'Fair rail' bill seeks to boost grain-by-rail efficiency in Canada

Canadian Agriculture Minister Gerry Ritz and Transport Minister Lisa Raitt yesterday introduced in Parliament the Fair Rail for Grain Farmers Act, which would amend the Canada Transportation Act and the Canada Grain Act to establish additional measures designed to help increase the grain transportation system's efficiency following a record crop year and grain-movement backlog.

The amendments created by the legislation would:
• Authorize the Governor in Council to set grain transport volume requirements during extraordinary circumstances at the joint recommendation of the ministers of transport and agriculture, with failure to comply resulting in penalties of up to $100,000 per day.
• Create regulatory authority to allow the Canadian Transportation Agency (CTA) to extend the interswitching distances in Saskatchewan, Alberta and Manitoba to 160 kilometers for all commodities to increase competition among railroads and provide shippers access to alternative rail services.
• Establish regulatory authorities to add greater specificity to operational requirements in service-level agreements and address non-performance by grain companies in their contracts with producers.

In addition, the Canadian government will require railroads to deliver more timely and granular data on grain movements to assist in monitoring supply chain performance of the supply chain. The legislation would extend the end date of CN's and Canadian Pacific's obligation to increase their weekly grain carrying capacity from June 7 to Aug. 3. Per a government order issued on March 7, the Class Is are required to haul a minimum of 500,000 metric tons of grain per week.

"A strong rail-based supply chain system is essential so that Canadian shippers can remain competitive in domestic, continental and offshore markets," said Raitt in a press release. "Building on our previous announcement of immediate and concrete measures to move grain in Western Canada, the introduction of this legislation is another important step to address this backlog."

The government plans to accelerate the review of the Canada Transportation Act to further improve the grain handling system over the long term to achieve improved capacity, predictability, planning and accountability for all parties in the supply chain, government officials said.

CN officials expressed disappointment with the legislation, especially the proposed introduction of new rules that would extend interswitching limits in the rail industry.

"The government is opening the door to extended interswitching limits for specific regions or goods without any due process to assess the potential consequences for railways and the Canadian economy. This action could hit Canada's railways by opening their business to unfair poaching by U.S. railways without any reciprocity," said CN President and Chief Executive Officer Claude Mongeau in a press release. "Beyond causing financial harm to CN, it could drain traffic away from Canadian ports and cause the loss of jobs, reduce investment and undermine tax revenues across Canada."

The legislation also would give the CTA "a highly intrusive role" in railway operating matters by arbitrating service-level agreements for specific shippers, with the potential to cause costly inefficiencies in the system, he said.

"CN firmly believes that commercial incentives and effective supply chain collaboration are the best ways to promote rail investment in infrastructure and resources to transport increased volumes of grain and other freight," said Mongeau.

The legislation is a missed opportunity to take an even-handed approach and encourage supply chain collaboration, he believes.

"The legislation does not address the root cause of the current grain situation and will do little to move more grain, now or in the future," said Mongeau. "If the government is going to go through with this legislation, we urge it to also subject grain elevator companies to greater regulatory oversight in order to ensure proper coordination and adequate resource allocation, with a view to creating surge capacity when crops are more sizable than the norm."