Running rights, interswitching changes may spur competition

The federal government’s plan for getting the grain transportation system working efficiently is a step in the right direction, but it is only one step.

The longer-term needs of farmers, grain handling companies and others that depend on the rail network to sell their goods and earn their livelihoods go much deeper.

Bill C-30, the Fair Rail for Grain Farmers Act, is expected to speed through Parliament on a fast track and should at least help address some concerns.

Among its benefits is extending the weekly one million tonne shipping target to Aug. 3.

However, prairie farmers will still be left with a huge carryover, which Agriculture Canada estimated at 22.6 million tonnes in a February report. That will lead to continued price discrepancy between what farmers are paid at the elevator and what is being offered at export positions.

The bill also does a decent job of addressing interswitching regulations for railways by extending interswitching distances to 160 kilometres from 30 km. Interswitching allows one railway company to seek business by using a portion of another company’s tracks, in effect increasing the prospect of competition.

Grain shippers also got something that they have been asking for, at least a measure of it, although details remain sparse. There are provisions to give the Canadian Transportation Agency more authority to regulate certain elements of commercial service level agreements between railways and grain shippers.

Shippers have long complained that railways have been reluctant to negotiate service agreements that contain penalty clauses for service failures. Bill C-30’s final version must include provisions for this.

There were promising signs last week that this would be the case. Saskatchewan agriculture minister Lyle Stewart changed his initial disappointment at the bill to a more conciliatory tone following a meeting with federal agriculture minister Gerry Ritz. Stewart said he felt reasonably assured that financial penalties would be included.

Due to the need for speedy action, Bill C-30 may present farmers with their best chance at short-term relief, but long-term change is also needed.

It’s a long way from a sure bet that last year’s bumper crop is the new normal, but infrastructure investment to boost capacity and efficiencies to a more appropriate level is a must.

It might also be time to reopen the debate around open running rights. It would grant licences for railways to run on each other’s tracks, could offer farmers and grain companies much needed rail competition and encourage better service from Canadian National Railway and Canadian Pacific Railway.

Ferroequus Railway applied to the CTA in 2002 to haul grain over CN lines from Camrose to Prince Rupert, B.C. Under the legislation, Ferroequus had to prove it would be in the public interest to grant the licence. That should be amended to place the onus on the national railways to prove it would not be in the public interest to grant running rights.

Regardless, it seems the Ferroequus request might gain more traction in today’s environment, even under the old strict rules, given the wording of the 2002 CTA ruling:

“Ferroequus has not established the existence of a rate or service problem in the relevant markets nor has it established that the granting of running rights would alleviate any lack of adequate and effective competition.”

Let us just say that existence of said problem has now been established.

About the author



Stories from our other publications