A federal order that imposes minimum weekly quotas on the amount of western grain that the major railways must haul comes as welcome relief to the prairie grain industry.
Canada’s major railway companies will be required to carry a combined total of one million tonnes of western Canadian grain each week, the equivalent of about 5,500 rail cars a week for each railway.
Railways have a grace period of four weeks to ramp up their operations to meet the new limits. After that, failure to meet the quota could result in fines as high as $100,000 per day.
Grain shippers welcomed the order but industry observers already doubt that the quotas will be achieved on a consistent basis.
“I think it’s going to be a challenge,” said Mark Hemmes, president of Quorum Corp., which runs the Grain Monitoring Program.
“The issue is not about whether you can do a week or two like this. The issue is whether you can do this week, after week … on a sustained basis.”
Details of the federal order are sketchy.
Transport Canada official Josianne Martel said in an email that the railways must report to the transport minister weekly.
Martel’s email contained no details about how the railways would report their weekly movements, how weekly reports would be scrutinized and what would constitute a tonne of grain carried.
As of March 10, Quorum had received no details about how grain movements would be reported or monitored.
“I would imagine they’ve got a plan, but it doesn’t involve us,” Hemmes said.
He said the challenges involved in moving prairie grain to market will not disappear when spring weather arrives.
New challenges will include rural road bans, spring flooding, avalanches and rock slides.
“I don’t know that the railways will be able to sustain 5,500 (cars per week) through that entire period.”
Canadian National Railway and Canadian Pacific Railway have never delivered one million tonnes in a single week to port locations that handle western Canadian grain, according to Canadian Grain commission statistics collected over the past two and a half years.
The highest combined weekly tonnage delivered to Canada’s four port locations has never exceeded 800,000 tonnes since Aug. 1, 2011.
The closest the railways came was in Week 9 of the 2013-14 crop year, when 785,000 tonnes were unloaded at Thunder Bay, Churchill, Vancouver and Prince Rupert.
The federal order includes grain delivered to Eastern Canada, the United States and domestic markets.
CP said it is disappointed with the order in council.
“CP believes the actions of the federal government raise more questions than … answers and only (focus) on the railways and not the entire supply chain,” said spokesperson Ed Greenberg.
CN president Claude Mongeau said his company will do its part.
“Our assessment shows that an upper limit of around 5,500 cars per week may be achievable, but only if all members of the supply chain work together closely.”
CN said it expects to move an additional 10 million tonnes of export grain this year because of last year’s record harvest.
“No supply chain in the world can reasonably be expected to handle a 10 million tonne increase in traffic on such short notice,” Mongeau said.
CN said more regulations for grain transportation would be ill-advised.
“(They) would lead to adversarial relationships within the supply chain, at a time when collaboration is essential,” he said.
Robert Ballantyne, chair of the Coalition of Rail Shippers, said Ottawa’s decision to impose a million-tonne-per-week quota will require the railways to live up to promises they made to grain shippers last fall.
“If the railways say they can do that, then it was reasonable for the government to put that into the targets,” Ballantyne said.
“But I think … this will be certainly be of concern to a number of other industry groups that are big users of rail.”
Added Hemmes: “Short of stealing assets and resources away from other commodities and creating problems for other commodity groups … I think we’re in a bind.”