Louis Dreyfus Commodities has filed a level-of-service complaint against CN Rail with the Canadian Transportation Agency (CTA).
It may be one of many as other grain companies contemplate similar action in hopes of recouping losses due to poor rail service for grain this winter.
Meanwhile, CN and CP Rail “have met the prescribed (grain-moving) target for each specific week,” an official with Transport Canada said in an email April 25.
Grain companies are grateful more grain is moving, but frustrated the railways are deciding which elevators will load cars and where they will be shipped. The result is domestic and American markets not being properly served, said Wade Sobkowich, executive director of the Western Grain Elevator Association.
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“In some cases we’re having to truck grain from Saskatchewan (elevator) locations to Alberta locations because the railways want to move from there to get quicker turnaround times to Vancouver,” Sobkowich said in an interview.
It’s either that, or the grain company doesn’t get the cars, he said.
The federal government’s March 7 order-in-council requiring the railways to ship one million tonnes of grain a week doesn’t specify how much grain should move in each shipping corridor.
“The focus of the order is to get and keep grain moving as quickly as possible,” a Transport Canada official wrote. “It is up to railways to plan how best to meet the targets.”
The U.S. is Canada’s closest and often best-paying grain customer, but grain companies can’t fill existing sales to American customers or make new ones, Sobkowich said.
“Is that what the government intended? I don’t think so,” he said.
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Livestock producers in British Columbia’s lower mainland were also shorted earlier sparking fears the region might run out of grain forcing farmers to destroy starving animals. However, the region is getting grain now, said Bob Dornan, secretary treasurer of the Animal Nutrition Association of Canada in B.C.
“We’re not in dire straits right now,” he said in an interview April 25. “We’re paying an enormous premium over what we used to pay for transportation, but that’s just dollars and cents. At least the animals aren’t starving.
“We have economic issues that will have to be figured out in the long term, but the short-term crisis situation has passed.”
The region, which requires a million tonnes of feed grain a year — much of it for poultry production — needs assurances its needs will be filled, he said. The association hopes to reach an agreement with Western Canada’s big four grain companies to supply grain from their export terminals in Vancouver should the region ever run out of grain.
“All it would do is be a backstop in an emergency,” Dornan said.
Grain is moving through Thunder Bay and that’s expected to help get more of Western Canada’s 76-million-tonne crop to market. The first two ships arrived April 21 — a month later than normal because of unprecedented ice on the Great Lakes.
“It’s like nothing we’ve ever seen before,” Tim Heney, CEO of the Thunder Bay Port Authority said April 25.
Twenty more ships were scheduled to arrive in Thunder Bay over the next 10 days, he said.
“The first ocean ship is here Monday or Tuesday,” Heney said. “There are about 10 of those lined up to come now too.”
No one from Louis Dreyfus Commodities returned telephone messages by press time April 28 to comment on its level-of-service complaint.
However, a CTA official confirmed the complaint, covered under Sections 113-116 of the Canada Transportation Act, was filed April 16.
Those sections spell out the service railways are to provide shippers, including “adequate and suitable accommodation for the receiving and loading of all traffic offered for carriage on the railway…”
Louis Dreyfus has also asked the CTA to issue an interim order requiring CN to abide by contractual terms during the proceedings.
“As it is a confidential contract, I cannot speak to the specifics of the agreement,” the official wrote in an email.
The CTA is reviewing the complaint and will make its ruling public.
Industry sources say other grain companies are considering filing level-of-service complaints to the CTA, a quasi-judicial organization that administers the Canada Transportation Act.
The Canadian Wheat Board filed a level-of-service complaint April 14, 1997 against CN and CP Rail accusing both of failing to provide adequate service during the winter of 1996-97.
CN reached an out-of-court settlement with the wheat board.
The CTA ruled in the wheat board’s favour Sept. 30, 1998. The board then used the findings in a lawsuit against CP Rail.
The wheat board sought $45 million in compensation from CP, but reached an out-of-court settlement for $15 million.
The wheat board’s case turned on the argument the railways didn’t give the board an adequate share of railway capacity during the winter of 1996-97, which like this winter, was bitterly cold.
Meanwhile, the CTA announced April 28 the railways are getting a 4.2 per cent increase in the Volume-Related Composite Price Index (VRCPI), which is used in determining their maximum revenue entitlement for the movement of western grain effective Aug. 1.
The increase was warranted by higher fuel costs and the lower Canadian dollar, which affects their operating costs, the CTA said in a release.
CORRECTION, May 5, 2014: An earlier version of this article incorrectly stated Dreyfus’ complaint was covered under Sections 113-116 of the Canada Grain Act. We regret the error.
