The Canadian Transportation Agency has ruled that Canadian National Railway breached its level of service obligations to shippers in the Canadian pulp industry when it announced plans to impose rail freight embargoes on the pulp and paper industry last September.
The CTA’s findings were the result of an investigation launched by the agency in January — the first such investigation launched by the agency under “own-motion authorities” that were introduced when the Canada Transportation Act was amended last May.
The ruling also sends a clear signal to Canadian rail carriers that freight embargoes are to be used only as a tool of last resort and should not be imposed unless railways have made every other reasonable effort to address traffic challenges through other means.
“CN breached its level of service obligations when it announced its intention to impose embargoes on wood pulp shipments in September 2018, several months before rail transportation challenges emerged in the Vancouver area,” the CTA said in an April 15 ruling.
The agency also ordered CN to develop and submit a “detailed plan, each year for the next three years, to respond to surges in traffic that occur in the Vancouver area … with a view to avoiding or minimizing the use of embargoes and maintaining the highest level of service reasonably possible.”
Hours after the CTA handed down its ruling, CN issued a news release saying it intends to appeal the decision.
“CN disagrees with the CTA’s conclusions … and intends to appeal the decision to the Federal Court of Appeal,” the railway company said.
CN argued that efforts to regulate shipments of wood pulp in late 2018 were aimed at avoiding congestion in the Vancouver railway network.
“CN maintains that this was an appropriate and necessary measure, in the circumstances,” the company said.
In its 29-page ruling, the CTA also ruled that other freight embargoes issued by CN in late 2018 and early 2019 were justified, including embargoes that:
- restricted incoming rail traffic destined for CN’s Thornton Yard in Surrey, B.C.
- restricted the movement of rail cars to Vancouver area container terminals.
The agency made no finding in respect to a CN embargo that restricted the movement of freight — including agricultural export products — to the Fibreco export terminal on Vancouver’s North Shore.
It also set aside preliminary observations relating to delayed shipments of grain and oilseed to export terminals owned by Cargill and Richardson International.
Freight embargoes are used to restrict the flow of traffic, but according to federal regulations, they are only to be used under certain circumstances and they cannot be used to discriminate against a particular commodity or shipper.
Fifteen freight embargoes were issued by Vancouver area railway companies in late 2018 and early 2019, including 12 by Canadian National Railway and three by Canadian Pacific Railway.
In its ruling, the CTA said embargoes issued by CP were justified given the level of rail congestion that had emerged in parts of the Vancouver area rail network.
The agency also found that BNSF Railway provided to shippers the “highest level of service … that it could reasonably provide in the circumstances.”
Rail congestion issues began to emerge in the Vancouver area in October of 2018 and worsened over the next two to three months.
Traffic volumes coming into to CN’s Thornton Yard — the company’s main rail car handling facility in the Vancouver area — exceeded outgoing traffic, resulting in congestion and delays that affected shipments of pulp, paper, pulse crops, flax, canola, and canola meal, among other products.
The CTA collected written submissions from rail companies and shippers over a period of two to three months and gathered additional testimony during oral hearings held in Vancouver in late January.
In announcing its intention to appeal, CN said the CTA’s findings related solely to a September 2018 announcement that said CN intended to regulate the flow of wood pulp shipments during December 2018 for the purpose of avoiding congestion.
However, CN argued that “the focus of the agency’s investigation was possible freight rail service issues in the Vancouver area during the four-month period of October 2018 to January 2019” with particular focus on “congestion at CN’s Thornton Yard,” CN said.
The agency concluded that CN’s regulated flow of traffic at Thornton Yard was “justified in the circumstances,” the railway added.
In an April 15 news release, Scott Streiner, chair and chief executive officer of the CTA, said freight rail service is essential to manufacturers, farmers, importers, shippers and the Canadian economy.
“Through this investigation, the CTA was able to quickly look into possible issues with rail service in the Vancouver area that were brought to its attention in late 2018 and early 2019,” Streiner said.
“The determination provides all parties with greater clarity on when rail service embargoes are, and are not, lawful.”