advertisement

---

On Friday, Transport Canada announced that the Rail Freight Service Review panel issued their interim report on an analysis of the nation’s rail-based logistics system and quality of freight-rail service provided to shippers.

Among its findings, the three-member panel determined that:
• the rail-based logistics system has gone through a period during which “rail service was less than adequate”;
• some service issues are attributable to non-railway stakeholders, including poor forecasting and over-ordering of rail cars, but most issues relate to “railway behavior”;
• there are no practical ways to directly increase rail competition;
• railroads have instituted a number of initiatives that are generating service improvements for shippers and should continue;
• it will take some time for the initiatives to be fully implemented and for the benefits to be fully achieved;
• the government should assess the success of the initiatives after a reasonable transition period, therefore undertaking an assessment in 2013; and
• regulatory solutions should be implemented under a “fallback” provision if the 2013 assessment concludes that the initiatives have not resulted in adequate service.

The panel recommends an approach that would provide railroads an opportunity to “demonstrate commercially their ability to properly deal with service issues on a sustained basis,” panel members said in an interim report summary.

”If adequate service is not achieved and sustained commercially, the panel recommends that legislative remedies be implemented,” they said.

The panel has invited stakeholders to provide comments on the interim report by Nov. 8. Panel members expect to issue a final report by year’s end.

The Forest Products Association of Canada (FPAC) is calling on the federal government to “act quickly and decisively” on the rail service issues identified in the interim report rather than wait three years, according to a statement issued yesterday.

“The interim report … correctly recognizes ‘there is a need for change’ and that ‘improvement in rail service is required.’ However, the panel is relying on CN and CP to voluntarily bring in the changes and says the government should only consider regulatory measures after 2013,” said officials at FPAC, which represents the interests of wood, pulp, and paper producers. “If the railways were serious about improving service they would have done so by now. Service is poor because there is no effective competition. A delay is simply unacceptable and a deep blow to resource communities in rural Canada that depend on rail shipping.”

CN disputes certain panel recommendations at this time while the Class I continues to “thoroughly” review the interim report and recommendations, CN officials said in a statement sent via email yesterday, adding that they plan to provide a “full, detailed response” during the comment period.

“CN wants to make clear it has issues with certain panel recommendations, which are disconnected from the panel’s factual research showing: solid Canadian railway transit times and order fulfillment performance; no discrimination on any of the key service dimensions; no evidence of structural market issues from a service standpoint; a robust rail regulatory framework in Canada; and all stakeholders in the supply chain — shippers and receivers, terminal operators, port authorities, truckers and steamship lines — are accountable for system performance, not just railways,” CN officials said. “Given the disconnect, CN does not see how the Canadian government could agree to implement the panel’s recommendations for new, intrusive government regulation of the rail industry.”

At the outset of the review, the government asked the railroads to develop “innovative, market-driven solutions” to service-related issues and CN has done just that by implementing a “vigorous series of commercial initiatives” designed to improve supply-chain performance, they said. This year, CN introduced a scheduled grain service in western Canada that has improved performance; the railroad has consistently achieved more than a 90 percent success rate in delivering specified cars to a specified elevator on a specified day since the beginning of 2010, CN officials said.

“Grain companies now can better schedule their staff at country elevators and waterfront export terminals, [and] sales can be made with more assurance the grain will be where it is needed,” they said. “This increase in scheduled reliability means a better export program.”

CN also signed supply-chain collaboration and service-level agreements with major Canadian ports and terminal operators that specify performance targets, service measures, and balanced accountability among all supply-chain participants within a commercial framework. In addition, the Class I instituted end-to-end shipment scorecards to instill greater accountability for meeting customer commitments, and identify and solve issues before they reach the “boiling point,” CN officials said.

Canadian Pacific also continues to demonstrate a commitment to its customers and service reliability, CP officials said in a statement emailed yesterday. The railroad has negotiated a number of service agreements with key supply-chain partners, including customers, ports and terminals, and implemented a number of new initiatives that focus on improving first-and-last-mile performance, including a yard reliability program.

“CP believes that commercial principles coupled with a stable regulatory regime is the best approach to promote supply chain coordination and investment. These are critical elements needed to enhance capacity and innovation in Canada's world-leading railway supply chain,” CP officials said. “The panel's own research … confirmed that the current regulatory regime for rail in Canada is robust. And so we do not agree with the panel's recommendation that additional regulation may be required post-2013.”

CP supports the government’s goal of improving overall supply-chain performance and has been actively engaged with the Rail Service Review panel throughout the process, they said. CP officials plan to meet with government officials during the next few weeks to discuss implementation of the panel's findings. For now, CP officials are in the process of reviewing the interim report and expect to provide a detailed response to the panel during the next few weeks.

— Jeff Stagl