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Farmers, grain companies deliver consistent message on rail legislation

They told the transport committee C-49 is an improvement but more needs to be done

Pending transportation legislation has hit the target — but it’s not a bull’s-eye.

That was the message from western Canadian grain farmers, elevator companies and oilseed processors last week, when they spoke to the House of Commons transport committee on Bill C-49, the Transportation Modernization Act. They told legislators that there was still room for improvement.

“Our points have come across and it shows in the (proposed) act, but… there are still some loopholes,” Norm Hall, vice-president of the Agricultural Producers Association of Saskatchewan and Canadian Federation of Agriculture, said in an interview Sept. 15.

Hall, Wade Sobkowich and Chris Vervaet, executive directors of the Western Grain Elevator Association and Canadian Oilseed Processors Association, respectively, testified on C-49 before the House of Commons Transport Committee Sept. 12 in Ottawa.

They emphasized in the absence of a truly competitive market for rail service, legislation is needed to compel the railways to be financially accountable when they fail to provide agreed-to service, Sobkowich said in an interview.

“We talk about things through the Crop Logistics Working Group… we share ideas and we’re all very consistent and very much on the same page,” he said. “We all know what we need to make sure that we have this balance between shippers and railways. It’s just a matter of getting the ball over the goal line with the government.”

Early review

Although a review of the Canada Transportation Act was scheduled, following the grain-shipping backlog of 2013-14, Ottawa started it a year early. The costly backlog added to the urgency, galvanizing farm groups and grain companies into a rare show of solidarity.

In his formal remarks to the committee Hall emphasized that ultimately farmers pay for grain shipping — a bill that in the 2014-15 crop year totalled $1.4 billion.

“While Bill C-49 is a great step in the right direction, it almost seems as if they are meant to look like improvements without real change, leaving railways far too much room not to comply with the intent and far short of emulating a competitive environment,” Hall’s written presentation says.

For example, the bill calls for more data collection but doesn’t give the Canadian Transportation Agency (CTA), which administers the legislation, the authority to use all the data.

Sobkowich had a similar complaint, noting proposed data collection under the act doesn’t include the number of cars grain companies order from the railways but don’t get on time.

Hall, Sobkowich and Vervaet all said the CTA should have the authority to investigate and resolve grain-shipping problems as opposed to requiring a formal complaint.

They also agreed proposed long haul interswitching should be priced based on competitive freight rates rather than historical ones.

They agreed long haul interswitching should also be more flexible. Sobkowich noted that under the proposal an elevator or processor couldn’t access long haul interswitching — a provision the government says should increase competition among railways — if it was located within 30 km of a competing railway, even if that competing railway doesn’t deliver where the shipper wants grain to go.

For example, the Red River South elevator on a CN Rail line is less than 30 km from an interchange with Burlington Northern Santa Fe (BNSF). But BN only delivers to American ports, not Vancouver or Thunder Bay — the destination for 75 per cent of that elevator’s grain during the last three years.

Sobkowich told the committee the WGEA wanted to keep extended interswitching, a provision introduced as a temporary, emergency measure to stimulate railway competition.

“The extended interswitching order had been in effect for the last three growing seasons and had evolved into an invaluable tool for western grain shippers,” Sobkowich told the committee.

A few suggestions

Given C-49 is an improvement, Sobkowich said the WGEA is proposing only four small amendments to improve it. Three deal with long haul interswitching. One would give shippers more flexibility, another would ensure fair rates when used, and the third would list interchange sites and prevent railways from arbitrarily delisting them.

The WGEA’s other proposed amendment is to add soybeans and soybean products to the maximum revenue entitlement (MRE) formula used to set the total amount the railways can earn hauling western grain.

The MRE was introduced to give the railways rate-setting flexibility to encourage system efficiencies, but protecting farmers by preventing the railways from charging what the market would bear.

Sobkowich pointed out that American grain moving through Canada to export through Thunder Bay or the West Coast, is covered by the MRE, but Canadian soybeans are not.

While Sobkowich and Hall welcomed the continuation of the MRE under C-49, Hall argued the railway costs of shipping grain used in the formula need to be reviewed — something that hasn’t happened for more than 20 years.

“As has been frequently stated, it is impossible to even do a credible impact analysis of legislative changes without actual current costing data,” Hall said.

Level of service and compliance mechanisms have to prevent railways from being ambivalent about providing services because shippers have no other options, Hall said. To that end the transport minister should monitor rail service.

Hall also emphasized penalties against the railways must not be included in the MRE calculation, which would pass the cost back to farmers.

The CFA also wants C-49 to give the transport minister the power to set the amount of grain railways have to move if a backlog reoccurs.

Hall called for a moratorium on railway abandonment of producer car loading sites, which farmers pay to maintain through the MRE.

In separate interviews Hall and Sobkowich said they felt the committee understood their message.

“I think we put our best foot forward,” Sobkowich said. “Now we’ll see what happens.”

About the author

Reporter

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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