Prairie grain farmers will face less rail competition and higher costs if Canadian National Railway is successful in ending an interswitching agreement with BNSF Railway, say grain shippers.
CN has asked the Canadian Transportation Agency to rule that interswitching rules, including regulated rates, should not apply to the movement of BNSF traffic from Winnipeg to the U.S.
Instead, CN wants to negotiate a commercial switching agreement, a move that some shippers say could price BNSF out of the market.
At least two shippers – the Canadian Wheat Board and Paterson Grain – have asked the CTA for intervenor status in the case.
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“If CN is successful in its application, there would be less rail competition in southern Manitoba in general and in Winnipeg in particular,” the CWB said in its brief to the agency.
“Less competition means poorer service, higher rates and therefore a cost to producers.”
The Winnipeg interchange, which dates back to 1912, is the only point on the Prairies from which grain cars can be shipped directly to the U.S.
Last crop year the board shipped 130,000 tonnes directly to U.S. buyers via BNSF out of Winnipeg. It expects to ship about the same amount this year.
Keith Bruch, vice-president of operations for Paterson, whose Winnipeg North elevator would be directly affected by any change, said moving to a higher commercial rate would likely spell the end to BNSF service.
“In our view it would be at a rate that would make the BN traffic uncompetitive and thereby shut it down,” he said, adding Paterson uses the BNSF connection to ship grain to the U.S. and Mexico.
The shippers also say that the use of BNSF rail cars to haul to the U.S. frees up domestic cars for other service.
“When we have a tight car supply like we did last year, access to BNSF relieves pressure on the system and provides benefits for all grain movement,” said CWB spokesperson Maureen Fitzhenry.
In addition, freight rates on BNSF are significantly lower than those charged by CN.
According to CWB figures, in 2007-08, the rate per car from Winnipeg to Chicago, including fuel surcharges, was $3,520.88 US on BNSF and $4,291.97 on CN, a difference of $771.09 per car, or about $8.50 a tonne.
The rate to Alton, Illinois, was $3,823.24 on BNSF and $5,334.66 on CN, a difference of $1,511.42 per car, or about $17 a tonne.
“A cost differential of that magnitude can be, and often is, a determining factor in whether or not to make a sale,” said the board’s submission to the CTA.
In asking the CTA to end regulated interswitching with BNSF, CN argues there is no physical interchange between CN and BNSF, and CN is not a “local carrier” so the interswitching regulations do not apply.
“CN wishes to stress that it is in no way attempting, through this application, to reduce or limit service to the Paterson facilities nor attempting to prevent BNSF from providing service to the Paterson facilities,” the railway said in its application.
It says it merely wants to clarify the situation, adding it is “fully interested and prepared” to deliver BNSF traffic to and from the Paterson elevator under a commercial agreement.
In its response to the CN application, BNSF rejects CN’s arguments and says interswitching is possible under CTA rules.
Paterson noted in its brief to the agency that CN filed its application Sept. 25, the same day that the grain company won a level of service complaint against the rail company.
“It is submitted that this kind of retribution is reprehensible and should not be tolerated in any circumstance,” the grain company said.
A CN spokesperson said the railway will withhold comment until a decision is made.
