CN Rail is facing federal fines for failing to meet legislated weekly targets for moving grain — this much is known.
But the big question in the grain industry last week was whether those $100,000 fines will be levied per day — as federal officials indicated in press statements last winter — or whether the penalty has quietly been changed to per week.
“If the government changes the fine to $100,000 a week there won’t be as much teeth in the legislation and that will be a major concern to us,” Western Grain Elevator Association executive director Wade Sobkowich, said in an interview Sept. 24.
Keystone Agricultural Producers president Doug Chorney said reduced railway fines would be a concern, but added since rail performance is measured weekly, weekly fines make sense. The Western Canadian Wheat Growers Association is pressing for fines of $1 million per violation, along with the right for shippers to seek penalities through their service agreements with the railways.
Both Sobkowich and Chorney said they would prefer the railways meet their requirements — making fines moot.
A massive backlog of grain on western Canadian farms and in country elevators that began last fall, prompted the federal government to issue an order-in-council March 7 obliging the railways to each move 500,000 tonnes of western grain a week. The government loudly proclaimed failure to do so would trigger fines of $100,000 per day. Some critics complained that was a pittance when railways earn more $350,000 in revenue per train, totalling more than $1 billion a year.
Which is it?
Government ministers and officials continued to refer to $100,000-a-day fines during House of Common hearings on Bill C-30, the Fair Rail for Grain Farmers Act, given royal assent this spring, allowing the federal government to continue setting the amount of grain the railways move.
Scott Steiner, an assistant deputy minister at Transport Canada, speaking to the agriculture committee March 31 said in part: “The only other thing I would underscore, and it comes back to an earlier question about the $100,000-per-day (fine), is that under the (March 7) order-in-council the fine would apply upon conviction… which requires prosecution. Under the legislation it will be an administrative monetary penalty, so it will be easier to apply in the event of non-compliance.”
So what, if anything, has changed with the fines?
New regulations under the Fair Rail for Grain Farmers Act took effect Aug. 1 ordering the railways to each transport 536,250 tonnes of grain until the end of November 2014 “with penalties of $100,000 per violation should they fail to meet the requirement,” the government said in a news release.
The reference to $100,000 fines “per violation” led some to conclude fines would be $100,000 per week instead of per day.
A Transport Canada official confirmed in an email Sept. 23 CN failed to meet its weekly grain movement requirement and the penalty process under the Canada Transportation Act had started.
“As this process is underway, it would be inappropriate to comment further,” the official wrote, declining to say whether rail fines had been cut, when CN’s alleged shortfall occurred, or the amount.
In a Sept. 17 email to AgCanada.com, Transport Minister Lisa Raitt’s press secretary Jana Regimbal, wrote the fine will be “up to the minister’s discretion.”
Ottawa’s July 31 order-in-council is silent on penalties. However, the Canada Transportation Act says the maximum fine for contravening the act is $100,000 “for each violation.”
Sect. 179. (1) (1.1) of the act states: “A violation that is committed or continued on more than one day constitutes a separate violation for each day on which it is committed or continued.”
Based on that, Liberal member of Parliament, Ralph Goodale believes the railways can be fined $100,000 a day, just as the government announced March 7.
NDP Agriculture Critic Malcolm Allen said if the fines have been softened, it would be a betrayal of the opposition efforts to help the government fast track the legislation. The NDP agreed to pass the Fair Rail for Grain Farmers Act quickly to help farmers and grain companies, he said.
“They said these penalties (of $100,000 per day) would be such that railroaders would sit up and take notice,” Allen said. “It was using the big stick and lo and behold they changed the big stick into a twig.
“One hundred thousand dollars a week to CN is like pocket change for you and I.”
Both Goodale and Allen said if rail fines have been cut it’s another sign of railway influence over Transport Canada.
“It does not bode well for farmers and shippers across this country when the rail review (of the Canada Transportation Act) starts,” Allen said.
“In my view the Ministry of Transportation has won the day and it has set up the table for the rail review that’s coming next year and ceded to railroaders before they even get to the table.”
Clarity on the question could be a long time coming. Industry observers say it is almost certain CN will appeal any fines imposed.
On Sept. 17, CN CEO Claude Mongeau told an investors’ meeting there hadn’t been enough grain in the system for CN to meet its weekly shipping requirements recently.
Agriculture Minister Gerry Ritz disagrees.
“I’m not sure where CN is getting the idea there isn’t grain to handle,” Ritz told reporters on a conference call from India last week. “The fines will be assessed, they will be levied, and we expect CN to actually pick up its game.”
In total, CN has exceeded the amount of grain ordered to move by the federal government by one million tonnes, CN spokesman Mark Hallman said in an email Sept. 26.
“CN believes any Canadian government penalties levied against the company in connection with its transportation of western Canadian grain would be unfounded, given that it was the current balance of the grain supply chain that did not allow CN to meet the order-in-council weekly requirement lately,” Hallman wrote.