Shippers squabble over grain transportation issues

It was a unified message that resulted in shipper-friendly legislation now under consideration. 
Now that unity appears threatened

Infighting is at risk of derailing a grand coalition of shippers that resulted in a shipper-friendly transportation modernization bill known as C-49.

While seven industry associations have stuck to script and asked Transport Minister Marc Garneau to make two key amendments to the government’s transportation modernization bill, those proposals were overshadowed by shots at the grain industry for demanding special treatment in unsnarling the western rail system.

The groups want the bill changed to require the railways to provide the appropriate cost and pricing information to the Canadian Transportation Agency to use in freight rate dispute resolutions and to enable the CTA to launch investigations into rail service delays without waiting for a formal complaint.

In addition to an agreed-upon letter to the minister, the groups have also asked the Senate transport committee, which is currently studying the bill, to consider their proposed changes.

However, the final version of the shipper joint letter, distributed by the Mining Association of Canada, added calls for the government not to intervene to speed up grain shipments because that would only cause headaches for other shippers.

“A singular emphasis on grain has the unintended but inevitable consequence of exacerbating rail service issues for other commodity sectors, skewing the railways’ allocation of scarce capacity resources towards the movement of grain,” said the letter.

Greg Cherewyk, chief operating officer of Pulse Canada, said the action came as a surprise.

“The original letter that was approved for Pulse Canada to sign on to, did not contain the language that was in the letter that was released,” Cherewyk said. “It’s imperative that we focus on the message of critical importance and that is the pressing need to amend the bill.”

The current law, which the legislation doesn’t change, “only provides government with the power to intervene when there has been an extraordinary disruption to the transportation system,” he said. The CTA needs to be able to act “at an early state to use the data and information at its disposal to identify problems with the transportation system, to launch an investigation and if necessary, impose general orders aimed at restoring service long before any sector being served by the railways is in crisis mode.”

“The regulator, in this case the agency, needs to be given the authority and the mandate to do its job,” he said. “The onus need not and should not be only on commercial relationships to address problems of national economic importance.”

The U.S. Surface Transport Board has the power to launch investigations of transport service problems without waiting for a formal complaint.

Bob Ballantyne, president of the Freight Management Association of Canada, said he would have been happier if the mining association “had downplayed the comments on grain.” The original letter to the Senate committee was not negative on grain.

As well, the amendments to give the CTA more authority to act “were made to the government when the bill was first introduced, to the Commons committee and to the Senate committee,” he said.

The original letter, also agreed to by Fertilizer Canada, the Canadian Chemical Industry Association, the Western Canadian Shippers Coalition, and the Forest Products Association of Canada, said, “As you know, serious rail capacity issues have plagued rail shippers across multiple commodity sectors since the third quarter of 2017.”

The situation demonstrates “the need for a permanent regulatory mechanism capable of addressing these broader types of issues. Political intervention can only come after the effects of capacity shortfalls have escalated to a crisis level.

“In situations short of extraordinary disruptions to the transportation system, it is restricted to moral suasion without any means to enforce accountability. It will always focus on those aspects of the problem that have garnered public attention, in this case the immediate issue of improving service for grain shipments, even though the problem is much wider in scope and, in many instances, no less serious or acute for shippers of other commodities. A singular emphasis on grain has the unintended but inevitable consequence of exacerbating rail service issues for other commodity sectors, skewing the railways’ allocation of scarce capacity resources towards the movement of grain.

“All of this highlights the lack of a workable mechanism in the act that could facilitate a more proactive and more predictable response to rail capacity issues affecting broad sectors of the Canadian economy and that cannot be properly addressed through complaints or arbitrations initiated by individual shippers.”

The current legislation “will not change that, and speedy passage will do nothing to alleviate the immediate crisis for grain or any other commodity,” the letter said. “In a normally functioning market, firms that fail to allocate the resources necessary to become sufficiently resilient to respond to increased demand or to obstacles, such as Canadian winters, which recur with some regularity, if not absolute predictability, lose customers to their nimbler competitors. The market for rail freight services in Canada is not a normally functioning market, and rail capacity issues and crises of one sort or another will continue to arise to the detriment of captive shippers and the Canadian economy.”

The Senate committee is currently focusing on hearing witnesses from the airline and maritime shipping industry about their issues with the bill.

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