Railway Safety Management System Regulations, 2015 Industry Briefings Spring

Overview Safety Management systems Why the changes? Notable changes from 2001 regulations Required processes Changes from Gazette I Employee involvement Oversight Transition period 2

Still adhering to the same SMS principles Same old definition: “A safety management system is a formal framework for integrating safety into day-to-day railway operations and includes safety targets and initiatives, risk assessments, employees knowledge, data analysis, and monitoring and internal audit processes.” Still does not replace the existing regulatory and oversight framework. Again - Increases safety by having railways put formal systems in place to proactively identify and address safety concerns before Transport Canada’s intervention, and before major safety issues arise. 3

Triggers to the change & expected benefits The new Regulations include:  RSA amendments of May 2013 ; and  12 years’ worth of lessons learned from oversight of SMS 4 TSB – LAC MÉGANTIC OAG REPORT SCOTIC REPORT STRENGTHENING OUR OVERSIGHT OF SMS Address concerns

The New SMS Regulations, 2015 The regulations were modified in three key areas: Expansion of the scope of application to LRCs Inclusion of new provisions stemming from amendments to the Act Additional detail and clarify expectations to facilitate more effective implementation and enforceability 5

New scope of application Divided into three parts: “Main track” - refers to a line of federal track on which the movement of railway equipment is authorized by a federal railway company. “Non-main track” - refers to a line of railway other than “main track”. “Non-main track” includes sidings and rail yards. 6 Part 1 Federal Railway Companies Full suite of twelve processes Part 2, Division 1 LRCs operating on federal main track Full suite of processes - except for processes linked to accident reporting requirements to the TSB, and processes related to labour relations Part 2, Division 2 LRCs operating solely on federal non-main track Minimum core processes, with a focus on risk assessment as well as implementation and evaluation of remedial measures

New features Notable new provisions: Accountable Executive Federal railway companies and LRCs operating on main track must designate an executive who is: responsible for the operations and activities of the company; and accountable for the extent to which the company meets regulatory requirements for SMS Companies may designate an appropriate manager to develop and implement one or more required processes Fatigue science and scheduling Federal railway companies must apply fatigue science principles to a schedule that: is not provided at least 72 hours in advance; requires work beyond an employee’s normal schedule; or requires work between midnight and 6 a.m. Process for reporting contraventions and safety hazard Federal railway companies must have both a reporting procedure and a written policy for protecting employees from reprisals for having reported a contravention or a safety hazard 7

The New SMS Regulations, 2015 Improved implementation, and as a result, enforceability Clearer, more detailed requirements o Detail that had previously existed in unenforceable guidance material moved to enforceable Regulations o Clarified expectations, adding clear rules of conduct o More consistent terminology o Added provisions requiring evidence of implementation o Information more logically organized 8

The SMS Regulations, 2015 Process for accountability – designating an accountable executive Process with respect to a safety policy –a policy that reflects the company’s commitment to promoting railway safety Process for ensuring compliance with regulations, rules and other instruments – a framework for identifying legal obligations, and verifying compliance with them Process for managing railway occurrences** –procedures for reporting and reviewing railway occurrences Process for identifying safety concerns –analyses to identify safety concerns Risk assessment process –risk assessments to identify risks and remedial action Process for implementing and evaluating remedial action –remedial action to treat an identified risk be implemented and the effectiveness evaluated A process for establishing targets and developing initiatives –targets and related initiatives to achieve those targets each calendar year Process for reporting contraventions and safety hazards** – procedure for employee reporting of contraventions and safety hazards without reprisal for reporting A process for managing knowledge** – ensuring employees and non-employees have the knowledge, skills and qualifications to carry out duties or activities safely A process with respect to scheduling** – applying the principles of fatigue science when scheduling employees who work certain schedules Process for continual improvement of the SMS –internal monitoring and audit activities * Applicable only to federal railway companies and local railway companies operating on federal main track ** Applicable only to federal railway companies 9

The New SMS Regulations, BeforeNow A railway company shall implement and maintain a SMS that includes, at a minimum, the following components:... (a) the railway company safety policy and annual safety performance targets and the associated safety initiatives to achieve the targets, approved by a senior company officer and communicated to employees; Process with Respect to a Safety Policy 9. (1) A railway company must include, in its safety management system, a written safety policy that reflects the railway company’s commitment to promoting railway safety. The policy must be approved and signed by the accountable executive. (2) The railway company must ensure that its safety policy is reviewed annually. (3) The railway company must communicate its safety policy, and any changes to the policy, to its employees. Process for Establishing Targets and Developing Initiatives 21. (1) A railway company must, for each calendar year, (a) establish targets designed to improve the safety of its railway operations; and (b) develop initiatives to achieve each target. (2) The targets must be based on the analyses conducted under section 13 and must take into account the results of any previous analyses. 22. A railway company must include, in its safety management system, a written description of each initiative to be implemented in order to achieve each target and a written explanation of how the initiative will contribute to achieving that target. 23. A railway company must communicate to its employees the targets established and the initiatives to be implemented.

Notable changes CGI to CGII Process for accountability 8(5) and 43(5) were added to introduce an annual update requirement Risk assessment Process “significant” removed to highlight focus on potential impact to safety, property and/or the environment Process for managing knowledge The process was reorganized to reduce confusion Process with respect to scheduling Changes to reflect that types of scheduling targeted by this process actually relate to situations with no formal schedule Process for continual improvement Process was reorganized, revised and clarified Two distinct elements: annual internal monitoring and a cyclical 3 year internal audit 11

Employee Involvement Provisions for employee involvement in the SMS to include o Collaboration o Consultation o Communication 12

2015 SMS Oversight Activities Railway Safety Inspectors (SMS) will conduct two different types of activities: 1.verification of a company’s compliance with Regulations requirements; and 2.assessment a company’s system to verify that all the processes of the system work together as intended to meet the objective of the 2015 Regulations, i.e. continually improve the safety of the company’s railway operations. 13

14 Enforcement of the new 2015 Regulations Compliance The new SMS Regulations contain basic minimum standards (which have been raised from the current standards). If met, would result in an adequate company safety management system. If a requirement is not met, actions must be taken in accordance with the Rail Safety Oversight Policy. Promotion of compliance (education and awareness) Letter of non-compliance Administrative Monetary Penalties Suspension or Cancellation of the Railway Operating Certificate Prosecution

15 SMS Audit Activities: the Assessment Assessment of systems – is the system working? Assess companies’ systems, helping companies to strive for continual improvement of their system Improve safety culture within the company Meet the objectives of the Regulations and help companies achieve “the highest level of safety” in their railway operations If the RSI (SMS) finds deficiencies and other findings in the company’s system: o Flags in Audit Report as an opportunity for the company to improve its system If deficiencies align in such a way that it risks compromising safety o Section 32(3.1) Ministerial Order

Transition Plan for Year 1 New Regulations come into force on April 1, The implementation of the new requirements will be achieved in two key phases: Phase I – between April 1, 2015 and October 1, 2015 TC inspections will focus on awareness and promotion of compliance through outreach activities Phase II– as of October 1, 2015 TC will conduct inspections the requirements of the 2015 Regulations will be fully enforced Phase III - As of April 1, 2016 TC will conduct audits to verify “is it working” Administrative Monetary Penalties (AMPs) for SMS, 2015 anticipated coming into force early June 2015 All outstanding findings from previous audits will be mapped out by Transport Canada and follow-up activities will be carried out to ensure that railway companies’ corrective actions have been put in place. 16

Transition- Phase I Phase I: April 1 st, 2015-October 1 st, 2015 Transport Canada will expect compliance with, and will enforce against, certain key provisions of the 2015 Regulations as of Day 1 (April 1, 2015) of the coming into force of the Regulations: Designation of an accountable executive Conducting risk assessments Notification to Minister of proposed changes in operations Templates for those three elements have been distributed Transport Canada will be visiting all the companies under the regime to monitor compliance, provide assistance as needed, and enforce against the initial mandatory provisions. 17

Transition- Phase II Phase II: October 1 st, April 1 st, 2016 As of October 1, 2015, Transport Canada expects companies to be in full compliance with all applicable requirements. Transport Canada will be conducting targeted inspections to verify compliance and take any necessary enforcement action. Companies will be required to submit their Index, upon request from the Minister, as well as other information, such as targets and initiatives for Year

Transition- Phase III Phase III: April 1 st, 2016 As of April 1, 2016 Transport Canada will be conducting audits of company systems to verify if they are working towards meeting the objectives of the Regulations in striving to achieve the highest level of safety. 19

Engagement: March 25, 2015 – Meeting with unions April 1, 2015 – Meeting with industry April 2015 – TC will organize Information Sessions for industry and will also be available upon request. April – December TC will hold regular internal and teleconferences to quickly address any issues or confusions and adapt guidance documents as required. Industry guidance: Comprehensive Industry Guide Templates for key processes for April 1st Template for companies new to SMS Transition Plan 20

The route to an SMS in 3 phases… 21 Build it Use it Assess it Developing the processesImplementing the systemIs it working as intended?

Other new regulations Railway Safety Administrative Monetary Penalties Regulations (AMP) Railway Operating Certificate Regulations (ROC) Rail Safety amendments to the Transportation Information Regulations (TIRs) 22