Widespread grain industry support for new federal transport legislation introduced last week comes with questions about how new long-haul interswitching provisions will work and what happens when extended interswitching expires this summer.
Farmers and grain companies applauded Bill C-49, the Transportation Modernization Act, for containing much of what they had asked for to improve rail service.
It includes reciprocal financial penalties, a strengthened definition of adequate and suitable service, improved data sharing by the railways, and maintenance but tweaking of the maximum revenue entitlement (MRE).
However, the new legislation likely won’t be in place when the Fair Rail for Grain Farmers Act and its terms of 160-kilometre extended interswitching ends Aug. 1.
The new bill promises long-haul interswitching of up to 1,200 km or 50 percent of the Canadian haul, whichever is greater. It will apply across the country and to all commodities.
Jeff Nielsen, president of Grain Growers of Canada, said farmers told Transport Minister Marc Garneau during a discussion May 18 that they would like the 160 km limit to remain in place in the interim.
“The minister stated in front of the group that they will be closely monitoring rail transportation into the new crop year and if they had to they would react,” he said.
“We would still like to see that part carry on until the new act is in effect.”
Other organizations, including the Canadian Canola Growers Association, have had similar comments.
“While C-49 introduces a new concept called long-haul interswitching as a replacement, the concept appears quite complex and will require considerable evaluation to assess its workability,” said canola growers association chief executive officer Rick White.
Former Agriculture Minister Gerry Ritz, who said the bill “got most of it right,” called that change troubling.
“I’m not sure how you make that work,” he said.
“We’re talking akin to joint running rights. It’s something that isn’t doable with today’s safety concerns, and interoperability just isn’t there. When cars move on, who’s liable for what when it’s changed over to someone else’s line?”
Barry Prentice, a transportation and supply chain expert at the University of Manitoba, said long-haul interswitching implemented Canada-wide could be a “disaster” because it is non-reciprocal with U.S. railways.
“We all live within about a couple hundred miles of the U.S. border, so well within that 1,200 km number,” he said. “If you are allowed to designate a U.S. carrier, you can imagine that U.S. carriers would be trying to market to Canadian shippers.”
The railways are still assessing the legislation.
Canadian Pacific Railway did not respond to a request for comment.
Canadian National Railway president Luc Jobin said, “Our initial view is that long-haul interswitching may have unintended consequences with respect to investment and will give U.S. railways access to the Canadian market at regulated rates, without reciprocity.”
On the other hand, he said he welcomed the changes to the MRE.
Those changes include a proposal to remove containerized grain from the calculations. Pulse Canada and Canadian Special Crops Association CEO Gordon Bacon said the industry would be watching.
“The industry expectation is that change must lead to improved containerized service, capacity and performance at competitive rates,” he said. “Having clearly defined performance measures in place will be key to determining if the removal of container traffic from the MRE has achieved the intended results.”
Under the MRE proposal, investments such as purchases of new hopper cars by one railway will no longer benefit the other.
Cereals Canada president Cam Dahl said this removes a disincentive to invest in cars and ultimately better service.
Garneau said he wants grain moved efficiently.
“It’s 10 percent of what our railways carry in this country and we’re extremely grateful to the farmers of this country who produce large amounts of grain, most of which goes to export markets in the United States or to foreign destinations,” he said in a news conference. “It is in our interest that it’s all working.”
Canadian Federation of Agriculture president Ron Bonnett urged Parliament to pass the bill as quickly as possible but there are only a few weeks left before the House breaks for the summer.
Meanwhile, federal Agriculture Minister Lawrence MacAulay also announced last week the extension of the Crop Logistics Working Group’s mandate for a fourth time. The group acts as a stakeholder forum to identify problems and solutions in the grain handling and transportation system.
MacAulay said the group would have input as the new transportation initiatives work their way through Parliament.
The grain monitoring program through Quorum, which monitors and reports on system performance, will continue for another three years, he added.