Canada proposes new rail regulations
Canadian regulators introduced railroad legislation Wednesday that would set a grain-transportation minimum for the country’s rail carriers in reaction to a grain crop in Western Canada that is 50-percent higher than normal.
The legislation would also let the Canadian Transportation Agency extend interswitching distances in Alberta, Manitoba and Saskatchewan from 30 kilometers to 160 kilometers for all commodity types. In addition, railroads will have to send the government data regarding grain shipments on a tighter timeframe; the Canadian Transportation Agency will review these data sets and help the government determine grain-volume minimums for each year.
The “Fair Rail for Grain Farmers Act,” proposed to Parliament by Transport Minister Lisa Raitt and Agriculture Minister Gerry Ritz, will, they said, help create a transparent supply chain while bolstering the shipper-farmer relationship and creating new efficiencies in the transportation of grain. The legislation would amend the Canada Transportation Act and the Canada Grain Act.
This year’s grain crop weighed in at 76 million tons, an amount that has put “significant pressure” on the supply chain in Western Canada, Ritz said. He added that these higher yields are becoming the norm.
“This legislation creates the necessary tools to help ensure Canadian shippers have access to a world-class logistics system that gets their commodities to market in a predictable and timely way,” Ritz said in a statement. “Farmers and our economy need a system that works today and tomorrow, with the capacity to move what is grown.”
Raitt and Ritz had already decreed that Canadian National and Canadian Pacific carry a minimum of 500,000 tons of grain each week by April 7. The order, which is good until June 7, carries a CAN$10,000 fine ($8,971) for each day a carrier is in violation of the ruling.
"A strong rail-based supply chain system is essential so that Canadian shippers can remain competitive in domestic, continental and offshore markets," Raitt said, regarding the new legislation. "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.”
Claude Mongeau, Canadian National’s president and chief executive officer, said the legislation could bring on “unfair poaching” by railroads in the U.S. by extending the interswitching limits.
"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,” he added.
Mongeau also said the new regulation would give the Canadian Transportation Agency a “highly intrusive” arbitration role that would insert the organization further into service-level disagreements between railroads and shippers.
“CN is disturbed that the government has decided to punish railways with re-regulation for an outsized crop and winter conditions totally beyond their control,” Mongeau said. “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. We also have deep concerns about the potential consequences of the government’s proposed new interswitching rules.”
The new grain minimums are a point of contention for Mongeau, as well.
“If the government is going to go through with this legislation,” he said, “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.”
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