Canada’s two national railways have been fined for not meeting federal targets for grain shipments, but not as much as farmers and grain companies say is warranted.
CN Rail said in a statement it will pay its $100,000 for two violations “and move forward,” while CP Rail will contest a $50,000 fine for a single violation, claiming it fell short due to circumstance beyond its control.
The railways have 30 days to pay up or seek a review, Lauren Armstrong, a spokesperson for Transportation Minister Lisa Raitt said in an email Jan. 9.
Keystone Agricultural Producers president Doug Chorney said while the fines are important symbolically, they aren’t high enough.
“I think until we have meaningful consequences and some way to see the fines go back to the shippers or farmers who are the offended parties, they are not going to have desired outcome,” Chorney said in an interview Jan. 9.
The fines are small but the Western Grain Elevator Association (WGEA) is pleased the federal government has taken action, said executive director Wade Sobkowich.
“Unfortunately the fines being paid by the railways pale in comparison to the costs that the industry has incurred due to the poor service in those time periods,” he said. “But we understand there are some limitations in the legislation and that the government is at least holding them accountable to some extent.”
Fines are the ultimate “public punishment” for the railways failing to move as much grain as they said they would, Agriculture Minister Gerry Ritz said in an interview.
“At the end of the day fines don’t move grain, it’s the incentive to do it… and I think we’ve got a good balanced approach moving forward with the continuation of the order-in-council with some real big numbers, as well as the plans we’ve asked for from the railways to be provided to Transport Canada on contingencies on how they are adjusting to the corridor-by-corridor data demands that we’re asking for.”
When Ottawa issued an order-in-council last March requiring the railways to each move 536,250 tonnes of grain a week, officials said the railways could be fined up to $100,000 a day for failing to do so. However, under the Fair Rail for Grain Farmers Act, which took effect in May, fines changed to up to $100,000 per violation, which officials interpret as per week since the movement target is weekly.
In these instances, the fines are $50,000 per violation — half the maximum.
“The actual level of an AMP (Administrative Monetary Penalty) is set by the Enforcement Officer and is established in a manner proportionate to the railway’s performance in relation to its obligation,” Armstrong wrote.
The Enforcement Officer issued Notices of Violation to both railways Dec. 12, 2014, she wrote.
CN failed to meet the minimum volume requirement for the period from July 28 to August 3, and both CN and CP failed to meet the requirements for the period from September 7 to 13.
From July 28 to August 3, CN was required to move 500,000 tonnes. From September 7 to 13, CN and CP were required to move 536,250 tonnes. What the railways moved is confidential, but it fell short of the required amount, Armstrong wrote.
“CP is disputing the fine on the basis that the missed targets of Sept. 7 to 13, 2014 were the result of broader supply chain issues, specifically the Labour Day holiday shutdown at the Port of Vancouver the week before,” CP spokesman Jeremy Berry wrote in an email. “These events outside of CP’s control in the supply chain contributed to delays in the movement, loading and shipping of rail cars on CP.”
The WGEA, which represents Western Canada’s major elevator companies, doesn’t buy it, Sobkowich said.
“The volume was there and the demand for the rail cars was there as long as they were placed at the right locations — the right country elevators — and with the right destinations,” he said.
CP continues to stress Canada’s grain supply chain must operate around the clock, seven days a week to be efficient.
“In 2014 we moved record amounts of grain — 21 per cent over the three-year average and up 16 per cent over the previous record crop year of 2008-09,” Berry wrote. “More than anything, it is market forces that have driven the record volumes of grain that CP has delivered this year and last.”
So far this crop year CN has exceeded its government-mandated minimum grain volumes by more than 1.5 million tonnes, CN spokesman Mark Hallman wrote in an email.
“By the end of December 2014, CN had just 1,500 grain orders on its wait-list to fulfil — the equivalent of only about three days of grain movements,” he wrote.
Grain movement from Aug. 1, 2014 until Christmas was up 37 per cent compared to the same period last year, Sobkowich said. The railways have been moving more grain, but some of the increase is because more grain moved earlier this crop year, he said.
Last crop year, following record grain production in Western Canada, a huge backlog in grain shipping occurred causing elevator prices to fall well below world prices.
The railways blamed the big crop and the coldest winter in 100 years.
Farmers and grain companies accused the railways of failing to invest in surge capacity because grain shipments can’t go elsewhere.
Farmers and grain companies hope the Canada Transportation Act review currently underway will result in regulations that force the railways to act how they would in a competitive market.