Farm groups appearing at a transportation committee meeting make the argument for keeping interswitching rules
Extended rail interswitching provisions should stay in place even if they aren’t being used that much, grain representatives told the federal standing committee on transportation last week.
Cereals Canada, the Grain Growers of Canada and the Canadian Federation of Agriculture all said the 160-kilometre radius implemented in the 2014 Fair Rail for Grain Farmers Act should not be eliminated as recommended in the Emerson review of the transportation system.
Extended interswitching “should be extended indefinitely,” said Jean-Marc Ruest, vice-chair of Cereals Canada. “This provision is proving to be an effective tool.”
Interswitching regulations force major railways to let competing rail companies use portions of their track, which increases carrier competition.
However, the committee also heard from the Canadian Transportation Agency, which said the provision was used only 16 times in 2015, representing slightly more than 2,900 cars.
CFA vice-president Humphrey Banack said it allows shippers to shop for lower freight rates.
“It may not be a lot, but it’s important to make sure that it’s always there,” he said.
Ruest said the grain monitoring agency Quorum has reported that in the 2015-16 crop year, 4,795 cars were moved outside of the regular 30 km interswitching limit. The longest distance was 125 km and the shortest was 33 km, he said.
“The shippers have reported savings of $5.2 million,” he said. “That is from what they have seen as being the rates that were offered initially compared to what they ultimately got as a result of using the interswitching provisions.”
Randall Meades, CTA chief strategy officer, said there isn’t enough hard data to measure the provision’s impact.
He agreed that anecdotal evidence shows it is at least reducing conflict between shippers and carriers.
Fiona Cook, executive director at GGC, said the greatest use of the provision has been passive.
“The mere existence of the option can provide shippers with the necessary leverage to obtain better terms and conditions,” she said.
CTA chief compliance officer Fred Gaspar said this helps create market balance because the railways know they must provide access and negotiate.
In his appearance before the committee Sept. 22, David Emerson, who chaired the CTA review panel, said the recommendation to phase out the extended provision clause was made because it applied only to the Prairies.
“It is an attempt to add a dimension of competition into a system which, to be very blunt, is rife with power imbalances between major service providers (and) small shippers,” he said. “Interswitching is one small tool to help the agricultural sector around that.
“We need to look at interswitching in a larger sense…. Ideally it should probably cover other commodities as well.”
Cook said the extension would have to be greater to accommodate fertilizer or petrochemical companies.
“Ideally, we would like to see it go to 250 (km), because then all the grain elevators would have access to an interchange,” she said. “It definitely benefits other commodities, but longer distance would be required.”