Small shippers feel rail legislation created winners, losers

Small shippers feel rail legislation created winners, losers

Federal legislation aimed at improving prairie grain movement is a step in the right direction, said witnesses appearing before the Senate agriculture committee in Ottawa May 14.

However, there is no guarantee that Bill C-30, the Fair Rail for Grain Farmers Act, will benefit all grain shippers equally.

Small shippers, including short-line railways and farmer-owned grain terminals, will still be at the mercy of big railway companies, which currently decide where rail cars are allocated and when.

“I think the fact that we are talking and we are working toward a longer-term solution is very positive and I think the legislation has got the attention of everybody,” said Perry Pellerin, general manager with GNP Grain Source Group, a short-line consultant in Calgary.

“Finally, finally we are all collectively standing up to the railways and saying, ‘that’s enough, we have to be better,’ ” he said.

“But I still have some fears for the smaller shipper.”

Witnesses who spoke to Bill C-30 in Ottawa last week generally acknowledged that the proposed legislation will result in better grain movement.

However, some witnesses expressed concerns that the legislation could have unintended consequences.

Regulations that require large railway companies to move one million tonnes of grain each week have already hurt smaller shippers.

Art Enns, a Manitoba farmer and director with Grain Growers of Canada, said shipments of Canadian oats to the United States are still well below normal levels.

Enns said Canadian oat producers are missing out on lucrative cash prices being offered by U.S. mills and losing market share to producers in other countries.

“The past two months have seen some improvement (in shipments) to the United States. However, we still hear that Australia and other suppliers are positioning themselves as more reliable exporters,” said Enns.

“We find ourselves losing markets that we spent years building. This is unacceptable.”

Enns said government efforts to improve rail service will result in a system that is “more balanced and accountable.”

However, he encouraged Ottawa to back Bill C-30 with meaningful regulations that will ensure adequate service for all shippers, regardless of where they are shipping grain.

“Remedies to date have focused largely on the west coast ports to the detriment of other corridors, especially the southern corridor,” Enns said. “It is very important that the government use the expanded role of the grain monitor to track railway allocation against demand, by corridor and destination, on a weekly basis.”

Ken Eshpeter, chief executive officer of Battle River Railway in east-central Alberta, offered a similar assessment, suggesting that regulations requiring Canadian National Railway and Canadian Pacific Railway to haul one million tonnes 
of grain per week have created winners and losers in the shipping community.

“When the federal government implemented its (million-tonne-per-week) performance requirements this spring, the problem of car allocation for short lines was actually made even worse,” said Eshpeter.

“Big rail merely sent more cars to big and near-to-port shippers.… Short lines have suffered. Saskatchewan has suffered.”

Eshpeter said BRR is still waiting for cars to fill sales orders that were scheduled for shipment in early March.

“A short line is totally at the mercy of its interchange partner, in our case CN, for car allocation,” he said.

CN president Claude Mongeau said the root causes of this year’s rail car backlog were a record harvest in 2013 and a prolonged winter with record cold temperatures.

Last year’s record harvest will require that each of Canada’s major railways carry an additional 10 or 11 million tonnes of grain this year.

“Ten million tonnes is twice as much as all the potash we move. It’s more than all the lumber we export out of Canada and it’s almost as much as all the coal that we export from Canada,” Mongeau said.

“The supply chain — railroads and grain elevator companies — are not designed to move that much (extra) grain. The only way we could … do that would be to displace other commodities.”

Mongeau said Ottawa’s response to last year’s record harvest and last winter’s record cold temperatures is a bill that “lacks balance and perspective” and unfairly targets railroads.

He said Ottawa and grain shippers need to recognize that constraints exist at other points in the supply chain and that cold weather results in shorter trains and reduced railway capacity.

“If it’s cold every day for the full year, we may need as much as 30 to 50 percent more trains, but of course we don’t have 30 to 50 percent more locomotives, we don’t have 30 to 50 percent more crews and we don’t have 30 to 50 percent more line capacity,” he said.

“Other commodity sectors understand that. They don’t go to Ottawa complaining, and we don’t have royal commissions and we don’t have finger pointing. We have honest balanced discussion about the adversity that we face.”

He said CN has historically done a good job of preparing for winter and planning for surge capacity in the grain sector.

“The one thing that we will change in the future is we will be much more prescriptive about what it is that we cannot do in winter so that people don’t make the wrong assumptions and then blame us afterward.”

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