The federal government has announced plans to extend provisions in the Fair Rail for Grain Farmers Act, also known as Bill C-30.
In an April 22 news release, Ottawa said it will work with Parliament to extend certain railway provisions in the Canada Transportation Act, including expanded railway interswitching distances and provisions that allow Ottawa to set mandatory grain hauling targets for the country’s largest railway companies.
The Liberal government will work with Parliament “to postpone for one year the repeal of certain provisions of the Canada Transportation Act that were enacted in 2014 by the Fair Rail for Grain Farmers Act,” the federal news release states.
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“Postponing the repeal of the provisions would allow the various participants in the commodity and railway system to plan for the upcoming year under predictable conditions, while the Minister of Transport fully considers recommendations presented in the report of the Canada Transportation Act Review.”
The former Conservative government introduced expanded interswitching provisions and government-imposed grain hauling targets in 2014 as part of the Fair Rail for Grain Farmers Act, also known as Bill C-30.
The measures were introduced in an effort to spur the movement of prairie grain following a supply chain bottleneck that slowed grain shipments to a crawl during the winter of 2013-14.
Provisions in Bill C-30 were due to expire in August 2016.
Ottawa’s decision to retain the provisions for another year sends a strong message to western Canadian farmers and grain shippers that Ottawa is taking their concerns about rail service seriously.
“The Government of Canada is committed to the efficiency of the transportation system,” federal transport minister Marc Garneau stated.
“The content of these provisions, such as interswitching and level of service obligations, impacts all shippers and postponing the repeal of these provisions would allow the government to fully assess the freight rail transportation system for all commodities, in the context of its response to the review of the Canada Transportation Act and the development of a long term plan for the sector.”
“We are committed to improving Canada’s transportation system over the long term to better support the agricultural sector’s economic growth, added federal agriculture minister Lawrence MacAulay.
“These measures allow the time needed to engage with stakeholders to ensure we build a system that Canadian farmers can count on to get their products to markets around the world.”
Provisions being considered for extension include:
• the ability to prescribe different distances, by region or by goods, when making regulations on interswitching;
• the ability to make regulations specifying what constitutes “operational terms” that can be referred to in level-of-service arbitration;
• the ability for Ottawa to order a railway company to pay compensation to a shipper or any person for any expenses they incurred as a result of the railway company’s failure to comply with its level-of-service obligations, and:
• the ability for Ottawa to prescribe a minimum amount of grain to be moved by Canadian National Railway and Canadian Pacific Railway during any period within a crop year, and to authorize designated persons to impose administrative monetary penalties for failing to meet these requirements.
While response to Ottawa’s announcement from the prairie grain industry is expected to be overwhelmingly positive, the reaction from Canada’s railway companies has been predictably negative.
“CN is disappointed that the federal government has to decided to postpone for one year the repeal of unnecessary provisions of the Canada Transportation Act ,” said Canadian National Railway in a prepared statement.
“The provisions were never justified and should sun-set this August, as recommended by the report on the review of the Canada Transportation Act led by David Emerson.”
CN said it hopes the government will see the wisdom of extinguishing the unnecessary provisions, including minimum grain volume mandates and extended interswitching, at the end of the one-year extension.
If not rescinded, extended interswitching will discourage railway investment in branch line networks, it added.
Earlier this spring, the government of Saskatchewan encouraged Ottawa to extend temporary measures in the Fair Rail for Grain Farmers Act.
In a March 3 letter addressed to Garneau.
Saskatchewan agriculture minister Lyle Stewart urged Ottawa to extend temporary provisions, at least until a long-term plan is put in place to ensure better rail service for the prairie grain sector.
Among other things, Bill C-30 contained expanded railway interswitching rules that require Canada’s biggest railway companies to move a competing railway’s cargo at prescribed freight rates within 160 kilometres of a so-called interswitch location.
Under previous rules, the legislated interswitch distance was 30 kilometres.
“The (Fair Rail for Grain Farmers) Act introduced a number of measures to address poor service and lack of competition in the grain handling and transportation system,” Stewart wrote.
“Extended interswitching in particular has been a success in western Canada. Western grain companies and shippers have used interswitching to increase rail service and access to grain cars. Even in cases where interswitching was not directly used by shippers, the option of its use resulted in a more competitive response from the railways ….”
Norm Hall, a Wynyard, Sask., farmer and head of the Agricultural Producers Association of Saskatchewan (APAS), said APAS supports the message contained in Stewart’s letter.
“He (Stewart) was basically saying everything that we’ve been saying,” Hall said.
“At the time (these measures) were put in, they were extremely useful. Hopefully, we don’t need them enforced again but for now, we’re saying keep everything that’s in Bill C-30.”
Hall said the expanded 160-kilometre interswitching distance helped to create a new level of competition among Class 1 railways in the West.
Roughly 85 percent of the primary elevators in western Canada are located within 160 kilometres of a designated interswitch location, he added.
Wade Sobkowich, executive director with the Western Grain Elevators Association, offered similar comments, adding that some grain companies have been using the expanded interswitching provisions regularly and with increasing frequency.
He said about 3,000 hopper cars of grain handled by WGEA members were interswitched between Aug. 1, 2015 and March 31, 2016.
Beyond that, the provisions give grain shippers additional leverage in efforts to negotiate better freight rates and better service from primary rail carriers.
“We’re of the view that it provides us with a measure … of competition in the rail freight market and that it should be retained beyond Aug. 1 and certainly until the government passes a bill to amend the Canada Transportation Act.”
Ottawa is currently preparing to review the recommendations contained in the Emerson Report, a federal report on transportation policy that was prepared by the Canada Transportation Act Review Committee.
Ottawa has indicated that it will review the Emerson Report and consult with stakeholder groups — including farmers, shippers and railway companies — before deciding whether to act on the report’s recommendations.
Consultations are expected to begin in the spring or summer.
