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Paying More Won’t Help

Canada’s newly reappointed agriculture minister believes he knows where the answer lies to squeezing better service out of the railways.

It’s in your wallet.

While doing some post-election musing about the government’s priorities for agriculture over the next several years, Gerry Ritz suggested farmers would be willing to pay more to move their grain to markets in exchange for better service.

“We want a much more commercially based system,” Ritz told theManitoba Co-operator.“I don’t mind paying a little extra for service as long as in the end it plays into my business plan and I see efficiencies there. If I’m sitting on my product because I can’t move it and I’m paying interest on a loan at the bank, I am willing to pay a few cents more per tonne to get that stuff moving.

“Personally, I think a revenue cap is problematic,” he went on to say, although it’s not clear what he intends to do about that.

With respect, this is a bit like going to a restaurant, ordering food and then tipping the server up front in the hopes you get your order.

The second flaw in that logic is the reality that it is not just grain shippers who are suffering the effects of poor railway service. In the absence of a revenue cap, shippers of other commodities are already paying more for freight. According to the Coalition of Rail Shippers, which represents 80 per cent of the customer base for Canada’s two national railways, they are getting the same chronically unreliable service.

It told the Rail Freight Service Review panel the railways delivered 90 per cent of the cars ordered at a specific location only half the time.

When you go to a restaurant, it’s reasonable to expect the table’s entrees to come at the same time, not in dribs and drabs. Likewise, shippers are entitled to get the numbers of cars they ordered on the day they need them.

If a restaurant delivers poor service, the customer can easily take their business elsewhere. Rail shippers in Canada don’t have that option, a predicament noted by Justice Willard Estey, who was hired by the federal government just after it axed the Crow Benefit in the late 1990s to figure out what was wrong with Canada’s grain transportation system and how to fix it.

After extensive consultations, Estey reported back in 1998 with 15 recommendations for making the system more commercial with built-in safeguards to protect the public interest.

One of those proposed safeguards was legislation that granted rail running rights to operators other than CN and CP Rail. There was even an implementation plan developed that proposed a five-year trial period in which any person, explicitly including a short-line railway, could apply for running rights over the lines of another railway. The onus would be on the latter to demonstrate why the application would be against the public interest and therefore should not be granted.

“The plan calls for the (Canadian Transportation) Agency, in assessing the merits of a case, to give primary emphasis to the interests of shippers, and to take account as well of impacts on the efficiency and capacity of the rail system, and on the ability of the railways to finance essential capital investments,” the stakeholders’ report said.

At the end of the five years, the results were to be studied to determine whether the running rights should become automatic instead of considered on a case-by-case basis.

Not surprisingly, the railways didn’t like that idea much and the whole idea was derailed.

It was actually Canadian Pacific that proposed replacing the maximum freight rate scale, which limited how much per tonne the railways could charge, to a maximum revenue cap, which limited their total revenues from grain transportation but provided more flexibility with setting tariffs.

The railways argued that would provide shippers with the necessary safeguards to avoid being overcharged. But it does nothing by way of holding the railways accountable for poor performance, as their service record in the years since has amply shown.

Gerry Ritz is right on one account: the price doesn’t much matter if you can’t get service.

If the federal government is even remotely sincere about ensuring a viable Canadian Wheat Board in an open market, and that’s a big if, it should turn over the government-owned and CWB rail car fleets to the board. And grant it running rights.

The board could work with short-line railways to help farmers deliver their grain via producer cars. It could work with the line elevator companies to hold the railways accountable on service issues in exchange for access to their handling facilities.

The board would have a pivotal role, but more importantly, Prairie farmers would have a powerful ally in two areas where they are vulnerable, transportation and grain handling. [email protected]

About the author

Vice-President of Content

Laura Rance

Laura Rance is vice-president of content for Glacier FarmMedia. She can be reached at [email protected]

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