Rail transport changes make no mention of costing review

The proposed Transportation Modernization Act, although widely supported, comes without a full railway costing review.

However, that was a Liberal pledge during the 2015 election campaign and something farm and commodity organizations have long called for.

Agricultural Producers Association of Saskatchewan president Todd Lewis said the issue is still top-of-mind for producers.

“We are still expecting that it is going to be done in the future,” he said last week.

Other organizations hold similar views.

Bill C-49 promises to tweak the maximum revenue entitlement (MRE), which regulates grain shipping fees, and introduce long-haul interswitching to allow railways to travel on one another’s track in some cases, but it does not mention the costing review.

University of Saskatchewan agricultural economist Richard Gray said the bill balances interests in the grain industry.

“I think they’ve obviously decided to keep the MRE but there’s no commitment to do a costing review, which would reduce that rate, so in that sense it’s a bit of a compromise,” he said.

He said retaining the MRE “eliminates any perverse incentives for the railways to restrict supply to get higher rates.”

And, they are still well paid for the services they provide, Gray said.

He said the move to long-haul interswitching of 1,200 kilometres or half the Canadian haul, whichever is greater, likely wasn’t designed for grain.

“My theory is that that mainly comes from outside of agriculture, that it’s really about captive mines and forestry and that type of thing,” he said. “It also might be useful for Prince Rupert.”

Gray said extended interswitching of up to 160 km wasn’t used much by grain shippers but it does prevent the railways from using undue market power on a particular shipper or line.

“It does enhance competition. That isn’t sufficient to keep rates under control, that’s why I think the MRE is still there, but I think it helps,” Gray said.

He also said American railways aren’t likely to take away grain business from Canadian companies.

“My guess is a lot of these kind of provisions don’t really get used,” he said. “If a shipper says, for example, ‘I’ve got a bid from a U.S. railway to move’ the Canadian railways match it.

He added that the provision might change pricing more than logistics.

“It’s just that much more efficient if you use one railway to get from A to B,” he said.

However, Canadian Pacific Railway said it is concerned about potential access to the Canadian rail network by U.S. railroads without reciprocity.

“It could create an uneven playing field and disadvantage Canadian railways vis-à-vis those in the U.S. with a negative impact on jobs and investment,” said CP chief executive officer Keith Creel.

Contact karen.briere@producer.com

About the author



Stories from our other publications