Watching railway customer Rob Davies and railway spokesman Cliff Mackay debate railway regulation was like watching Abbott and Costello, except this was improv.
“I just don’t think regulations create win-win solutions,” Mackay, president of the Railway Association of Canada, said during a panel discussion here Nov. 16 during a grain industry symposium organized by the Canada Grains Council and Grain Growers of Canada. “It usually creates ‘he won, he lost.’”
“Yeah,” pipes up a straight-faced Davies, CEO of Weyburn Inland Terminal. “And that’s the regulatory environment we’re in today”
Cue the rimshot. Ba dum tsssh.
Under the current framework farmers and grain companies say they’re the losers and the railways the winners. And according to them that’s why the railways are loath to agree to “rebalancing” the regulations.
Cargill Canada president Len Penner, speaking on behalf of the Western Grain Elevator Association (WGEA), said everyone in the room prefers commercial solutions, but since the railways won’t play ball, regulation is the only option.
Under the current system the railways dictate the relationship because they have a quasi-monopoly and don’t compete, Penner said.
For example, grain companies forgo discounts in freight rates if they fail to load cars within a certain time, while port terminals are penalized if they don’t unload them within a set time. Fair enough, say the shippers and receivers, but why aren’t the railways penalized when they don’t deliver all of the cars ordered or fail to do it on the day promised?
That happens a lot. QGI, the
POINT COUNTERPOINT:Rob Davies (l) ofWeyburn InlandTerminal and Cliff Mackay of the RailwayAssociation of Canada kept each other on their toes during a discussion on grain transportation during a meeting in Ottawa last week.
firm hired to assess railway performance for the federal government’s recent review of railway service found that while the railways delivered up to 97 per cent of the grain cars ordered on an annual basis, they only met 50 per cent of the weekly target during the three-year period studied.
“That’s a huge error rate,” Mark Hemmes, president of Quorum Corporation, QGI’s sister company, told the symposium. He said it makes it difficult for companies to plan.
“I can’t count the number of people who said ‘I don’t care if it takes 10 days or 30 days (to get cars) just tell me which one.’ This is pretty much the case from every commodity group we heard from.”
Grain Growers of Canada president Doug Rober tson complained poor rail service costs farmers in lost or deferred sales and hurts Canada’s reputation as a reliable supplier.
Farmers, grain companies and the Canadian Wheat Board (CWB) are pushing hard for better rail service. The review panel agrees service has been poor. In its interim report released in October it blames railway market power due to a lack of competition.
Its final recommendations are due by year’s end.
However, most rail users, including the 18-member Coalition of Rail Shippers (CRS), which includes companies that ship automobile, lumber and chemicals, complain the report doesn’t go far enough. Two of three panelists
recommended the government prepare railway regulations but only enact them in 2013 if the railways fail to improve service.
“The regulatory backstop we think is needed now as a surrogate for (railway) competition,” coalition chair Bob Ballantyne said.
The coalition and others including the CWB, also want the industry to agree on what’s an acceptable standard of service, measure system performance and have penalties for failing to perform. And they want it the form of a federal regulation.
Shippers also want a fast-track arbitration process to settle disputes and allow the Canadian Transpor tat ion Agency to launch its own investigations into the level of railway service.
Regulation, no matter how well intentioned or deftly delivered, are “cumbersome, inflexible and dampen innovation,” Mackay said. More regulation will discourage railway investment, he said.
The railways compete and they don’t have excessive market power, he said.
“So if we’re big bad monopolists how come we’re not making a ton of money and returning huge amounts of money to our investors?”
According to Mackay, rail profits are lower than in gas and oil and pharmaceuticals.
The railways have written the panel with commitments to future performance that he said he couldn’t disclose last week.
WGEA executive director Wade Sobkowich is skeptical.
“I would submit if we don’t change the policy environment we won’t change anything long term.”
The railways say they will agree to a rebalanced, commercial system, but if times get tough or senior management changes, they could slip back in their old ways, Davies said. Regulat ions prevent that.
Penner suggested the railways get three months instead of three years to reach agreements with shippers. If a deal can’t be struck, then bring in regulations to do it.
Davies said the system needs a measuring stick to assess system performance.
One that bankrupts the railways? asked Mackay.
Or bankrupts farmers and grain companies ? repl ied Davies.
It needs to be win-win, said Mackay.
“Exactly,” said Davies. [email protected]
“Ican’tcountthe numberofpeoplewho said‘Idon’tcareifit takes10daysor30 days(togetcars)just tellmewhichone.’”
– MARK HEMMES