Winter-from-hell rail service disputes still linger

Federal Court of Appeal says Canadian Transportation Agency exceeded its legal jurisdiction in car rationing ruling

Prairie farmers are probably all too happy to forget about the transportation crisis that slowed grain shipments to a crawl in the winter of 2013-14.

But for lawyers, judges and regulators, the fallout of the great grain derailment of 2013-14 is still being discussed and debated nearly three years later.

In a decision dated Jan. 12, 2017, the Federal Court of Appeal has ruled that the Canada Transportation Agency made “unreasonable errors of law” when it concluded that Canadian National Railway, in late 2013 and early 2014, breached its level of service obligations to Canada’s two largest grain-handling companies — Viterra Inc. and Richardson International Ltd.

In a decision delivered by Justice Marc Nadon, the Federal Court of Appeal supported CN’s contention that rulings made by the Canada Transportation Agency were flawed and should overturned.

CTA’s original decision was made about two years ago

In late 2014 and early 2015, roughly a year after grain transportation problems had reached their peak on the Prairies, the agency ruled that CN had failed to meet its service obligations to Viterra and Richardson.

CTA also ordered CN to take remedial measures to make up for an alleged shortfall in rail car deliveries. CN appealed that decision, arguing that the CTA acted outside of its jurisdiction.

“It is … my opinion, that in concluding that CN had breached its level of service obligations … the agency (CTA) made unreasonable errors of law, which justify intervention on our part,” Nadon wrote in his decision.

“I would therefore allow the appeals, with costs, I would set aside the agency’s preliminary and final decisions, and, in the circumstances, I would send the matter back to the agency for reconsideration.”

Canada’s 2013 grain crop was the largest on record with total harvested volumes estimated at nearly 76 million tonnes.

CN responded to the resulting surge in demand for freight service by implementing car rationing.

The rationing methodology assessed each shipper’s use of CN grain transportation services during a post-harvest peak period in the 2012-13 crop year, and used those figures to assign each shipper a percentage share of CN’s total available rail car supply.

The allocations were communicated to Viterra and Richardson in late 2013 and early 2014.

However, when extreme weather affected the railway’s ability to move cars, the actual number of cars provided by CN to the grain companies fell short of the percentage-based allocations calculated under CN’s rationing system.

In its submission to the appeals court, CN contended that the CTA lacked jurisdiction to determine whether the car allocations — and CN’s failure to honour them — constituted a breach of obligations.

It also argued that the CTA exceeded its jurisdiction by prescribing how railways must design and implement car rationing policies, adding that the CTA confused CN’s car rationing methodology with its statutory obligations.

“In CN’s view, the agency was not mandated to ‘broadly legislate how all railway companies must move their traffic or conduct their operations,’ ” Justice Nadon wrote.

CN issued a brief statement in response to the ruling.

“We strive to always meet our customers’ demands through various service options and offerings,” it wrote in a Jan. 27 email.

“But in times when capacity is restrained due to factors out of our control, we will use a fact-based methodology to allocate available capacity incorporating commercial agreements and our common carrier obligations in order to provide service.”

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