CN to appeal Ottawa’s freight embargo ruling

The CTA’s Vancouver investigation makes it clear that freight embargoes are to be used only as a tool of last resort

The Canadian Transportation Agency has ruled that Canadian National Railway breached service obligations to shippers in the Canadian pulp industry when it announced plans to impose rail freight embargoes on pulp and paper shippers 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 officials said they intend to appeal, claiming the decision to use embargoes was “appropriate and necessary.”

“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 has 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 decision, CN issued a news release, confirming plans to appeal the ruling.

“CN disagrees with the CTA’s conclusions … and intends to appeal the decision to the Federal Court of Appeal,” the railway 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.

Freight embargoes are used to restrict the flow of rail traffic, but according to federal regulators, they are to be used only under certain circumstances and cannot be used to discriminate against any particular commodity or shipper.

A total of 15 freight embargoes were issued by Vancouver area railway companies in late 2018 and early 2019, including 12 by CN and three by Canadian Pacific Railway.

In its 29-page ruling, the CTA ruled that most freight embargoes issued by CN in that period 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 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.”

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 grains and oilseed to export terminals owned by Cargill and Richardson International.

Rail congestion issues began to emerge in the Vancouver area in October of 2018 and worsened over the following two to three months.

Traffic volumes coming into 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.

In announcing its intention to appeal, CN said the CTA’s ruling that the railway breached its statutory obligations was based solely on CN’s September 2018 announcement stating that the railway intended to regulate the flow of wood pulp shipments during December of 2018 for the purpose of avoiding congestion.

CN argued that the agency’s investigation was supposed to be focused on freight rail service issues that occurred during the four-month period of October 2018 to January 2019” with particular focus on “congestion at CN’s Thornton Yard.”

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, CTA chair Scott Streiner 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.

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