It didn’t take long.
Just days after Parliament’s return from summer break, the government’s Fair Rail for Grain Farmer’s Act was facing its first real test: Canadian National Railway would be fined.
Transport minister Lisa Raitt made the announcement of the undisclosed fine in a statement the evening of Sept. 17. Word of the fine came just hours after CN president Claude Mongeau told a CIBC investors conference the railway hadn’t been meeting federal grain volume targets because there wasn’t enough grain left in the commercial system.
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However, it remains unclear what prompted the sudden government action. The minister’s office refuses to say how many days or weeks CN missed. The information, her office insists, is “commercially sensitive.”
Under the legislation passed at the end of June, the fine amount is up to the minister’s discretion but can be as high as $100,000 per day.
As of Sept. 22, CN had yet to be contacted by Transport Canada or the minister’s office about its looming punishment, and no information about the fine had been posted to the department’s website.
However, news of the pending fine spread like wildfire through Ottawa’s agriculture community, where the conversation continues to be dominated by issues related to grain and rail.
With concerns about this year’s crop quality, Canada’s millers are warning they’re already experiencing delays in grain shipments, which is yet another test for the government’s grain bill.
“We are not where we need to be,” National Miller’s Association president Gordon Harrison told more than 50 industry stakeholders, including a Japanese official and representatives from both national railways, at a meeting in Ottawa Sept. 15.
Millers warned that U.S. mills’ reserve stocks still haven’t recovered from last year’s transportation bottlenecks, thanks in part to ongoing fights with the railways to ship goods south.
Shippers have said that one of the unintended consequences of the federal government’s ongoing minimum volume requirements is a favouring by the railways to ship on higher volume east or west routes, rather than smaller corridors.
Meanwhile, back on Parliament Hill, the warnings from the milling industry were overshadowed with news that Canadian Pacific Railway had filed a court challenge against the federal government.
In the suit, which was filed with the Federal Court of Appeal in August, CP alleges that changes made by the federal government to interswitching rules will cost the company more than $13 million per year in operational and administrative costs.
New regulations imposed Aug. 1 extended the interswitching radius to 160 kilometres from 30 km. Both railways have warned that the move opens them up to poaching from American rail lines.
They insist that the move will also make grain even harder to move because it can be cumbersome and difficult to co-ordinate.
CN has not said whether it plans to join the CP suit.
CN could also decide to challenge accusations regarding the pending fine in court once both parties address the matter with the Transportation Appeal Tribunal of Canada.
Few were expecting the federal government to make it through the fall sitting without at least a handful of grain transportation questions. Still, given recent events, the issue is unlikely to dissipate anytime soon.
Raitt and agriculture minister Gerry Ritz have committed to finding, or at least mitigating, a solution to supply chain woes.
Therefore, surviving these first punitive and legal challenges is im-perative, given the industry’s wariness about the strength of legislation.
With stakeholders planning on using the ongoing rail service review to push for even tougher changes, including a clearer definition of service and reciprocal penalties, all eyes will be on Ottawa’s response to these latest developments.
Poor movement across the supply chain also risks becoming an election issue, particularly given its importance in the eyes of the Conservative base.
With all three parties ramping up their election campaigns, targeting farmers with promises of better service is an easy strategy for opposition parties.
One also cannot expect it to stop creeping into conversations with international customers. If the bill fails to withstand the challenges, Canada’s fragile credibility with international importers could see further damage, while patience here at home could become even more frayed.
And no one wants that.
