It remains to be seen whether Ottawa’s move to expand interswitching on prairie railway lines will increase competition among rail carriers.
However, there is little doubt that interswitching provisions contained in the Fair Rail for Grain Farmers Act are generating a wide range of opinions among shippers and rail carriers.
Interswitching allows a railway to provide service to a grain elevator, even if the railway does not have direct track access to the elevator.
Under current interswitching provisions, the railway company that controls track access is obliged to move cars from the elevator, at a federally regulated freight rate, to an interswitch location where another rail carrier can resume the haul.
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It must deliver hopper cars to a regulated interswitch as long as the distance between the elevator and the interswitch is 30 kilometres or less.
The Fair Rail for Grain Farmers Act would expand interswitching provisions in Saskatchewan, Alberta and Manitoba to 160 km.
Farmers and grain handlers have generally welcomed the move, saying it will increase competition among railway carriers, or at least provide an incentive for railway companies to offer better service.
Wade Sobkowich, executive director of the Western Grain Elevators Association, said interswitching can be a cumbersome way to move grain but it has the potential to improve service.
“The fact that it’s there as a backstop isn’t bad at all,” said Sobkowich. “There’s only an upside to this, no downside.”
Railway companies were quick to criticize the new provisions, suggesting they will expose Canadian railways to competition from U.S. carriers that operate under a different regulatory regime.
“(Canadian National Railway) is deeply concerned with the government’s decision to open the door to extended interswitching limits without any due process to assess the potential consequences for railways and the Canadian economy,” CN said in a March 28 email.
“If it proceeds, the new interswitching regime would drive outcomes totally at odds with thoughtful and sound public policy.”
CN said amended interswitching rules would allow U.S. railroads to poach Canadian rail traffic, erode the rate structure and economic viability of Canadian railways and drive traffic to U.S. ports, thus reducing traffic and employment at Canadian ports.
In a March 28 news release, Canadian Pacific Railway said it was disappointed with Ottawa’s decision to introduce legislation that does nothing to improve grain movement but has the potential to cause “great damage” to the Canadian rail transportation system.
“CP … believes that the expansion of regulated interswitching could seriously impact Canada’s competitiveness, as it effectively transfers traffic that normally would move over Canadian railways and ports to U.S. railroads and ports,” it said.
“Interswitching will also lead to double handling of grain shipments, which will slow down the grain supply chain, negatively impacting transit times.”
Federal officials say there are 18 interswitch locations on the Canadian Prairies.
Only 14 primary elevators in Western Canada are affected by interswitching under the current 30 km provisions.
Increasing the interswitch distance to 160 km would give 150 elevators potential access to service by more than one railway, including U.S. railways.
Granting American rail carriers access to Canadian grain elevators was a calculated strategy aimed at increasing the movement of western Canadian grain through southern rail corridors and U.S. export facilities.
“I think it would be very positive,” said Ritz.“It would actually allow Burlington Northern … to run right up into Winnipeg and certainly with the Portal development (near North Portal, Sask.,) … it’s an excellent opportunity to have that flow going south and also west through Seattle as a safety valve.”
CN is already involved in a dispute with the Canadian Transportation Agency over an interswitch ruling that the agency made last year.
According to CN, the CTA ruled that a 30 km interswitching provision would apply at Emerson, Man., giving the BNSF access to CN’s Canadian traffic within 30 km of Emerson.
CN challenged the CTA decision, arguing that the agency had no authority to regulate the interswitch because the interchange point is not entirely within Canada.
CN is appealing the CTA decision to the Federal Court of Appeal.
Extending the Emerson interswitch to 160 km would give BNSF access to CN traffic in Winnipeg and beyond.
“CN would have to deliver traffic to BNSF at regulated, non-compensatory rates established by the CTA that would be well below commercial rates,” CN said.
“Yet BNSF, in the U.S., would get to charge fully commercial rates for the traffic CN hands off to it.”
