Mixed reviews for new rail legislation to improve grain shipping

C-30 doesn’t spell out the service agreements grain companies want, but Ritz says 
they can be added through regulation. He also rejects calls for a new GTA

The Fair Rail for Grain Farmers Act — Ottawa’s answer to the issues facing Canada’s grain export system — fell a little flat among the 240 farm and industry leaders’ meeting here last week.

While government action on the issue was welcomed, many said the legislation tabled March 26 falls far short of providing the remedies shippers say they need to balance their negotiations with the railways for service.

The legislation increases interswitching access in the West from 30 km to 160 km, empowers the federal transportation and agriculture ministers to impose shipping targets on the railways, empowers the Canadian Grain Commission to arbitrate contract disputes between farmers and grain companies over delivery contracts and promises to provide more specifics in how level-of-service agreements between shippers and the railways would be arbitrated by the Canadian Transportation Agency.

None of the six amendments farm groups and the Western Grain Elevator Association (WGEA) wanted in last year’s rail bill, are in C-30. WGEA executive director Wade Sobkowich hopes they will be added via regulation.

“It’s a fill-in-the-blanks-type piece of legislation,” Sobkowich said in an interview. “If the blanks are filled out appropriately it could be very, very good and it could be the solution we’ve been looking for if it gets worked out properly.”

One idea that emerged from the industry summit organized by the University of Saskatchewan agricultural economist Richard Gray, was to create an independent entity akin to the old Grain Transportation Agency (GTA) to co-ordinate grain shipping from country elevator to vessel. (See sidebar)

The proposal was rejected outright by agriculture and transport ministers, Gerry Ritz and Lisa Raitt when asked about it at their Winnipeg press conference the next day.

“Another level of bureaucracy in between is really not necessary to today’s situation,” Ritz said after meeting with grain company and farm officials to discuss C-30.

Market forces

Raitt added “market forces” should be allowed to work, even though it’s the lack of them that prompted Ottawa to introduce this legislation weeks after it used an order-in-council to force the railways to ship at least one million tonnes of grain per week to ease a growing backlog in grain shipments.

As of last week, the railways were 70,000 cars behind, with 50 ships waiting for Prairie grain at eastern and West Coast export terminals.

The railways blame an extraordinarily cold winter and record crops for shipping delays. Grain shippers say the railways, knowing grain is a captive, have streamlined so much they lack surge capacity.

In addition to railway penalties, the WGEA wants the transport minister to extend its order of minimum-volume targets to include specific export corridors.

The WGEA also wants railways held accountable for liquidated damages related to poor service and an inexpensive and quick dispute resolution process to back it.

Saskatchewan Agriculture Minister Lyle Stewart said he wanted the act to increase the minimum shipments to 13,000 cars a week instead of 11,000, and fines of $250,000 a day for non-compliance instead of $100,000.

“We were hoping this would be a permanent fix to a recurring problem, but it doesn’t appear that it will be, at least not a secure one,” he said in a radio interview, referring to the minimum rail shipping order that expires Aug. 1, 2016, unless renewed by the government.

From the Grainews website: Railways expect to meet government’s order on grain

Falls short

The Western Canadian Wheat Growers Association agreed the legislation falls short.

“These measures do not adequately tackle the backlog in grain shipments,” WCWGA president Levi Wood said in a release.

Ritz said the legislation will “establish regulatory power to establish greater specificity to service-level agreements as requested by shippers of all commodities.”

But he was non-committal when asked later whether shippers will get the regulations they want. “That’s what these discussions are all about.”

Keystone Agricultural Producers president Doug Chorney said the legislation is a positive move, but stressed important provisions must be included in regulation. Even more important changes could come from the upcoming review of the Canada Transportation Act, which is now due to begin in 2015, he said.

KAP supports having the transportation minister mandate the minimum amount of grain the railways move. The current backlog shows the industry can’t rely on market forces, he said.

The Canadian Canola Growers Association welcomed the legislation unconditionally.

“We appreciate the government’s intentions with this bill as it takes one more step toward addressing the complex and highly interconnected grain logistics challenges that we face,” association CEO Rick White said in a news release.

CN and CP Rail condemned the legislation saying in separate releases it will not move grain faster. They warned the interswitching changes could hurt Canada’s economy, outsourcing grain shipping and handling to the United States.

“(It) has the potential to cause great damage to the Canadian rail transportation system that is unquestionably the best in the world,” said CP chief executive officer E. Hunter Harrison.

“Canada’s grain-handling system is just not built to handle this record amount of grain,” Harrison said, referring to the West’s record 73-million-tonne crop harvested last fall.

The government should also regulate grain companies to ensure they have enough surge capacity to handle record crops, said CN president and chief executive officer Claude Mongeau.

“It’s a sad day for Canada when the government decides to hit one sector of the economy in order to placate a vocal constituency, instead of fostering sound commercial solutions to strengthen Canada’s transportation infrastructure.”

About the author

Reporter

Allan Dawson

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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