Railway review is long overdue – WP editorial

Reading Time: 3 minutes

Published: May 10, 2007

FOR THE first time since Canada’s rail system was deregulated in 1995, the federal agency that oversees the country’s transportation system is officially informing Transport Canada that shippers want a full review of railway costs.

What took it so long?

It’s no secret that farmers and others in the agricultural sector who depend on the rails to move product to port have long cried foul over railway charges.

Many grain shippers complain that the railways have not passed along savings they have enjoyed since the grain handling system was streamlined and a less regulated environment began with the repeal of the Western Grains Transportation Act.

Read Also

A variety of Canadian currency bills, ranging from $5 to $50, lay flat on a table with several short stacks of loonies on top of them.

Agriculture needs to prepare for government spending cuts

As government makes necessary cuts to spending, what can be reduced or restructured in the budgets for agriculture?

Since then, freight rates have risen, farmers and handlers face increased costs and service problems abound. Yet railway profits are strong.

The average rate to ship grain to Thunder Bay, Ont., in 1994-95 was $14.72 per tonne. In the 1995-96 shipping year, the first after the Crow Benefit transportation subsidy was abolished, that shipment cost $31.23 per tonne.

In 2005-06, the rate was $34.75.

From 1995-96 to 2005-06, freight rates rose 11.3 percent.

In the same time frame, country elevators were replaced by centralized inland terminals, which can accommodate larger trains. They provide more efficient loading and offer railways more centralized collection points.

There is evidence that grain shippers have done their part to streamline the system. In 2005-06, 76 percent of grain was shipped under volume discount rates. The average discount in 2005-06 for shipping via 50-car or 100-car trains was $4.77 per tonne.

But those centralized collection points increased farmers’ costs for trucking over longer distances. They also had to buy or build more on-farm storage space to suit the requirements of the new system.

Meanwhile, in 2006, Canadian National recorded a net income of $2.1 billion, an increase of 34 percent from 2005. Canadian Pacific Railway’s net income for 2006 reached $796 million, a 47 percent increase from the previous year.

Grain handling has long been one of the most profitable aspects of railway business.

The improved profits are at least partly a result of the elevator consolidation that increased farmers’ costs, but costs are only one user complaint.

Grain shippers, including the Canadian Wheat Board and the Western Grain Elevator Association, which represent a majority of bulk grain shippers, have complained that better railway service that was to appear in the less regulated system has not materialized.

As well, a level of service complaint before the Canadian Transportation Agency alleges CN’s pricing programs discriminate against small shippers.

Then there was last week’s drama in the Senate. Representatives from Agricore United and the Western Canadian Shippers Coalition, which represents resource-based industries, went before the Senate transport and communications committee and explained their frustrations.

Shippers say they feel betrayed by the Conservative government because discussions they had with Transport Canada in May 2006 appear to have gone unheeded.

After grain shippers met with the department last year, federal transport minister Lawrence Cannon said a new bill would address concerns. In return, shippers dropped their requests that railways be held more accountable for failing to deliver rail cars on time.

The bill was expected to make it easier for small shippers to settle service disputes, provide rules for interswitching between railways to ease congestion at key choke points and institute more regular service reviews. But the bill now before the Senate maintains power in the hands of the railways.

Cam Dahl of Agricore United last week asked the Senate to amend the bill to force a review of railway service and to shorten the time for regular reviews to four years instead of eight.

Cannon must act on these requests.

When rail regulations were relaxed in 1995, it was to herald a new age of efficiency, reliability and service. Railways would compete with one another and with trucking companies to keep costs low and service high. The idea then was to get government out of the way so industry could lead.

Critics warned that without proper safeguards, the lack of true competition between the two railways would leave shippers at their mercy.

Their forecasts are now reality.

It is time Transport Canada and the transport minister heeded their advice.

Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.

explore

Stories from our other publications