-track railway equipment that is designed for moving or propelling railway cars that are designed to carry freight, other equipment, or passengers, but that itself is not designed to carry freight, other equipment, or passengers other than those operating the locomotive. It does not include railway equipment that

• (a) is constructed for movement both on and off lines of railway;
• (b) is powered by a steam engine;
• (c) is powered only by an external source of electricity;
• (d) is designed primarily for use in maintenance, construction, the post-accident recovery of equipment, repairs or other similar uses;
• (e) has a total rated power of less than 750 kW (1,006 horsepower); or
• (f) is operated solely for the purposes of exhibition, demonstration, evaluation or testing. (locomotive)

locomotive engine means an engine that propels a locomotive. (moteur de locomotive)

new locomotive means

• (a) a freshly manufactured locomotive;
• (b) a remanufactured locomotive;
• (c) an upgraded locomotive; or
• (d) an imported locomotive. (locomotive nouvelle)

particulate matter means respirable particulate matter with a diameter of less than or equal to 10 microns. (particules)

percent previously used parts means the percentage, calculated in accordance with paragraph 1033.640(c) of the CFR, that represents the total dollar value of the previously used parts of the locomotive relative to the total dollar value of the unused parts and previously used parts of the locomotive. (% de pièces usagées)

permanently removed, in respect of a locomotive, means removed from the total fleet as a result of having been scrapped, sold or destroyed. (retirée de façon permanente)

place into service means to place a new locomotive into initial operation or to permit the placement of a new locomotive into initial operation. (mettre en service)

power assembly means, in respect of a locomotive engine, a module in which the combustion of fuel occurs, which consists of the cylinder, the piston and piston rings, the valves and ports for the admission of charge air and the discharge of exhaust gases, the fuel injection components and controls, and the cylinder head and its associated components. (ensemble de puissance)

refurbished locomotive means a locomotive that contains less than 50 percent previously used parts. (locomotive remise à neuf)

remanufactured locomotive means a locomotive that was originally manufactured after December 31, 1972, that contains more than 25 percent previously used parts and that

• (a) has had, whether during a single maintenance event or cumulatively within a five-year period, each power assembly
  • (i) replaced, or
  • (ii) inspected and qualified for use;
• (b) has been converted to enable it to operate using a fuel other than a fuel it was originally manufactured to use;
• (c) is a repowered locomotive; or
• (d) is a previously used locomotive into which a remanufactured locomotive engine is installed. (locomotive reconstruite)

remanufactured locomotive engine means a locomotive engine that

• (a) has had, whether during a single maintenance event or cumulatively within a five-year period, each power assembly
  • (i) replaced, or
  • (ii) inspected and qualified for use;
• (b) has been converted to enable it to operate using a fuel other than a fuel it was originally manufactured to use; or
• (c) in the case of a locomotive engine that does not contain power assemblies, has been repaired to a condition that is equivalent to or better than its original condition with respect to reliability and fuel consumption. (moteur de locomotive reconstruit)

repowered locomotive means a previously used locomotive whose engine has been replaced with a locomotive engine that has never been remanufactured and that has never been installed in a locomotive. (locomotive réalimentée)

service life means the total life of a locomotive. Service life begins when the locomotive is originally manufactured and ends when the locomotive is permanently removed from service. (durée de service)

switch locomotive means a locomotive that has a total rated power of 1 715 kW (2,300 horsepower) or less. (locomotive de manœuvres)

tier of standards means the tier of standards set out in Tables 1 to 3 to section 1033.101 of the CFR that applies in respect of a locomotive according to its year of original manufacture. (niveau des normes)

total fleet means the active fleet of a railway company plus all of the locomotives that it has put in storage in Canada. (parc total de locomotives)

upgraded locomotive means a locomotive that was originally manufactured before January 1, 1973 and that is

• (a) a repowered locomotive; or
• (b) a refurbished locomotive that contains more than 25 percent previously used parts. (locomotive mise à niveau)

useful life means the period during which an emission standard applies in respect of a locomotive or locomotive engine, as determined in accordance with paragraph 1033.101(g) of the CFR. (durée de vie utile)

year of original manufacture means the calendar year of the date of original manufacture of a locomotive, as determined in accordance with subsection (3). (année de construction initiale)

Total rated power

(2) The total rated power of a locomotive is equal

• (a) in the case of a locomotive propelled by only one engine, to its rated power, which is determined in accordance with the provisions of section 1033.140 of the CFR; and
• (b) in the case of a locomotive propelled by more than one engine, to the sum of the rated power of each of its engines, including any permanently installed auxiliary engine that can be operated while the main propulsion engine is operating but not including an auxiliary engine that operates only to reduce the idling time of the main propulsion engine.
  

Date of original manufacture

(3) The date of original manufacture of a locomotive is

• (a) in the case of a locomotive that has been assembled only once, the date on which the assembly was completed;
• (b) in the case of a switch locomotive that has been assembled more than once, the date of completion of the most recent assembly of the locomotive that resulted in the locomotive containing less than 25 percent previously used parts;
• (c) in the case of a line-haul locomotive that has been assembled more than once, the date of completion of the most recent assembly of the locomotive that resulted in the locomotive containing less than 50 percent previously used parts; and
• (d) in the case of an upgraded locomotive, January 1, 1973.

Purpose

Protection of environment

2 The purpose of these Regulations is to

• (a) reduce emissions of nitrogen oxides, particulate matter, hydrocarbons, carbon monoxide and smoke resulting from the operation of locomotives; and
• (b) establish emission standards and test procedures for locomotives.

Emission Standards, Testing and Labelling

Application

Application — sections 4 to 9

3 (1) Subject to subsections (2) to (5), sections 4 to 9 apply in respect of a new locomotive for the duration of its useful life if the locomotive is placed into service on or after the day on which these Regulations come into force.

Exception — locomotive covered by EPA certificate

(2) If a new locomotive placed into service on or after the day on which these Regulations come into force is covered by an EPA certificate that sets out family emission limits, section 4 applies in respect of the locomotive for the duration of its service life.

Exception — remanufactured locomotive

(3) Sections 4 to 9 do not apply in respect of a new locomotive placed into service on or after the day on which these Regulations come into force if the locomotive

• (a) is a remanufactured locomotive;
• (b) is operated by a railway company that has realized gross revenues of $30 million or less for the provision of rail transportation services in Canada in each of the two calendar years before the year in which the locomotive is placed into service;
• (c) is not covered by an EPA certificate; and
• (d) is operated for the provision of freight rail transportation services or tourist and excursion rail transportation services.
  

Exception — nonroad engines

(4) Sections 4 to 9 do not apply in respect of a new locomotive that is a switch locomotive placed into service on or after the day on which these Regulations come into force if the locomotive

• (a) is equipped with a nonroad engine within the meaning of the definition of “nonroad” in section 1033.901 of the CFR;
• (b) is covered by an EPA certificate issued under Part 89 or Part 1039 of the CFR, as applicable; and
• (c) is affixed with the EPA locomotive label set out in paragraph 1033.150(e)(4) of the CFR and the EPA engine label set out in section 1039.135 of Part 1039 of the CFR or section 89.110 of Part 89 of the CFR, as applicable.

Exception — incidental operations

(5) Sections 4 to 9 do not apply in respect of a new locomotive placed into service on or after the day on which these Regulations come into force if the locomotive is operated by a railway company as part of incidental operations.

Emission Standards

Exhaust Emissions

Prohibition — placing into service

4 (1) A railway company must not place into service a locomotive unless, when tested in accordance with section 8, the locomotive conforms to the applicable exhaust emission standards set out in Tables 1 and 2 to section 1033.101 of the CFR and in paragraph 1033.101(f)(1) of the CFR.

Alternate standards — carbon monoxide and particulate matter

(2) Despite subsection (1), when tested in accordance with section 8, the locomotive placed into service by the railway company may conform to the alternate carbon monoxide and particulate matter emissions standards set out in paragraph 1033.101(i) of the CFR instead of the applicable carbon monoxide and particulate matter emission standards set out in Tables 1 and 2 to section 1033.101 of the CFR.

Exception — EPA certificate and labels

(3) Subsections (1) and (2) do not apply in respect of a locomotive that is covered by an EPA certificate and that is affixed with the EPA locomotive label and EPA locomotive engine label that are set out in section 1033.135 of the CFR.

Prohibition — operating without EPA certificate or with EPA certificate that does not set out family emission limits

(4) If a locomotive is not covered by an EPA certificate or is covered by an EPA certificate but one that does not set out family emission limits, a railway company must not operate the locomotive after the locomotive has been placed into service unless, when tested in accordance with section 8, the locomotive conforms to the applicable exhaust emission standards set out in Tables 1 and 2 to section 1033.101 of the CFR and in paragraph 1033.101(f)(1) of the CFR.

Prohibition — operating with EPA certificate that sets out family emission limits

(5) If a locomotive is covered by an EPA certificate that sets out family emission limits, a railway company must not operate the locomotive after the locomotive has been placed into service unless, when tested in accordance with section 8, the locomotive conforms to

• (a) the applicable exhaust emission standards set out in Tables 1 and 2 to section 1033.101 of the CFR and in paragraph 1033.101(f)(1) of the CFR for which there are no family emission limits; and
• (b) the family emission limits.
  

Alternate standards — carbon monoxide and particulate matter

(6) Despite subsection (4) or (5), when tested in accordance with section 8, a locomotive referred to in subsection (4) or (5) may conform to the alternate carbon monoxide and particulate matter emissions standards set out in paragraph 1033.101(i) of the CFR instead of the applicable carbon monoxide and particulate matter emission standards set out in Tables 1 and 2 to section 1033.101 of the CFR.

Footnotes

(7) For the purposes of this section, footnotes d and e to Table 1 to section 1033.101 of the CFR and footnotes b and c to Table 2 to that section do not apply.

Smoke Emissions

Prohibition — placing into service

5 (1) A railway company must not place into service a locomotive unless, when tested in accordance with section 8, the locomotive conforms to the smoke standards set out in Table 3 to section 1033.101 of the CFR that correspond to the locomotive’s tier of standards.

Exceptions to subsection (1)

(2) Subsection (1) does not apply in respect of a locomotive that

• (a) is covered by an EPA certificate and is affixed with the EPA locomotive label and EPA locomotive engine label that are set out in section 1033.135 of the CFR; or
• (b) emits 0.05 grams per brake horsepower-hour of particulate matter or less.
  

Prohibition — operating

(3) A railway company must not operate a locomotive after the locomotive has been placed into service unless, when tested in accordance with section 8, the locomotive conforms to the applicable smoke standards set out in Table 3 to section 1033.101 of the CFR.

Exception to subsection (3)

(4) Subsection (3) does not apply in respect of a locomotive that emits 0.05 grams per brake horsepower-hour of particulate matter or less.

Crankcase Emissions

Prohibition — crankcase emissions

6 (1) A railway company must not operate a locomotive that releases crankcase emissions directly into the atmosphere.

Exception — testing

(2) Subsection (1) does not apply in respect of a locomotive in the case where crankcase emissions are added physically or mathematically to the exhaust emissions when tested in accordance with section 8 and with paragraph 1033.115(a)(1) of the CFR.

Exception — treated crankcase emissions

(3) When crankcase emissions are routed to the exhaust upstream of the exhaust aftertreatment, the release is deemed not to be a direct release into the atmosphere.

Exception — EPA certificate and labels

(4) Subsections (1) to (3) do not apply in respect of a locomotive that is covered by an EPA certificate and that is affixed with the EPA locomotive label and EPA locomotive engine label that are set out in section 1033.135 of the CFR.

Testing

Initial testing

7 (1) A railway company must test a locomotive in accordance with section 8 before placing the locomotive into service.

Exception

(2) Subsection (1) does not apply in respect of a locomotive that is covered by an EPA certificate and is affixed with the EPA locomotive label and EPA locomotive engine label that are set out in section 1033.135 of the CFR.

In-use testing

(3) In every calendar year beginning with the 2019 calendar year, a railway company that has realized gross revenues of $250 million or more for the provision of rail transportation services in Canada in each of the two preceding calendar years must test, in accordance with section 8, a sample of locomotives that is determined in accordance with subsections (4) to (6).

In-use test sample characteristics

(4) Each locomotive in the sample referred to in subsection (3) must

• (a) be operated in the provision of freight rail transportation services;
• (b) not have been tested in the previous calendar year; and
• (c) be at more than 50 percent of its useful life at the time of testing.

In-use test sample size

(5) The number of locomotives that the railway company must test under subsection (3) is the number determined by multiplying 0.00075 by the number of locomotives that meet all of the following conditions:

• (a) they were part of the active fleet of the railway company on December 31 of the previous calendar year;
• (b) they are subject to the exhaust emissions standards referred to in section 4;
• (c) they have the characteristics set out in paragraphs (4)(a) to (c).
  

Rounding up

(6) If the multiplication set out in subsection (5) results in a product that is a fraction, the product is to be rounded up to the next whole number.

Testing required by Minister

(7) The Minister may require a railway company to test any locomotive that it operates, if the Minister determines that it is necessary to do so in order to ascertain whether the locomotive conforms to section 4 or 5.

Test procedures

8 A locomotive tested for conformity to section 4 or 5 must be tested in accordance with the test procedures set out in Subpart F of the CFR.

Labelling

Locomotive engine label and locomotive label

9 (1) Subject to subsections (2) to (4), a railway company must not operate a locomotive unless

• (a) the locomotive engine or locomotive engines are affixed with a label containing the following information:
  • (i) the heading “Engine Emission Control Information”, the heading “Renseignements sur le contrôle des émissions du moteur” or a bilingual heading consisting of both headings,
  • (ii) the full corporate name of the locomotive engine manufacturer or remanufacturer, as the case may be,
  • (iii) a statement that identifies the tier of standards to which the locomotive must conform and that indicates whether the locomotive is a line-haul locomotive or a switch locomotive,
  • (iv) the exhaust emission standards to which the locomotive engine must conform under section 4, and
  • (v) the useful life of the locomotive; and
• (b) the locomotive is affixed with a label containing the following information:
  • (i) the heading “Original Locomotive Emission Control Information”, the heading “Renseignements sur le contrôle des émissions de la locomotive initiale” or a bilingual heading consisting of both headings,
  • (ii) the full corporate name of the locomotive manufacturer or remanufacturer, as the case may be,
  • (iii) a statement that identifies the tier of standards to which the locomotive must conform and that indicates whether the locomotive is a line-haul locomotive or a switch locomotive,
  • (iv) the exhaust emission standards to which the locomotive must conform under section 4, and
  • (v) date of original manufacture of the locomotive.
    

Exception to subsection (1)

(2) Subsection (1) does not apply in respect of a locomotive covered by an EPA certificate and affixed with the EPA locomotive label and EPA locomotive engine label that are set out in section 1033.135 of the CFR.

Additional label for refurbished locomotives

(3) In addition to the labels required by subsection (1), a refurbished locomotive must be affixed with a label containing the following information:

• (a) the heading “Refurbished Locomotive Emission Control Information”, the heading “Renseignements sur le contrôle des émissions de la locomotive remise à neuf” or a bilingual heading consisting of both headings;
• (b) a statement that identifies the tier of standards to which the locomotive must conform and that indicates whether the locomotive is a line-haul locomotive or a switch locomotive; and
• (c) the exhaust emission standards to which the locomotive must conform under section 4.

Exception to subsection (3)

(4) Subsection (3) does not apply in respect of a refurbished locomotive covered by an EPA certificate and affixed with the EPA locomotive label set out in paragraph 1033.640(f)(3) of the CFR.

Labelling

(5) A label referred to in subsection (1) or (3) must

• (a) in the case of a label referred to in paragraph (1)(a),
  • (i) be durable throughout the useful life of the engine,
  • (ii) be legible and affixed to the engine in a position in which it will remain readily visible after the engine is installed in the locomotive,
  • (iii) be affixed to an engine part that is necessary for the normal operation of the engine and that does not normally require replacement during the useful life of the locomotive,
  • (iv) not be affixed to any equipment that is easily detached from the engine,
  • (v) be affixed so that it cannot be removed without being destroyed or defaced,
  • (vi) be made up of one piece or, if all the pieces are permanently affixed to the same engine part, more than one piece, and
  • (vii) be lettered in a colour that contrasts with the background colour of the label; and
• (b) in the case of a label referred to in paragraph (1)(b) or subsection (3),
  • (i) be permanently affixed to the locomotive,
  • (ii) be legible and affixed to the locomotive in a position in which it will remain readily visible,
  • (iii) be affixed to a locomotive chassis part that is necessary for the normal operation of the locomotive and that does not normally require replacement during the service life of the locomotive,
  • (iv) not be affixed to the engine or to any equipment that is easily detached from the locomotive,
  • (v) be affixed so that it cannot be removed without being destroyed or defaced,
  • (vi) be made up of one piece except in the case of a locomotive whose tier of standards is 0, in which case it may be made up of more than one piece, and
  • (vii) be lettered in a colour that contrasts with the background colour of the label.
    

Language

(6) A label referred to in subsection (1) or (3) must be worded in English, French or both.

Idling

Prohibition — idling

10 (1) Subject to subsection (2), a railway company must ensure that the locomotives in its active fleet do not idle for more than 30 minutes.

Exceptions

(2) A locomotive may idle for more than 30 minutes to the extent that is necessary to

• (a) prevent locomotive engine damage, such as damage resulting from the freezing of the engine coolant;
• (b) maintain air pressure for the brakes or the starter system;
• (c) recharge the locomotive battery;
• (d) heat or cool the cab, if the heating or cooling is necessary for reasons of health and safety;
• (e) provide head end power, if necessary for reasons of passenger health and safety;
• (f) perform diagnostic testing and necessary maintenance; or
• (g) respond to an emergency.
  

Anti-idling policy

(3) A railway company must

• (a) have a written anti-idling policy that reflects the railway company’s commitment to reducing locomotive idling;
• (b) submit the policy to the Minister together with, as the case may be, the initial report filed under section 13 or the incidental operations report filed under section 16;
• (c) if an amendment is made to the policy, submit a copy of the amended version to the Minister
  • (i) together with the annual report filed under section 14, or
  • (ii) within 45 days after the end of each calendar year, if the company operates its locomotives in Canada as part of incidental operations; and
• (d) keep a copy of the policy that was submitted in accordance with paragraph (b) and, if it was amended, a copy of the amended version.

Records and Information

Application — exception

11 Sections 12 to 15 do not apply to a railway company that operates its locomotives in Canada as part of incidental operations.

Contents of Record

Contents of record — total fleet

12 (1) A railway company must keep, for each locomotive in its total fleet, a record containing the following information:

• (a) a statement indicating whether the locomotive is a line-haul locomotive or a switch locomotive;
• (b) a statement indicating the type of rail transportation service for which the locomotive is primarily operated;
• (c) the date of original manufacture;
• (d) the locomotive’s tier of standards;
• (e) the locomotive identification number;
• (f) the name of the locomotive manufacturer or remanufacturer, as the case may be;
• (g) the model of the locomotive;
• (h) the name of the locomotive engine manufacturer or remanufacturer, as the case may be; and
• (i) the model of the locomotive engine.

Additional information — active fleet

(2) In addition to the information set out in subsection (1), for each of the locomotives in its active fleet, a railway company must include in the locomotive’s record the following information:

• (a) a description of the locomotive engine or locomotive engines, including the total rated power, the number of cylinders and the type of fuel;
• (b) the locomotive’s annual fuel consumption by type of fuel or, in the absence of that information, the annual fuel consumption of the active fleet by type of rail transportation service and type of fuel; and
• (c) the useful life of the locomotive.
  

Additional information — new locomotives covered by EPA certificates

(3) In addition to the information set out in subsections (1) and (2), for each new locomotive in its active fleet that is covered by an EPA certificate and to which the exhaust emission standards referred to in section 4 apply, a railway company must include in the locomotive’s record the following information:

• (a) the EPA engine family number applicable to the locomotive;
• (b) a statement as to whether the locomotive is an imported locomotive, a freshly manufactured locomotive, a refurbished locomotive, a remanufactured locomotive or an upgraded locomotive, or any combination of these;
• (c) the date on which the locomotive was placed into service; and
• (d) any maintenance performed on the locomotive that substantially affects its emissions or that is likely to substantially affect its emissions.

Additional information — new locomotives not covered by EPA certificates

(4) In addition to the information set out in subsections (1) and (2), for each new locomotive in its active fleet that is not covered by an EPA certificate and to which the exhaust emission standards referred to in section 4 apply, a railway company must include in the locomotive’s record the following information:

• (a) a description of the locomotive’s anti-idling technology;
• (b) a description of the locomotive’s crankcase emissions handling;
• (c) a description of the basic engine design;
• (d) a description of the emission control equipment and related components and an explanation of the operation of the emission control system;
• (e) the results of all emissions testing;
• (f) the date and time of each emissions test;
• (g) the locomotive’s hours of operation at the time of each test;
• (h) a statement indicating whether the locomotive is an imported locomotive, a freshly manufactured locomotive, a refurbished locomotive, a remanufactured locomotive or an upgraded locomotive, or any combination of these;
• (i) the date on which the locomotive was placed into service; and
• (j) any maintenance performed on the locomotive that substantially affects its emissions or that is likely to substantially affect its emissions.
  

Additional information — locomotives permanently removed from total fleet

(5) In addition to the information set out in subsections (1) to (4), as applicable, for each locomotive that is permanently removed from its total fleet, a railway company must include in the locomotive’s record the following information:

• (a) the date of its removal; and
• (b) the reasons for its removal.

Initial Report

Filing of initial report

13 (1) A railway company must file with the Minister

• (a) in the case of a company created on or before the day on which these Regulations come into force, a report with respect to all of the locomotives in its total fleet, as the fleet existed on that day, within 90 days after that day; and
• (b) in the case of a company created after the day on which these Regulations come into force, a report with respect to each locomotive in its total fleet, as the fleet existed on the day on which the company was created, within 90 days after the day of its creation.
  

Contents of initial report

(2) The report must contain the following information:

• (a) the name of the railway company, the address of its head office and, if different, its mailing address;
• (b) the address of the department within the railway company responsible for maintaining the records required under section 12;
• (c) the name, telephone number and email address of the contact person for the railway company; and
• (d) for each locomotive in its total fleet, the information set out in subsection 12(1).

Annual Report

Filing of annual report

14 (1) A railway company must file with the Minister, within 45 days after the end of each calendar year beginning after the end of 2018, a report with respect to each locomotive in its active fleet, as the fleet existed on December 31 of the calendar year, and each locomotive permanently removed from its total fleet in the calendar year.

Contents of annual report

(2) The report must contain the following information:

• (a) the name of the railway company, the address of its head office and, if different, its mailing address;
• (b) the address of the department within the railway company responsible for maintaining the records required under section 12;
• (c) the name, telephone number and email address of the contact person for the railway company;
• (d) for each locomotive in its active fleet, the information set out in subsections 12(1) and (2);
• (e) in the case of a new locomotive in its active fleet to which the exhaust emission standards set out in section 4 apply,
  • (i) the information set out in paragraphs 12(3)(a) to (c), if the locomotive is covered by an EPA certificate, and
  • (ii) the information set out in paragraphs 12(4)(a) to (i), if the locomotive is not covered by an EPA certificate; and
• (f) in the case of a locomotive permanently removed from the total fleet during the calendar year, the information set out in subsections 12(1) and (5).
  

In-use Test Report

Filing of in-use test report

15 (1) A railway company must file with the Minister, within 90 days after the end of each calendar year, a report with respect to each locomotive tested under subsection 7(3) in that calendar year.

Contents of in-use test report

(2) The report must contain the following information:

• (a) the name of the railway company, the address of its head office and, if different, its mailing address;
• (b) the address of the department within the railway company responsible for maintaining the records required under section 12;
• (c) the name, telephone number and email address of the contact person for the railway company; and
• (d) the information set out in subsection 12(1) and paragraphs 12(4)(e) to (g).
  

Incidental Operations Report

Filing of incidental operations report

16 (1) A railway company that operates its locomotives in Canada as part of incidental operations must file with the Minister

• (a) in the case of a company created on or before the day on which these Regulations come into force, a report confirming the incidental operations existing on that day, within 90 days after that day;
• (b) in the case of a company created after the day on which these Regulations come into force, a report confirming the incidental operations existing on the day on which the company is created, within 90 days after the day of its creation; and
• (c) in the case of a company, other than a company referred to in paragraph (b), that begins incidental operations after the day on which these Regulations come into force, a report confirming the incidental operations and the day on which those operations began, within 90 days after that day.

Contents of incidental operations report

(2) The report must contain the following information:

• (a) the name of the railway company, the address of its head office and, if different, its mailing address;
• (b) the address of the department within the railway company responsible for keeping the copies of the anti-idling policy referred to in subsection 10(3);
• (c) the name, telephone number and email address of the contact person for the railway company; and
• (d) a statement from the railway company that it operates its locomotives in Canada as part of incidental operations.
  

Report Certification

Certification

17 Each report referred to in sections 13 to 16 must include a certification, by the person responsible for the oversight of the railway company’s locomotive emissions program or by a person authorized to act on that person’s behalf, that all the information contained in the report is accurate.

Keeping of Records and Information

Records — duration

18 (1) A railway company must keep every record referred to in section 12 for at least four years after the day on which the locomotive is permanently removed from its total fleet.

Reports — duration

(2) A railway company must keep every report referred to in sections 13 to 16 for at least eight years after the day on which it is filed.

Records and reports — form

(3) A railway company must keep every record and report in written form or in a readily readable electronic or optical form.

Consequential Amendment to the Transportation Information Regulations

19 Subsection 12.2(1) of the Transportation Information Regulations (see footnote 1) is repealed.

Coming into Force

Registration

20 These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

1. Background

More and more Canadians are aware of the impact of local air pollutants on their health and on the air quality in their communities. Air pollutants, or criteria air contaminant (CAC) emissions, include sulphur oxides (SO_x), nitrogen oxides (NO_x), particulate matter (PM), carbon monoxide (CO), ammonia (NH₃), ground-level ozone (O₃), and volatile organic compounds (VOCs), including hydrocarbons (HC). NO_x and PM are two of the most harmful CACs that are emitted from locomotive engines. They can lead to the formation of smog and acid rain and have been linked to premature mortality, asthma, some forms of heart disease and aggravated cardiac and respiratory diseases. Groups most at risk are the elderly, children and people with respiratory issues. Emitting these CACs into the air damages the environment and lowers the quality of life of people.

In 2015, Canada’s transportation sector accounted for 54.50% of all NO_x emissions and 8.2% of all PM emissions. Of all transportation-related emissions, rail accounted for 12.3% of NO_x and 5.7% of PM emissions. (see footnote 2) It is important to keep CAC emissions to their lowest practical level, as rail traffic in Canada is expected to grow and many rail corridors run through heavily populated areas where air pollutant emissions are already at higher concentrations.

Railway companies have been voluntarily implementing measures to reduce emissions from the rail sector. The rail industry has been working with the Government of Canada through a series of Memoranda of Understanding (MOU) to reduce emissions since 1995. (see footnote 3) These voluntary agreements have resulted in railway companies adopting commercially viable and feasible technologies and adjusting operations to reduce emissions. The first MOU was in effect from 1995 to 2005. It reflected a commitment between the Railway Association of Canada (RAC) and Environment Canada to maintain NO_x emissions below a threshold of 115 000 tonnes per year. During this time frame, railway activity grew significantly while NO_x emissions declined.

The United States started regulating CAC emissions from locomotives in 2000. These regulations were updated in 2008 and technical amendments were made in 2016. The U.S. regulations set emission standards for NO_x, PM, HC, CO and standards for smoke opacity which become increasingly stringent over time.

In October 2006, the Government of Canada issued the Notice of Intent to Develop and Implement Regulations and Other Measures to Reduce Air Emissions (Notice of Intent) (see footnote 4) to regulate air emissions, including those from the rail sector. The Regulations will be made under the authority of the Railway Safety Act. This commitment was reiterated in the 2007 Regulatory Framework for Air Emissions (see footnote 5) and is also in subsequent Transport Canada Reports on Plans and Priorities. (see footnote 6)

As a bridge to regulations, a second MOU between the Railway Association of Canada, Transport Canada and Environment Canada was signed in 2007, for the 2006–2010 period, and set targets to reduce the intensity of greenhouse gas (GHG) emissions and encouraged the reduction of CAC emissions. It has been effective in both preparing the industry for the regulatory requirements and reducing emissions.

A third successive MOU was signed, this time between the Railway Association of Canada and Transport Canada in 2013 for the 2011–2015 period. (see footnote 7) In 2015, this MOU was extended by one year to 2016. This agreement included measures, targets and actions to reduce the intensity of greenhouse gas emissions from rail operations and included a commitment to continue to monitor criteria air contaminants. It was intended to complement the Regulations and encourage Railway Association of Canada members to continue to conform to U.S. emission standards (Title 40 of the Code of Federal Regulations of the United States, Part 1033) until the Regulations come into force.

According to the 2014 Locomotive Emissions Monitoring Program report, the Railway Association of Canada reported that NO_x emissions intensity from total freight railway operations decreased by 62% from 1990.

2. Issues

The Government of Canada aims to protect the environment and the health of Canadians by addressing CAC emissions and greenhouse gas (GHG) emissions. Reducing emissions from transportation, including rail, is an essential element. CAC emissions from other transportation sources have dropped significantly as a result of long-standing regulations. As a result, emissions from railway locomotives, particularly NO_x, have become a larger proportion of total transportation emissions.

Railway companies have been encouraged to comply with U.S. regulations through the MOU. Railway companies have been voluntarily meeting U.S. emission standards to the extent possible. In some cases, locomotives have been manufactured or remanufactured to meet some, but not all, of the emission standards. As the MOU is a voluntary agreement, it is not enforceable by law.

3. Objectives

The objective of the Locomotive Emissions Regulations (the Regulations) is to reduce CAC emissions, namely NO_x, PM, HC and CO, and smoke, from the operation of locomotives by establishing mandatory emission standards and test procedures for new locomotives. The Regulations are established under the authority of subsection 47.1(2) of the Railway Safety Act.

To support the transition to a cleaner and low-carbon transportation sector, the Government of Canada is developing regulations and standards that will limit emissions from all transportation modes. This effort focuses on aligning Canadian regulations with U.S. and international standards, improving the efficiency of our transportation system, and advancing green technologies. These Regulations are an important part of this effort.

This initiative builds on the extensive collaboration between the Canadian and U.S. governments on air emissions from locomotives. Under the framework of the Regulatory Cooperation Council, Transport Canada and the U.S. Environmental Protection Agency (EPA) are working collaboratively on the development of potential strategies for the reduction of GHG emissions from locomotives. Transport Canada has worked closely with the U.S. EPA on the development of the Regulations, as they align with the existing U.S. standards. (see footnote 8)

The Canada–U.S. rail industries are highly integrated and almost all new locomotives in Canada are imported from the United States and built to U.S. manufacturing standards. The alignment of the Canadian Regulations with the existing U.S. regulations will ensure that regulatory requirements are consistent with one another, particularly for railway companies that operate on both sides of the border.

Aligned standards and requirements will allow Canadians to enjoy the health and environmental benefits of reduced emissions from locomotives, without causing barriers to trade or otherwise having a negative impact on the Canada–U.S. rail transportation system.

4. Description

The Regulations, made under the Railway Safety Act, introduce progressively more stringent CAC emission standards. They come into force on the day on which they are registered and apply to railway companies as they are defined in the Railway Safety Act.

The Regulations are aligned with the existing U.S. regulations. (see footnote 9) The U.S. regulations set emission standards that vary according to the type of locomotive and its year of original manufacture. The Regulations incorporate the U.S. emission standards and associated testing procedures by reference.

The Regulations require railway companies to meet emission standards, undertake emission testing, and adhere to anti-idling provisions, which benefit human health and the environment. Some of the regulatory requirements apply in respect of all locomotives in a railway company’s fleet, immediately following the coming into force, while others apply in respect of a locomotive only if it is placed into service following the coming into force.

More specifically, the Regulations set out emission standards for NO_x, PM, HC, and CO and standards for smoke opacity. Locomotives that are placed into service by railway companies are subject to the emission standards as well as to the provisions for testing and labelling. Placing a locomotive into service refers to the initial operation of a new locomotive. New locomotives are freshly manufactured, remanufactured, upgraded, or imported.

Locomotives that were manufactured or remanufactured prior to the coming-into-force date of the Regulations are not subject to these provisions until the next time they are placed into service. This means that locomotives already in service at the time of the coming into force of the Regulations are not required to meet the emission standards or the testing and labelling requirements. When such locomotives are removed from service to be remanufactured, refurbished or upgraded, they will be required to meet these requirements before they are placed back into service.

The Regulations include an exception for U.S. railway companies with incidental operations in Canada from most of the requirements except for the idling provisions. Incidental operations are defined as the operation of locomotives by a railway company where the locomotives cross the border between Canada and the United States; where the company’s locomotives that are operated in Canada operate for a distance of not more than 40.23 km (25 miles) on a line of railway inside Canada; and, in the preceding calendar year, the operating time of the company’s locomotives in Canada represented an average of less than 5% of the total operating time of all of its locomotives. Railway companies with incidental operations are required to notify Transport Canada through an incidental operation report that they meet these parameters. These companies remain subject to the idling provisions.

The Regulations also include flexibility for small railway companies. In this context, a small railway company is a railway company that realizes gross annual revenues of $30 million or less from the provision of rail transportation services in Canada. The Regulations exclude remanufactured locomotives operated by small railway companies for the provision of freight services or tourist and excursion services from having to meet the emission standards unless they are covered by a U.S. EPA certificate.

Locomotives that were built before 1973 are not required to meet the emission standards in the Regulations unless they are upgraded (which is defined as a type of remanufacture specific to locomotives built before 1973). As a substantial number of small railway companies’ locomotives (approximately 30 to 40% of their fleet) were built before 1973, this is an additional flexibility for them and for other railway companies with older locomotives.

All locomotives in the active fleet of a railway company are subject to requirements for idling and railway companies are required to meet certain record keeping and reporting obligations immediately after the coming into force of the Regulations, with limited exceptions for companies with only incidental operations in Canada.

Key elements of the Regulations

The Regulations set out several requirements for railway companies relating to the operation of locomotives. Below is a brief description of the key regulatory requirements.

Emission standards: Based on the type of locomotive and the year of original manufacture, new locomotives are required to meet the increasingly stringent tier of standards for NO_x, PM, HC and CO emissions, as well as smoke opacity. These standards are incorporated by reference to the U.S. regulations. Locomotives are required to meet the applicable tier of standards for their entire useful life and, in certain cases, for their entire service life. The useful life is the period during which the locomotive is designed to properly function in terms of reliability and fuel consumption without being remanufactured, and during which a locomotive is required to comply with all applicable emission standards. The typical useful life of a locomotive is 10 years. (see footnote 10) Service life is the total life of a locomotive and ends when the locomotive is permanently removed from service. The typical service life of a locomotive is 40 years. (see footnote 11)

Table 1: Line-haul locomotive emission standards

Year of Original Manufacture	Tier of Standards	Standards (g/bhp-h)
		NOx	PM	HC	CO
1973–1992	Tier 0	8.0	0.22	1.00	5.0
1993–2004	Tier 1	7.4	0.22	0.55	2.2
2005–2011	Tier 2	5.5	0.10	0.30	1.5
2012–2014	Tier 3	5.5	0.10	0.30	1.5
2015 or later	Tier 4	1.3	0.03	0.14	1.5
Source: CFR 1033.101, Table 1

Table 2: Switch locomotive emission standards

Year of Original Manufacture	Tier of Standards	Standards (g/bhp-h)
		NOx	PM	HC	CO
1973–2001	Tier 0	11.8	0.26	2.10	8.0
2002–2004	Tier 1	11.0	0.26	1.20	2.5
2005–2010	Tier 2	8.1	0.13	0.60	2.4
2011–2014	Tier 3	5.0	0.10	0.60	2.4
2015 or later	Tier 4	1.3	0.03	0.14	2.4
Source: CFR 1033.101, Table 2

Table 3: Smoke standards for locomotives

Tier of Standards	Standards (Percent Opacity)
	Steady State	30-s Peak	3-s Peak
Tier 0	30	40	50
Tier 1	25	40	50
Tier 2 and later	20	40	50
Source: CFR 1033.101, Table 3

In the United States, manufacturers have the option to certify locomotive engine families to a family emission limit. Family emission limits are alternate emission standards for locomotives created under the U.S. Averaging, Banking and Trading (ABT) program. Under the Regulations, approved family emission limits are accepted for locomotives that are part of the U.S. ABT program and covered by a U.S. EPA certificate as long as they conform to the applicable provisions of the Regulations.

In alignment with the U.S. regulations, locomotives may meet alternate CO and PM standards. These alternate standards are incorporated by reference to allow for natural gas locomotives, which generally have higher CO emissions and lower PM emissions as compared to conventional diesel locomotives.

New locomotives are also prohibited from releasing crankcase emissions directly into the atmosphere, unless when tested, crankcase emissions are physically or mathematically added to the exhaust emissions, or if they are routed to the exhaust upstream of the exhaust aftertreatment. There is an exception to this requirement for locomotives covered by a U.S. EPA certificate and affixed with U.S. EPA locomotive and engine labels set out in section 1033.135 of the CFR.

Testing: Prior to placing a new locomotive into service in Canada, a railway company is required to test the locomotive to prove that it meets the applicable emission standards. The testing procedures are incorporated by reference from the U.S. regulations. Those locomotives covered by a U.S. EPA certificate can use the certificate as proof of compliance with this requirement by providing the EPA engine family number.

Beginning in 2019, Class I railway companies (i.e. a railway company that realized revenues of at least $250 million for the provision of rail transportation services in the two preceding calendar years) are also required to select and test 0.075% of their active fleet of freight locomotives annually to demonstrate compliance with the emission standards throughout their useful life. This testing is referred to as in-use testing.

Labelling: Railway companies are required to label all new locomotives with an engine label and a locomotive label. The Regulations prescribe the form, content and placement of such labels. The Regulations provide an exception to the labelling requirements for locomotives covered by a U.S. EPA certificate and affixed with U.S. EPA locomotive and engine labels set out in section 1033.135 of the CFR.

Idling: All locomotives in a company’s active fleet are prohibited from idling for more than 30 minutes unless the extended idling is for a reason set out in the Regulations. For example, idling may be permitted if it is necessary to prevent engine damage, such as to prevent the engine coolant from freezing. In addition, railway companies are required to have an anti-idling policy and to submit it with the initial report or incidental operations report, as appropriate (see “Reporting” section).

Record keeping: Railway companies, other than those whose operations are limited to incidental operations, are required to keep a detailed record for each locomotive in their fleet. The record includes information such as the type of locomotive, date of original manufacture, applicable tier of standards, identification number and model.

Reporting: The Regulations prescribe specific reporting requirements for railway companies. Railway companies are required to file an initial report, an annual report, and an in-use test report with the Minister, as applicable. Railway companies that operate their locomotives in Canada as part of incidental operations are required to notify the Minister through an incidental operations report.

Initial report: Existing railway companies are required to file a report with the Minister 90 days after the coming into force of the Regulations that provides information on each locomotive within its total fleet.

Annual report: Railway companies are required to file a report with the Minister annually, 45 days after the end of each calendar year starting in 2018, which provides information on all locomotives in the company’s active fleet as it existed on December 31 of the calendar year and information on locomotives that were permanently removed from the total fleet, during the previous calendar year.

In-use test report: Class I railway companies are required to file a report with the Minister 90 days after the end of each calendar year with respect to each in-use freight locomotive tested during the previous calendar year. The obligation to perform in-use testing begins in 2019.

Consequential amendment: The Regulations repeal subsection 12.2(1) of the Transportation Information Regulations.

5. Regulatory and non-regulatory options considered

Three options were considered for the development of the Regulations: a voluntary approach, a regulatory approach aligned with the United States, and a regulatory approach with unique Canadian standards.

5.1 Voluntary approach (status quo)

Canadian railway companies have voluntarily managed locomotive emissions in Canada since 1995, under three MOUs. (see footnote 12) Under the 2006–2010 voluntary agreement, four of Canada’s largest railway companies (Canadian National, Canadian Pacific, VIA Rail and GO Transit) agreed to take action to reduce CAC emissions through such measures as

• purchasing new locomotives certified by the U.S. EPA to current tier standards;
• retiring a number of medium-horsepower locomotives built between 1973 and 1999; and
• upgrading medium-horsepower and high-horsepower locomotives to meet applicable U.S. standards.

Under the 2011–2015 MOU (extended in 2015 to 2016), Railway Association of Canada members were encouraged to continue to conform to United States emission standards (Title 40 of the Code of Federal Regulations of the United States, Part 1033) until the Regulations are introduced.

While positive results have been achieved, the voluntary agreements and other non-compulsory measures cannot offer guaranteed reductions of CAC emissions and are not enforceable. Regulations are enforceable and require emission reductions on a reliable schedule, as well as ensure emissions monitoring and transparent reporting.

For the above-mentioned reasons, this option was not selected.

5.2 Regulatory approach

The Government of Canada first announced its commitment to take regulatory action to reduce emissions from the rail sector in the Notice of Intent published in the Canada Gazette, Part I, on October 21, 2006. (see footnote 13) The regulations referred to in the Notice of Intent would establish nationally consistent emission standards to address all major sources of air emissions in Canada, including all modes of transportation, the industrial sectors and from consumer and commercial products.

With respect to the rail sector, the Minister of Transport is responsible for the development and implementation of new regulations under the Railway Safety Act.

5.2.1 Regulations that set emission standards in alignment with U.S. emission standards

The integrated nature of rail transportation systems between Canada and the United States is a strong rationale for a policy of alignment, as is the dominance of the U.S. manufacturing sector in the Canada– U.S. locomotive supply chain. Common Canada– U.S. emission standards, established through regulations, will benefit the environment and health of the people on both sides of the border. The Canadian rail industry also broadly supports a policy of alignment with U.S. standards.

The primary difference between the authorities of the Canadian Railway Safety Act and the U.S. Clean Air Act (see footnote 14) is that the United States regulates locomotive manufacturers whereas Canada regulates railway operations (that is, railway companies). Despite this difference in regulatory approach, regulations made under the Railway Safety Act align with those in place in the United States to the extent possible and achieve the same environmental results.

The U.S. emission standards are both stringent and achievable for reducing locomotive CAC emissions. They are progressively stringent technology-driven standards that take advantage of advances in control and mitigation of engine emissions.

In addition, alignment of the Regulations with U.S. regulations ensures that new locomotives with higher emissions are not sold for service in Canada when they are no longer permitted in the United States, while maintaining a level playing field for the Canadian and U.S. rail industries. This option maintains trade flows while not imposing undue costs to the industry.

For the above-mentioned reasons, the Government of Canada has adopted this regulatory approach.

5.2.2 Implementation of unique Canadian emission standards

This option is recognized as unrealistic commercially and operationally, given that there is a high degree of integration between the Canadian and the U.S. railway networks, that locomotives are almost exclusively designed and manufactured in the United States, and that the major Canadian railway companies have been buying and maintaining locomotives in accordance with the U.S. regulations since 2000.

While it would be technically possible to develop separate locomotive emission standards for locomotives operated in Canada, the challenges and risks of this option far outweigh any potential gain in health or environmental benefits.

Developing unique Canadian locomotive CAC emission standards could have a negative impact on trade flow between Canada and the United States, and could impose undue costs to the rail industry.

The option of adopting standards that are different from U.S. emission standards was not selected.

6. Benefits and costs

An analysis of the costs and benefits of the Regulations was conducted in order to estimate and monetize the impacts of the Regulations on Government and stakeholders, including industry and the Canadian public. While the Regulations impose costs on industry and Government, the benefits to Canadians from reduced criteria air contaminant emissions, including nitrogen oxides (NO_x) and particulate matter (PM) emissions, result in a net benefit.

The present value of total incremental costs of the Regulations is estimated to be $162.3 million, discounted at 7%, over the first 10 years of implementation of the Regulations. These costs include the costs to railway companies and those to the federal government, the majority of which would be borne by railway companies. Environmental benefits will result from the Regulations, with the reductions in NO_x and PM emissions estimated at 79.6 kilotonnes and 1.4 kilotonnes, respectively, over the analysis period. The total present value of the incremental benefits is estimated to be $244.9 million, discounted at 7%, over the first 10 years of implementation of the Regulations. The Regulations are estimated to result in a net benefit of approximately $82.7 million, over the first 10 years of implementation of the Regulations. Overall, the benefits exceed costs by a ratio of approximately 1.5:1.

A summary of the cost-benefit analysis is presented below. The full cost-benefit analysis document is available upon request (see section 13 for departmental contact information).

6.1 Analytical framework

The approach to cost-benefit analysis identifies, quantifies and monetizes, to the extent possible, the incremental costs and benefits of the Regulations. The cost-benefit analysis framework consists of the following elements:

Incremental impact: The incremental impacts were determined by comparing two scenarios: a base case scenario and a “with regulations” scenario. The two scenarios are described in more detail below.

Time frame for analysis: The time horizon used for evaluating the economic impacts is 10 years; 2015 to 2024 was selected for this analysis.

Approach to cost and benefit estimates: All costs and benefits have been estimated in monetary terms to the extent possible and are expressed in 2012 Canadian dollars. Whenever this was not possible, due either to lack of appropriate data or difficulties in valuing certain components or data inputs, the costs and benefits were evaluated in qualitative terms.

The Regulations introduce incremental costs to railway companies, including compliance and administrative burden costs, and to Government. The compliance cost estimates are mostly based on the U.S. EPA’s technology cost estimates to comply with the U.S. regulations, supplemented by additional information from Canada-specific sources.

The Regulations will lead to environmental benefits from reduced emissions. While the Regulations will reduce emissions of criteria air contaminants, including NO_x, PM, hydrocarbons, and carbon monoxide, the cost-benefit analysis focused on NO_x and PM, as these pollutants are of primary concern in terms of magnitude and impact. The environmental impact of the Regulations was estimated using the quantified benefits associated with the volumetric change in NO_x and PM emissions between the two scenarios described below. It was not possible to analyze directly the impact of NO_x and PM emission reductions attributable specifically to the Regulations on ambient air quality improvement and related environmental and human health benefits. However, using unit air pollution costs from existing Canadian literature, it was possible to monetize the expected environmental benefits of the Regulations.

Discount rate: In line with Treasury Board of Canada Secretariat guidance, a discount rate of 7% was used for this analysis.

6.2 Analytical scenarios

The incremental impacts of the Regulations were determined by comparing two scenarios:

1. A base case where it is assumed that there are no regulations; and
2. A “with regulations” scenario where it is assumed that Canada develops regulations that set emission standards in alignment with U.S. emission standards.

A number of assumptions were made for each of the scenarios. The base case scenario assumes that Canadian railway companies would partially comply with the existing U.S. emission standards. The “with regulations” scenario assumes that the Regulations would be implemented beginning in 2015. The “with regulations” scenario assumes that Canadian railway companies would comply with the Regulations.

The incremental impact of the Regulations is the estimated change in costs and benefits between these two scenarios over the analysis period. The following provides a high level summary of the methodology that was used to estimate the incremental annual costs and benefits:

• Start with the most recent data on the composition of the Canadian locomotive fleet. At the time of this analysis, 2010 was the most recent year for which this information was available.
• Forecast traffic activity for the 2011 to 2024 time frame.
• Add and remove locomotives to the 2010 fleet for each future year under consideration up until 2024 for the base case scenario, based on the base case assumptions.
• Add and remove locomotives to the 2010 fleet for each future year under consideration up until 2024 for the “with regulations” scenario, based on the “with regulations” assumptions.
• Estimate the incremental costs by assessing the costs that are a direct result of the Regulations, including those associated with compliance and administrative burden.
• Estimate the incremental benefits by first quantifying the NO_x and PM estimated emission reductions between the base case and “with regulations” scenarios over the analysis period.
• Monetize the benefits using average unit air pollution costs from best available Canada-specific literature. The nature of these benefits include damages foregone to human health, agricultural crops and visibility from transportation-related air pollution in Canada.

A model was developed to help define the scenarios and simplify the projections and emissions calculations. For the purpose of analysis, railway companies were grouped according to the following categories: Class I Freight, Class I Passenger, and non-Class I. Other than administrative burden costs, it was assumed that there would be no incremental costs or benefits to U.S. Class I companies that operate in Canada due to their compliance with existing U.S. regulations.

6.3 Costs

The incremental costs identified in this analysis were the compliance costs and administrative burden costs incurred by railway companies and the administrative costs incurred by government to implement the Regulations.

6.3.1 Costs to railway companies

In order to comply with the Regulations, railway companies will bear compliance and administrative burden costs.

Compliance costs

Under the Regulations, railway companies are required to operate locomotives that meet the emission standards and to comply with the other regulatory requirements. Compliance costs vary depending on the existing fleet and stock turnover decisions of railway companies. The incremental compliance costs could include costs related to compliance with Tier 0 and Tier 4 and testing. The Tier 0 and Tier 4 compliance cost estimates are mostly based on the U.S. EPA’s technology cost estimates to comply with the U.S. regulations, supplemented by additional information from Canada-specific sources.

Note that railway companies may also carry additional compliance costs to comply with the other requirements of the Regulations, such as the costs related to prohibitions against the discharge of crankcase emissions and to labelling. These costs were considered negligible compared to the Tier 0- and Tier 4-related costs and testing costs described below and were therefore not included in the cost-benefit analysis.

Tier 0-related costs

Tier 0-related costs are the costs associated with remanufacturing locomotives to meet the current Tier 0 standard. While costs could vary depending on the locomotive engine model, the incremental costs associated with a Tier 0 remanufacture are estimated to be approximately $99,091 (2012 Canadian dollars). This estimated cost is based on literature that references Tier 0 technology costs and it combines estimated costs to remanufacture to the original Tier 0 standards ($31,650 in 2003 U.S. dollars (see footnote 15) or $52,511 in 2012 Canadian dollars) with estimated costs to meet the current, more stringent Tier 0 standards ($33,800 in 2005 U.S. dollars (see footnote 16) or $46,579 in 2012 Canadian dollars).

Tier 4-related costs

Tier 4-related costs are those incremental costs associated with purchasing new locomotives that meet the Tier 4 standard. The cost increase of a Tier 4 locomotive is assumed to be mainly due to additional equipment required, such as exhaust aftertreatment technologies. (see footnote 17) Based on available sources at the time of this analysis, the total incremental cost of a Tier 4 locomotive is estimated to be $115,551 (2012 Canadian dollars). (see footnote 18)

Testing

The Regulations include two requirements for locomotive emissions testing: (1) initial testing and (2) in-use testing for Class I freight locomotives. Railway companies are expected to bear the testing costs. Based on current testing costs, locomotive emissions testing costs are estimated to be approximately $20,000 to $40,000. For the purpose of this analysis, the cost of a locomotive emissions test is estimated at $30,000 (2012 Canadian dollars).

The number of initial tests will depend on the railway company’s decision to operate or place into service locomotives covered by a U.S. EPA certificate.

With respect to in-use testing, since the Class I freight railway companies in Canada already participate in the in-use testing program of the United States, no incremental costs are expected.

The initial testing costs to railway companies could be considered as a benefit to locomotive test facilities; however, this benefit was not quantified.

Administrative burden costs

The incremental administrative burden costs to railway companies are associated with the need for familiarization with the regulatory requirements and compliance program, record keeping and reporting, and inspection activities. These costs are described in section 8.

6.3.2 Costs to Government

In order to develop and enforce the Regulations, the federal government will incur some additional costs. The administrative costs to Government for the Regulations include those associated with compliance and enforcement.

6.4 Benefits

The incremental benefits identified by this analysis are the environmental benefits of the Regulations.

6.4.1 Environmental benefits to Canadians

6.4.1.1 Quantified benefits to Canadians

Total NO_x and PM emissions were calculated for each of the scenarios and the change in emissions levels was determined. Table 4 below shows the projected total locomotive emissions for NO_x and PM for the base case scenario and the “with regulations” scenario along with the emissions reductions. Figures 1 and 2 present (in graphical form) the estimated emissions trends for NO_x and PM in these two scenarios.

The cumulative reductions in NO_x and PM emissions over the first 10 years of implementation of the Regulations are estimated at 79.6 kilotonnes and 1.4 kilotonnes, respectively (or a reduction of 9.3% and 8.0% for NO_x and PM, respectively).

Table 4: Estimated emissions reductions

Year	Base case (kilotonnes)		With Regulations (kilotonnes)		Reductions (kilotonnes)
	NOx	PM	NOx	PM	NOx	PM
2015	90.5	2.1	88.9	2.0	1.6	0.0
2016	89.0	2.0	86.0	1.9	3.0	0.1
2017	87.4	1.9	83.0	1.8	4.4	0.1
2018	85.9	1.8	80.0	1.7	5.9	0.1
2019	84.3	1.7	76.9	1.6	7.3	0.1
2020	82.8	1.6	73.9	1.5	8.9	0.2
2021	82.2	1.6	71.7	1.4	10.5	0.2
2022	83.1	1.6	71.4	1.4	11.6	0.2
2023	84.0	1.6	71.3	1.4	12.7	0.2
2024	84.9	1.6	71.3	1.4	13.7	0.2
Total	854.0	17.5	774.4	16.1	79.6	1.4

Note that the sum may not equal the total due to rounding.

Figure 1: Estimated NOx emissions

Figure 2: Estimated PM emissions

6.4.1.2 Monetized benefits to Canadians

As indicated in the previous section, the Regulations are expected to reduce NO_x and PM emissions, which in turn will reduce ambient ozone levels and PM levels, thereby improving air quality and resulting in health benefits for Canadians.

The rail sector is one of many sources of NO_x and PM emissions, representing 12.2% and 5.7% of all transportation-related NO_x and PM emissions, respectively, in Canada. (see footnote 19) There is very limited data on the geographic density of these emissions. As a result, estimating the change in ozone level and PM concentration attributable specifically to the Regulations poses a significant challenge and estimates were not included in this cost-benefit analysis. Similarly, and as a direct consequence, the potential health benefits were not quantified in this analysis.

Despite this limitation, it is expected that the Regulations will result in some improvements in air quality and will subsequently result in health benefits. While these benefits were not quantified in this analysis, an effort was made to monetize the environmental benefits using the best available Canada-specific literature, more specifically Transport Canada’s Full Cost Investigation (FCI) synthesis report. (see footnote 20)

The FCI report indicates that average unit air pollution costs per tonne of NO_x and PM emitted are estimated at $3,580 for NO_x and $12,600 for PM _2.5 (2000 Canadian dollars) (see footnote 21) or $4,567 for NO_x and $16,074 for PM (2012 Canadian dollars). These estimates are conservative when compared to those in the European literature (see footnote 22) and in a study undertaken by ICF Marbek in 2011. (see footnote 23) Additional details on these comparisons can be found in the full cost-benefit analysis document available upon request (see section 13 for departmental contact information). The benefits of the Regulations were monetized by multiplying the FCI unit cost of air pollution by the estimated NO_x and PM emission reductions. These results are shown in Table 5.

Of note, the FCI estimates were derived at a macro level using aggregated costs associated with air pollution from all transportation activity in Canada. The cost-benefit analysis assumes that the FCI estimates can be proportionally adjusted at the micro level. For example, it assumes that one tonne of emission has one thousandth the cost impact of a thousand tonnes of the same emission. The reality is that the health and environmental impacts of air pollution are not necessarily linear in nature, as existing concentrations in the atmosphere also play a role. One tonne of NO_x or PM emissions by itself can potentially have little impact on human health and the environment. For example, one tonne of NO_x, emitted gradually in the span of one year in non-populated areas, is unlikely to have a measurable impact. The estimates of Table 5 should be used in consideration of the information above.

Table 5: Monetized benefits

Year	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024	Total
NOx emission reduction (kilotonnes)	1.6	3.0	4.4	5.9	7.3	8.9	10.5	11.6	12.7	13.7	79.6
Monetized value of NOx emission reductions ($ per tonne of NOx reduced)	4,567	4,567	4,567	4,567	4,567	4,567	4,567	4,567	4,567	4,567	—
Benefits of NOx reductions (millions of dollars)	7.2	13.7	20.1	26.9	33.6	40.5	48.1	53.2	57.8	62.4	363.5
PM emission reduction (kilotonnes)	0.0	0.1	0.1	0.1	0.1	0.2	0.2	0.2	0.2	0.2	1.4
Monetized value of PM emission reductions ($ per tonne of PM reduced)	16,074	16,074	16,074	16,074	16,074	16,074	16,074	16,074	16,074	16,074	—
Benefits of PM reductions (millions of dollars)	0.4	0.8	1.2	1.7	2.1	2.5	3.0	3.3	3.6	3.9	22.6
Total benefits (millions of dollars)	7.7	14.6	21.4	28.5	35.6	43.0	51.1	56.5	61.5	66.3	386.0
Total benefits: 7% discount (millions of dollars)	7.2	12.7	17.4	21.8	25.4	28.7	31.8	32.9	33.4	33.7	244.9

Note that the sum may not equal the total due to rounding.

6.5 Impact on stakeholders

This section describes the impact of the Regulations on the identified stakeholders.

Impact on railway companies

The stakeholders most affected by the Regulations are the railway companies required, under the Regulations, to operate locomotives that meet the emission standards (identical to those of the United States) and to comply with the other regulatory requirements. The impacts on railway companies are based on the current composition of and projections related to their fleets.

Class I freight: These railway companies are the most affected by the Regulations as they operate the majority of the locomotives, account for the majority of the traffic handled, and consume the most fuel of the railway companies in Canada to which the Regulations apply. In 2010, Class I freight railway companies operated approximately 80% of all locomotives operated in Canada, accounted for almost 94% of freight traffic and consumed almost 92% of the total freight fuel. (see footnote 24)

For Class I freight railway companies, the analysis included compliance costs associated with meeting Tier 0 and Tier 4 emission standards and performing initial testing as well as administrative burden costs. Overall, it is estimated that the Regulations will cost Class I freight railway companies a net present value of approximately $153.8 million, discounted at 7%, over the first 10 years of implementation of the Regulations.

Class I passenger: Class I passenger railway companies are less affected by the Regulations than Class I freight railway companies due to the size and composition of their locomotive fleet. For Class I passenger railway companies, the analysis included compliance costs associated with meeting Tier 0 emission standards and performing initial testing as well as administrative burden costs. Overall, it is estimated that the Regulations will cost Class I passenger railway companies a net present value of approximately $1.3 million, discounted at 7%, over the first 10 years of implementation of the Regulations.

Non-Class I: These railway companies are much less affected by the Regulations than Class I railway companies. For non-Class I railway companies, the analysis included compliance costs associated with meeting Tier 0 emission standards and performing initial testing as well as administrative burden costs. Overall, it is estimated that the proposed Regulations will cost non-Class I railway companies a net present value of approximately $1.9 million, discounted at 7%, over the first 10 years of implementation of the Regulations.

U.S. Class I: For U.S. Class I railway companies, the analysis assumed that these railway companies will comply with U.S. regulations and will not carry any incremental compliance costs; however, the administrative burden costs would apply. Overall, it is estimated that the Regulations will cost the U.S. Class I railway companies a net present value of approximately $0.04 million, discounted at 7%, over the first 10 years of implementation of the Regulations.

Impact on shippers

In 2011, the Railway Association of Canada reported that railway companies carried approximately 305.8 million tonnes of goods. (see footnote 25) If it is assumed that the growth in tonnes is the same as the growth rate for revenue tonne-kilometres (RTK) [that is, 2.5% growth in RTK in 2011–2015, 2% growth in 2016–2020, (see footnote 26) and 2% in 2021–2024] the total tonnage forecast to be transported by railway companies over the analysis period is estimated to be 3,695.9 million tonnes. Based on the Class I freight railway companies’ share of fuel consumed from total freight operation (92%), (see footnote 27) Class I freight railway companies would carry 3,407.7 million tonnes of goods over the analysis period. Assuming Class I freight railway companies were to pass on all costs of complying with the Regulations to customers, shipping fees would increase by an estimated 5 cents per tonne transported, assuming a 7% discount rate. If costs are not fully passed on, shipping fees would increase by less.

A similar analysis can be made for carloads transported. The Railway Association of Canada reported that approximately 4.0 million carload movements occurred in 2011. (see footnote 28) Using the same projections as for tonnage transported, it can be projected that Class I freight railway companies would transport a total of approximately 45.1 million carloads during the analysis period. The cost of the Regulations expressed in dollars per carload is therefore estimated at $3.41, assuming a 7% discount rate. These additional costs are not expected to have a significant impact on business.

As a basis for comparison, a carload of bituminous coal with the Standard Transportation Commodity Code (STCC) of 1121290 shipped from Calgary, Alberta, to Thunder Bay, Ontario, costs approximately $13,000 in shipping. (see footnote 29) In this particular instance, the Regulations would lead to a cost increase of less than 0.1%.

Impact on Government

The administrative costs to Government for the Regulations include those associated with compliance and enforcement. The total incremental costs of implementing and enforcing the Regulations are estimated at a net present value of approximately $5.3 million for the first 10 years of implementation, discounted at 7%. Costs are expected to decrease in subsequent years.

Impact on Canadians

The Regulations will lead to environmental benefits to Canadians from reduced emissions. The cumulative reductions in NO_x and PM emissions over the first 10 years of implementation of the Regulations are estimated at 79.6 kilotonnes and 1.4 kilotonnes, respectively (or a reduction of 9.3% and 8.0% of NO_x and PM, respectively). As described in section 6.4, the emission reductions were monetized such that the Regulations would lead to an estimated benefit to Canadians of $244.9 million, discounted at 7%, over the first 10 years of implementation of the Regulations. The environmental benefits resulting from the Regulations will lead to improved air quality and associated health benefits to Canadians.

Impact on other stakeholders

Other indirectly affected stakeholders are locomotive manufacturers, remanufacturers and part suppliers, which will be asked by railway companies to supply locomotives and parts that meet the regulatory requirements. Locomotive test facilities will experience a positive impact since railway companies are required to perform locomotive emissions testing to prove compliance with the emission standards.

6.6 Dealing with uncertainty

A sensitivity analysis was conducted to test the robustness of the results based on variations in some of the variables used in the analysis. It examined variations in the discount rate, the price of fuel, the growth rate of economic activity and the capacity utilization of locomotives to ensure the validity and robustness of the results and that the Regulations will yield a positive net benefit. Overall, the sensitivity analysis determined that the Regulations are likely to result in a positive net benefit, even with variations in the above-listed variables.

6.7 Cost-benefit statement

The net benefits of the Regulations are estimated at approximately $82.7 million over the first 10 years of implementation of the Regulations and are expected to increase steadily post-2024. Overall, the benefits exceed the costs by a ratio of approximately 1.5:1.

Table 6 summarizes the cost-benefit analysis estimates, over the analysis period, of the annual incremental costs and benefits of the Regulations compared to those of the base case scenario. All monetized impacts are in 2012 Canadian dollars and are discounted at 7%.

Table 6: Cost-benefit statement

Category	Stakeholder	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024	Total	Annualized Average
A. Quantified impacts (in 2012 Canadian dollars [millions, 7% discount])
Costs	Class I	12.59	13.22	14.49	15.66	16.62	17.51	18.03	15.90	15.71	15.35	155.08	22.08
	Non-Class I	0.30	0.23	0.21	0.20	0.21	0.17	0.16	0.15	0.16	0.13	1.94	0.28
	U.S. Class I	0.01	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.04	0.01
	Government	0.76	0.64	0.60	0.56	0.53	0.49	0.46	0.43	0.40	0.37	5.25	0.75
Benefits	Canadians	7.16	12.75	17.44	21.76	25.40	28.66	31.79	32.87	33.43	33.68	244.95	34.88
Net benefits												82.65	11.77
B. Quantified impacts (in non-dollars)
Benefits: Reduction of NOx in kilotonnes	Canadians	1.58	3.01	4.41	5.88	7.35	8.87	10.53	11.64	12.67	13.66	79.59	—
Benefits: Reduction of PM in kilotonnes	Canadians	0.03	0.05	0.08	0.10	0.13	0.16	0.19	0.21	0.22	0.24	1.40	—
C. Qualitative impacts
(1) Railway company customers (i.e. shippers): These stakeholders may be affected by the Regulations because railway companies could pass on, at least in part, the costs of compliance to their customers in the form of increased shipping fees. These additional costs are not expected to have a significant impact on business and consumers.
(2) Locomotive manufacturers, remanufacturers and parts suppliers: These stakeholders may be affected by the Regulations because railway companies will likely choose to purchase locomotives and locomotives parts that are certified by the U.S. EPA. As a result, there could be a reduction in demand for locomotives and locomotive emission-related parts that are not U.S. EPA certified.
(3) Locomotive test facilities: Locomotive test facilities will be positively impacted since railway companies are required to perform locomotive emission testing to prove compliance with the emission standards.
(4) Canadians: The emission reductions realized by the Regulations will lead to improvements in air quality and in associated health benefits to Canadians.

Note that the sum may not equal the total due to rounding.

7. Small business lens

In the development of the Regulations, Transport Canada has taken impacts on small business into consideration. The largest railway companies account for the majority of the emissions from railway operations in Canada. In fact, smaller railway companies account for less than 3% of total rail operations’ fuel consumption (and emissions). (see footnote 30)

The Regulations include flexibility in order to reduce the burden on small railway companies. In this context, a small railway company is a railway company that realizes gross revenues of $30 million or less from the provision of rail transportation services in Canada. The Regulations exclude remanufactured locomotives operated by small railway companies for the provision of freight services or tourist and excursion services from having to meet the emission standards unless they are covered by a U.S. EPA certificate.

Furthermore, small railway companies will be less affected by the Regulations as they have a substantial number of locomotives (approximately 30% to 40% of their fleet) that may not be required to meet the emission standards since they were built before 1973.

Regulatory flexibility analysis

As part of the small business lens analysis, (see footnote 31) Transport Canada assessed two options for small railway companies:

• (1) an initial option, which does not provide flexibility to small railway companies; and
• (2) a flexible option, which provides flexibility for small railway companies.

The Treasury Board of Canada Secretariat defines a small business as “any business, including its affiliates, that has fewer than 100 employees or generates between $30,000 and $5 million in annual gross revenue.” (see footnote 32) As mentioned above, under the Regulations, a small railway company is a railway company that realizes gross revenues of $30 million or less from the provision of rail transportation services. This broader definition of small business was used in order to better align with the definition of small railway used in the United States.

The rail industry, including small railway companies, was consulted on the development of the Regulations. The rail industry expressed interest in a provision for small railway companies in Canada similar to what is included in the U.S. regulations.

Using the methodology described in section 6, the incremental costs and benefits to small railway companies were determined for each of the options. According to the data available at the time of the analysis, it was assumed that there were 16 small railway companies operating in Canada. The analysis included the compliance costs associated with meeting Tier 0 emission standards and performing initial testing as well as administrative burden costs. For the initial option, no flexibility provided to small railway companies, it was assumed that the incremental compliance costs would begin in the first year, following the Regulations coming into force. For the flexible option, the Regulations would exclude remanufactured locomotives that are operated by small railway companies for the provision of freight services or tourist and excursion services from having to meet the emission standards unless the locomotives are already covered by a U.S. EPA certificate. There would be no incremental compliance costs under this option. The administrative burden costs were assumed to be the same for each of the two options and include familiarization with the regulatory requirements and compliance program, record keeping and reporting, and inspection activities (see section 8 for more detail).

The compliance and administrative burden costs for both options are presented in Table 7. The flexible option was selected for the Regulations in order to reduce the burden on small railway companies.

Table 7: Small business flexibility statement (2012 Canadian dollars, 7% discount)

	Initial Option		Flexible Option
Short description	Beginning when the Regulations come into force, any new locomotive, including remanufactured locomotives, placed into service by a small railway company will be required to meet the applicable emission standards.		The Regulations exclude remanufactured locomotives that are placed into service by small railway companies from having to meet the emission standards.
Number of small businesses impacted	16 (see note 1*)		16 (see note 2*)
	Annualized Average ($ millions)	Present Value ($ millions)	Annualized Average ($ millions)	Present Value ($ millions)
Compliance costs
Tier 0-related costs	0.35	2.44	0.00	0.00
Testing costs	0.01	0.07	0.00	0.00
Compliance costs (total)	0.36	2.51	0.00	0.00
Administrative burden costs (total)	0.01	0.09	0.01	0.09
Total costs (all small businesses)	0.37	2.59	0.01	0.09
Average cost per small business	0.03	0.22	0.00	0.01
Risk considerations	The estimated monetized benefits from the reduction of emissions from small railway companies in this option ($3.4 million) represent approximately 1.4% of the benefits estimated from Class I railway companies ($236.3 million).		The estimated cost savings to small railways in this option as compared to the initial option are $2.5 million. There are no environmental or health benefits with this option. Providing flexibility to small railways poses minimal risk to the environment and human health.
Note that the sum may not equal the total due to rounding.

• Note 1*
  At the time of the analysis, data was only available for 12 of the 16 small railway companies. Figures are based on available data. The average cost per small business results are indicative of the estimated burden to small railway companies.
• Note 2*
  At the time of the analysis, data was only available for 12 of the 16 small railway companies. Figures are based on available data. The average cost per small business results are indicative of the estimated burden to small railway companies.

8. “One-for-One” Rule

The “One-for-One” Rule applies to the Regulations and the Regulations are considered an “IN” under the Rule. The Regulations introduce a new regulatory title, requiring existing regulations to be repealed.

The Regulations introduce new administrative costs to railway companies. Costs were monetized at a total annualized average of approximately $21,637 (2012 Canadian dollars, 7% discount) for all railway companies for three categories of administrative functions: familiarization with the regulatory requirements and compliance program, record keeping and reporting, and inspection activities.

Familiarization with the regulatory requirements and compliance program: It was estimated that a designated officer from each railway company would require two days of training to learn about the regulatory requirements and how to use the compliance program information system for reporting.

Record keeping and reporting: Regarding the administrative costs for record keeping under the Regulations, it was estimated that each railway company would require approximately 8 hours for record keeping. The administrative costs for reporting relate to the reports that are required under the Regulations. For the one-time initial report, it was estimated that one person from each railway company would require a total of 36.5 hours to compile, review and approve and submit the report. For the annual report, it was estimated that one person from each railway company would require a total of 10.5 hours to compile, review and approve and submit the report. For the in-use testing report, it was estimated that one person from each Class I freight railway company would require a total of 6.5 hours to compile, review, approve and submit the report.

Inspection activities: Inspection activities are incremental to the existing regime. It was estimated that each railway company would require no more than one day per year to provide information to a railway safety inspector and to supervise inspections.

9. Rationale

The Government of Canada is taking a regulatory approach that sets emission standards for locomotives in alignment with U.S. emission standards. This supports the integrated nature of the Canadian and American railway industries and trade between Canada and the United States.

Implementation of the Regulations is expected to reduce NO_x and PM emissions by 9.3% and 8.0%, respectively, over the first 10 years of implementation. The net benefits are estimated at approximately $82.7 million over the first 10 years following the implementation of the Regulations. Without regulations, emissions of air pollutants would be higher (>8%).

New technologies will assist locomotive operators in achieving emission reductions. Without regulations, these new technologies would likely penetrate the Canadian fleet more slowly, potentially hindering the adoption of advanced emission reduction technologies in Canada. During Transport Canada’s consultation process, it was noted that investments in advanced emission control and mitigation technologies have yielded positive results in the United States, leading locomotive manufacturers, parts manufacturers, and remanufacturers to rapidly advance towards creating cleaner and more efficient engines. The Regulations encourage greater and more consistent investment in, and the uptake of, new emission control and mitigation technologies in Canada.

Canadian and U.S. industry stakeholders expressed support for the alignment of the Canadian Regulations with existing U.S. regulations.

10. Consultation

Preliminary stakeholder consultations were held from December 1, 2010, to February 14, 2011. The primary stakeholders for the Regulations are railway companies. Other stakeholders include manufacturers, suppliers, industry experts and associations, unions, nongovernmental organizations, provincial and municipal governments, academia and the general public.

Transport Canada launched preliminary consultations with the release of a consultation paper and an issue brief (see footnote 33) in December 2010, developed to stimulate discussion and feedback from stakeholders on the design of a Canadian regulatory regime for the reduction of CAC emissions from locomotives. A series of six stakeholder consultation sessions were held in Ottawa, Montréal, Vancouver and Detroit during the consultation period.

During this period, Transport Canada received 16 written submissions from a range of stakeholders, (see footnote 34) including industry associations, Canadian railways companies, unions, provincial and municipal governments, industry experts and the general public. Transport Canada took these comments into account in developing the Regulations. The key issues raised by stakeholders, and the manner in which the questions were addressed and the results of those consultations were summarized in the Canada Gazette, Part I, publication (see footnote 35).

Since 2011, there have been continuous discussions with the rail industry on emissions-related issues through the negotiation and oversight of the current MOU between Transport Canada and the Railway Association of Canada, and through the Canada–U.S. Regulatory Cooperation Council Locomotive Emissions Initiative.

The proposed Regulations were published in the Canada Gazette, Part I, on June 18, 2016, followed by a 90-day comment period. Transport Canada received six formal comments from the rail sector, manufacturers, a regional government and a member of the general public. The comments received and responses are summarized below.

Alignment with the United States and definitions

Most stakeholders indicated continued support for aligning with the U.S. EPA regulations.

Clarification was sought on the definition of fleet and a suggestion was made to include a definition that aligns with the existing voluntary Locomotive Emissions Monitoring Program reporting under the MOU. The Regulations were adjusted to add definitions of “active fleet” and “total fleet.” Railway companies are required to report on their total fleet in their initial report and their active fleet and permanent removals (from their total fleet) in their annual reports.

Some technical adjustments were made to improve the alignment with the U.S. regulations, for example, the provision related to crankcase emissions was modified and a provision for certified non-road engines was added.

The in-use test provision was also modified to allow locomotives to be tested at 50% of useful life or greater to better align with the U.S. EPA regulations. Transport Canada will accept the results of locomotives that are tested as part of the existing Association of American Railroads in-use test program that is conducted in accordance with the U.S. EPA regulations, so long as they meet the requirements of the Regulations.

Reporting

Comments were made related to the requirement for railway companies to submit a copy of the U.S. EPA certificate of conformity for each new locomotive. As manufacturers are the holders of those certificates, the accountability rests with them. The Regulations have been modified to remove the requirement for railway companies to submit a copy of the certificate, as this information can be obtained based on the U.S. EPA engine family number.

Other comments were provided to simplify reporting requirements. Adjustments were made to the Regulations, balancing the requirements for reporting with the need to enforce and monitor the effectiveness of the Regulations. As a result, the requirement for photographs of labels, locomotive serial numbers and engine displacement were removed.

Through an internal review, duplicative reporting requirements were identified with the Transportation Information Regulations. As a result, the Regulations include a consequential amendment to the Transportation Information Regulations removing the duplicative requirements.

U.S. railway companies with incidental operations in Canada

An exception for U.S. railway companies with incidental operations was requested in line with a similar provision for Canadian companies in U.S. EPA regulations. The Regulations were modified to include an exception for incidental operations based on a one-time requirement to notify the Minister of the operations, because railway companies have limited operations in Canada and their locomotives already meet the requirements of the U.S. EPA regulations. Such railway companies are subject to the anti-idling provisions in the Regulations and are required to submit an anti-idling policy.

Idling

A number of stakeholders provided comments related to idling. A request was made to add additional flexibility for when locomotives can idle for longer than 30 minutes. Transport Canada sought clarification from the rail industry on specific examples for when a locomotive may need to idle longer than 30 minutes and not already covered by the provisions. The Regulations have been modified to include diagnostic testing and locomotives providing head-end power for passenger cars for reasons of passenger health and safety to the exceptions to this provision.

Comments were also provided to suggest that idling time be reduced from 30 minutes. The idling requirements in the Regulations are intended to align with those of the U.S. EPA, which require anti-idling devices that shut the engine off after 30 minutes of idling for new locomotives. The Regulations go further than this by prohibiting all locomotives in a company’s active fleet from idling for longer than 30 minutes unless there is a valid reason for extended idling. Anti-idling policies are also required by the Regulations.

Natural gas locomotives

A comment was made that the U.S. EPA would be amending the Alternate CO Standards in their regulations, which facilitate the certification of natural gas locomotives. The U.S. EPA published technical amendments in 2016, which included this amendment. The Regulations were modified to add a provision for alternate CO and PM standards aligned with the U.S. EPA regulations.

A suggestion was made that Canada and the United States should partner to demonstrate advanced emissions control technology. Transport Canada and U.S. EPA will continue to work together on regulatory coordination efforts to ensure that emission regulations are aligned to the extent possible.

Suggestions to go further

Some concerns were raised about older locomotives, including a suggestion for mandatory retirement and remanufacture schedules. The Regulations are intended to align with U.S. EPA regulations at the federal level. At this time, a requirement for mandatory retirement of locomotives is not included in the Regulations. The performance of the Regulations will be monitored on an ongoing basis and in cooperation with the U.S. EPA to ensure their effectiveness. A remanufacturing schedule could be considered in the future.

Comments were also made regarding provincial railways. Transport Canada and provincial authorities have a strong history of collaboration on the alignment of rail safety regulations. Transport Canada has recommended to provinces that they adopt these standards and will continue to liaise with interested provincial parties on collaborative and consistent regulatory frameworks in Canada, where appropriate.

Comments were also provided to encourage the regulation of greenhouse gas emissions from the rail sector. The Locomotive Emissions Regulations are intended to address CAC emissions in alignment with existing U.S. regulations. Addressing greenhouse gas emissions from rail is also an important priority for Transport Canada. In December 2016, federal and provincial governments jointly released the Pan-Canadian Framework on Clean Growth and Climate Change. This framework lays out Canada’s plan to meet its emissions reduction target and grow the economy. It includes a pan-Canadian approach to pricing carbon pollution, a clean fuel standard and measures to achieve reductions across all sectors of the economy. Significant efforts are required, both by governments and industry, to reduce GHG emissions from all sectors, including rail.

11. Implementation, enforcement and service standards

Transport Canada will administer a comprehensive compliance and enforcement program to verify compliance with the Regulations. The Department already administers programs pertaining to federal safety regulations, rules and guidelines under the Railway Safety Act, with a network of railway safety inspectors in all regions of the country to perform audits and inspections to monitor compliance. The implementation of these Regulations will leverage existing departmental resources and the Department’s long-standing and productive relationship with Canadian railway companies and their association, the Railway Association of Canada.

Railway companies are responsible for ensuring that their locomotives that are subject to the Regulations comply with them and are required to produce and maintain evidence of such conformity.

The compliance and enforcement program will include

1. promoting compliance by ensuring clear and enforceable requirements and by providing information and training to help educate stakeholders;
2. monitoring compliance by reviewing and assessing report submissions, conducting inspections and requiring emission tests; and
3. administering enforcement activities for non-compliance.

The program will use an automated online information system that will store data submissions and allow for easy reporting. Railway safety inspectors will undertake periodic inspections and audits and will note any noncompliance with the Regulations. Departmental officials will assess compliance based on the submissions by railway companies and data gathered by railway safety inspectors.

Transport Canada will monitor the CAC emission performance of locomotives and locomotive fleets and compliance with the Regulations. All enforcement activities will be made under the authority of the Railway Safety Act. If a locomotive is found not to comply with the Regulations, the railway company could be subject to prosecution pursuant to section 41 of the Railway Safety Act. Specific provisions of the Locomotive Emissions Regulations could also be designated by an amendment to the Railway Safety Administrative Monetary Penalties Regulations, which would allow for the issuance of a notice of violation imposing an administrative monetary penalty for a contravention of the proposed Regulations.

For situations of non-compliance, the Department will determine the appropriate enforcement action based on the following factors:

Nature of the alleged violation: This includes consideration of the damage, the intent of the alleged violator, whether it is a repeat violation, and whether an attempt has been made to conceal information or otherwise subvert the objectives and requirements of the Railway Safety Act.

Effectiveness in achieving the desired result with the alleged violator: The desired result is compliance within the shortest possible time and with no further repetition of the violation. Factors to be considered include the violator’s history of compliance with the Regulations, willingness to cooperate with departmental officials, and evidence of corrective action already taken.

Consistency: Departmental officials would consider how similar situations have been handled in determining the measures to be taken to enforce the Regulations.

In its administration of the compliance and enforcement program for the Regulations, Transport Canada will provide the following services in a timely manner:

• acknowledging receipt of submissions from railway companies;
• assessing submissions from railway companies for compliance;
• responding to railway companies on whether submissions are in compliance; and
• responding to requests and/or questions.
  

The Department has developed a guidance document describing the required evidence of conformity specified in the Regulations and the procedures to be followed when submitting required documentation.

12. Performance measurement and evaluation

Establishing a framework for measuring and evaluating the performance of the Regulations is necessary to ensure that they achieve the intended outcomes in an effective, efficient and transparent manner. Regularly scheduled data collection and program evaluation activities are important as evaluation tools.

A performance measurement and evaluation plan (PMEP) has been developed, with the goals of

• clarifying the intermediate outcomes and logic chain that connects departmental activities to the ultimate outcome;
• providing measurable indicators through which the program activities can be evaluated to ensure that the Regulations are continually meeting their objectives; and
• outlining a schedule and guide for evaluators to follow in future.

An electronic database system will be used to store and manage the data gathered through the regulatory program. Measurements of all indicators will be drawn primarily from this system that will include inspection and audit reports compiled by railway safety inspectors, testing data and other fleet data provided by railway companies, records of industry–government interaction, and records of Transport Canada enforcement actions and decisions. Other departmental records will also be surveyed and be factored into reports as necessary to measure performance.

A report on the status of performance measurement will be compiled and the PMEP will be revisited or revised, if necessary.

13. Contact

For further information on the Regulatory Impact Analysis Statement, please contact

Diane McLaughlin
Manager
Regulatory Policy
Environmental Policy
Transport Canada
Place de Ville, Tower C, 26th Floor
330 Sparks Street
Ottawa, Ontario
K1A 0N5
Telephone: 613-998-2661
Fax: 613-949-9415
Email: diane.mclaughlin@tc.gc.ca

Small Business Lens Checklist

1. Name of the sponsoring regulatory organization:

2. Title of the regulatory proposal:

3. Is the checklist submitted with a RIAS for the Canada Gazette, Part I or Part II?

☐ Canada Gazette, Part I ☑ Canada Gazette, Part II

A. Small business regulatory design

I	Communication and transparency	Yes	No	N/A
1.	Are the proposed Regulations or requirements easily understandable in everyday language?	☑	☐	☐
2.	Is there a clear connection between the requirements and the purpose (or intent) of the proposed Regulations?	☑	☐	☐
3.	Will there be an implementation plan that includes communications and compliance promotion activities, that informs small business of a regulatory change and guides them on how to comply with it (e.g. information sessions, sample assessments, toolkits, Web sites)?	☑	☐	☐
4.	If new forms, reports or processes are introduced, are they consistent in appearance and format with other relevant government forms, reports or processes?	☑	☐	☐
II	Simplification and streamlining	Yes	No	N/A
1.	Will streamlined processes be put in place (e.g. through BizPaL, Canada Border Services Agency single window) to collect information from small businesses where possible?	☑	☐	☐
2.	Have opportunities to align with other obligations imposed on business by federal, provincial, municipal or international or multinational regulatory bodies been assessed?	☑	☐	☐
3.	Has the impact of the proposed Regulations on international or interprovincial trade been assessed?	☑	☐	☐
4.	If the data or information, other than personal information, required to comply with the proposed Regulations is already collected by another department or jurisdiction, will this information be obtained from that department or jurisdiction instead of requesting the same information from small businesses or other stakeholders? (The collection, retention, use, disclosure and disposal of personal information are all subject to the requirements of the Privacy Act. Any questions with respect to compliance with the Privacy Act should be referred to the department’s or agency’s ATIP office or legal services unit.)	☐	☐	☑
Through internal review, duplicative reporting requirements were identified with the Transportation Information Regulations, as a result, the Regulations include a consequential amendment to the Transportation Information Regulations removing the duplicative requirements.
5.	Will forms be pre-populated with information or data already available to the department to reduce the time and cost necessary to complete them? (Example: When a business completes an online application for a licence, upon entering an identifier or a name, the system pre-populates the application with the applicant’s personal particulars such as contact information, date, etc. when that information is already available to the department.)	☑	☐	☐
6.	Will electronic reporting and data collection be used, including electronic validation and confirmation of receipt of reports where appropriate?	☑	☐	☐
7.	Will reporting, if required by the proposed Regulations, be aligned with generally used business processes or international standards if possible?	☑	☐	☐
8.	If additional forms are required, can they be streamlined with existing forms that must be completed for other government information requirements?	☐	☐	☑
Through internal review, duplicative reporting requirements were identified with the Transportation Information Regulations, as a result, the Regulations include a consequential amendment to the Transportation Information Regulations removing the duplicative requirements.
III	Implementation, compliance and service standards	Yes	No	N/A
1.	Has consideration been given to small businesses in remote areas, with special consideration to those that do not have access to high-speed (broadband) Internet?	☑	☐	☐
2.	If regulatory authorizations (e.g. licences, permits or certifications) are introduced, will service standards addressing timeliness of decision making be developed that are inclusive of complaints about poor service?	☐	☐	☑
No regulatory authorizations will be introduced as a result of these Regulations.
3.	Is there a clearly identified contact point or help desk for small businesses and other stakeholders?	☑	☐	☐

B. Regulatory flexibility analysis and reverse onus

IV	Regulatory flexibility analysis	Yes	No	N/A
1.	Does the RIAS identify at least one flexible option that has lower compliance or administrative costs for small businesses in the small business lens section? Examples of flexible options to minimize costs are as follows: Longer time periods to comply with the requirements, longer transition periods or temporary exemptions; Performance-based standards; Partial or complete exemptions from compliance, especially for firms that have good track records (legal advice should be sought when considering such an option); Reduced compliance costs; Reduced fees or other charges or penalties; Use of market incentives; A range of options to comply with requirements, including lower-cost options; Simplified and less frequent reporting obligations and inspections; and Licences granted on a permanent basis or renewed less frequently.	☑	☐	☐
2.	Does the RIAS include, as part of the Regulatory Flexibility Analysis Statement, quantified and monetized compliance and administrative costs for small businesses associated with the initial option assessed, as well as the flexible, lower-cost option?	☑	☐	☐
3.	Does the RIAS include, as part of the Regulatory Flexibility Analysis Statement, a consideration of the risks associated with the flexible option? (Minimizing administrative or compliance costs for small business cannot be at the expense of greater health, security or safety or create environmental risks for Canadians.)	☑	☐	☐
4.	Does the RIAS include a summary of feedback provided by small business during consultations?	☑	☐	☐
V	Reverse onus	Yes	No	N/A
1.	If the recommended option is not the lower-cost option for small business in terms of administrative or compliance costs, is a reasonable justification provided in the RIAS?	☐	☐	☑
The flexible option was selected.

• Footnote a
  S.C. 2012, c. 7, s. 37
• Footnote b
  R.S., c. 32 (4th Supp.)
• Footnote 1
  SOR/96-334; SOR/97-92, s. 1; SOR/99-328, s. 1; SOR/2013-196, s. 1
• Footnote 2
  Environment and Climate Change Canada, 2015 National Pollutant Release Inventory, http://www.ec.gc.ca/inrp-npri/donnees-data/ap/index.cfm?lang=En.
• Footnote 3
  Railway Association of Canada, Locomotive Emissions Monitoring Program, http://www.railcan.ca/publications/emissions.
• Footnote 4
  Canada Gazette, Part I, October 21, 2006, http://gazette.gc.ca/rp-pr/p1/2006/2006-10-21/pdf/g1-14042.pdf.
• Footnote 5
  Environment Canada, Regulatory Framework for Air Emissions, http://www.ec.gc.ca/doc/media/m_124/report_eng.pdf, 2007.
• Footnote 6
  Transport Canada, Reports on Plans and Priorities, http://www.tc.gc.ca/eng/corporate-services/planning-625.htm.
• Footnote 7
  Transport Canada and the Railway Association of Canada, Memorandum of Understanding between Transport Canada and the Railway Association of Canada for Reducing Locomotive Emissions 2011-2015, http://www.tc.gc.ca/eng/policy/acs-locomotive-emissions-mou-3064.htm.
• Footnote 8
  Primarily U.S. EPA, Title 40, Part 1033, Code of Federal Regulations, “Control of Emissions from Locomotives”, http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=6c6e448cfb2f89ca064af255bb93926d&tpl=/ecfrbrowse/Title40/40cfr1033_main_02.tpl.
• Footnote 9
  Ibid.
• Footnote 10
  Idem, refer to paragraph 1033.101(g).
• Footnote 11
  U.S. EPA, Regulatory Impact Analysis: Control of Emissions of Air Pollution from Locomotive Engines and Marine Compression Ignition Engines Less than 30 Liters Per Cylinder, p. 1–53, http://www.epa.gov/otaq/locomotives.htm.
• Footnote 12
  Transport Canada and the Railway Association of Canada, Memorandum of Understanding between Transport Canada and the Railway Association of Canada for Reducing Locomotive Emissions, http://www.tc.gc.ca/eng/policy/acs-locomotive-emissions-mou-3064.htm.
• Footnote 13
  Canada Gazette, Part I, October 21, 2006, http://gazette.gc.ca/rp-pr/p1/2006/2006-10-21/pdf/g1-14042.pdf.
• Footnote 14
  U.S. EPA, Clean Air Act, http://www.epa.gov/air/caa/.
• Footnote 15
  Peter Eggleton, Technology to Meet EPA Locomotive Emissions Standards Without Fuel Penalties, p. 7.
• Footnote 16
  U.S. EPA, Regulatory Impact Analysis: Control of Emissions of Air Pollution from Locomotive Engines and Marine Compression Ignition Engines Less than 30 Liters per Cylinder, p. 5-74, http://www.epa.gov/otaq/locomotives.htm.
• Footnote 17
  Following the completion of this analysis, it was revealed that some locomotives will meet Tier 4 standard without the use of aftertreatment. The implications for costs in this case is that the Tier 4 incremental technology costs could be higher than originally assumed, but the operational costs could be lower for locomotives that do not need to use urea-based aftertreatment.
• Footnote 18
  U.S. EPA, Regulatory Impact Analysis: Control of Emissions of Air Pollution from Locomotive Engines and Marine Compression Ignition Engines Less than 30 Liters per Cylinder, extracted from Table 5-29, 5-38 and 5-39, http://www.epa.gov/otaq/locomotives.htm.
• Footnote 19
  Environment and Climate Change Canada, 2015 National Pollutant Release Inventory, http://www.ec.gc.ca/inrp-npri/donnees-data/ap/index.cfm?lang=En.
• Footnote 20
  Transport Canada, Estimates of the Full Cost of Transportation in Canada, synthesis report prepared by the Economic Analysis Directorate of Transport Canada in collaboration with the Full Cost Investigation Task Force for the Policy and Planning Support Committee of the Council of Deputy Ministers Responsible of Transportation and Highway Safety, http://publications.gc.ca/collections/collection_2009/tc/T22-165-2008E.pdf, August 2008.
• Footnote 21
  Idem, p. 66.
• Footnote 22
  Mike Holland, et al., AEA Technology Environment, Damages per tonne emission of PM2.5, NH3, SO2, NOx and VOCs from each EU25 Member State (excluding Cyprus) and surrounding seas, ec.europa.eu/environment/rp-pr/cafe/activities/pdf/cafe_cba_externalities.pdf, March 2005.
• Footnote 23
  ICF Marbek for Transport Canada, Quantification of Clean Air Benefits of Transport Canada’s Proposed Locomotive Emissions Regulations, March 2011.
• Footnote 24
  Railway Association of Canada, Locomotive Emissions Monitoring Program 2010, http://www.railcan.ca/publications/emissions.
• Footnote 25
  Railway Association of Canada, Railway Trends 2012, p. 25, http://www.railcan.ca/publications/trends.
• Footnote 26
  Peter Eggleton and Robert Dunn, Present and Future Canadian Railway Activity and Emissions Profile.
• Footnote 27
  Railway Association of Canada, Locomotive Emissions Monitoring Program 2010, p. 8, http://www.railcan.ca/publications/emissions.
• Footnote 28
  Railway Association of Canada, Railway Trends 2012, p. 25, http://www.railcan.ca/publications/trends.
• Footnote 29
  CN, Get Carload Price Tool, http://www.cn.ca/en/customer-centre/prices-tariffs-transit-times.
• Footnote 30
  Derived from 2009 data provided by the Railway Association of Canada, summer 2011.
• Footnote 31
  Treasury Board of Canada Secretariat, Hardwiring Sensitivity to Small Business Impacts of Regulation: Guide for the Small Business Lens, http://www.tbs-sct.gc.ca/rtrap-parfa/guides-eng.asp.
• Footnote 32
  Treasury Board of Canada Secretariat, The Small Business Lens, http://www.tbs-sct.gc.ca/rtrap-parfa/report-rapport/asr-fea07-eng.asp.
• Footnote 33
  Transport Canada, Locomotive Emissions Regulations, http://www.tc.gc.ca/eng/policy/acs-consultations-prelim-2157.htm.
• Footnote 34
  Transport Canada, Locomotive Emissions Regulations — Stakeholder Submissions, http://www.tc.gc.ca/eng/policy/acs-consultations-stakeholder1-2161.htm.
• Footnote 35
  http://www.gazette.gc.ca/rp-pr/p1/2016/2016-06-18/html/reg4-eng.php